« FDA endorses masking placebos as proven drugs as a get-rich-quick scheme | Main | The most cited and most butchered statistical law »


Feed You can follow this conversation by subscribing to the comment feed for this post.


...and yes, that's a reference to a Dominican beer.


Well, it depends on how many coins you started off with. If we started off with some very, very, very large number of coins (to Gelman's point, an impossible number), it would not be unusual that we'd get one fair coin that landed heads 1,000,000 times in a row.

But we can easily move this problem into the space of the possible. If we look at how advisory (not index) mutual funds are marketed, a strategy is to start a large number of funds with small seed money. Some strategies will perform well, possibly by accident. These get heavily promoted and the rest get quietly folded.

We're told that the fund has a glowing track record (for instance, it has always gone up -- the equivalent in this space of always coming up heads) but not given full information about the sampling space.

So, the best conclusion in these situations isn't that those who run the fund are geniuses for having a run of X excellent years, but people who've flipped a whole bunch of coins and will return to coin-flip accuracy as soon as you invest in the fund.

(I note the sum of coin flips is a random walk, and there's a whole literature on stock prices as random walks)


The example seems related to Gambler's fallacy http://en.wikipedia.org/wiki/Gambler%27s_fallacy

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.


Post a comment

Marketing and advertising analytics expert. Author and Speaker. Currently at Vimeo and NYU. See my full bio.

Next Events

Mar: 26 Agilone Webinar "How to Build Data Driven Marketing Teams"

Apr: 4 Analytically Speaking Webcast, by JMP, with Alberto Cairo

May: 19-21 Midwest Biopharmaceutical Statistics Workshop, Muncie, IN

May: 25-28 Statistical Society of Canada Conference, Toronto

June: 16-19 Predictive Analytics World (Keynote), Chicago

Past Events

Feb: 27 Data-Driven Marketing Summit by Agilone, San Francisco

Dec: 12 Brand Innovators Big Data Event

Nov: 20 NC State Invited Big Data Seminar

Nov 5: Social Media Today Webinar

Nov: 1 LISA Conference

Oct: 29 NYU Coles Science Center

Oct: 9 Princeton Tech Meetup

Oct: 8 NYU Bookstore, NYC


Jul: 30 BIG Frontier, Chicago

May: 30 Book Expo, NYC

Apr: 4 New York Public Library Labs and Leaders in Software and Art Data Viz Panel, NYC

Mar: 22 INFORMS NY Student-Practitioner Forum on Analytics, NYC

Oct: 19 Predictive Analytics World, NYC

Jul: 30 JSM, Miami

Junk Charts Blog

Link to junkcharts

Graphics design by Amanda Lee


  • only in Big Data