9 ms·

Not from the article, but this makes me think of something that we learned back in my college probability course: "wealth gravitates towards the wealthy." Even

Not from the article, but this makes me think of something that we learned back in my college probability course: "wealth gravitates towards the wealthy." Even in fair games and situations, it is much harder to come out ahead when you start out behind. Think of how the house always wins in Vegas, or how a random walk can experience heavy drift.

guiscreenshots 8y ago
The house always wins because all of the games have a negative expected value, not because the house starts out with more money than you.
- downer56 8y ago
  The house uses its wealth to construct an environment that only houses games with negative expected values.
- cbanek 8y ago
  But the house needs enough money to keep playing to even out the random fluctuations over time to make it to that expected value. For example, a craps table has a negative expected value for the players, and positive expected value for the house. But on a winning streak (these streaks are fairly common, just like losing streaks) the table might lose money if you look at the period of a few hours.
  - basementcat 8y ago
    That is why casinos have insurance policies. Sometimes they do not accept bets beyond a certain size. https://www.distinguished.com/Site/programs/hospitality-and-restaurants/hotel-casinos-and-gaming/ https://www.distinguished.com/Site/programs/hospitality-and-...
    - blackflame7000 8y ago
      Pot-Size limits don't impact hot or cold streaks.
      - slededit 8y ago
        They can ask you to leave at any time.
      - hindsightRegret 8y ago
        True, but it does impact how probabilistically unlikely the hot streak needs to be to default the house.
- hari_seldon_ 8y ago
  That's a fair point for some games, but even in games where the gambler has a positive expected value would have him/her go bust eventually when playing against someone with much, much more wealth (ignoring the fact that you can walk away): https://en.wikipedia.org/wiki/Gambler%27s_ruin https://en.wikipedia.org/wiki/Gambler%27s_ruin
  - deleted 8y ago
    [deleted]
  - Zanni 8y ago
    This actually should not happen if you adjust your bet size to match your bankroll (with the caveat that your bankroll is sufficiently large to be unaffected by the minimum bet). The article you link to actually suggests that, in the first bullet point, though it's expressed in the negative.
    - milesvp 8y ago
      For those interested, look up The Kelly Criterion. https://en.m.wikipedia.org/wiki/Kelly_criterion https://en.m.wikipedia.org/wiki/Kelly_criterion This is why poker players who are good enough to play at a certain table level can't maintain it if their bankroll falls too low. At each stakes level the game not only gets harder, but the minimum bet can eat up your bankroll if you get large string of unplayable hands (let alone bad beats or bad plays). What ends up happening a lot is that players will win a significant amount of money at say the $5 table, then try to play the $10 table, and lose enough money they find themselves back at the $5 table. The really unlucky ones may end up back at the $2 table because they may not have moved back to $5 early enough to be able to bankroll that level properly. I find the economics of poker to be completely fascinating, and when I found out about kelly betting from a HFT friend if mine, it really changed how I looked at the topic.
basementcat 8y ago
I would argue that wealth gravitates toward those who are better at accumulating wealth (Warren Buffet, George Soros, Peter Lynch). There may be a correlation between those who are good at accumulating wealth and those who have accumulated a large amount of wealth.
- the_cat_kittles 8y ago
  what is your argument? you just made a claim without evidence- would be more compelling with some. i think there is a lot of data to suggest the opposite.
  - AnimalMuppet 8y ago
    > i think there is a lot of data to suggest the opposite. You also just made a claim without evidence. It would be more compelling with some.
  - basementcat 8y ago
    I claim that those who are better at managing their money (spend wisely, save more, invest wisely) tend to accumulate wealth more quickly than those who don't. For example, I have several colleagues who started their careers around the same time as me. Some are much wealthier than me partly because they spent considerable time and effort accumulating real estate portfolios (among other investments). Others have accumulated less wealth than me because they spent much of their incomes on ephemeral pleasures.
    - the_cat_kittles 8y ago
      thats just completely tautological. id argue that little upward mobility, and racial inequality in lifetime earnings suggest that being having money makes it easier to make more. also because it is my lived experience as someone who is rich.
- hari_seldon_ 8y ago
  When talking about wealth in our society (especially when it is tied up in real estate and other non-cash assets), things get a lot more complicated, especially when wealth can help move markets and set policy. I was purely talking from the perspective of thinking about games and probability.
AdamM12 8y ago
Does one player actually need to get ahead of the other? Couldn't a "win" be that the player that started behind improved their position over time. Feels like it oversimplifies life as a zero sum game.
- 83457 8y ago
  Well inflation
  - AdamM12 8y ago
    Nitpicky much?
laughingman2 8y ago
There is this interesting paper that evaluates role of luck and talent in outcome. https://arxiv.org/abs/1802.07068 https://arxiv.org/abs/1802.07068 " The largely dominant meritocratic paradigm of highly competitive Western cultures is rooted on the belief that success is due mainly, if not exclusively, to personal qualities such as talent, intelligence, skills, efforts or risk taking. Sometimes, we are willing to admit that a certain degree of luck could also play a role in achieving significant material success. But, as a matter of fact, it is rather common to underestimate the importance of external forces in individual successful stories. It is very well known that intelligence or talent exhibit a Gaussian distribution among the population, whereas the distribution of wealth - considered a proxy of success - follows typically a power law (Pareto law). Such a discrepancy between a Normal distribution of inputs, with a typical scale, and the scale invariant distribution of outputs, suggests that some hidden ingredient is at work behind the scenes. In this paper, with the help of a very simple agent-based model, we suggest that such an ingredient is just randomness. In particular, we show that, if it is true that some degree of talent is necessary to be successful in life, almost never the most talented people reach the highest peaks of success, being overtaken by mediocre but sensibly luckier individuals. As to our knowledge, this counterintuitive result - although implicitly suggested between the lines in a vast literature - is quantified here for the first time. It sheds new light on the effectiveness of assessing merit on the basis of the reached level of success and underlines the risks of distributing excessive honors or resources to people who, at the end of the day, could have been simply luckier than others. With the help of this model, several policy hypotheses are also addressed and compared to show the most efficient strategies for public funding of research in order to improve meritocracy, diversity and innovation."

