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from the article: He admits the models will never be perfect, but thinks that even a model that’s only right about 50 percent of the time could help investor
by sickpig 12y ago
from the article:
He admits the models will never be perfect, but thinks
that even a model that’s only right about 50 percent of
the time could help investors and entrepreneurs avoid
particularly bad ideas
dunno why but I can't stop thinking that tossing a coin could achieve the same goal :)
- joshyeager 12y agoThat only works if startups fail 50% of the time. If they fail more frequently, a coin flip would be wrong.
- sickpig 12y agoI stand corrected, you're right. I'm supposed to know better.
- jgeralnik 12y agoNope, you're still right. Assume startups fail 90% of the time. 50% of the time your coin comes up tails, and you claim the startup will fail. 50% of the time your coin comes up heads and you claim the startup will succeed. You guess correctly 0.5 (the chance your coin comes up tails) * 0.9 (the chance the startup fails) + 0.5 (heads) * 0.1 (success) = 0.5 of the time.
- kylebrown 12y agoIts not clear from the article which factor the 50% figure applies. I doubt its the overall odds ratio, but rather the likelihood given some priors. For example, given a prior that 90% of startups fail, what is the likelihood that this particular startup will succeed? If the prior is already factored in, then the model predicts no better than a coin flip. The point made in the article is that investing at the odds of a coin flip would be better than investing with incorrect risk assumptions (ie. buying into "particularly bad ideas").
- crdb 12y ago1% * (+500,000,000) + 5% * (+5,000,000) + 94% * (-100,000) >> 50% * (+100,000) + 50% * (-100,000)