Flipping Out
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Flipping Out
Think a coin toss has a 50-50 chance? Think again.
Posted Tuesday, July 28, 2009 - 1:32pm
This is adapted from David E. Adler's book Snap Judgment, published this month by FT Press.
Coin tosses are a classic metaphor in economics for randomness. For instance, in his book about market efficiency, A Random Walk Down Wall Street, economist Burton Malkiel compares the price movements of the stock market to the random outcome of a flipped coin: "[S]ometimes one gets positive price changes for several days in a row; but sometimes when you are flipping a coin you also get a long string of ‘heads' in a row." According to Malkiel, mathematicians' terms for the sequences of numbers produced by any random process—in this case a coin flip—is known as a random walk. To him, this is exactly what stock price movements look like; hence the title of his book.
Similarly, Nassim Taleb, in Fooled by Randomness, points out that the seemingly amazing success of money managers at beating the market is often best explained by pure chance. Randomness alone could easily explain why any one manager could do well for several years in a row. Instead, people misperceive patterns in what are, in fact, purely random sequences, akin to the outcomes of a coin flip. And as everyone knows, coin flips produce "heads and tails with 50% odds each."
Lately, the idea of randomness in stock market prices has come under attack; prices for individual stocks (but not the market on the whole) often show small momentum effects: Stocks that go up tend to keep going up, and stocks that are going down tend to keep going down. But the metaphor of a coin flip for randomness remains unquestioned. We use coin tosses to settle disputes and decide outcomes because we believe they are unbiased with 50-50 odds.
Yet recent research into coin flips has discovered that the laws of mechanics determine the outcome of coin tosses: The startling finding is they aren't random. Instead, for natural flips, the chance of a coin coming up on the same side as it started is about 51 percent. Heads facing up predicts heads; tails facing up predicts tails.
Three academics—Persi Diaconis, Susan Holmes, and Richard Montgomery—through vigorous analysis made an interesting discovery at Stanford University. As they note in their published results, "Dynamical Bias in the Coin Toss," laws of mechanics govern coin flips, meaning, "their flight is determined by their initial conditions."
Photograph of a coin toss by Anyka/Shutterstock.
Comments
True "Randomness" is only a theoretical construct
All of this nonsense over something that only exists in theory anyway! The notion of a truly "random" process has caused problems at the very foundations of Quantum Mechanics. The completely "Random" nuclear decay used to illustrate Shrodinger's Cat "wave function" does not exist in reality. Radioactive decay has been shown to be non-random. In fact, the entire idea of true "randomness" is archaic and an artificial construct that exists only in our puny minds.
Why take my word for it? Go to the Princeton website where approximately 64 "true" random number generators spread out over the entire globe have been behaving very non-randomly for over a decade:
http://noosphere.princeton.edu/
If the link is wiped, it is noosphere.princeton.edu
This problem is making experimental physicists, economists, etc. a bit nervous, but they will never admit it because the prevailing dogma is that all events and positions in space and time are unconnected. This is a Newtonian fallacy.
Now where are we going to get truly "random" numbers from? And why is it important? Do a little research before
How does the coin know if it is a head?
I suspect flawed research! A truly honest coin, with a truly honest toss/flip would show no bias. If you read Taleb he does not believe in a random market, but in a market that is non-Gaussian. A Guassian probability distribution could account for a whole lot of coin tosses coming up heads instead of tales (easily within one sigma)! Sounds like milk-a grant-dry research. I grasped from Taleb's books, his acknowledgment in the differences of physics (tossing coins) and mathematical eloquence (theory), and not a probability calculation of market dynamics. Taleb poked fun of Quants.
Flipping Out
I would really like to know how much money was spent on this rediculous experiment. The people who conducted this xperiment just aren't very smart. If you build a machine to perform a function exactly the same way everytime the outcome should be the same everytime. If it doesn't come out the same everytime then you didn't build a very good machine. Thats part of the reason why we build machines for automation. A major component of the randomness of the coin flip is the less than perfect repeatibility of the human flipping the coin. Do the experiment the right way with several humans flipping the coin multiple times and you will find a 50-50 randomness.
Flawed Theory
That theory is a good one but seriously flawed because:
1.Typicaly a fllipped coin starts from one hand and lands in the same hand, then its flipped on top of the other hand. So even if it lands on the same side, that last flip is bound to cause a problem if you chose the side it started on.
2.In sports coins are typically flipped but are not caught so now distance of the coin comes into play. For the above theory to work it has to be the same distance coming down as going up but if the coin is just left to hit the ground, amount of flips will vary due to distance.
3.Some people dont flip, they toss. In that scenario, the coin rotates at a slower pace (if at all) and has a different probability to land on the same side it started. Furthermore, number one and two are now more of a factor because the randomness of the coin has already been increased.
Sometimes I sit and think about what would make a lot of things better but then I realize that so many people do it the way they do it because the theories of making them better has already been tested and deemed unsuitable. They been using the coin toss/flip for so long and there's a reason why they still do. Why try to disprove the usefulness and/or validity of the practice? Come on Stanford - the cure for Cancer has yet to be discovered.
Sad....sad....sad.....
C'mon folks...have you not seen what this article is truly about? It's not about being able to predict some market phenomenon it's about hand eye coordination. Ted Williams once said he could see the laces of the ball as he hit it...he wasn't lying. Some people have the ability to physically see things others can't. The fact that an entire association of people (MLB) can see a sphere traveling at 100mph and are able to hit it square on axis with a stick is a pretty incredible feat, but I think there are 1000 people in major league baseball? And that's just those who have made it to the big leagues. Granted it's not a common talent but there are people who can do it.
So why is it so unbelievable that a "professional magician" can initiate a coin flip and stop the coin on the desired coin face....he used to doing this for a living folks....this study shows nothing about the lack of randomness of a coin flip.
Flipping out stock picks?
I'll take my chances with Due Diligence before I take a gamble with a flipped coins decision. If you're on the fence that much about making the decision then maybe you shouldn't be investing, if that is your investment tool. I'll stick with my pick of HGUE instead of heads or tails.
Really?
Have we become this bored, pathetic etc..? Oh, and 51% "research" what is going on with this country!!??!
Flip heads 95%
I believe the study. I've been with my wife for 8 years and sometimes flip coins to settle a dispute. My wife stopped accepting that as a way to settle things, because i was able to flip to my advantage about 95% of the time. I know because of we tested that theory. I didn't look at what side i was flipping from but I flipped the coin "heads" 95 out of 100 times. It's freaky.
random coin toss
The statement of the random result of the coin toss is inaccurate: the center of gravity of the coin is not exactly in the middle of the coin. Therefore, coin will tend to fall in the way to position the center of gravity dawn.
Ridiculous research
It is quite obvious that if we as humans had the ability to precisely control the spin of a coin the outcome could always be controlled. The outcome of all world events could be predicted if we had the ability to calculate all the variables. We assign the word "Random" when we don't fully understand the mechanics of specific outcomes.