Don’t Flip a Coin on Your Financial Future

penny

Ever been to the casino? Well the probability that you’ll win big isn’t in your favor. Or is it?

That is just the kind of thinking that the casino is hoping we all have. We naturally tend to throw out logic and rely on what we want to happen when it comes to the probability of something happening. We all think we’re going to win the lottery, but we’ll probably get struck by lightning before that ever happens. Yet, someone has to win and we all want it to be us.

The Penny Flipping Experiment

Materials: Penny (or any coin with 2 different sides), piece of paper, and a pen

  1. Write down how many times you think you will land on heads if you flip the coin 20 times.
  2. Flip the coin 20 times and record your results.

My results: T, T, H, H, T, H, T, T, H, T, T, H, T, H, H, H, H, H, H, H

Heads: 12   Tails: 8

Observations

I naturally assumed that given the 50% chance of landing on heads, I would land on heads 10 times out of 20 flips. That couldn’t be more wrong of an assumption. In fact, each flip does have a 50% chance of landing on heads, but the next flip has absolutely nothing to do with the prior flip. Each flip is different and functions on its own. You’ll also notice that the last 7 flips of mine were all heads. After 2 heads in a row, something felt wrong and I expected to land on tails. I didn’t. Again, my brain thought that because I landed on heads so many times in a row, the probability was greater for me to land on tails. However, my probability never changed. Every flip I made had a 50% chance of landing on heads and a 50% chance of landing on tails.

This is how you could lose roulette. Most would assume that if black wins a few times in a row that red just has to be next. The truth is that black could win 100 times in a row and the next spin has nothing to do with the prior 100. There is still a 50% chance of landing on black and a 50% chance of landing on red.

Don’t flip a coin on your financial future. Speak with a Connex representative.

Has probability ever tricked you?

Chris, Marketing

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Posted in Financial Education, Improve your life, Money Saving Tips

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