In today’s Creating Wealth show, Jason first talks about statistics and how so many people use it to manipulate others. He also talks about how there are still a few Meet the Masters home study courses left, so do not forget to order them now while supplies last!
Sara Silverstein joins Jason today on the Creating Wealth show to talk about funny tongue and cheek correlations. She shares a few examples that she has found over the past few months as well as talks about the birthday paradox, the Wizard of Oz, and her next article for Business Insider about vaccines.
Key Takeaways:
1:45 – Jason talks about how you can mislead people with statistics.
8:45 – People self-select for jobs. Jason explains what he means by this.
14:10 – Jason introduces Sara.
17:30 – So many people don’t understand that a correlation does not always mean causation.
22:45 – Sara is combing all of these weird correlations together to show people a very tongue and cheek view of how correlations work.
26:35 – You can take pretty much any two things and figure out a way to make them related.
29:15 – Both Jason and Sara talk about the conflict of interest dilemma.
33:00 – Is Wizard of Oz a story about the gold standard?
34:30 – Sara talks about the birthday paradox.
37:45 – Sara talks about her next upcoming article for Business Insider about vaccinations.
Tweetables:
“Conflict of interest is such a huge one and can explain a lot of issues and problems that we see.”
Mentioned In This Episode:
How to Lie with Statistics by Darrell Huff
Freakonomics by Stephen Dubner and Steven Levitt.
http://www.businessinsider.com/author/sara-silverstein
Transcript
Jason Hartman:
Welcome to the Creating Wealth show, this is your host Jason Hartman. This is episode 475 and today our guest is Sara Silverstein from Business Insider who did a really interesting story on ridiculous correlations. I’m going to talk a little bit before Sara comes on about how to lie with statistics, so first of all, thank you all for joining us from 164 countries worldwide and thank you so much for reviewing us on iTunes and subscribing to us and welcome everybody from Stitcher radio. Thank you for your reviews there as well. We really appreciate those reviews, so thank you very much for taking time out to do them. It only takes a moment and we very much notice and appreciate them always. So, thank you for doing that.
So, statistics, aren’t they a funny thing, though? I mean, isn’t it amazing how misleading statistics can be? Someone post this interesting thing and not that it has anything to do with today’s guest or anything, but it does have to do with real estate, because as am I sitting here in beautiful Whistler, Canada in British Columbia. I’m looking at some of the material that I’ve saved up and I’ve got a whole bunch of articles on how to lie with statistics and just really interesting things that are so misleading in our culture and people take them as the gospel and it really just drive me crazy that they do this.
Here is just one of so many examples and, by the way, when it comes to real estate and the Case-Shiller Index, right, that is the renowned index that so many people live and die by when it comes to real estate and it only surveys 20 markets. Just 20 and the last time I looked at the Case-Shiller Index, I would only be interested investing in 5 or 6 of those 20 markets, because the old saying in real estate is all real estate is local.
It is very much a local asset class and how can we have it that the most renowned index for real estate investors is something that only surveys 20 of almost 400 markets, yet people take that as the gospel for how the real estate market is doing and most of those markets are cyclical markets that have big upswings and downswings and those aren’t the markets we like as prudent cash flow oriented investors anyway.
So, this article not that it has anything to do with real estate really, but it does have a lot to do with how to lie and mislead people with statistics and it was an article that one of my friends on Facebook posted and she says, I know we got problems, but c’mon, what’s the obsession with killing? And it’s a graph that shows the number of serial killers by country and the US of course is the leader in serial killers, I guess, right. It says it’s a Radford University survey of the serial killer database, so I didn’t even know there was a database of this kind of thing, but it doesn’t surprise me, so here’s what’s interesting about it.
It shows the US being number one, England being number two, Italy, South Africa, Japan, Germany, Canada, blah blah, it goes down and the lower ones on the graph are Russia, China, Mexico, Brazil, and Scotland and Poland, okay, but this is totally misleading. The first reason it’s totally misleading is because with the exception of China and India, the US has more population than any of these countries, so it’s not a per capita chart, so that’s the first giant problem and that’s why I am so into rent to value ratios, right, because everything is about a ratio. Everything is really should always be reduced to ratios and parentage and per capita. You can’t know what the meaning of anything is unless you know the relationship between the overall number and the specific number in any given case, okay.
