May 04 1 Response

What A Coin Flip Can Teach You About Expected Value vs Probability

For whatever reason, it took me forever to understand the difference between probability and expected value. I searched the web high and low, and as far as I could tell, there wasn’t a good explanation to be found. I spent way too much time trying to wrap my head around the concepts, and I hope my explanation below will shortcut the process for you.

First, let’s start off with some quick definitions:

Probability measures how certain we are a particular event will happen in a specific instance.

Expected Value represents the average outcome of a series of random events with identical odds being repeated over a long period of time.

Take a coin flip. Every time a coin is flipped, the probability of it landing on either heads or tails is 50%. To determine the expected value, we have to apply some numbers to the outcomes.

In a scenario where every time the coin comes up heads, you win $2, and every time the coin comes up tails, you pay $1, your expected value is $0.50 per flip. That is, if you flipped the coin twice, one time it will come up tails and you’ll pay $1 and one time it will come up heads and you’ll get paid $2. So after two coin flips, you have made $1 ($2 – $1) or $0.50 per flip.

Of course, we all know if you only flip a coin twice, you could easily end up with heads twice or tails twice. Fortunately, we can use math to show us the probability of a particular outcome occurring. If we wanted to know the probability of flipping a coin twice and heads coming up at least once, we would apply this formula:

1 – (number of non-desired outcomes divided by total number of possible outcomes) ^n where n is the number of times a particular event is being repeated.
For the above example of a coin being flipped twice, it would be 1 – (1/2)^2 or 75%.

  • 25% of the time, you lose twice, Tails/Tails
  • 25% of the time, you win twice, Heads/Heads
  • 50% of the time, you win once Tails/Heads or Heads/Tails

Now, read the above again, and realize, it has NOTHING AT ALL TO DO WITH EXPECTED VALUE. It’s a straw man argument to try and correlate the two different concepts. It’s impossible to win $0.50 on any flip (you either win $2 or lose $1), and 25% of the time you won’t win anything at all. It is easy to associate the two concepts with each other, but don’t. You need probability to get expected value, but that’s it. There are no more math principals to imply. Here’s another example:

A Weather Example
Take a 5-Day Weather forecast where there is a 20% chance of rain every day. The probability of it raining at all during those 5 days is 1 – (4/5)^5 or 67%. Every day, there is 1 outcome we want, rain (20%) and 4 outcomes we don’t want, no rain (80%). That’s where the 4/5 comes from. And 5 represents the number of days we are repeating this particular event.

So if we were gambling, how should we look at the outcome? Should we focus on the 67% of rain over the course of 5 days or the 20% chance of rain each day? It depends completely on what the bet is. “Will It Rain This Week” is a very different bet than “Will It Rain Today”.

In “Will It Rain Today” bet, if we have $5 to wager, and we spread it out over the week, betting $1 every day for it to rain against $5 that it doesn’t, the expected value is $0.20 per day. On the day it rains you’ll win $5, and on the four days it doesn’t, you lose $4. That means every day, you’re expected value is: $0.20.

The “Will It Rain This Week Bet” is a completely different bet with completely different odds, and you’ll do nothing but confuse yourself if you look for links between the two bets. In this instance, we bet $5 against $5 as a one time bet and our expected value is $1.67 (2/3 of the time you win $5; 1/3 of the time you lose $5).

Using the rule of large numbers, over a long enough period of time with the above odds, we will definitely make money or in gambling terms have a positive expected value (EV+). This is the basic principle that keeps the lights on in Las Vegas; only it’s the house with with EV+ where you, the gambler, will have an EV-.

Expected Value (EV) gives you the expected return on a single event and cannot be correlated to several events, that’s not what it does. In the “Will It Rain Today” example above, your EV is $0.20 on every bet. It is the same on the next bet and the next one. If the chance of rain were 20% on three days, your expected value on those days is still, $0.20. It is not an additive principal. If the, Probability of a specific event changes, your Expected Value will also change – and this is the only time it will change.

Just because you have a 1/5 chance over 5 days does not mean an event will happen. In fact, we can show definitely, it will only happen 2/3 of the time. On the other hand, there will be weeks where it will rain multiple times as well. Over the long run, you can expect it to rain 1 out of every 5 days, but you can never say with certainty when that 1 day will come. There will be stretches of no rain and stretches of rain. Over time, though, there will be a regression to the mean. This is why you can bank on making 20 cents every day. This is expected value.

Probability of Ruin
Am I telling you to always take the risk if you have a positive expected value? No, there is one more principle to consider called risk of ruin. It takes into account the probability of winning, the probability of losing, and the portion of your finances at risk. This isn’t a hard and fast number, but more of a personal risk tolerance equation. While some people would be perfectly happy risking all of their assets for a 2/3 chance of being able make enough money to retire, others would focus much more on the 1/3 of the time you ruin your finances.

