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The Man Who Knows Whether Any Startup Will Live or Die

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Re: The Man Who Knows Whether Any Startup Will Live or Die

#41

Post by RogerL »

mox1 wrote: post #37
mojuba wrote: post #15

Earlier quoted context omitted.

Not really. What the article says is, the model would predict 50% of time whether a company will fail or not, which doesn't make sense, because 50% for a binary prediction (i.e. fail or not) is exactly nothing. So maybe it's just bad or confusing wording in the article, the guy actually meant to say something else.

I think it's easier to relate to a coin flip if we use an "unfair coin". 90% of the time the coin flip returns tails (aka fail). 10% of the time it returns heads (aka win). For a given coin flip, their algorithm can predict the results 50% of the time. At this point I don't remember the calculations off the top of my head, but it involves a Binomial distribution.

Hmm, I can predict that 90% of the time, so I don't follow.

Re: The Man Who Knows Whether Any Startup Will Live or Die

#42

Post by kylebrown »

joshyeager wrote: post #22
sickpig wrote: post #5

from the article: He admits the models will never be perfect, but thinks that even a model that’s only right about 50 percent of the time could help investors and entrepreneurs avoid particularly bad ideas dunno why but I can't stop thinking that tossing a coin could achieve the same goal :)

That only works if startups fail 50% of the time. If they fail more frequently, a coin flip would be wrong.

Its not clear from the article which factor the 50% figure applies. I doubt its the overall odds ratio, but rather the likelihood given some priors. For example, given a prior that 90% of startups fail, what is the likelihood that this particular startup will succeed? If the prior is already factored in, then the model predicts no better than a coin flip.

The point made in the article is that investing at the odds of a coin flip would be better than investing with incorrect risk assumptions (ie. buying into "particularly bad ideas").

Re: The Man Who Knows Whether Any Startup Will Live or Die

#43

Post by jgeralnik »

sickpig wrote: post #29
joshyeager wrote: post #22

Earlier quoted context omitted.

That only works if startups fail 50% of the time. If they fail more frequently, a coin flip would be wrong.

I stand corrected, you're right. I'm supposed to know better.

Nope, you're still right.

Assume startups fail 90% of the time. 50% of the time your coin comes up tails, and you claim the startup will fail. 50% of the time your coin comes up heads and you claim the startup will succeed.

You guess correctly 0.5 (the chance your coin comes up tails) * 0.9 (the chance the startup fails) + 0.5 (heads) * 0.1 (success) = 0.5 of the time.

Re: The Man Who Knows Whether Any Startup Will Live or Die

#44

Post by kylebrown »

RogerL wrote: post #41
mox1 wrote: post #37

Earlier quoted context omitted.

I think it's easier to relate to a coin flip if we use an "unfair coin". 90% of the time the coin flip returns tails (aka fail). 10% of the time it returns heads (aka win). For a given coin flip, their algorithm can predict the results 50% of the time. At this point I don't remember the calculations off the top of my head, but it involves a Binomial distribution.

Hmm, I can predict that 90% of the time, so I don't follow.

That prediction doesn't improve over the prior. So its no better than the (biased) coin flip.

Re: The Man Who Knows Whether Any Startup Will Live or Die

#45

Post by x1798DE »

brudgers wrote: post #31
colanderman wrote: post #6

> According to the U.S. Bureau of Labor Statistics, about half of all businesses fail within five years. > He [...] thinks that even a model that’s only right about 50 percent of the time could help investors and entrepreneurs avoid particularly bad ideas ...does he have a bridge to sell me too? What am I missing? (One can simply predict "always succeeds" and will be right half the time.)

Perhaps what has been missed is the difference between a single coin flip and a combination of coin flips? Consider one startup. f(x) = #fail succeeds better than 50%, and f(x) = #succeed succeeds less than 50%. This is due to the nature of startups. Sure, it's easy to get about 50% accuracy for one startup by flipping a coin: f(x) = if rand(1) > 0.5 then #fail else #succeed But consider the case of two companies A a…

That's... not accurate. There are two success conditions (Fail, Fail) and (Succeed, Succeed), and two failure conditions (Succeed, Fail), (Fail, Succeed). If you flip two coins, the chance that they come up both heads is 25%, but the chance that they come up the same is 50%.

Re: The Man Who Knows Whether Any Startup Will Live or Die

#46

Post by rimantas »

krampian wrote: post #26

title: "The Man Who Knows Whether Any Startup Will Live or Die" text: ""He admits the models will never be perfect, but thinks that even a model that’s only right about 50 percent of the time could help investors and entrepreneurs..." Which is not surprising... if the title was really true, this man would likely be richer than Warren Buffett at this point.

Wouldn't a coin toss be right 50% of the time?

Re: The Man Who Knows Whether Any Startup Will Live or Die

#47

Post by crdb »

sickpig wrote: post #5

from the article: He admits the models will never be perfect, but thinks that even a model that’s only right about 50 percent of the time could help investors and entrepreneurs avoid particularly bad ideas dunno why but I can't stop thinking that tossing a coin could achieve the same goal :)

1% * (+500,000,000) + 5% * (+5,000,000) + 94% * (-100,000) >> 50% * (+100,000) + 50% * (-100,000)

Re: The Man Who Knows Whether Any Startup Will Live or Die

#48

Post by xtrumanx »

colanderman wrote: post #6

> According to the U.S. Bureau of Labor Statistics, about half of all businesses fail within five years. > He [...] thinks that even a model that’s only right about 50 percent of the time could help investors and entrepreneurs avoid particularly bad ideas ...does he have a bridge to sell me too? What am I missing? (One can simply predict "always succeeds" and will be right half the time.)

> (One can simply predict "always succeeds" and will be right half the time.)

Considering most businesses fail I don't think that's quite right but I get your point.

Re: The Man Who Knows Whether Any Startup Will Live or Die

#50

Post by Hasu »

gerhardi wrote: post #20
falcolas wrote: post #19

Earlier quoted context omitted.

> He basically admits his model is no better than a monkey Well, technically, a monkey with a coin to flip. "Heads this startup will succeed, tails it will fail"

Now coin flip wouldn't be anything near 50% accurate, unless there is a world where more than a small fraction of startups survive!

What? A coin flip would still be 50% accurate. If 10% of startups succeed, and we say that heads is "succeed" and tails is "fail":

5% of startups will be predicted to succeed and will succeed (correct prediction)

5% of startups will be predicted to fail and will succeed (false prediction)

45% of startups will be predicted to succeed and will fail(false prediction)

45% of startups will be predicted to fail and will fail (true prediction)

50% true predictions, 50% false predictions. A coin flip is always 50% accurate.

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