So, this is totally deceptive. There’s many other flaws here right since the US has been human rights than most of the countries listed, it’s far more difficult to catch and convict them here, right. For example, many countries listed don’t have laws to protect their citizens and their effects like the 4th amendment of the constitution from search, so it’s easier to catch people who don’t have rights to protect them from their government.
Another point is, the graph address serial killers, but not murder rates or other violent crimes, which is massively higher in many of these countries than it is in the US, right? So, that’s deceiving too. Like, why would you just profile serial killers specifically, okay. This doesn’t say anything really about the overall violence or fear in which any of us should live, right. Like, Brazil and Mexico. Very, very violent, okay. South Africa, lots of murder there and lots of problems like that.
As scary as these people are, these psychopaths, they’re usually pretty smart, so they tend to be very intelligent. Like, didn’t Ted Bundy have a PhD or something like that? I mean, he had a very high IQ. I remember watching some story about him years ago and so it’s pretty hard to catch them. Maybe in some of these other countries with lower educational resources, maybe they’re not as smart. Okay, that’s another thing.
Now, granted, the media glorifies violence and that’s awful and it’s terrible, but the US is also effected with more of that media, because more people in the cultures of wealthier more advanced countries have more access to media and since most of that media is made in good old Hollywood the content creation capital of the world, which is Hollywood. It’s just very misleading when you look at this stuff.
Let’s look at another one. I always love the one about college, right. So, they say college graduates, okay, here’s a fed report. Fed reports a college diploma is worth $831,000 and you’ve all heard of these kinds of surveys, right, that if you go to college and you graduate from college, you’re going to make almost a million dollars more over your career, but what they don’t tell you, which I’ve talked about before, is that people who enter college are largely self-selected.
They’re from, not always, but a lot of them, are from middle and upper middle class families and certainly for wealthy families, I mean wealthy kids almost always go to college, okay. So, they already have connections, capital, better education before they even got to college most of the time, so of course they’re going to earn more. They were already programed to earn more.
Now, granted there are stories of the rich spoiled kid who is a total screw up. We understand that, but they don’t tell you that these things are self-selected, okay. The people who enter college already even if they didn’t go to college, they already had a big head start in life.
How about this one and listen, ladies, do not get upset with me about this, okay, there’s a lot of fallacies to this statistic, but it’s that old one you’ve heard that women only make 77 cents for every $1 a man makes. What do they not tell you? They don’t tell you necessarily that people self-select for a job. Now, look it, I’ve employed hundreds of people and I can positively tell you that when I place an ad in the old days of course, you know, like 10 years ago for a receptionist or even 7 or 8 years ago for a receptionist when we had a big physical office and so forth. The applicants would be all female. When I place an ad for outside sales or telemarketer, guess what, the applicants would be almost all male.
Now, why is that? Well, I don’t know. Look at commercial real estate firms. It’s like a good old boy’s club. It’s all men particularly. There’s hardly females in commercial real estate and I think that’s awful by the way. I hate that, but in commercial property management, I had an ex-girlfriend that was a commercial property manager. It’s almost all female. Guess who makes more money? The brokers do, because they are on commission, they’re willing to sacrifice security for opportunity, so there’s a lot of self-selection that goes on there. They don’t tell you that women leave the workforce for many years a lot of times to have a closer bond to their children.
So, listen, anybody knows that the much more important holiday is mother’s day. Mother’s day is way more important than father’s day, okay. Mothers almost always have a closer bond with their children than fathers do. Did anybody adjust for that? No, didn’t adjust for it, right. So, you know, there’s a lot of stuff here in these statistics. How about shadow stats? Remember when we had John Williams on and we talked about the way the government manipulates and lies about inflation rates through the major ways that they do this are called waiting, substitution, and hedonix or hedonism.
So, they index all these things. They say if people, you know, if the price of beef goes up too much people will just, they’ll just have chicken instead. So, substitution, which is not fair. It’s not a real way to count and quantify the true inflation rate. They also have what they call the core rate, the core CPI, core inflation it’s also referred to as and this talks about how energy and food prices are too volatile to have in the index and now they’re on the downside, so they probably include them again, because it makes it look like the government and the fed are doing a better job, right, but you know, they are too volatile, they go up and down too much, right. So, we’re going to throw them out, but yet no human being on earth can really live without food and energy.
