Phishing for Phoolish Mistake
I have been reading Phishing for Phools and found a mathematical error in the book. In footnote 10 of chapter 1, the authors gives out an interesting stat- 2.5% bankruptcy rate every two years. They then go on to say that there is a 62.5% chance that an average American will go bankrupt in his adult lifetime. They go on to say that if those who file one bankruptcy, go on to file for bankruptcy two more times, then the precent of people filing for at least one bankruptcy would be 20% in their life times. There are two main faults to this statement. The first is that this statement is mathematically incorrect! The life expectancy of an average American is 78 years. An adult is anyone over 18 years. So the adult lifetime would be 60 years. The probability of an event happening in the next y years given p, the probability of it happening in any given year is 1-(1-p)^y. The simple logic can be explained by the similar probability problem for the 100 year flood . The probability of so...