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Right, I don't think that's the part that's counterintuitive. It's the claim he makes "if someone offers you a bet 70% chance to win a dollar, 30% loss, it's be
by oarabbus_ 5y ago
Right, I don't think that's the part that's counterintuitive. It's the claim he makes "if someone offers you a bet 70% chance to win a dollar, 30% loss, it's better not to take it in some cases" is what is counterintuitive to people.
- itsdsmurrell 5y agoProbably depends on your aversion to losing it all. If it's a dollar go for it. If it's 100 dollars, again, take the bet. If it's your life savings of 50000 dollars and going to 0 would be worse for you than 70/30 doubling your money, you don't want to go for it.
- kqr 5y agoSure, much like the Kelly criterion would tell you. If your life savings are $50,000, and someone offers you an even odds bet but with a 70 % chance of winning, you get optimal growth by wagering $20,000. However, that assumes you'll get a large number of similar offers so that you can make your losses back later if you get unlucky now. That said, growth is pretty close to optimal even for smaller wagers. This plot shows growth rate as a function of wager size: https://www.wolframalpha.com/input/?i=plot+log%2850+-+x%29*0.3+%2B+log%2850%2Bx%29*0.7%2C+x%3D0..50 https://www.wolframalpha.com/input/?i=plot+log%2850+-+x%29*0...
- cochne 5y agoSeems pretty misleading, since that’s only true of a dollar is a significant portion of your wealth…