All of these concepts can be applied any time you are dealing with risking money based on probabilities. In this sense, gambling is the same as trading stocks or trying to determine if you should pursue a specific business opportunity.

Good luck, and I hope this helps someone.

Apr 03 0 Responses

Running A Corporate Website On Open Source Technology

The Tech Behind The New

18 months of planning, stressing, and obsessing comes down to a 30 second file transfer. Such is the technology life. When we soft launched MTM Recognition March 30th, we had a lot of technology helping us out. Here’s the rundown of what’s behind the latest incarnation of our site, and how we build a corporate website on open source technology.

For five years, we ran a custom written Content Management System (CMS). In the end, we really couldn’t tell you why. Maybe it was because in our hearts we’re all tinkers and liked the idea of our own CMS (it is custom after all). Whatever the reason, it was stupid. WordPress is rock solid, runs millions of sites, and is easy for techies and non-techies alike to use and maintain.

Thesis Theme
Thesis is more of an engine than a theme. It allows you to really get into the nitty gritty of a WordPress install. We had a requirement that the site looked exactly how we wanted it to look – no constraints. Thesis allowed us to do that.

Not the sexiest of headings, but it is noteworthy that we’re running WordPress on a Windows server. It’s a really straightforward implementation that can be done in about 5 minutes.

We use Google as our cloud based email provider. Out of the box, WordPress does not allow you to run your own SMTP. That being said, there is a plugin for everything, and WP-Mail-SMTP was the answer to overriding the built in mail settings.

If you’re running Javascript, you should be using jQuery. It’s a great library that allows you to quickly add some dynamic elements to otherwise static pages.

Contact Form 7
A really simple, flexible form that integrates seamlessly into WordPress, Contact Form 7 was a great way to quickly add a contact form to our site.

Yoast SEO
If you care about being found on the web, you should care about Search Engine Optimiation (SEO). Yoast is by far the easiest to use, most well respected SEO plugin available. It is nearly impossible to screw up SEO if you are using this tool.

Of course, you should always back up your website. BackupBuddy is run by the guys at iThemes and does cost a few dollars. It is well worth it though, as I’ve personally used the software to restore several websites. It’s a great tool at a fair price.

The End Of The Beginning
So we lined up our ducks, closed our eyes, and pushed the button. So far, the site has launched to rave reviews. Our internal people like how user friendly the admin tools are, and so far, we haven’t had to use BackupBuddy.

All in all, moving off our proprietary systems has helped us reduce costs while increasing productivity. I don’t see how anyone can see it as anything other than a success.

Mar 27 2 Responses

Graduation Letter To Students

Do not go where the path may lead; go instead where there is no path and leave a trail. – Ralph Waldo Emerson

It’s graduation season, and I had the great opportunity to be asked to write an advice letter to a soon to be graduate. Here is the letter in full, added here in hopes that some snippet might make a difference to someone or this might help you write a graduation letter to students:

It’s been nearly 15 years since I was in your shoes, or in your eyes, nearly a lifetime. No matter how many times someone told me, “time flies”, “life is short”, or some other sage fortune cookie wisdom, it went in one ear and out the other. I’m not so naïve to think you’re different than I was. So I’ll go a different route. If you only remember one thing from this letter, remember this: don’t live your life for anyone else. Don’t waste your limited time on earth following someone else’s dreams.

People like to talk about savings and retirement, especially to young people in your spot. That’s all well and good, but you’ll regret sacrificing your youth much more than not having your 401K where it needs to be.

Choose great work you love, and you won’t be tempted to surrender the best years of your life just to get away from it. Live in the moment, and don’t worry about finding yourself. Create yourself.

Everyone gets breaks, and you’re no different. You don’t know when they’ll come; all you can do is be prepared for them when they show up. And when your opportunities do show up, squeeze them until they scream, and even then, don’t let go until you’ve wrung everything you can out of them.

Most of your life’s book is yet to be written, and only two things limit your future: your imagination and your willingness to make bold moves. Trust in your gut and in God. Don’t take anything too seriously. Be flexible with your path, and always be learning.

Now is the time to take risks and make memories. Love who you are, and enjoy the ride,

Greg Starling

Dec 12 0 Responses

Starting A Startup

The secret of getting ahead is getting started. – Mark Twain

There are a lot of people out there giving advice on how you can start your business. I’m not smart enough to be giving advice though so I’ll just tell you how I went about starting a startup.

The short version is Fun Panda was founded because I couldn’t find a customizable bamboo case for my iPad. The longer version is:

The Idea
Coming up with an idea is easy; implementing an idea is difficult. In fact, frustrated with my inability to get any ideas to take off, I started a company called MilliSeed with a tag line of “A million ideas; a thousand beginnings.” Will Fun Panda be different? To be honest, I don’t know, but I have learned a lot from a half a dozen failed businesses over a dozen years.

