Probability is defined as the possibility, chance or odds of likelihood that a certain event or occurrence will take place now or in the future. In a world where business managers like to “know the odds”, how does probabilistic thinking (Frequentism and Bayesian) mesh with extreme events (i.e. Black Swans) that just cannot be predicted?
In creating “one for the record books”, the 2011 Red Sox collapse shows us that the human factor continually confounds probability models.
It may be blasphemy, but for one investor, a macro “big picture” approach is proving much more profitable than one that’s (normal distribution) probability driven.