Think Like Buffett: What Counterintuitive Truths Have You Overlooked?

Tiger_SG
05-02
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At a party with 25 people, what is the probability that at least two of them share the same birthday?

This is a classic probability puzzle known as the "Birthday Paradox". Warren Buffett once used this paradox to make a bet.

At a gathering of Benjamin Graham followers, Buffett claimed that in a group of 25 attendees, at least two would share the same birthday. It turned out Buffett was right.

“The simple (but surprising) explanation is that the probability of this happening is around 60%.”

Probability sometimes is unintuitive

In fact, a more accurate estimate of the probability is about 57%. That figure is still surprisingly high—so how is it calculated?

Assume there are 25 people, and each birthday is uniformly distributed across 365 days in a year. Let's first calculate the easier scenario: the probability that all birthdays are different.

  • The first person can have any birthday: 100%.The second person must have a different birthday from the first: 364/365. The third must be different from the first two: 363/365. And so on, until the 25th person must differ from the first 24: 341/365.

So, the probability that all birthdays are different is:

(364/365) × (363/365) × (362/365) × ... × (341/365)

After calculation, this value is approximately 0.4292.

Therefore, the probability that at least two people share a birthday is: 1 – 0.4292 = 0.5708, or about 57%.

Are there other counterintuitive cases in life or the stock market?

People often misjudge probabilities in daily life, largely because we rely too heavily on intuition. In the stock market, such misjudgments are common. For example:

Misconception: A stock that has already dropped 50% is unlikely to fall another 20%.

Reality: Stock price movements are like coin tosses—past results don’t affect future outcomes. If a company's fundamentals worsen, the probability of the stock falling from 50 yuan to 40 yuan (another 20% drop) could be higher than you think.


Would you like more examples of counterintuitive investing principles or mental models?

What other Buffett anecdotes do you know?

What’s the best lesson Buffet ever teach to you?

Join our topic and post directly: The Buffett Series: What Surprising Truths Have You Overlooked? or leave your comments to win tiger coins~

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The Buffett Series: What Surprising Truths Have You Overlooked?
There is a classic probability puzzle known as the "Birthday Paradox". Warren Buffett once used this paradox to make a bet. This case is quite meaningful, as it serves as a reminder that: Probability is more counterintuitive than we imagine. There are many such examples in the stock market. Throughout his life, Buffett has shared numerous quotes and stories that serve as warnings to investors. Would you like more examples of counterintuitive investing principles or mental models? What other Buffett anecdotes do you know? What’s the best lesson Buffet ever teach to you?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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Comments

  • Shyon
    05-02
    Shyon
    The Birthday Paradox has always intrigued me—especially how Warren Buffett used it to win a bet. At first, it seems unlikely that in a group of 25 people, two would share a birthday, but the math shows a 57% chance. It’s a great example of how our intuition often fails when dealing with probability.

    This kind of thinking error appears often in the stock market. Many believe a stock that has dropped 50% is unlikely to fall further, but if fundamentals worsen, another 20% drop is very possible. Markets respond to present conditions, not past price movements—just like a coin toss has no memory.

    One of the best lessons I’ve learned from Buffett is the power of independent thinking and patience. Like waiting for the right pitch in baseball, good investing means staying calm and avoiding emotional decisions. Paradoxes like this sharpen my thinking and remind me to always question what seems obvious.

    $Berkshire Hathaway(BRK.A)$

    @Tiger_SG @Tiger_comments @TigerStars

  • icycrystal
    05-02
    icycrystal
    @GoodLife99 @LMSunshine @koolgal @Shyon @Aqa @Universe宇宙 @rL @HelenJanet @SPACE ROCKET @TigerGPT

    People often misjudge probabilities in daily life, largely because we rely too heavily on intuition. In the stock market, such misjudgments are common. For example:

    Misconception: A stock that has already dropped 50% is unlikely to fall another 20%.

    Reality: Stock price movements are like coin tosses—past results don’t affect future outcomes. If a company's fundamentals worsen, the probability of the stock falling from 50 yuan to 40 yuan (another 20% drop) could be higher than you think.

    Would you like more examples of counterintuitive investing principles or mental models?

    What other Buffett anecdotes do you know?

    What’s the best lesson Buffet ever teach to you?

    leave your comments to win tiger coins~

  • koolgal
    05-05
    koolgal
    🌟🌟🌟Warren Buffett 's Most Famous Counterintuitive Truth is "Be Greedy When Others Are Fearful".  While many investors may shy away from the markets in times of widespread panic,  Warren Buffett's famous adage urges the opposite.

    This means when the markets are bearish and stock prices plummet , the best opportunities arise for those who are calm enough to see value where others see disaster.

    Warren Buffett's strategy is built on the idea that market over reactions create substantial buying opportunities.  His success shows that a little fear can create a deep well of opportunity for disciplined long term investors.

    Thank you Warren Buffett for this pearl of wisdom which I believe in and try to practise.  It takes courage and patience to do so.

    @Tiger_SG @Tiger_comments @TigerStars @CaptainTiger @TigerClub

  • AliceSam
    05-04
    AliceSam
    人们在日常生活中经常会误判概率，很大程度上是因为我们过于依赖直觉。在股市中，这样的误判屡见不鲜。
  • Aqa
    05-02
    Aqa
    I have learned from Warren Buffett to invest only in what I understand, maintaining a long-term perspective, avoid debt, focus on quality and understanding the value of a business before investing. Always stay informed and maintain a competitive edge. Above all, buy Berkshire Hathaway stock. It has grown 22% in value over the past year! Thanks @Tiger_SG @icycrystal
  • MHh
    05-02
    MHh
    This is indeed counterintuitive. Most of us would have dismissed it as close to zero chance. i am definitely looking forward to more examples to challenge my assumptions. I think the best lesson that buffet has taught us is not to lose money and the second rule is to always remember the first rule to not lose money. Definitely easier said than done! @HelenJanet @Wayneqq @LuckyPiggie @DiAngel @Universe宇宙 @rL @Success88 @Fenger1188 @Kaixiang @SPOT_ON come share any anecdotes that you know!
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