Probabilities do not matter, payoffs do. Careful readers of Nasseem Nicholas Taleb would recognise this phrase immediately. In this election season, investors seem to be constantly looking for ways to see the future. But how many understand the difference between probabilities and payoffs?
I came across a perfect explanation of this in an overheard conversation between two people who seemed to be discussing betting on the IPL. I think this was when the tournament had just begun. One ask ..
