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To the extent possible under law,
Somik Raha has waived all copyright
and related or neighboring rights to
“An Introduction to Decision
Analysis.” This work is published
from: United States and India.
Language, Simulation
& Inference
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Somik Raha
Language, Simulation & Inference
Pick what you wish to focus on
Sample Topics
WORDS TO STOP USING
RANDOM

EXPECTED VALUE

RISK

DEPENDENCE
SIMULATION
PROBABILISTIC ESSENCE
NEW PROBABILITY DISTRIBUTION
THE METALOG DISTRIBUTION
INFERENCE
LEARNING THEORY

BETA DISTRIBUTIONS

A/B TESTING

RELIABILITY
OPEN HOUSE
Words to Stop Using
There is nothing “random” about “random”
Words to Stop Using: RANDOM
What do we mean by “random”?
Exercise: Go online and find the definition of this word, and paste in chat



Sources: 

dictionary.com 

m-w.com
There is nothing “random” about “random”
Words to Stop Using: RANDOM
When you call rand() in Excel or other libraries, 

is it really arbitrary or without logic?
There is nothing “random” about “random”
Words to Stop Using: RANDOM
When you call rand() in Excel or other libraries, 

is it really arbitrary or without logic?
No. If it were so, it would not be usable for 

simulation.
There is nothing “random” about “random”
Words to Stop Using: RANDOM
When you call rand() in Excel or other libraries, 

is it really arbitrary or without logic?
rand() —> Samples from a Uniform Distribution
There is nothing “random” about “random”
Words to Stop Using: RANDOM
“Let’s generate random numbers”
Misleading and Unclear
Correct and Clear
“Let’s sample from a uniform distribution”
SEEK NOT JUST TO UNDERSTAND, BUT ALSO TO BE UNDERSTOOD
Can you expect $50 in the deal below?
Words to Stop Using: EXPECTED VALUE
50%
50%
$100
$0
$50
Can you ever get $50 from this deal?
Can you expect $50 in the deal below?
Words to Stop Using: EXPECTED VALUE
50%
50%
$100
$0
$50
Can you ever get $50 from this deal?

No. You can only get $100 or $0.
Can you expect $50 in the deal below?
Words to Stop Using: EXPECTED VALUE
50%
50%
$100
$0
$50
Can you ever get $50 from this deal?

No. You can only get $100 or $0.
This is your 

Certain Equivalent
Amount of money for certain that is equivalent 

to the uncertain deal, according to you
=
Causes imbalanced thinking
Words to Stop Using: RISK
RISK = probability of loss or bad outcome
? = probability of good outcome
Causes imbalanced thinking
Words to Stop Using: RISK
Can you say “The risk of making a lot of money” without feeling silly?
Causes imbalanced thinking
Words to Stop Using: RISK
Use “chance” or “probability” or “uncertainty” instead of “risk”
Misleading
Words to Stop Using: DEPENDENCE
Shoe Size Reading Ability
Do you feel silly saying "shoe size is dependent on reading ability”?
Misleading
Words to Stop Using: DEPENDENCE
Shoe Size Reading Ability
How about: "shoe size may be relevant to reading ability”?
Meaning, knowing shoe size may tells us something about reading ability?
THE ESSENCE OF SIMULATION
What is the distribution of the CDF
of any distribution?
Use your intuition
How is the CDF distributed?
0 0.25 0.5 0.75 1
0%
25%
50%
75%
100%
0 0.25 0.5 0.75 1
Numbers on x-axis are concentrated in some areas
What about the numbers on the y-axis?
Use your intuition
CDF is distributed uniformly
0 0.25 0.5 0.75 1
0%
25%
50%
75%
100%
0 0.25 0.5 0.75 1
Numbers on x-axis are concentrated in some areas
Simulation: 

The cdf-1 function

on a number sampled 

from a uniform dist

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Language, Simulation and Inference

