Step 15 - Math - Descartes & Solving Problems With A Calculator

This lesson teaches how to make decisions right. Decisions need to be taken along the path to the good life and mistakes must be avoided at all cost, because a human being can only make so many mistakes until his time is up.

How do we separate a good from a bad decision? The answer is fairly simple. We use math.

Descartes, trying to separate the truth from the false himself, concluded that most political, economical or social theories couldn't be verified as undoubtedly 100% correct, since every theory could have a millionth of probability to be false. Thus by trying to go to the bottom of the truth, he concluded that only math had the ability to be 100% correct.

In a similar way we need to apply quantifiable reasoning into our decision making ourselves, if we want to understand the quality of our options.

Quantifiability should not only be applied on investment decisions either, or whether you decide to invest in a degree or into a business. But presumably in all areas of life, where you are unsure which path to take, even with friends, when you need to figure out if you should hang out with them or not.

A bad friend might give you +2 points of comfort for every hour you spent with him, but might give you -1 of opportunity cost and -2 in value you get from him.

Even worse might be a friend that puts you down which might equal to -2. So at the end of the day you get -3 points for every hour you spent with him. Which might be pretty bad and you should reconsider your affiliation.

Equally you should always have a calculator on you and get better in math and statistics. Play some probability and mind games like chess. And in the end try to objectify and quantify your life. Don't use it to an extreme, but use it plenty, if you want to reduce mistakes and get the good life.

Questions

1. Of two different future choices, calculate the odds of one doing better than the other and why do you think that it will?

Stabll Business Idea Presumptions:

100 Clients á 1.200 a year = 120.000 € revenue. Calculated opportunity cost for each month: 2.500 €.

Option A: Programing it myself.

Probable time to completion: 6 months till MVP. Necessary knowledge needed to acquire: Asynchronous Javascript on the Frontend tested with EmberJS or Polymer. Some deeper PHP knowledge on the backend for authorization, authentication, Investment: 8 Months of my time. (82.500 = 20.000) Chance of working out: 50% Investment decision: 0,5 120.000 – 20.000 = 40.000 €

Option B: Finding a business partner to program it.

Probable time to completion: 2 months finding him, 3 months till he completes MVP. Investment: 25% equity. 5 months of my time. Chance of working out: 80% Investment decision: 0,8 (0,75120.000) – 12.500 = 59.500 €

Winner is Option B, finding a business partner. (The above equation is just exemplaratory, because there are still a few things I didn’t take into account, like several different probability equasions for the same option, or benefits from acquiring skills through Option A, which I could benefit on future projects and would therefore lack, if I went with Option B. Will make a more analytical calculation at some other point.)