Let’s start with a small riddle.
A man, probably a statistician, believes that his next child will be a girl since his wife has already borne him three sons.
Do you find his argument convincing?
The argument intuitively doesn’t feel right. Isn’t it? But why?
We’ll circle back to this puzzle but before that let me indulge you in another interesting thought experiment.
Imagine yourself as a spectator in a coin flipping tournament. You notice that in one of the plays, the coin has landed on heads for 5 consecutive flips. If you were given an opportunity to bet on the next flip, would you bet on heads or tails?
I know you’re a value investor and don’t believe in speculating or gambling away your hard earned money on frivolous coin flipping tournaments, but this being a thought experiment I would request you to play along.
So what’s your answer?
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