Look at the national association of retailers. We had Lawrence Yun on the show and talk about statistical thing that they do that are, I can’t even get into that the national association of retailers and the kind of stuff that you see published on home prices, it just burns me up, but you know, that goes back to Case-Shiller too as well. Realty mogul, one of the crowd funding platforms, I talked about this one a little while back, about how they’re bragging about how good their returns are, yet their returns are really not that good at all when I pointed them out and that was somewhere in I believe early January. There’s a lot more detail on that on the show.
Back to college graduates, here’s another article about college graduates statistics like this are totally BS, okay. It says, college grads make 98% more than everyone else, okay. Now, get this, okay, if you made a chart of the earnings of BMW owner’s incomes versus average Americans, it would show that BMWs are worth it too, okay, and that’s because BMW owners generally and; we’re just using BMW as a proxy for any expensive car; they make more money. Well, people that can afford to go to college that enter college, that have that middle and upper middle class upbringing, they’re generally going to make more money too. There’s a self-selection bias that is just not imputive in these statistics. This kind of stuff drives me nuts and Sara Silverstein just did such an interesting article on that in Business Insider and I wanted to have her today to talk about this.
Hey, almost out of those Meet the Masters home study courses, so order them, when I get back from Whistler and San Diego, if I live through heli-skiing, I’ll let you know. Hope that you hear from me on the next episode. I really do. Then, I will ship those off to you and I ship them myself, so they’re shipped to you with love and affection, okay. So, we’re almost done with those Meet the Masters home study course physical products. You can get the last remaining versions of those while supplies last at JasonHartman.com and also we have some great properties on the website, so check those out and stay tuned because, yes, you’ve been asking for it and we are going to announce an upcoming property tour very shortly here. Maybe, maybe as soon as the end of March, so pencil that in on your calenders. Hopefully we’ll be announcing that soon.
Anyway, thank you so much for listening to my little rant about statistics here. I gotta go play in the snow, let’s listen to our guest today as Sara talks about some ridiculous correlations.
It’s my pleasure to welcome Sara Silverstein to the show. She is senor producer at Business Insider. One of my go-to resources that I read pretty much everyday and she produces some awesome videos one on just funny, zany, compelling correlations that make absolutely no sense. One about the Wizard of Oz and it’s possible implications on the gold standard and just want to talk to her about a bunch of that stuff today, so Sara, welcome, how are you?
Sara Silverstein:
Great, thank you so much for having me.
Jason:
Yeah, it’s good to have you and you’re coming to us from the Big Apple, right?
Sara:
Yeah, I’m in New York at the Business Insider office.
Jason:
Is that where Business Insider is based? The main office?
Sara:
Yeah, but we have offices all over. San Fran, we just opened one in London, so we’re everywhere.
Jason:
You know, I just want to ask you before we dive into some of these actual topics a little bit about Business Insider since I don’t think many people really know much about it. It’s a website with interesting articles. I like reading it a lot. How old is the company? How big is it? I’m just kinda curious.
Sara:
The company has been around, I don’t know exactly how long, I just joined a year ago. It’s incredibly fast growing. I think we just started beating the Wall Street Journal on the web for growth and we have I don’t know how many people.
Jason:
And you’ve got several offices, do you have offices outside of the US too?
Sara:
Yeah, we do, in London.
Jason:
Do your reports leave the office or is it entirely like at a desk kind of base, because you know, I’m just interested in the changing media landscape. The old style is CNN has a bureau in many countries and the people go out and they’re reporting on video, but you’re kind of the newer model and I’m just kind of wondering what the distinctions are if you wanna speak to that for just a moment.
Sara:
Yeah, I mean, we do have people in the field they’re not necessarily, you know, like right now CES is going on this week so we have somebody there covering it, because we would be missing out on that, but we can do a lot of stuff without, you know, you don’t have to go out to cover the tornado and stand in front of it necessarily.
Jason:
Right. Like the CNN reporters that sort of hypish kind of style.
Sara:
There’s certainly value to that. People want to see it, but our readers want us to just be on top of the pulse of what’s going on and where ever that story is we can follow it, but we don’t necessarily always have to go there, but we do travel.
