Thread by @blackhatwizardd

Quick thread on understanding statistics even if you're a complete idiot

Basically the most useful math in business

READ

THREAD

These are annual returns of the stock market

They are NORMALLY DISTRIBUTED around 7%

Meaning *most of the time* you get 7%

But *sometimes* you get -30%, +36%, +50%, doesn't matter

What it means is IN THE LONG RUN your returns will BE DISTRIBUTED AT ABOUT 7%

68.3% of the time your return will be between +1 and -1 STANDARD DEVIATIONS

95.5% of the time your returns will be between +2 and -2 STANDARD DEVIATIONS

Crazy shit happens. Crazy bull markets, crazy bear markets. You will always evenly distribute

BUT WAIT. THIS APPLIES TO SO MUCH MORE

MOST of the time your cold email campaigns might distribute around 15% reply rate

But SOMETIMES you'll get 30%

And SOMETIMES you'll get 5%

It's just the distribution of eventualities

You use Tinder sometimes you get 75 matches in a month sometimes you get 25

But in the long run you're a dude who gets about 50

Sometimes you might get 5

Sometimes you might get 100

But you're still a dude who gets 50

Quick note on STATISTICAL SIGNIFICANCE

Not gonna get too deep into this but say you make a cold email campaign with 30 people in it and you get 5% reply rate

"Oh that's a bad campaign"

NO

YOU DON'T KNOW THAT YET

THE SAMPLE SIZE ISN'T BIG ENOUGH

Your reply rate is going to normally distribute around some number but it just so happened in this instance you were -2 standard deviations from the normal

You need more data

It WILL evenly distribute around some number