You must already be aware of the concept of probability, aren’t you? Well, probability is a vital mathematical concept which refers to the likelihood of the occurrence of an event. While most people relate probability to mathematical formulas, it actually applies in all areas of life, including weather forecasting, investing, and much more. So, here we are going to talk about how probability influences various aspects of daily life. We will also talk to you about Ajay Srinivasan’s take on the matter.
The importance of probability in our daily lives
Probability has a big role to play in various real-life scenarios. It helps in predicting the likelihood of an event. This enhances the quality of life because we are able to make better decisions. We are also able to prepare ourselves for what might happen in the upcoming days. According to Ajay Srinivasan, the former CEO of Aditya Birla Capital, we often think of probability as a classroom subject. However, in reality, probability shapes almost every choice we make.
The most interesting thing is how our minds misinterpret odds, leading to biases that behavioural economists have been studying for decades. Behavioural economics reminds us that humans are not natural statisticians. We overweight rare events, underweight common ones, and let emotions cloud our judgment.
Various instances of probability in daily lives
Now, we are going to talk about some of the instances where probability is actually used in our daily lives:
Weather forecasting:
Weather forecasting is one of the most common real-life examples of probability. Probability can be used by weather forecasters to determine how likely it is that there will be rain, snow, clouds, etc., on a given day in a certain area. That way, people can stay prepared for what they are about to experience. Weather forecasting also ensures that the necessary steps can be taken so that weather changes do not bring about significant damage to life and property.
Sports betting:
Probability is used quite heavily in the sports betting industry to determine the odds of certain teams winning certain matches. Sports betting companies mainly look at the track records of teams and determine which team has a better probability of winning. Based on these probabilities, companies offer higher pay outs to people who bet on the team that has lower chances of winning.
Politics:
Political forecasters make use of probability to predict the chances that certain candidates will win in an election. This is again a vital aspect of probability. It gives the idea to the voters how likely a particular candidate will win. Based on that, they can make their decision.
Digital Technology:
According to Ajay Srinivasan, probability also has a big role to play in the world of digital technology. From the predictive text on your phone to the ads you see online, algorithms use probability to guess what you’re likely to type or be interested in, based on a vast amount of data.
Sales forecasting:
A lot of retail companies make use of probability in order to predict the chances that they will sell a certain amount of goods in a day, week, or month. This allows the companies to predict how much inventory they are going to require. This helps in preventing overstocking or understocking of products. The company’s revenue generation also increases significantly.
Health insurance:
Health insurance companies make use of probability to determine how likely a particular individual is to make a claim. Every year, the companies make use of factors like existing medical conditions, current health insurance status, etc., to determine the probability of healthcare claims likely. The individuals who are more likely to make claims will be charged higher premiums because the companies know that they will bring more expenses to the company.
Natural disasters:
The environmental departments of various countries make use of probability to determine the likelihood of the occurrence of natural disasters like hurricanes, tornadoes, earthquakes, etc. In case the probability is high, then the department will make decisions on resource allocation, housing, etc., that will minimise the effects done by the natural disaster.
Investing:
Investors make use of probability to determine how likely a particular investment is to be profitable. Based on that, they will determine how much of their net worth to invest in the stock. The more accurately the investors make their decisions, the greater will be their chances of getting a good return from their stocks. This will help them enhance the profit from their investments.
Queue Lengths:
Ajay Srinivasan has also talked about the relevance of probability in daily matters such as queue lengths. Ever notice how the line you switch to in a supermarket or immigration queue often moves more slowly, he says? That’s probability. With multiple queues, the chance of picking the fastest one is less than 1 divided by the number of lines. Statistically, you’re more likely to land in a slower queue.
Parting Thoughts
As Ajay Srinivasan has explained, probability does have a very important role to play in our daily lives. It directly influences the various decisions that we take on a daily basis. By having a better understanding of probability, we can make more informed decisions. We can also save ourselves from becoming victims of any unfavourable conditions.