Pirate's kiss (1) - probability

Pirate Kiss, Think
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Note: The main content is first written in Chinese, with the English translation following below.

Chinese Version

我打算写一系列的文章来记录我是如何在生活中应用 Pirate's kiss 这个理论的. 内容会涉及概率论, Gambling, 扑克, 交易, 投资等等.

什么是 Pirate’s kiss?

这个词要分开理解.

首先我们先理解kiss, 这里指KISS原则, 在英语里是Keep It Simple, Stupid, 当然我倾向于KISS = Keep It Stupid Simple.

KISS原则类似于奥卡姆剃刀, 就是尽量用简单的方式解决问题, 不仅仅是不要over kill, 而是要尽量的简单, Stupid Simple的那种简单.

然后是Pirate, 在这里指海盗精神, 就是不随大流, 不墨守成规, 有自己的思想, 知行合一, 在一些关键问题上, 不会轻易接受主流认知, 总是先质疑, 然后验证, 最后才是决定是否接受.

比如:

  1. 金融市场是有效的, 价格是当前所有信息综合起来的表现, 不存在套利机会
  2. 在二级市场里个人是无法战胜机构, 基金经理无法战胜指数
  3. 只要在X时候买入A股票长期看来能盈利
  4. 只要找到X指标, 交易就能盈利
  5. 有钱人都坏, 我变坏了也能赚到钱

所以Pirate's kiss原则就是, 当看到上述这些论点时:

  1. 第一个反应就是这是bullshit, 然后用KISS原则简单快速证明这是bullshit
  2. 如何不能快速证明是bullshit, 那就逐步增加验证的复杂度, 最终决定是否接受/拒接这个观点
  3. 在这个过程中往往能在某些方面获得一些优势

概率101

现在让我们先了结一些概率基础知识这个是我们讨论更深问题的基础.

概率论有很多知识, 但是我们先理解期望(EV)和大数定律即可.

至于方差, 尾部效应, 贝叶斯, 凯利公式, 胜率, 赔率, 盈亏比, 抽水率等等概念, 等到我写的内容需要这些知识的的时候我再写.

当然在这一系列文章里我会尽量避免使用数学公式, 我会从实用的角度来定义和解释这些概念, 这也符合Pirate's kiss的精神.

未完待续…

English version

I plan to write a series of articles to share how I use the Pirate’s Kiss idea in my life. The topics will include probability theory, gambling, poker, trading, investing, and more.

What is Pirate’s Kiss?

This term should be understood by looking at each part.

First, let’s look at kiss. Here, it means the KISS principle. In English, this stands for “Keep It Simple, Stupid.” Personally, I prefer to say KISS = Keep It Stupid Simple.

The KISS principle is similar to Occam’s Razor. It means you should try to solve problems in a simple way, not just avoid making things too complex, but make them really, really simple. "Stupid Simple" means as simple as possible.

Next is Pirate. Here, it means the pirate spirit, which is: not following the crowd, not sticking to old rules, and having your own way of thinking. You do what you believe. When facing important questions, do not easily accept what most people believe. Always question first, then test and check, and only then decide whether to accept an idea.

For example:

  1. Financial markets are efficient. The prices reflect all the information, so there are no chances for arbitrage.
  2. In the secondary market, individuals cannot beat big institutions, and fund managers cannot beat the index.
  3. If you buy stock A at time X, you will make money in the long run.
  4. If you find indicator X, you can always trade for a profit.
  5. All rich people are bad, so if I become bad too, I can make money.

So, the Pirate’s Kiss principle is: When you see ideas like these,

  1. The first reaction is, “This is bullshit.” Then, use the KISS principle to quickly and simply prove that it is bullshit.
  2. If you cannot prove it quickly, then make your test a little more complex step by step, and finally decide if you should accept or reject the idea.
  3. In this process, you can often get some advantage in some areas.

Probability 101

Let’s first go over some basic ideas about probability. This will help us talk about deeper topics later.

There are many things to learn in probability, but for now, we just need to understand EV(expected value) and the Law of Large Numbers.

As for concepts like variance, tail risk, Bayes’ rule, Kelly formula, win rate, odds, risk-reward ratio, and Bookmaker Margin, I will explain them later when we actually need them.

Also, in this series of articles, I will try not to use math formulas. I will define and explain these ideas from a practical point of view. This also matches the spirit of Pirate’s Kiss.

To be continued…