The Incerto Podcast Ergodicity Simply Explained (Nassim Taleb's Favourite Concept)
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Oct 5, 2021 AI Snips
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Ergodicity Defined Simply
- Ergodicity means a group's average equals an individual's time-average when variables are well defined.
- A fair coin tossed once by 100 people equals one person tossing it 100 times under ergodicity.
Coin Toss Example
- The host uses a fair coin toss as a concrete example to illustrate ergodicity.
- He argues 100 people tossing once equals one person tossing 100 times because no one can game a fair coin.
Skeptically Treat Financial Ergodicity Claims
- Question claims of ergodicity in financial markets because they often ignore absorbing risks.
- Treat financial models skeptically when they assume individual time-averages equal group averages.