Probability for Better Decisions
Probability Basics
What is Probability?
Probability is simply a way to measure how likely something is to happen. It's a number between 0 and 1. If the probability of an event is 0, it's impossible. If it's 1, it's a sure thing. Everything else falls somewhere in between.
Think of flipping a coin. The probability of getting heads is 0.5, or 50%. It's not a guarantee, but it tells you what to expect over many flips.
We often express probability as a fraction or a decimal. The basic idea is captured in a simple formula, where stands for the event we're interested in:
For a standard six-sided die, the probability of rolling a 4 is $1/6$. There's one way to get a 4, and there are six possible outcomes in total.
Three Flavors of Probability
While the basic formula is a great start, we don't always have a neat set of equally likely outcomes. Probabilities can come from different sources, which we can group into three main types.
Classical Probability
adjective
Used when each outcome in a situation has an equal chance of occurring.
This is the most straightforward type. Think of games of chance: flipping coins, rolling dice, or drawing a card from a well-shuffled deck. We can calculate the probability without ever performing an experiment because we know all the possible outcomes and that each one is equally likely.
Empirical Probability
adjective
Based on the results of an experiment or observations from real-world data.
Sometimes, we can't reason our way to a probability. Instead, we have to collect data. For example, to find the probability that a random person is left-handed, we'd have to survey a group of people. If we find that 10 out of 100 people are left-handed, our empirical probability is $10/100$, or 0.1. This type of probability comes from what has already happened.
Subjective Probability
adjective
An individual's personal judgment or belief about the likelihood of an event.
What's the probability that your favorite team will win its next game? There's no deck of cards or historical data to give a perfect answer. This is where subjective probability comes in. It's an educated guess based on knowledge, experience, and intuition. A sports analyst might say a team has a 70% chance of winning based on player health, recent performance, and other factors.
| Type | Basis | Example |
|---|---|---|
| Classical | Logic and symmetry | Probability of rolling a 2 on a fair die (1/6) |
| Empirical | Data and observation | Probability a light bulb is defective, based on testing a batch |
| Subjective | Belief and intuition | Probability a new movie will be a blockbuster hit |
Rules of the Game
Calculating the probability of a single event is useful, but we often want to know the chances of multiple events happening. Two basic rules help us do this: the addition rule and the multiplication rule.
The key is to know when to add and when to multiply. It usually comes down to one word: 'or' means add, and 'and' means multiply.
The Addition Rule (for 'or' events)
The addition rule helps us find the probability that at least one of two events will occur. For example, what's the probability of rolling a 2 or a 3 on a die?
Since these two events can't happen at the same time (they are mutually exclusive), we can simply add their individual probabilities.
For our die roll: .
The Multiplication Rule (for 'and' events)
The multiplication rule is for finding the probability that two or more events will both happen. For this to work, the events must be independent—meaning the outcome of one doesn't affect the outcome of the other.
Flipping a coin twice is a classic example. What's the probability of getting heads on the first flip and heads on the second flip? The first flip doesn't change the odds for the second one, so the events are independent. We just multiply their probabilities.
For two heads in a row: .
These foundational ideas are the building blocks for understanding risk, making predictions, and navigating a world full of uncertainty. By classifying probabilities and knowing how to combine them, you can start to make sense of the chances all around you.