  • 1. To the extent possible under law, Somik Raha has waived all copyright and related or neighboring rights to “An Introduction to Decision Analysis.” This work is published from: United States and India.
  • 2. Language, Simulation & Inference Will begin shortly Please
 Join from your computer
 Mute yourself
 Select Active Speaker view
 Open Q&A panel
 No multi-tasking
  • 4. Pick what you wish to focus on Sample Topics WORDS TO STOP USING RANDOM
 EXPECTED VALUE
 RISK
 DEPENDENCE SIMULATION PROBABILISTIC ESSENCE NEW PROBABILITY DISTRIBUTION THE METALOG DISTRIBUTION INFERENCE LEARNING THEORY
 BETA DISTRIBUTIONS
 A/B TESTING
 RELIABILITY OPEN HOUSE
  • 6. There is nothing “random” about “random” Words to Stop Using: RANDOM What do we mean by “random”? Exercise: Go online and find the definition of this word, and paste in chat
 
 Sources: 
 dictionary.com 
 m-w.com
  • 7. There is nothing “random” about “random” Words to Stop Using: RANDOM When you call rand() in Excel or other libraries, 
 is it really arbitrary or without logic?
  • 8. There is nothing “random” about “random” Words to Stop Using: RANDOM When you call rand() in Excel or other libraries, 
 is it really arbitrary or without logic? No. If it were so, it would not be usable for 
 simulation.
  • 9. There is nothing “random” about “random” Words to Stop Using: RANDOM When you call rand() in Excel or other libraries, 
 is it really arbitrary or without logic? rand() —> Samples from a Uniform Distribution
  • 10. There is nothing “random” about “random” Words to Stop Using: RANDOM “Let’s generate random numbers” Misleading and Unclear Correct and Clear “Let’s sample from a uniform distribution” SEEK NOT JUST TO UNDERSTAND, BUT ALSO TO BE UNDERSTOOD
  • 11. Can you expect $50 in the deal below? Words to Stop Using: EXPECTED VALUE 50% 50% $100 $0 $50 Can you ever get $50 from this deal?
  • 12. Can you expect $50 in the deal below? Words to Stop Using: EXPECTED VALUE 50% 50% $100 $0 $50 Can you ever get $50 from this deal?
 No. You can only get $100 or $0.
  • 13. Can you expect $50 in the deal below? Words to Stop Using: EXPECTED VALUE 50% 50% $100 $0 $50 Can you ever get $50 from this deal?
 No. You can only get $100 or $0. This is your 
 Certain Equivalent Amount of money for certain that is equivalent 
 to the uncertain deal, according to you =
  • 14. Causes imbalanced thinking Words to Stop Using: RISK RISK = probability of loss or bad outcome ? = probability of good outcome
  • 15. Causes imbalanced thinking Words to Stop Using: RISK Can you say “The risk of making a lot of money” without feeling silly?
  • 16. Causes imbalanced thinking Words to Stop Using: RISK Use “chance” or “probability” or “uncertainty” instead of “risk”
  • 17. Misleading Words to Stop Using: DEPENDENCE Shoe Size Reading Ability Do you feel silly saying "shoe size is dependent on reading ability”?
  • 18. Misleading Words to Stop Using: DEPENDENCE Shoe Size Reading Ability How about: "shoe size may be relevant to reading ability”? Meaning, knowing shoe size may tells us something about reading ability?
  • 19. THE ESSENCE OF SIMULATION
  • 20. What is the distribution of the CDF of any distribution?
  • 21. Use your intuition How is the CDF distributed? 0 0.25 0.5 0.75 1 0% 25% 50% 75% 100% 0 0.25 0.5 0.75 1 Numbers on x-axis are concentrated in some areas What about the numbers on the y-axis?
  • 22. Use your intuition CDF is distributed uniformly 0 0.25 0.5 0.75 1 0% 25% 50% 75% 100% 0 0.25 0.5 0.75 1 Numbers on x-axis are concentrated in some areas Simulation: 
 The cdf-1 function
 on a number sampled 
 from a uniform dist