guiscreenshots 8y ago

The house always wins because all of the games have a negative expected value, not because the house starts out with more money than you.

downer56 8y ago
The house uses its wealth to construct an environment that only houses games with negative expected values.
cbanek 8y ago
But the house needs enough money to keep playing to even out the random fluctuations over time to make it to that expected value. For example, a craps table has a negative expected value for the players, and positive expected value for the house. But on a winning streak (these streaks are fairly common, just like losing streaks) the table might lose money if you look at the period of a few hours.
- basementcat 8y ago
  That is why casinos have insurance policies. Sometimes they do not accept bets beyond a certain size. https://www.distinguished.com/Site/programs/hospitality-and-restaurants/hotel-casinos-and-gaming/ https://www.distinguished.com/Site/programs/hospitality-and-...
  - blackflame7000 8y ago
    Pot-Size limits don't impact hot or cold streaks.
    - slededit 8y ago
      They can ask you to leave at any time.
    - hindsightRegret 8y ago
      True, but it does impact how probabilistically unlikely the hot streak needs to be to default the house.
hari_seldon_ 8y ago
That's a fair point for some games, but even in games where the gambler has a positive expected value would have him/her go bust eventually when playing against someone with much, much more wealth (ignoring the fact that you can walk away): https://en.wikipedia.org/wiki/Gambler%27s_ruin https://en.wikipedia.org/wiki/Gambler%27s_ruin
- deleted 8y ago
  [deleted]
- Zanni 8y ago
  This actually should not happen if you adjust your bet size to match your bankroll (with the caveat that your bankroll is sufficiently large to be unaffected by the minimum bet). The article you link to actually suggests that, in the first bullet point, though it's expressed in the negative.
  - milesvp 8y ago
    For those interested, look up The Kelly Criterion. https://en.m.wikipedia.org/wiki/Kelly_criterion https://en.m.wikipedia.org/wiki/Kelly_criterion This is why poker players who are good enough to play at a certain table level can't maintain it if their bankroll falls too low. At each stakes level the game not only gets harder, but the minimum bet can eat up your bankroll if you get large string of unplayable hands (let alone bad beats or bad plays). What ends up happening a lot is that players will win a significant amount of money at say the $5 table, then try to play the $10 table, and lose enough money they find themselves back at the $5 table. The really unlucky ones may end up back at the $2 table because they may not have moved back to $5 early enough to be able to bankroll that level properly. I find the economics of poker to be completely fascinating, and when I found out about kelly betting from a HFT friend if mine, it really changed how I looked at the topic.

