Statistical Sobriety

January 11, 2023 by Anthony Isola

If your financial plan relies on winning the lottery or day trading – It’s time to find a new plan. Why do people count on the improbable regarding wealth creation?

Putting human emotion aside (Easier said than done), ignoring probability and statistics tops the list.

In 1986 the American Physical Society, the primary organization of our nation’s physicists, encountered a scheduling conflict.

Initially scheduled for San Diego, their convention event was switched to Las Vegas. Four thousand physicists piled into the MGM Grand Marina.

That’s when things got interesting. During the physicist’s siege, MGM had its worst week – ever. Many would guess that these brainiacs were expert poker, roulette, or craps players due to their stratospheric I.Q.s.

That wasn’t the case. Mathematics kept their wallets full. They knew the odds and refused to play. By American standards, this is a Black Swan; in 2021, Casino revenue reached an all-time high of $45 Billion!

Likely, this group doesn’t partake in another of America’s favorite pastimes, playing the lottery. We spend $100 Billion yearly in this doomed quest to become rich and famous.

Advertisers know our Kryptonite. It’s not in their playbook to display their product’s effectiveness statistics. Celebrity endorsements provide the bait. During last year’s Super Bowl, Crypto Ads were all the rage.

Matt Damon insulted the manhood of millions by mocking their fear of uncertainty and the potential wealth of digital coins. We know how this turned out for the Crypto Bros.

Stock investors fall for the same fallacies. Ignoring probabilities shouldn’t be a part of anyone’s financial portfolio.

Even the so-called experts fall prey to a lottery mentality. Ignore index funds at your peril.

SPIVA data confirm these findings.