Archive for category letters

Date: December 20th, 2009
Cate: letters

Pokeit Letter #4 – What is the Probability of Getting Head on First Try

Mustafa_1

This question, posed to a class full of undergraduates, wasn’t interpreted quite the way Mustafa had intended. At the time, I was taking Stat 10 to satisfy a pre-requisite for my hastily put together plan to switch majors and apply to UNC’s business school. See, it turned out that physics just wasn’t my calling. Perhaps it was Dr. Yu Wu’s prickly demeanor in Physics 26, or the fact that Dr Hernandez in Physics 27 was an asshole. Whatever it was, my grades in physics had not been compelling. By the time the second Physics 27 midterm rolled around, knew I had to stop griding glass into my eyes. I spoke with my academic advisor, and by the end of the day, I had signed up for STAT 10 and ECON 10 in the Spring. Next semester, Mustafa Tural introduced me to statistics.

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Date: December 2nd, 2009
Cate: letters

Pokeit Letter #3 – Cum hoc ergo propter hoc!

xkcd

There’s this great story one of my economics professors use to tell in order to illustrate that “correlation does not imply causation”. It’s most certainly false but it goes like this. The setting is 16th century Russia, during the latter half of Ivan the Terrible’s reign. In general, this was not a great time to be living in Russia. A combination of drought, famine, Polish-Lithuanian raids, Tatar invasions, and the sea-trading blockade carried out by the Swedes, Poles and the Hanseatic League had devastated the country.  On top of that, a particularly nasty epidemic of the plague was killing between 600 and 1000 people every day.  It was not known at the time how the plague spread, so efforts to fight it were subject to wild theories. Ivan, mentally unstable and physically disabled, suspected treachery. To prove it, he had his advisors gather statistics on the number of doctors and the number of dead throughout his Kingdom. Once it was discovered that regions with more doctors also had more deaths, Ivan rounded up all of the doctors and had them executed for treason.

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Date: November 20th, 2009
Cate: letters

Pokeit Letter #2 – Nate Silver’s Crystal Ball

At 9:46 p.m., blogging on his site FiveThirtyEight.com, Nate Silver called the presidential election for Barack Obama. The television networks followed suit about an hour and 15 minutes later after most polls in Western states closed.

Of course, Mr. Silver had a head start: he had forecast that Senator Obama would beat Senator John McCain back in March.

From the New York Times – November 10, 2008

Nate Silver, the prodigy behind the PECOTA system for predicting the performance of baseball players, and former economic consultant for KPMG, had developed a new statistical framework for analyzing elections. Silver had already proven its scary accuracy during the Democratic primaries in May. While every other commentator was celebrating Hillary Clinton’s resurgent momentum, Silver was skeptical of the new polls showing she would win by five in Indiana and had closed the gap to 8 in North Carolina. The fresh polls didn’t make sense when compared against the relatively stable demographic data. Blogging under than handle Poblano, he broke down the numbers in a different way – Clinton by just two in Indiana, and a seventeen point whuppin in the Tar Heel State. On May 6th, the night of the Democratic primaries, Clinton won Indiana by one and lost North Carolina by fifteen.

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Date: November 12th, 2009
Cate: letters

Pokeit Letter #1 – Poker Through the Lens of Expected Value

The basic problem in poker is that unlike craps, roulette, blackjack, or any of the various table games you might find yourself blowing cash on at Casino Royal, the expected value of any bet in poker is uncertain. Calculating expected value in roulette is pretty straightforward in comparison. Take for example a $100 bet on black. The equation for the expected value, or average profit per bet would be:

<X, black> = p(black)*(payout if black) – $100

That is, the probability that black comes up, multiplied by payout if black comes up, minus your original bet. On a standard American table, the payout for black is 1:1 and the probability of hitting black is a little less than even:

<X, black> = (16/38)*$200 – $100
<X, black> = $94.74 – $100 = -$5.26

Almost every bet in roulette will give you the same expected value: - 5.26% with the only difference being the variance between individual outcomes. The same concept is true for other table games. The expected value of betting the Pass line in Craps is -1.41% per bet and likewise, the expected value of betting ‘Hard Eight’ is -9.09% per bet. This is of course how the casinos make their money. Poker is different from the table games primarily because the expected value of bets change and estimates of expected value are always uncertain.

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