Beating the Odds – Susquehanna International – Jeff Yass

Jeff Yass was always a little different from his peers — a brilliant young man taken with poker and horse racing and the power of rational decision-making. He’s used all of it to turn his company — Bala Cynwyd’s stealthy and mysterious Susquehanna International — into one of the world’s most lucrative and powerful financial firms

LET’S PLAY A game. Let’s say you’re a contestant on Let’s Make a Deal, Monty Hall’s game show from a generation ago. It’s your moment. There are three doors. Behind one door is a brand-new Camaro. Behind each of the other doors, there’s a goat. If you pick the right door, the Camaro is yours.

Silky-voiced Monty Hall gives you the big question:

“Do you pick door number one, door number two or door number three?”

The studio audience weighs in, and tension builds, as you think. Finally you pick, let’s say, door number one. But Carol Merrill, Monty’s assistant, doesn’t open it, not yet. Instead, Monty Hall directs Carol to open one of the other doors — door number two, say. Behind that door is … a goat. The audience titters nervously — that Camaro, still hidden, might yet be yours.

First, though, Monty is going to give you another choice. He’s going to give you both an option, and a dilemma:

“Would you like to stay with door number one,” he asks, “or would you like to switch to door number three?”

You ponder. But it’s a no-brainer, right? With two doors left, there’s a 50-50 chance the Camaro is behind either one. So you might as well stick with door number one.

Now I’m going to quote a man named Jeff Yass, from a book called The New Market Wizards. These words have made him very rich:

“The correct answer is that you should always switch to door number three. The probability that the prize is behind one of the two doors you did not pick was originally two-thirds. The fact that Monty opens one of those two doors and there is nothing behind it doesn’t change this original probability, because he will always open the wrong door.”

That’s what you didn’t consider: Monty Hall knows exactly where that Camaro is parked, and he wasn’t about to direct Carol to open a door that revealed it — no, he’s going to stretch out the game, to have fun with you, to see if, in your finger-crossed begging of the fates, you’ll switch doors.

And that’s the thing — your intuition is telling you, with two doors left, that the odds have got to be 50-50. But that’s wrong. The door you picked originally had a one-third chance of yielding that Camaro; Monty Hall picking a door he knows doesn’t hide the car won’t make it more likely that your door does.

Back to Jeff Yass:

“Therefore, if the probability of the prize being behind one of those [other] two doors was two-thirds originally, the probability of it being behind the unopened of those two doors must still be two-thirds.”

If this sort of thing makes you cross-eyed, suffice it to say that an empire has been built in Bala Cynwyd by Jeff Yass based not on numbers, but on a philosophy, a certain worldview. A world in which Monty Hall will always open the wrong door, so to speak.

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  • Gary

    FYI

  • Bernice

    As a gambler, and card player I wish Jeff Yass all the luck in the world. Anyone that intelligent should always hit a hole-in-one. Good luck to you and Susquehanna.

  • Johan

    If Yass is taking credit for solving the ‘Monty Hall’ problem, I would not trust him.

  • farty

    He’s not taking credit for solving the monty hall problem. Because that would be dumb. The author was using the monty hall example as a hook to demonstrate that complex probability questions can be counter-intuitive and to make the point that these answers are obvious to somebody as smart as Jeff Yass but not to the rest of us. It was the worst part of the article, because it’s been so over used as an example that even knee-jerk brain poopers like you have heard of it.

  • deborah

    Entire article says nothing other than Mr. Yass likes Poker, something that anyone could Google. Misleading headline gives the impression the reader will discover some inside scoop. Reading your arti