
Probability Management Blog
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Limbic Analytics A blog devoted to connecting the seat of the intellect to the seat of the pants. ProbabilityManagement.org is a 501(c)(3) nonprofit dedicated to making uncertainty actionable through tools, standards, applications, and training.
Probability Management Blog
3M ago
by Dr. Sam L. Savage
Stochastic Data from Ancient Greek στόχος (stókhos) ‘aim, guess’ means uncertain data. But wait a minute, all data is uncertain.
That’s my point!
AI can make statistical sense out of uncertainty. Visit our webpage Gateway to AI where we have posted 8 short videos on what I call the Stochastic Data Cycle.
Coherent Stochastic Data
AI is trained on Stochastic Data, and AI can produce Stochastic Data. But before that data may be used in subsequent calculations it must be converted to a SIP (Stochastic Information Packet). And for that SIP to be combined with other SIPs, it m ..read more
Probability Management Blog
4M ago
A PolyBlog featuring research by Dr. Sam Savage and his former student Pace Murray, a View from the Trenches from an even more former student, Jimmy Chavez, and the announcement of a new book by Doug Hubbard.
Illustration from Construction Cost Overruns: Reference-Class Forecasts on Steroids by Pace Murray and Sam Savage in Phalanx Magazine.
Extracting SIPs from Historical Data
By Pace Murray and Dr. Sam L. Savage
When toddlers encounter their first rolling ball, they often crawl to where the ball was a second ago and then iterate the process by crawling to where it was a second later, and so ..read more
Probability Management Blog
4M ago
By Dr. Sam L. Savage
My Latest Album Will Drop at Risk Awareness Week
October 8, 2024
• Stochastic Data: Gateway to AI
• CHANCES* Consortium for Natural Hazards
• Taking the Chances out of AI
*Conveying Hazards And Catastrophes through Extracted Simulations
Like David Foster Wallace’s fish who had no clue what water was in spite of being immersed in it, many of us have a similar lack of awareness of being immersed in AI. And AI, in turn, is immersed in stochastic data, that is, uncertain data. But isn’t all data uncertain? Exactly. That’s my point. The discipline of probability managem ..read more
Probability Management Blog
6M ago
By Dr. Sam L. Savage
The prestigious Journal of Portfolio Management has just published a special issue in memory of Harry Markowitz, and I was honored by an invitation to contribute. I invited my old friend Ben C. Ball as my co-author. Together we applied Harry’s modern portfolio theory to petroleum exploration, as described in Ch. 28 of my book The Flaw of Averages, and changed the trajectory of my career.
The JPM article, written as a docudrama, chronicles meeting Ben in the1980s, Harry in the 1990s, and developing an application that I dubbed the Markowitzatron in the 2000’s while ..read more
Probability Management Blog
6M ago
By Dr. Sam L. Savage
At ProbabilityManagement.org our ultimate goal is to assist people in dealing with uncertainty. In this context, optionality is of great benefit in reducing downside risk. For example, fire insurance is really an option to sell your house to your insurance company at market value, even if it burns to the ground. A call option lets you purchase a stock after the fact, if it goes up, but limits your losses if it goes down. Recently, optionality played a key role in an emotional decision that my wife and I had to make.
Losing Rosey
Recently we tragically and unexpected ..read more
Probability Management Blog
7M ago
By Dr. Sam L. Savage
Source: Predictit.org
As I, like 51 million others watched the debate the other night, I suddenly realized there was something even more important to be watching: the prediction market reactions. Prediction markets, although not without potential problems, react instantly and reflect where people are putting their own money. They are much faster than polls and potentially more accurate.
The left graph displays real time “Presidential Win” probabilities and market volume for the top six people, candidates or not for a 24-hour period starting four hours before the deb ..read more
Probability Management Blog
10M ago
Powering Tomorrow: Why Our Grid Needs Chance-Informed Decision-Making
By Dr. Sam Savage, Executive Director
and
Daniel Krashin, Chair of Renewable Energy Applications
ProbabilityManagement.org
What’s Not to Like
What’s not to like? Free energy from the sun and wind have arrived just as the demand for power skyrockets to feed our electric cars, and giant data centers toiling away on the production of crypto currency and artificial intelligence.[i] The good news is that there is plenty of renewable energy to go around. The bad news is that it can only be used if it arrives at the right time at ..read more
Probability Management Blog
1y ago
By Sam L. Savage
John Button of Gartner, Eng-wee Yeo of Kaiser Permanente, and I have published a three-part blog series at the FAIR Institute: Part 1, Part 2, Part 3.
We were inspired by Eng-wee’s use of SIP Libraries at Kaiser, to integrate their risk and investment models. In 1952 the late father of Modern Portfolio Theory, and co-founder of ProbabilityManagement.org, Harry Markowitz, showed us that risks and returns have inevitable tradeoffs and cannot be considered in isolation.
The open SIPmath™ Standard provides a means to easily network together stochastic simulations of all sorts, in ..read more
Probability Management Blog
1y ago
Recognize, Reduce, Respond
By Dr. Sam L. Savage
Just as Readin’, ‘Ritin’, and ‘Rithmetic were the pillars of public education, as encouraged in the United States in the early 1800’s, the Chance Age will require its own foundational elements.
I offer you Recognize, Reduce, and Respond.
Recognize
Those who do not recognize uncertainty run afoul of the Flaw of Averages or worse.
I used to think there was nothing worse than representing uncertainties as single numbers until I saw it done with colors.
With the advent of the discipline of probability management, once you recognized a set o ..read more
Probability Management Blog
1y ago
By Dr. Sam L. Savage
August 24, 1927 - June 22, 2023
It is with deep sadness that I announce the passing of Harry Markowitz, Nobel Laureate in Economics, father of Modern Portfolio Theory, and co-founding Board member of ProbabilityManagement.org, in San Diego on June 22. Harry’s obituary published by the New York Times can be found here.
Harry truly started the war on averages in the early 1950’s at the University of Chicago. He read the academic literature of the time which specified that investment decisions should be based on the average value of the assets. But he knew that averag ..read more