| Take any random pair of people and the probability | | | | pair born on the same date. |
| of them having the exact same birthday sits at (1 | | | | As shown, it takes only 23 unique people or events |
| 365)?0.0027 or roughly 0.27%. The chance of it | | | | for something formally considered "highly unlikely" to |
| seems so low that many would ignore and assume it | | | | transpire. This suggests that business operators could |
| never occurring. | | | | adopt a more meticulous and mathematical approach |
| The Birthday Paradox however makes available | | | | to risk management. |
| mathematical means to display that the "improbable" | | | | Killer storms or typhoons come on the ocean |
| occurs quite more often than general belief. How | | | | infrequently. Yet, shipbuilders make certain to |
| many people does it take to have over 50% chance | | | | construct and design the vessels to endure the |
| of a pair sharing the same birthday? | | | | worst of conditions. When it comes down to life or |
| 23 | | | | death, survival relies on weathering the rare |
| Explanation, please keep in mind this example ignores | | | | catastrophes. |
| leap years. | | | | Does your business model include contingency plans |
| 1) With 23 people 253 possible pairs exist. | | | | for short term negative outcomes or if competitors |
| 23*22/2=253 | | | | employ unforeseen strategies? The investors of |
| (Look up Permutations if you don't understand this) | | | | bankrupt New Zealand financing companies had to |
| 2) Now instead of finding the chance of two people | | | | learn this the hard way, with some losing a lifetime of |
| having the same birthday, let us find the probability | | | | savings. I often hear the phrase "take calculated |
| of them having DIFFERENT birthdays. | | | | risks", yet not many people understand the |
| 1-1/365?0.9973 or 99.73% or 364/365 in fraction | | | | calculation part. It certainly does not equate to |
| 3) Plugging in the number of possible pairs. | | | | guessing and hoping for the best. |
| (364/365)^253?0.4995 or 49.95% chance of having | | | | I plan to discuss risk management in the near future. |
| every possible pair within the group to have | | | | In the mean time, free resources are available |
| DIFFERENT birthdays. | | | | everywhere at the library or over the internet. Learn |
| 4) Therefore, this concludes that out of a group of | | | | to survive the worst of times, and everything will |
| 23 people, there exists 50.05% probability of having a | | | | turn out A O K. |