We confuse probability with risk - Deepstash

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# We confuse probability with risk

We use probability to assess how risky something is, such as an investment or an action we want to take. But if we just use probability to assess risk, we fail to take into account how bad the potential negative outcomes will be if they do occur.

For example, would you rather get

1. \$50,000
2. or have a 50/50 chance of losing \$100,000 or getting \$200,000?

The expected value is the same, but the negative results in the second scenario would be really bad. The risk is much higher.

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Math is a science that helps us solve common problems and enable us to be right about our decisions. Math is mostly just common sense. We intuitively use logic and reason to solve "math" problems.

People often assume that the rate of change of a quantity will remain the same over time.

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