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Well, I've got to admit that I don't see the fundamental difference. One involves death, but death is also quantifiable. "Your strategy should be to seek upsid

by ced 19y ago

Well, I've got to admit that I don't see the fundamental difference. One involves death, but death is also quantifiable. "Your strategy should be to seek upside while limiting downside.": But it's all a matter of degree! Taking insurance would be a dumb idea if it costed 5000$/month, wouldn't it? Plus, there is all this business about being risk-averse or not, for which there is no rational answer. People who stick to their safe jobs are risk-averse. It makes absolute sense for them to get insurance, as long as its expectation value is not too negative. People who do startups, however, are less risk-averse. They accept a game in which the EV is higher, but variance is also high. Not taking insurance is a very similar game: higher EV (presumably; it depends on the value and probability of death), higher variance. Loto and russian roulette both have low EV and high variance. They both suck. So would you rather have a 100% chance of an exciting life, or a 99% chance of a slightly more exciting life + 1% chance of a really bad one? I believe there is no single answer to the question, even if you quantify everything. It depends on how risk-averse you are. But maybe I'm just blinded by mathematics. If so, I'd appreciate a correction.

paul 19y ago
Like I said, it's about controlling downside. The downside of losing the lottery is that you lose a dollar. The downside of losing at russian roulette is that you die. It's a mistake to only consider expected value. Risk is something that should be intelligently assessed and balanced, not blindly embraced. It's also a mistake to equate "not winning" at startups to failure. I'd rather work at a string of unsuccessful but fun startups than some soul-crushing big company.
- ced 19y ago
  "It's a mistake to only consider expected value." Agreed, to be precise, one has to look at the entire value range, associated probabilities, and their effect on one's personal "happiness function". That's what I was trying to do with my variance "estimates", since most of these things are pretty gaussian anyway. "Risk is something that should be intelligently assessed and balanced, not blindly embraced." Also agreed, and that is precisely what I am trying to do with regards to the real value of health insurance (admittedly without much quantitative data). So far, all I see in this thread is anecdotal evidence of some catastrophic events. "I'd rather work at a string of unsuccessful but fun startups than some soul-crushing big company.": Me too, but that depends on a whole lot of personal factors, and there is no one right answer for everyone. Likewise for health insurance.

by ced 19y ago

paul 19y ago

Like I said, it's about controlling downside. The downside of losing the lottery is that you lose a dollar. The downside of losing at russian roulette is that you die. It's a mistake to only consider expected value. Risk is something that should be intelligently assessed and balanced, not blindly embraced. It's also a mistake to equate "not winning" at startups to failure. I'd rather work at a string of unsuccessful but fun startups than some soul-crushing big company.

ced 19y ago
"It's a mistake to only consider expected value." Agreed, to be precise, one has to look at the entire value range, associated probabilities, and their effect on one's personal "happiness function". That's what I was trying to do with my variance "estimates", since most of these things are pretty gaussian anyway. "Risk is something that should be intelligently assessed and balanced, not blindly embraced." Also agreed, and that is precisely what I am trying to do with regards to the real value of health insurance (admittedly without much quantitative data). So far, all I see in this thread is anecdotal evidence of some catastrophic events. "I'd rather work at a string of unsuccessful but fun startups than some soul-crushing big company.": Me too, but that depends on a whole lot of personal factors, and there is no one right answer for everyone. Likewise for health insurance.