Ninety-Nine Heads

On the topic of academia vs intuition of real people, Taleb has a funny, but illuminating story. It goes like this:

You toss a fair coin 99 times and it comes up heads every time. What is the chance of heads on the next toss?

If you ask a normal person this question, they will answer that the next toss will be heads.

Thats when the academic Dr.John comes it. He shakes his head and says "No, no. Coin tosses are independent events. The next coin toss is not dependent on what happenend before. And since its a fair coin, the next toss still has a 50 % chance of heads"

Then Fat Tony walks in. In Taleb's literature, Fat Tony represents a street-smart person who runs on an intuition based on his experiences. Fat Tony listens to the question, concludes that he has been lied to that the coin is fair, concludes that the coin is actually rigged and answers that the next toss will be heads.

So who is right?

If the above situation actually happened in real life, it is an extremely tiny, tiny chance of a fair coin coming heads 99 times in a row. You can safely believe that something is wrong with the coin and the next toss will indeed be heads.

What the story illustrates is the difference between academic thinking and common sense intuition. The academic creates a model and then falls in love with the model. When something strange seems to be going on, they fall back on the model's answer rather than questioning whether the model is broken.

Fat Tony and the common man might not be that sophisticated, but they recognise when things are broken and act accordingly.

I'll admit it. The first time I read this story, I was the academic.