A big difference this time is it’s not just an idea. This is a frustration turned business plan. I’ve sat around with groups of brilliant people throwing concepts up on the wall. In those cases, we were trying to find a niche or create a market. In this case, the market already exists. There are large market segments for customized iPad cases and environmentally responsible product. There just wasn’t an existing solution for customizable responsible iPad cases.

The Market
The reason most of my earlier businesses failed is people didn’t want what I was selling. Sure, there was money to be made, and others with similar businesses were able to succeed where I didn’t. Maybe the ideas were too soon (search engine optimization in the late 90s, green lawn care in the mid 2000s). Maybe they were too late (baseball card inventory management long after most people stopped collecting). There are plenty of excuses, but the bottom line is that if more people were buying what I was selling those businesses would have been successful.

This time around, I have a much firmer grasp of the market and the opportunity. My living room is littered with print outs of projections, trends, and market analysis.

The Team
I learned my lesson several years ago when I partnered with a couple of guys to create grassroots organization software for political movements. I didn’t know these guys particularly well, and two months later, one of them was 1,000 miles away, not answering his phone, and holding all the vital info to run the business.

This time around, I wanted to work with friends. I interview a lot of people in my “real” job, and I’ve learned being friends with someone, even for a short period of time, will tell you more about a person than you will ever learn in an interview.

My checklist for partnering:

  • A Friend
  • Smart
  • Gets Stuff Done
  • Could stand to hang around for hours on end

There is always the possibility of going it alone, but for me, I’ve done that. You have the weight of the world on your shoulders, and when things don’t go according to plan, there’s no one there to hold you accountable, pick you up, or not allow you to quit. This time around, going it alone wasn’t an option.

The Money
Everyone I told about the customizable bamboo cases loved the idea, and when they saw the samples, the responses were amplified. This made for an odd problem – too many people wanted to invest. I followed the partner checklist above and found a couple of people who could help off-set some of the start-up costs.

This will become a new rule of thumb for me for future business ideas. If people aren’t fighting each other to invest in your business, it’s probably not a very good idea.

The Future
While I’ve made a couple of personal loans to the business, I also know where my bread is buttered. I have a great job that I love very much. I’m not going to go into debt to grow Fun Panda, but I’m also not going to be taking money out of the company. For now, invest and reinvest in the company, work hard at night and on the weekends, and see if we can’t grow this thing into something great.

In the end, no one knows exactly why anything works. Groupon was an accident.  HP turned down the personal computer idea 5 times before Steve Wozniak partnered with Steve Jobs to found Apple. For now, it’s a really fun project with a lot of potential.

If you’re looking for an iPhone or iPad case, check us out.

Oct 14 0 Responses

Two Easy Steps To Deliver Projects Quicker

If you want to make an easy job seem mighty hard, just keep putting off doing it. – Olin Miller

Here’s a quick heads up. That six month project you just started – it’s going to take you seven months. If you’re clever and scheduled it for seven months – it’s going to take you eight. After spending my entire adult life sitting through one hour meetings that should have lasted 15 minutes, I am more confident than ever in Parkinson’s law.

If you’re not familiar with Parkinson, his law basically states, ‘work expands to fill the time available for completion.’ My addendum would be, “Plus 10%” – people tend to over-estimate their skills and under-estimate complexity.

Short Timeframes
If an atom, which literally means indivisible in Latin, can be divided; you can figure out how to divide your project too. Breaking a small piece off your project and setting a due date in the near future is the best way to push forward. If you can procrastinate and get it done; the timeframe isn’t short enough. This will create enough pressure to maximize productivity without limiting your ability to engage resources or be creative.

Concrete Deliverables
You’re much more likely to lose two pounds this week than your are to lose some weight. What is some weight? It’s an undefined deliverable that can be rationalized away. “I ate a bigger than usual lunch.” “I just drank a lot of water.” Wrong. You’re fat. Go for a jog. Concrete deliverables are defined and measurable. They make sure you are solving the right problem and not getting caught up in distractions.

Continuously moving forward (short timeframes) and in the right direction (concrete deliverables) makes big projects small and over time will make small paychecks big.

Jul 22 0 Responses

Move Files From a Mac to a PC External Hard Drive – The Quick Way

You can’t always get what you want, but if you try sometimes, you might find, you get what you need. – The Rolling Stones

I’m not a huge fan of making technical posts; there are a lot of people a lot smarter than me when it comes to most of these topics. Every now and then though there is so much wrong information out there that I don’t mind dipping my toe in Nerd Lake.

Despite what you may have  heard or read, it is possible to move files from a Mac to an NTFS-formatted (PC) external hard drive. That being said, in Steve Jobs’ infinite wisdom, NTFS drives are not natively supported by Apple computers.

