Day 231: Drunk. Confusing. Numbers.

Yesterday I made the mistake of mentioning the stock market and received what felt like one million replies.

Some were abuse stating how I’m not supposed to do that (Ummm, OK) some asking questions and of course, I left you a cliff-hanger for Apple.

 Apple is currently priced for an institutional or experienced investor.

Who wants to own 1 or 2 shares of anything?

Apple does nothing by accident and they see the stock market going for a rough ride.

History shows a stock that’s $50 goes back to $100 four times faster than one at $200 trying to crawl back to $400 (range where AAPL trades).

It’s more psychology than anything else.

Apple wants a piece of the day traders and non-savvy traders entering.

The last four months have seen a consecutive record number of new trading accounts set up.

Amateurs.

That’s a reasonable example of the ultimate competitive advantage of seeing the entire playing field.

 Morale of story…

*Please consider my elementary level of intelligence*

Apple isn’t suddenly a great buy because you can own four times as many shares.

But maybe it is?

Do your homework and never invest in something you do not understand.

INVEST IN YOUR OWN BUSINESS AND TEAM.

Anyhoo…

Your ONE COACHING THING Today Is:

‘The Mental Model: Base Rate Fallacy’

I’ve been studying finance, accounting, and essentially MATH for the last few years.

Doesn’t come naturally in any way but it’s of critical importance if you want to be uber-successful in business… that’s where this one comes from.

‘Mental Models‘… is something else I’m passionate about.

Today’s ONE COACHING THING brings those two together.

A ‘Base Rate’ is the probability of an occurrence (event) when no new facts or specific information is made available.

The primary function is to provide a percentage chance something will happen (or not happen) if nothing new or exciting happens that would affect the outcome.

Base rate fallacy refers to our tendency to ignore facts and probability…

Instead, we focus on new, exciting, and immediately available information.

Base rates are the single most useful number you can use when trying to predict an outcome.

Most business owners get this horrifically wrong.

Example 1:

Let’s assume 1% of the population gets virus X (not ‘the virus’ but virus X so I can save you from Base Rate Fallacy, before we start, thanks to your lovely, accurate, ethical, media that’s immediately available).

Other facts that are critical is that the test is 80% accurate. It detects ppl with virus X 100% of the time but provides a false positive at a 20% rate.

Let’s assume you get tested for virus X and it comes back positive.

What are the odds that you actually have it?

I assume you said 80% (like I would have done prior to understanding this Mental Model) but that’s wrong and you suffer from Base Rate Fallacy.

If you’re not a mathematician… you said 80%.

The Base Rate for virus X was 1%.

That’s where you start and the other facts (the positive test) go up from there.

Likely landing you at about 5% chance of being positive despite your results.

Example 2:

One in a thousand people are driving drunk and one thousand people are pulled over and breath tested.

A police officer takes one thousand random breath tests on the side of the road.

The test provides a false positive 5% of the time but with 100% effectiveness, they test positive when someone is actually over the legal limit.

A random driver gets pulled over for no particular reason and blows… tests positive.

What are the chances he/she is actually over the limit?

You likely answered 95% like everyone else did.

The correct probability is about 2%.

*1 driver is drunk (1 in 1000) and there would have been 49 false positives (5%).

Therefore, the probability that one of the drivers is among the 1 + 49.95= 50.95 positive results really are drunk… is 1 / 50.95 = .019627

Don’t worry, even I’m confused…. just know that most peoples ‘assumptions’ are horrifically wrong.

*When a woman gets interviewed and says “I got the virus while pregnant after months in strict isolation, my case remains a medical mystery.”

I want you to guess what actually happened.

But it makes a great headline to freak everyone out, get ratings, and to sell advertising….

Why in the world am I explaining all this to you…

80% of businesses fail… they need your help and they NEED you to help them with their Base Rate Fallacy.

The numbers they’re using for their marketing, financial decisions, pricing, and direction of their company are ridiculous and not serving them on any level.

Be their voice of reason…

And the above is part of why it’s so easy to find any business owner $100,000 in 45 minutes without them having to spend an extra dollar on marketing or advertising.

And if the above examples sound crazy and you want a better explanation of Base Rate Fallacy, go here:

https://en.wikipedia.org/wiki/Base_rate

You heard it here first.

Kinda.

*I need some prayers for my second Mom. She is an AMAZING woman that was there for me when I needed someone to be there for me.

Obsessed with your business coaching success,

Karl Bryan aka King Karl

PS. My Grandfather has the heart of a lion… and a lifetime ban from the zoo.

PPS. If you’re looking for a proven system to follow for your coaching…. I created business coaching software and high-end step by step training to support it…

It’ll teach you ‘How to find any small business owner $100,000 in 45 minutes without them spending an extra dollar on marketing or advertising.’

Imagine finding your annual $12,000 to $50,000 coaching fees BEFORE you started coaching your new clients?!  And a proven coaching system created for you to follow with your new coaching client.

Reply to this post if you want to start following a proven coaching system.

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