You’re explaining expected value and it’s absolutely true. It’s the law that tells you what decision to make.
If there’s an intuitive explanation, I haven’t found it yet. All I know is that there’s a reliable cluster of people who
prefer a certain $500 to a 15% chance of a $1,000,000.
will never bet with you on anything, no matter how sure they are.
call a $5 scratch ticket “paying five dollars for entertainment”
believe that it’s impossible to be a professional gambler / poker player
say things like, “the reason people lose money in stocks in they get too greedy...you have to put your money in, wait for the price to go up, then sell it!”
Even weirder are the ones who know the math, agree with you that something is a good bet for them to take, and then refuse to bet anyway! Like math and decisions occupy completely different worlds, and the heuristic “if you gamble, you’ll lose” takes precedence over EV.
Even weirder are the ones who know the math, agree with you that something is a good bet for them to take, and then refuse to bet anyway!
I know a number of mathematically literate people who buy lottery tickets. Their usual justification is that they pay for happiness provided by the hope of winning.
Mathematically literate like grad students, or quants? I’d expect to hear that justification much more from the former group than the latter. It doesn’t hold water, right?
You’re explaining expected value and it’s absolutely true. It’s the law that tells you what decision to make.
If there’s an intuitive explanation, I haven’t found it yet. All I know is that there’s a reliable cluster of people who
prefer a certain $500 to a 15% chance of a $1,000,000.
will never bet with you on anything, no matter how sure they are.
call a $5 scratch ticket “paying five dollars for entertainment”
believe that it’s impossible to be a professional gambler / poker player
say things like, “the reason people lose money in stocks in they get too greedy...you have to put your money in, wait for the price to go up, then sell it!”
Even weirder are the ones who know the math, agree with you that something is a good bet for them to take, and then refuse to bet anyway! Like math and decisions occupy completely different worlds, and the heuristic “if you gamble, you’ll lose” takes precedence over EV.
I know a number of mathematically literate people who buy lottery tickets. Their usual justification is that they pay for happiness provided by the hope of winning.
Mathematically literate like grad students, or quants? I’d expect to hear that justification much more from the former group than the latter. It doesn’t hold water, right?
Why is the top-level comment retracted?
Because someone downvoted it. If I had to guess why they did it, it’d probably be some combination of these:
It doesn’t answer OP’s question—I think Blackened was asking something more specific than what I answered.
It comes across as overconfident (whoops)
It’s needlessly personal (self-aggrandizing) -- the word “I” shouldn’t appear in it at all.