You’re going to have to follow these steps to make the your computer work like it should:

  1. Disconnect the external hard drive from the Mac
  2. Download and Install MacFuse (website)
  3. Download and Install NTFS-3G for Mac (website)
  4. Restart your computer
  5. Plug in your external hard drive.
  6. Start moving files

That’s about as straight forward as it gets. Usually with Macs, they just work like you think they should. This is one of those rare cases where they just don’t. Hope this post saves you the headache I had.

May 15 0 Responses

Roasted Asparagus with Panko Bread Crumbs

Roasted asparagus with panko bread crumbs is a simple side that will taste like it was much more complicated to put together than it actually was.

  • 1 lb Asparagus
  • 2 Tbsp Olive Oil
  • 2 ClovesGarlic
  • ½ tsp Kosher Salt
  • ¼ tsp Black Pepper
  • 1/3 Cup Panko Bread Crumbs
  • 1/4 Cup Parmesan Cheese
  1. Preheat oven to 425˚ F
  2. Cut and throw away bottom 2 inches of Asparagus
  3. Cut remaining Asparagus into 1-2” lengths
  4. Mince Garlic
  5. Place Asparagus in mixing bowl and toss with Olive Oil, Kosher Salt, Garlic, and Pepper
  6. Spread Panko Bread Crumbs in a 13”x9” metal cake pan and place in 425˚ oven for 2 minutes
  7. Remove Bread Crumbs from oven and add to bowl with the Asparagus mixture
  8. Toss the bowl to combine the ingredients
  9. Add the entire combination to the cake pan and place in oven for 12-14 minutes
  10. Remove from oven, toss in Parmesan Cheese, and serve
May 15 0 Responses

Truffled Potato Mash

A full flavored mashed potato that has all the characteristics of a more traditional recipe but with enough flavor difference that your guests will be saying ‘I can’t put my finger on it, but something makes this the best mashed potatoes I’ve ever had.’

  • 3 lbs Redskin Potatoes
  • 1 ½ Cups Heavy Cream
  • 6 Tbsp Butter
  • 2 Cloves Garlic
  • 2 ½ tsp Salt
  • 1 tsp Pepper
  • 2 Tbsp Truffle Oil (buy at Amazon)
  1. Cut potatoes into 1-2” cubes
  2. Place potatoes into pot and cover completely with water
  3. Bring water to a boil and cook potatoes until fork tender (about 25 minutes)
  4. Drain water from potatoes and return to low heat for 2-3 minutes to dry up excess water
  5. Put the cream and butter in a small saucepan and place over medium heat until butter is melted
  6. Using a masher and fork, mash the potatoes in their pot
  7. Add garlic, salt, pepper, and the cream/butter to the potatoes and stir until mixed
  8. Stir in the truffle oil and serve

Truffle oil can be very expensive and you don’t always get what you pay for. After a lot of research and testing, La Tourangelle Infused White Truffle Oil is an inexpensive solution that has all the flavor of it’s more expensive counterparts.

May 15 0 Responses

Grilled Bouquet Garni Pork Loin

You’ll have your guests thinking they’re eating at a fine dining restaurant with this sweet, earthy dish.

  • 1 Boneless Pork Loin (2-4 lbs)
  • 1-2 Tbsp Penzey’s Bouquet Garni
  1. Brine Pork Loin for 2 hours per pound
  2. Remove Pork Loin from Brine, wash under water, and pat dry
  3. Generously apply Bouquet Garni to the pork loin
  4. Wrap Pork Loing in plastic wrap and allow to sit at room temperature for 60 minutes
  5. Preheat and oil grill with coals placed to the sides of the grill
  6. Place Pork Loin over coals allowing to brown for 2 minutes on each side
  7. Move the Pork Loin to indirect heat and allow to cook until internal temperature reaches 145 -150° F
  8. Remove from heat, tent with foil, and allow to rest for 10-15 minutes
  9. Slice into ½” thick discs and serve

Bouquet Garni comes in many different forms, but Penzey’s just seems to do the trick better than any others I’ve come across.

May 15 0 Responses

Pork & Chicken Brine

The secret to juicy tender lean meats like pork tenderloin and chicken breasts is brining.

  • 2 1/2 Gallons Water
  • 2 1/2 Cups table salt
  • 2 Cans Sprite
  • 3 Lemons Halved / Squeezed
  • 1 Tbl garlic powder
  • 1/2 Tbl black pepper
  • 16 oz Pancake Syrup
  1. In a cooler add the ingredients and stir together.
  2. Store at refrigerator temperatures

This recipe can be cut down by a third with the same results. Modifications that aren’t exactly divide by 3  include: 1 Gallon Water, 1 Cup Salt, and 1 Can Sprite.

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