basementcat 8y ago

I would argue that wealth gravitates toward those who are better at accumulating wealth (Warren Buffet, George Soros, Peter Lynch). There may be a correlation between those who are good at accumulating wealth and those who have accumulated a large amount of wealth.

the_cat_kittles 8y ago
what is your argument? you just made a claim without evidence- would be more compelling with some. i think there is a lot of data to suggest the opposite.
- AnimalMuppet 8y ago
  > i think there is a lot of data to suggest the opposite. You also just made a claim without evidence. It would be more compelling with some.
- basementcat 8y ago
  I claim that those who are better at managing their money (spend wisely, save more, invest wisely) tend to accumulate wealth more quickly than those who don't. For example, I have several colleagues who started their careers around the same time as me. Some are much wealthier than me partly because they spent considerable time and effort accumulating real estate portfolios (among other investments). Others have accumulated less wealth than me because they spent much of their incomes on ephemeral pleasures.
  - the_cat_kittles 8y ago
    thats just completely tautological. id argue that little upward mobility, and racial inequality in lifetime earnings suggest that being having money makes it easier to make more. also because it is my lived experience as someone who is rich.
hari_seldon_ 8y ago
When talking about wealth in our society (especially when it is tied up in real estate and other non-cash assets), things get a lot more complicated, especially when wealth can help move markets and set policy. I was purely talking from the perspective of thinking about games and probability.

AdamM12 8y ago

Does one player actually need to get ahead of the other? Couldn't a "win" be that the player that started behind improved their position over time. Feels like it oversimplifies life as a zero sum game.

83457 8y ago
Well inflation
- AdamM12 8y ago
  Nitpicky much?

laughingman2 8y ago

There is this interesting paper that evaluates role of luck and talent in outcome. https://arxiv.org/abs/1802.07068 https://arxiv.org/abs/1802.07068 " The largely dominant meritocratic paradigm of highly competitive Western cultures is rooted on the belief that success is due mainly, if not exclusively, to personal qualities such as talent, intelligence, skills, efforts or risk taking. Sometimes, we are willing to admit that a certain degree of luck could also play a role in achieving significant material success. But, as a matter of fact, it is rather common to underestimate the importance of external forces in individual successful stories. It is very well known that intelligence or talent exhibit a Gaussian distribution among the population, whereas the distribution of wealth - considered a proxy of success - follows typically a power law (Pareto law). Such a discrepancy between a Normal distribution of inputs, with a typical scale, and the scale invariant distribution of outputs, suggests that some hidden ingredient is at work behind the scenes. In this paper, with the help of a very simple agent-based model, we suggest that such an ingredient is just randomness. In particular, we show that, if it is true that some degree of talent is necessary to be successful in life, almost never the most talented people reach the highest peaks of success, being overtaken by mediocre but sensibly luckier individuals. As to our knowledge, this counterintuitive result - although implicitly suggested between the lines in a vast literature - is quantified here for the first time. It sheds new light on the effectiveness of assessing merit on the basis of the reached level of success and underlines the risks of distributing excessive honors or resources to people who, at the end of the day, could have been simply luckier than others. With the help of this model, several policy hypotheses are also addressed and compared to show the most efficient strategies for public funding of research in order to improve meritocracy, diversity and innovation."