Jason:
Good, good stuff. Well, hey, let’s talk about some of these crazy compelling correlations. I’ve always have been fascinated with the title of the book How to Lie with Statistics is always fascinated me and, you know, as I’m reading and doing research and talking to my real estate investor clients for that business I have, you know, I’m always pointing out these funny little lies and misleading things in statistics that just don’t make any sense, but they are compelling. Tell us about some of the ones that you’ve found.
Sara:
Well, I’m the same way. I love when I see them and I always read them and I come across so many. Some of the ones that I picked out recently the lead exposure leads to crime, sunny skies causes suicides, you know, the Super Bowl indicator, which is always funny, you should buy or sell stocks based on who wins the Super Bowl and these are all based on correlations that are seemingly strong, but don’t necessarily apply causation and even though people will say that, that doesn’t necessarily mean that that’s the way that they’re interpreting.
So, I went ahead and looked at some state data and just downloaded a ton of data, the most, like, the census data, all this data about the states and the type of people that live there and then also silly data about how many people own cats in every state and what drugs people use and that sort of thing, just to figure out where some correlations were.
Jason:
Fascinating stuff, before you dive into yours, can I just comment on what you said, so a couple of funny indicators are the length of women’s skirts, I’ve heard, is an indicator of a coming bear or bull market. So, as the skirts are getting shorter, that means a bull market is in the offing they say on Wall Street and as they’re getting longer, you know, more conservative, that’s a bear market. That’s a bad sign and sunny skies I would think, you know, I’ve definitely heard and it seems legit that, you know, gray, dreary places like Seattle, Alaska, dark, you know, especially in winter the darker places have increased suicide rates, I mean, wouldn’t that be true? I mean, sunny skies, you know, I live in Arizona and it’s gorgeous all the time here particularly. So, I would think the suicide rate would be lower in a sunny place, no?
Sara:
Yeah, I mean, I don’t know and I don’t remember what the article had said about that one, but some of them certainly are causal, some of them certainly have, you know, other reasons that would lead the two to be linked, so I mean, I think there are some..some of them have some sense to them and some of them don’t, but it’s easier to make the leap.
Jason:
Right, right. Okay, so tell us about some of the ones that you’ve found and let’s also talk about the Wizard of Oz and the gold standard.
Sara:
Okay, some of the ones that I’ve found much like the women’s skirts in bull and bear markets, the average commute time in any state is very correlate to the percentage of women-owned firms. So, the states with the shortest commutes also had the fewest women-owned businesses like North Dakota and South Dakota and the highest were like California and New York and Maryland and I doubt that these two are tied to each other because women bosses some how cause, you know, traffic ingression, it’s much more likely that has something to do with rural versus urban areas or something like that, some third thing that causes both of them or is that an indication of both of these things.
Jason:
I would say that’s true and I would say and this is not a chauvinistic statement or anything like that, I would say generally women-owned businesses might be smaller, because they’re maybe felt there’s a glass ceiling and wanted to get away from that and so they opened a smaller business where they maybe have home based employees or people that are working closer to them for some odd reason where is maybe, you know, you mentioned North Dakota and South Dakota, I think of the oil business and, you know, totally male dominated of course and the fact that those are larger businesses, more industrial-type business. I would think that women would be attracted to more information-type businesses and also women are totally over taking colleges, so there are more educated. You know, there’s just a bunch of interesting..any thoughts on that?
Sara:
I think that’s absolutely true, but I also think that some of the places where both of these things are happening might be more urban, might have faster growing businesses and there are more women-owned businesses, you know, now as a percentage than there were before, so places were businesses are growing, there might be more traffic. The whole point is that I don’t think that one is causing the other. I don’t think having women work is causing a slower commute, so that’s kind of the, you know, the idea behind it.
Jason:
One other factor in that is that the more urban areas with the shorter commutes probably tend to be more progressive areas, so you’re going to have more female-owned businesses there too. So, yeah, I don’t know. That’s just fascinating, okay, tell us about some more.
Sara:
Okay, well we find a high correlation between households that have cats and breweries per capita by state. A lot of my friends are trying to convince me that this is causal, that they like beer because they love cats or vice versus, I don’t buy it. I saw in Jersey, I think we had some of the lowest cats and breweries per capita also Louisianan and Alabama, we saw the highest in Vermont over 50% of the households I think have cats or have had and 6 breweries per 100,000 people also Oregon and Maine were up there with cats and breweries.
