This post aims to answer the question we posed before and discuss how this is relevant to investing:
If you were offered HKD 10,000 for sinking free throw shots, which one would you choose?
A) You are only offered 1 shot. If you sink it, you win HKD 10,000.
B) You are offered 3 shots, but you have to make any 2 of the 3 shots to win HKD 10,000.
The answer is, “it depends on your skill”.
(This picture is from the book “Are you smart enough to work at Google”?)
The intuitive answer from the graph above is that, if you were a good free throw shooter (probability of sinking a basket is higher than 50%), shooting more shots allows you to demonstrate your skill more, and thus your chance of winning the contest is higher than just shooting one shot. If you are not so good at free throws, then shooting 1 shot is a better strategy as you might get “lucky”.
For someone like Mr. Alpha, he would most definitely be choosing to shoot one shot only for the chance to win HKD 10,000.
So, how about answering an interview question like that at the search engine company we have all grown accustomed to using? 🙂
For Investing, we get a lot of “it depends” answers as well. “Is this stock going to rise or fall?”, well, that depends on the overall market environment we are in, and our understanding of the data we use to make our investment decisions. What we would like to do is to raise awareness to the logic of how AlphaInvestments.hk is generating data and security lists from a current and historical perspective.
– Mr. Alpha