[The following was copied and pasted from GPT-4 after I fed it a transcript of a 3 minute ramble I had recorded while walking just now and asked it to turn it into a 700 word blog in the style of Morgan Housel]
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In a world brimming with possibilities, we often hear the inspirational refrain - "You can do anything!" We're told that we're unique, and if we truly commit ourselves, we can achieve anything. It's a wonderful sentiment, grounded in truth, and it fuels our ambition to strive for greatness. Yet, in our quest for personal growth, it's equally crucial to have a keen understanding of reality, particularly regarding our situational contexts.
There is a concept in statistics called the 'base rate.' Simply put, it refers to the likelihood of an event occurring in a given population. For example, if we're looking at the success rate of start-ups, the base rate might tell us that a certain percentage of new businesses will still be operational after five years. This rate offers an 'average' or 'median' outcome, offering a glimpse into what tends to happen under usual circumstances.
Applying base rate thinking to our lives serves as a reality check. It reminds us that while we might feel special and capable of extraordinary things – and we very well could be – we are not immune to the statistical realities that apply to individuals in similar situations.
Now, don't get me wrong. I'm not suggesting that we diminish our aspirations or see ourselves as just another number in a vast sea of statistics. On the contrary, understanding the base rate of a particular situation can guide us in our decision-making process and help us make informed choices.
Consider Bayes' theorem, a principle in probability theory and statistics, which suggests that we should adjust our expectations based on new information. In essence, it nudges us to change our mind when the situation changes. If we only think deterministically – believing in fixed outcomes – we are at odds with our inherently probabilistic world, where outcomes are not set in stone but rather influenced by a myriad of variables.
Many situations in life reflect the pattern of a bell curve, a normal distribution where most outcomes cluster around the average. But others, especially in realms like wealth or viral popularity, follow a power-law distribution where a small number of cases account for the majority of the effect. Knowing where we are on these distributions can aid in setting realistic expectations.
Understanding base rates and adjusting our assumptions based on changing circumstances enables us to navigate life with a more grounded perspective. It's about embracing the fact that while we are unique, we are also part of a larger statistical reality. We are special, yes, but so is everyone else, each in their own unique way. Recognizing this interplay between individual uniqueness and collective statistics is not a deterrent to our aspirations but a compass that guides our journey.
Ultimately, the key lies in striking a balance between our individual potential and the wisdom gained from the experiences of those who have walked paths similar to ours. It involves recognizing our potential, understanding the statistical realities of our situation, and being open to changing course when new information warrants it.
This balance, this marriage of individual potential and statistical reality, can be our most reliable guide. It whispers to us that while we are indeed capable of anything, we must also remain grounded in the understanding that others have been in our shoes before, and there is much we can learn from their experiences. Remember, the world is vast, the possibilities are endless, but an understanding of base rates can be our trusty compass on this exciting journey called life.