Jason:
Well, shouldn’t we count those, Sara, beer, shouldn’t we be looking at beer consumption versus brewery locations.
Sara:
I mean, there are so many statistics that we could look at. This is just one correlation that popped up and again the reason that I’m doing this was to show, like you said, the way we can use statistics to lie, so the fact that it’s not the best metric maybe for people that like, you know, to compare against and the fact that the correlation exists kind of points to that as well, right.
Jason:
Great point, no question, absolutely and this whole thing, I should tell the listeners, is kind of tongue and cheek for sure.
Sara:
This is a spoof, if you will, or a parody of a real news story just the fact that we can find this data and try to make these arguments knowing that we don’t think that these, you know, relationships really mean anything necessarily.
Jason:
Yeah, it’s amazing. You really gotta live in between the lines with everything in life and many politicians and world leaders both good and evil throughout history have used this kind of technique to mislead people, right?
Sara:
Absolutely and one of the things we looked at was the Walmarts per capita, again, this is the number of like Walmart locations, so may or may not be very telling and the negative correlation with wine consumption and if you were to take this data and tried to spin some way you could say, Walmart could say, oh, if you open up a Walmart, wine consumption in the area will go down and that will be using the data incorrectly, because, of course, I don’t think opening a Walmart or not having Walmarts is actually causing people to drink or to drink more or less wine. They just both happen to be true in the same area.
Jason:
Yeah, fascinating stuff. Okay, gives us maybe one more if you would.
Sara:
Well, one that wasn’t as strong of a correlation, but I thought was worth doing, because every year I see a story about, oh, about your sex life and your paycheck. Like, if you have more sex, you’re going to make more money and these are the numbers and so I did one, because I found a correlation with internet porn page views per person in each state and the average annual wage and the lowest was Arkansas, Idaho, Montana and the highest was California, Colorado, and New York where there was a lot of porn and higher wages and, again, I don’t think the two are tied, but there is a statistical relationship between the two.
Jason:
So, like let’s just dissect that one for a moment and this, again, a spoof.
Sara:
If we were going to try to make sense of it, yes, how would you do it.
Jason:
Here’s what you’d have to do to make sense of that, right, okay so, maybe pornography websites charge subscription fees and you have to have a higher income to be able to have the discretionary money to pay for that, right, and really, I don’t know why you made the leap to sex versus income, because it’s not sex versus income, it’s pornography consumption versus income, right? So, maybe there’s actually more single people, less actual sexual activity. Now, again, you could argue whether you have more if you’re married or single, for sure, and married people always have that complaint. You know, that’s like a cliche, but yeah, I mean, that’s gosh, I don’t know what to make of that one. Any other thoughts on it?
Sara:
No, I mean, your point is a really good one, I didn’t think of that, but yeah, if porn sites are not cheap, it’s something that people can charge a lot for, because you’re going to do it secretly and you’re not going to share it probably with your friends, so you’re right, but just because you’re able to come up with a, you know, a story line that’s exactly how these relationships are explained constantly in media, right, that you can take any two things and figure out a way to make the relationship make sense or we could probably come up with a reverse. We could come up with the story that would make it make sense the other way, right.
Jason:
This reminds me of the book Freakonomics and there are some other books on sort of interesting economic issues and I’m looking at economic stuff all the time and I’m really quite fascinated by it. You know, I poke holes in the Freakonomics thing all the time in their different theories about, like, the one that was sort of famous years ago when the book first came about, it was about real estate agents and their commissions and there were all sorts of variables they didn’t consider in there and what they didn’t realize, because I have a background in real estate and they don’t, is that actually, oddly, a lot of times a real estate agent wants the property to sell more slowly, because they get more of a marketing opportunity out of holding open houses and advertising that property. As soon as the sold sign goes up, they lose all the buyer leads, so there’s kind of a conflict of interest that’s inherit sometimes in these things, which is interesting.
I’d give you another example in the legal system that’s sort of interesting, I’ve noticed that and, lawyers would tell you this probably, that judges don’t generally like parties that represent themselves very much in court, okay, because maybe they feel they had to hold their hand a little bit more and they don’t understand the system and the system is intentionally un-understandable, but then you see when you hire a lawyer to go to bat for you and represent you, the lawyer has an inherit conflict of interest.
