The Power and Beauty of the Insightful Statistical Prediction

Hans Rosling [1] have for some years now inspired me and many others in his enchanting way of presenting statistics and future prediction. This talk, describing the rise of Asia as the dominant force in the world is his best ever:

http://www.ted.com/talks/hans_rosling_asia_s_rise_how_and_when.html

Look at his humble intro and natural approach throughout.
Look at the elegant way of using dynamics in the graph to prove the prediction.
Look at how well he matches and lifts his audience and their final reaction to his presentation.

Great people project great ideas.




[1] http://www.gapminder.org/

Violence in Decline

In contrast to popular opinion, violence in the world has been continually declining since biblical times to the present. This continual decline correlates strongly with the gathering of societies in centralized states and democracies and in parallell to the increase in reason and technology. Especially, the 16th century - the start of the age of reason - marked the start of a unprecedented drop in violoence and rates of deaths in war.


See this great TED conference lecture by Steven Pinker for the whole inpiring story (see this to read the whole lecture). Enjoy!

According to Pinker, several theories have been noted to explain the effect. All of these have some truth to them I am sure:

1. "Hobbes got it right" - In a state of anarchy, there's a constant temptation to invade your neighbors pre-emptively, before they invade you. A centralized state this is not such a great problem.
   
2. "Life is cheap" - "When suffering & early death are common in one's own life, one has fewer compunctions about inflicting them on other. Technology and economic efficiency make life longer and more pleasant, one puts a higher value on life in general"
3. "The non-zero sum game" - "..in certain circumstances, cooperation or non-violence can benefit both parties in an interaction, such as gains in trade"
4. "The Expanding Circle" -Evolution bequeathed us with a sense of empathy. By default, we apply it only to friends & family, over history, the circle has expanded:
   -village->clan->tribe->nation->other races->both sexes.

Principle of Universal Options

Whatever the challenge, field or situation, there are options to invest in to hedge risk and unceirtainty.



This is a rather bold assertion, but I believe it to be very true. Some examples:

Stock market: Options and other derivatives.
Commodity and currency markets: Hedging or futures.
Business and personal economy: Insurance, portfolio management,
Personal health: Excercise, healthy food, vacations
Personal Career: Education, training, parallell ventures
Project Management: Real Options, Risk and change management
Engineering: Modularity, flexibility
Medicine and psychology: Alternative treatment forms

My note to self? Whatever the challenge, there will be heging possibilities that for a limited cost will reduce the risk we are facing.

90-9-1 Community!

As described here before [1], power laws are very potent at describing many type of phenomena. Latest principle is the 90-9-1 principle of online communities [2].

The concept is simple. In an online community, 1 percent are creators of content, 9 percent are editors of content and the remaining 90 percent are just the curious audience watching. The phenomenal thing is that this rule seems to be proportional, so that getting more creators to a site, increases the editors and the audience.


My bet is that many users act in different roles depending on the site they use, but that there is a small minority of heroes out there that generates most of the community content - and hence drives the traffic.


[1] The Vital Few or the Trivial Many?
[2] 90-9-1 Principle

The Vital Few or the Trivial Many?

When the Pareto Principle [1] was popularized within business and engineering in the 1940s by Dr. Joseph Juran, he called his theory "The Vital Few and the Trivial Many" [3] : A few vital inputs produce most of the results. For many years now that has been how we are taught to prioritize ideas and activities in business. However, thanks to the Internet, the Pareto Principle is being falsified [4] in various domains.
The insight comes from power law theory [2]. As one can see in the figure to the right (from wikipedia) , a power law distribution can be split into a vital few (the green area) and the trivial many (the yellow). What is happening for many products and services sold via the Internet is that demand is shifting down the tail - making the tail fatter and the head slimmer! According to [5] there are 3 reasons for this:

1. Cost of production of many products from music and books to Internet services is falling, thereby creating more available products in the tail.
2. Cost of inventory and distribution is falling though JIT production, digital content and application hosting. The marginal cost of one more product ore product feature in the inventory is extremely small, making it profitable for low volume sales of one item.
3. The Internet and it's search engines and communities are creating new ways for consumers and businesses to find more specialized products and solutions that fit their exact tastes and needs.
   

This insight is rather extraordinary because it shows that lucrative business opportunities exist where there was said to be none. Furthermore, there are signs that the profit margin is larger and the competition smaller at the tail per unit than at the head. Sounds like faster money to me!

[1] The Pareto Principle
[2] Power Laws and Long Tails
[3] The Vital Few and the Trivial Many (external)
[4] Falsifiability (external)
[5] The Long tail (exteral)

The Pareto Principle - After 101 Years

The Pareto Principle or the 80/20 [1] rule as it has often been called, was first noted in 1906 by economist Wilfredo Pareto while he was studying the wealth distributions of people. Apparently, 80% of a nations wealth was in the early 1900s controlled by 20% of the population. Since then, the Principle has been popularized in management theory and is applied in all sorts of domains. Take for instance blog entries such as this [3].

It seems that 100 years later the relationship has become even more differentiated. According to [2] 10% of the worlds population control 85% of the wealth. Hence, if Pareto had lived today, the Pareto principle would have been called the 85/10 rule.

[1] Pareto Principle - an explanation of the Pareto principle and further reads.

[2] UN study of the wealth distribution in the world - ppt of some very interesting figures.

[3] Notes to Self blog entry about 80/20 in your daily life

The Spooky Explanation for Pretty Girls

According to [1], beautiful parents are 36 percent more likely to have a daughter than a son. Hence, beautiful women are easier to find than attractive men. The hypothesized reason for this statistical result is that "evolutionarily speaking, beauty is a trait that is more valuable for women than for men". Selection pressure hence gives the beautiful parents pretty girls.

Similar results apply to parents working in "empathic" occupations such as nurses, social workers and kindergarten teachers. On the other hand scientists, mathematicians and engineers are more likely to have sons than daughters.

Did anyone say politically incorrect?

[1] Why Do Beautiful Women Sometimes Marry Unattractive Men?