# Blackwell’s Bet, from Jeff Watson

June 28, 2016 |

An interesting reading for people who deal with probability. The last sentence of this article, "Blackwell's Bet", sums it up nicely: "It's unexpected and ironic that an unrelated random variable can be used to predict that which appears to be completely unpredictable."

## Rocky Humbert writes:

I would posit something that is market relevant. The envelopes contain positive integer amounts of money.

For simplicity, let's say you open envelope X and find that it contains \$5. And we are trying to guess envelope Y.

There are are only 5 possible amounts that are smaller than X: \$5, 4, 3, 2, 1.

But there are infinite number of possible amounts in envelope Y that are greater than X: 5, 6, 7, 8…. to infinity.

Since we know nothing about the distribution, is it not reasonable to surmise that Y probably is in that much bigger universe (between 5 and infinity)?

This is intuitive. Not mathematical. The same thing is true for people who trade on the long side. Prices can rise an infinite amount. But they can only decline to zero. Hence, there is a natural edge to trading from the long side ceteris paribus.

Name

Email

Website

1. Andre on June 29, 2016 12:14 pm

In games like poker I believe one can understand the game. The financial markets are so complex one has to really focus on an incredibly specific niche know everything about that niche in order to make it an understandable beatable game. Not just a specific product, but one type of entry and holding period on that product, focus all efforts on this combination if it’s a winning horse until it doesn’t win anymore. How does one know when form changes? In super system Doyle speaks of intuition. And ayn rand speaks of individuality. Combining these into strong conviction and deep understanding one can win for a time I believe. The herd seduces an individual out of these individual strengths see Bon and the Freud nephew on propaganda

2. Patrick Lyons on June 29, 2016 4:45 pm

Hi there,

I’m a writer for VICE.com and am looking to interview an speculation expert for a new feature we’re running on professional deceit. Basically we’re interviewing members of several professions (undercover cops, trial lawyers, etc.) that are often assumed to require some form of lying or non-truth, and at least to the layman, professional speculating is one of them.

If this is of interest to either of you, please shoot me an email and we can set up a brief phone interview.