Of course, the obvious one is that they might want to stretch things out to bill you more, but that’s not even the one that I’m talking about; is that the lawyer has to maintain a relationship in this system and sort of be nice to the judge, because they’ll know they’ll be in front of that judge again where as the defendant or the plaintive is representing themselves, you know, they shouldn’t care about that, because they’ll probably never see the judge again.
It’s sort of interesting like the lawyer may not really go to bat for you as hard, because of that and the same is true actually with real estate agents, because they have to maintain a relationship with those other agents in their community and maybe that creates a conflict of interest with the client. It’s just interesting how much more complex things are than people realize initially, right?
Sara:
Yeah and I think that a conflict of interest is such a huge one and can explain a lot of things, a lot of issues and problems that we see.
Jason:
No question, no question. You’re from the hedge fund background, so of course, there’s lots of conflicts of interest when it comes to investors and the funds in which they invest, right, because the fund manager wants to like put a lot expenses through the fund and those are maybe questionable expenses, but they want to get a lot of perks, right, and that’s not in the investor’s interests, is it?
Sara;
No, I mean, that’s a good point is including marketing expenses sometimes for funds can be fed through the expenses through the fees of the fund.
Jason:
Yeah, you mean the $3,000 dinners where they got a wine and dine prospects and..
Sara:
Which doesn’t necessarily, it’s hard to make the argument that increase the benefit to you as an existing client.
Jason:
I totally agree. It’s really fascinating and then the other issues, I mean there’s so many issues with funds, but with funds a lot of times they want to bring earnings forward and sacrifice the future to, and CEOs do this too with companies all the time, of course; and politicians do it too, and they wanna bring a benefit forward so that they can brag about a high return, but that may sacrifice the long term returns that the fund might get, right?
Sara:
I mean, if they do do that and that’s completely wrong, of course. We’re only talking about people that, that’s violation and more illiquid funds, it’s easier to do that, because the pricing is more objective or less objective and also because, you know, the way that the fees are structure the idea of incentive fees for hedge funds is that, oh well, if we get a percentage of the performance, then we’re incentivized along with you for the fund to make money. The one problem is that usually those incentive fees end at the end of the year, so it’s based on that year performance, so to have the performance finished at a certain year, especially if there’s a hurdle that they have to beat in performance then that could absolutely happen, because it would benefit the managers of the fund. Again, that only…when that does happen that is, you know, very bad behavior and that is not the norm.
Jason:
But, bad behavior is what Wall Street is all about, isn’t it?
Sara:
I think there’s a lot of good players on Wall Street. Like you said, conflict of interest is one of the main causes of bad behavior in many industries not just on Wall Street.
Jason:
Well, we too a little..we digressed a bit there, but thank you for entertaining my thoughts on that. I just believe in commandment number three in my ten commandments for investing Thou Shalt Maintain Control, just be a direct investor and own your own stuff and get the middle man out of the thing whenever you can, you know, but tell us about the Wizard of Oz. I loved that piece that you did on the Wizard of Oz and were they promoting the gold standard?
Sara:
Well, the Wizard of Oz is not, first of all, this is just something I…I got the first time I read it was in Gregory Marquis textbook in like my first economic class and I’ve been thinking about it ever since and I had an opportunity to do a story on it and I did. It’s basically the, it’s the theory that when the wonderful Wizard of Oz was written that it may have been an allegory for the gold standard and what was happening at the time and the characters represent different players in that story and basically in the early 1900s the framers in the west were burrowing a bunch of money from the bankers in the east to build farms or buy farms and there was massive deflation so the value of the dollar was increasing and the money that the farmers owed to the bankers in the east, the value of that money, their debt, just ballooned and this is because all the value of the dollar was tied to actual gold and so basically the way that the allegory works is that the bankers in the east are represented by the munchkins and they’re saying follow the yellow brick road, you know, keep on the gold standard, that’s what they want and in the west, you have the scarecrow represents the farmers that, you know, are not being benefited by this and the tin man I think represents all the workers that could no longer work, unemployment I think reached, God, I haven’t looked at it in a while, but at 18% at the time; I can’t remember all of the players names, but…
Jason:
That’s okay, neither can I.
