Uncertainty and the use of Probability in Decision Making

We live and operate in a world that is full of uncertainties.  A writer once said uncertainty is the essence of life, and it fuels opportunities.

Uncertainty can be defined as a state of doubt about the future, or about what is the right thing to do at a given point in time.  An example of uncertainty is starting a business. It is hard to tell if the venture is going to be successful or not.

Uncertainty usually presents huge opportunities and to tap into these opportunities, quality decisions must be made. Folding of arms will not make uncertainties disappear but if we act, the odds of the outcome can be positive. This is where the use of probability comes in handy.

Probability measures the chance of the likelihood of an event to occur. You might be wondering; this is for the mathematicians or the statisticians I do not need probability. This idea is wrong.

We use probabilities in our everyday life without us knowing. We use terms such as likelihood, chances, odds not knowing that we are speaking the language of probability.    

Probability can be applied in our everyday life such as in sports, weather reports, predicting the sex of a baby, Insurance and Finance.

Insurance:  Probability can be used in framing policies and premiums.

Sports and betting companies: use probability to determine how likely a team or person is to have a chance to win a game.

Finance: Probability can be used to determine the likelihood of a stock getting to a particular price.

Politics: Probability can be used to predict the outcome of an election.

Medical Decisions: When a patient plans to undergo surgery, he or she would like to know the odds of the operation. success rate or failure rate before the surgery is performed.

A probability equation can be expressed as:  Probability of an event happening = Number of ways it can happen/ total number of outcomes.  When you toss a coin. There are several ways it can happen, either head or tail right, and the total outcome is Two (2) that is head and tail. The chance of getting a tail is now1/2 which can also be put said as 50:50

Probability distributions can be divided into 4

1. Random Variables: This explains the numerical description of an experiment e.g., total number of sales
2. Discrete Probability distribution: counts occurrences that have countable or finite outcomes
3. Binomial Probability distribution: This explains the probability of a success or failure of an outcome in an experiment or survey that is repeated multiple times.
4. Poisson Probability distribution: This is used to show how many times an event is likely to occur over a period of time.

The use of probability also comes with disadvantages

• It can be time consuming
• It can also be complex in nature

Probability plays a vital role in our day to day lives. Decisions are easy to make when we have several options, and we choose only one based on higher probability.