Paul and Randomness

I have been a great devotee of Paul the Octopus, and cannot wait to invest in the company that buys him out and starts a predict-your-future gig. He's had 8 consecutively correct predictions, and I was sold by the time the 3rd one rolled in. I truly feel that he's got something going.

This reminds me of an anecdote Taleb relates in Fooled by Randomness. (paraphrasing) A smart scamster takes 10,000 envelopes on Dec 15th, and fills 5000 of them with this message: "Greetings! We have a fantastic new stock market predicting technique, and we think you'd be interested. But you needn't believe us. We'll send you one prediction a month, and you can call us when you get interested. We claim that by Jan 31, the stock market would have gone UP from its Jan 1 level". The other 5000 have the exact same message, except that it says the market would go DOWN by Jan 31. The envelopes are then sent out all across the country, with some simple measures to minimize chances of some of the 10000 people knowing each other.

By Jan 31, 5000 people would have received a correct 'prediction'. Our chap then writes a more confident message, and tells 2500 of them that the market would be "EVEN higher by Feb 28!". To the other 2500, he writes "BUT THIS TIME, the market's going to go down!". Come Mar 1, 2500 people would have received two consecutive correct predictions with an increasingly confident pitch.

It wouldn't take people more than 5-6 months to start believing something is seriously on. The crucial part in this, as well as with Paul, is that these planned events are intertwined with everyday life, and not perceived as clearly laid-out thought experiments. One prediction would have made someone want to "try it out", and when it worked, it would have resulted in a whole chain of events in his life. A little more confidence the next time, and even higher rewards. 

As Jean Cocteau once said, "We must believe in luck. For how else can we explain the success of those we don't like?"

:-)
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