I am not at all a mathematician, but more and more I have seen discussions of Bayesian reasoning in finance and from people promoting “rational thinking.” Bayes is a systematic way to adjust one’s existing view by incorporating new evidence.
I had a very high-level understanding of the idea of Bayes’ rule, but when I saw the actual formula, my eyes glazed over. I had trouble connecting the theoretical idea to the math.
If you’re interested in learning the basics of Bayes relatively quickly, the below resources were super helpful for me. Reviewing them in this specific order was key for me when trying to connect the theory to the formula.
Understanding the Theory
1. Clearer Thinking’s Interpreting Evidence Interactive: This interactive mini-course is great for understanding the theory of Bayesian reasoning and the intuition behind it. You probably already think this way to some degree without realizing it.
2. Bayesian Reasoning Explained Visually: This video has several good use cases of the theory and I really like the visual representation of the probabilities and logic.
Understanding the Formula
3. Introduction to Conditional Probability: Conditional probability is one of those things I studied in college and am now very rusty on. To understand the actual formula for Bayes’ Theorem, you will need to understand conditional probability. The “Venn Diagram”-style illustrations of probability helped me a lot.
4. The Actual Formula: This video connects Conditional probability to Bayes’ Theorem and illustrates that it works with a simple example. Connecting Conditional probability to the theorem made the concept “stick” in my mind.
5. More Complex Example: Finally, this video applies the formula to a more complex example.
I am still a rookie when it comes to these topics, but these resources helped me form a solid understanding of the basics of this powerful way of thinking. I hope they help you too!