Sara:
Sorry, but if you can go through it step by step and look at the different political figures of the time and at the end of the book, she’s wearing silver slippers, not gold slippers, and the idea is saying that the answer was right under our nose the whole time that adding silver to the gold standard would basically bring the value of the dollar back down and relive this pain that the country was feeling.
Jason:
Interesting. Fascinating stuff. What about the birth date paradox?
Sara:
Well, the birthday paradox and it’s called the birthday paradox, but it’s more of an intuitive, you know, surprising fact that if you’re in a room with 23 people, the chances are better than not that two of those people will have the same birthday and people are often surprised by this, because 23 people is not that many. There’s 365 days in the year, but the probability that you and I have the same birthday is 0.27% So, when people think about this problem they say, well, if there’s 22 other people in the room, the chances of them having the same birthday as me, anyone, is only 6%, but the truth is that there’s 253 pairs of people among 23 people and the chance that at least two of them have a matching birthday is 51% and if you have 75 people, the chances are 99.9%.
Jason:
Hmm, that’s interesting. So, it’s not because of some sort of commonality that people with common birthdays are drawn together somehow or anything like that.
Sara:
No, no.
Jason:
You’ve probably heard the studies about people’s names. I’ve always wondered about the impact
someone’s name has on their life. You know, disproportionate share of people named Dennis are Dentists. I mean, that’s just mind blowing and it is an amazingly disproportionate share.
Sara:
That’s right and there are a lot of trends certainly in names. I think Hillary and Chelsea are both most popular right after Bill Clinton came into office, so I think there are some trends in names that have to do with time periods and there are certainly..Freakonomics writes about the different types of demographics that use certain names, so there’s certainly something to that, but no the birthday paradox is totally separate. It’s just a statistical anomaly, if you will, I don’t know if that’s the right word, but just surprising information, but it certainly, I think it relates to investing as well, because I think there’s a lot of surprising things that sometimes people assign too much weight to, you know, sometimes people do well just by chance and we discount that and sort of hold them up on a pedestal when if you put a 1,000 traders in a room and they flip coin so many times, one of them is going to end up getting, I don’t know how many heads in a row, but an impressive number of heads in a row, you know, so I think that sometimes you have to say that it is just a statistical coincidence and not magic.
Jason:
Sara, I always liked to say, I rather be lucky than good any day of the week. Luck isn’t very reliable unfortunately, so we gotta just be good. Any other articles that you’ve done that you want to share just real quickly before we wrap up? You know, any really interesting stuff or stuff that you’re working on now, you know.
Sara:
Well, right now I’m doing something on vaccines that I’m trying to relate to economics and the free-rider problem with people not choosing not to vaccinate right now.
Jason:
Tell us about that.
Sara:
Well, I think that the free-rider problem in economics is basically that if people in a community are using a community benefit, but some people are not paying their fair share and the free-rider problems exists because it’s in everyone’s best interest to maybe do that, but it also creates this effect for more and more people free-ride and then the benefit disappears and I think that that’s getting close to happening with vaccines as it used to be that everybody vaccinated their children and so everybody was protected against these diseases and so now if I’m making the choice whether or not to vaccinate my child, I don’t have much risk of getting this disease or my child getting this disease, because everybody else is vaccinated, so I can free-ride on this herd immunity without paying the cost of whatever risks I think exist, you know, by taking that vaccine.
Jason:
Interesting. Yeah. People are getting so suspicious of vaccines. I’ve done several shows on that and that’s part of the problem with this, but yeah, that’s a complicated issue. The other complicated issue is the antibiotics, I mean, the bacteria and the germs are getting, they’re just overcoming it constantly and now it becomes a real decision doctor have to make of if we’re over prescribing these antibiotics, they’re just not going to work anymore. So, you let the person get sick or not recover or give them the antibiotic and make the germ stronger. It’s a real issue they’re facing around the world, so very interesting.
Sara, give out your information, where should people just find you. BusinessInsider.com, of course, you can search your name on the website and see all of your great content.
Sara:
Yeah, Business Insider videos, I’m all over there, but yeah, definitely BusinessInsider.com
Jason:
Excellent, Sara Silverstein, thank you so much for joining us today.
Sara:
Thank you so much for having me.
