Mastering Risk Based Decision Making: Strategies for Handling Compounding Risks

There was one sentence in the 816 page book that stuck with me the most. The book was The Snowball; a biography about Warren Buffett. In an interview for the book, Warren mentioned that if you take a 10% chance of failure and do it for 50 years, there's a 99.5% chance of this failure happening.

It took me much trial and error and asking mathematician YouTubers through comment sections, but I finally figured out the formula that Warren Buffett refers to.

On an iPhone, you take

A.) 1 minus the risk percentage

B) X to the y button when iPhone is tilted to the side

C) Number of times performed

D) Equals the inverse of the chance of it happening

E) Inverse this to get the probability percentage

Let's use Warren's example. (Notes on right)

A) 1 - .1 = .9 ( 10% risk )

B) X raised the the y button

C) 50 ( Performed 50 times )

D) = .00515 ( Inverse of risk )

E) 99.5% ( Probability percentage )

This formula can be applied to any risk percentage and number of times performed.

Amazon link