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The suggested step 2 in this article is 'calculate the expected value' . . . but isn't this going to be far more complicated in practice? See: https://en.wikip

The suggested step 2 in this article is 'calculate the expected value' . . . but isn't this going to be far more complicated in practice? See: https://en.wikipedia.org/wiki/Expected_value#Expected_values_of_common_distributions https://en.wikipedia.org/wiki/Expected_value#Expected_values... Probability distributions are complicated. Even determining what kind of distribution you are look at is difficult in many cases. Such distributions are also skewed in real life by things like insider information (in poker, that would be cheating). Even so the list is rather intimidating, assuming fair play: Bernoulli, Binomial, Poisson, Geometric, Uniform, Exponential, Normal, Standard Normal, Pareto, Cauchy If financial institutions (and crypto players) are using these kind of approaches to make their bets, then isn't the individual investor hopelessly outgunned in the vast majority of cases? Plus, not having a big pool of capital to absorb temporary losses makes that situation even worse. Investment capitalism, in other words, is just a casino for the uber-wealthy. Letting it rule the economy is a serious mistake.

kqr 4y ago
It's even more complicated than you think! The theoretical distributions you list are just that: theoretical. No real-world process generates values exactly according to a theoretical distribution. So you're not even dealing with a somewhat countable list of distributions -- everything has its own unique distribution! Fortunately, you don't need to model things exactly. A very rough approximation often gives me miles better results than plain gut feeling.
passivate 4y ago
Its not only complicated, its bordering on the impossible. They are simply hand-waving the "analyze your past decisions" part. Its extremely difficult to be introspective like that. You don't know why someone said "yes" to your deal, and not to someone else. You can guess, but there are so many micro things that fall in your favor when you're successful. Context matters, environment matters, and while we can capture our thoughts, we can't always capture the environment in which those events occurred, etc, etc. This is Harvard business review type stuff, excepting each person to accurately weigh and analyze all that is unrealistic. You're going to find examples of people who "read the book" or "attended the lecture" or "sought advice from X" and struck gold, and these examples provide buoyancy for such ideas. >If financial institutions (and crypto players) are using these kind of approaches to make their bets, then isn't the individual investor hopelessly outgunned in the vast majority of cases? When its your job, you're better at it compared to someone for whom its a hobby. And also, larger firms are able to manipulate the market which tilts the balance in their favor.

kqr 4y ago

It's even more complicated than you think! The theoretical distributions you list are just that: theoretical. No real-world process generates values exactly according to a theoretical distribution. So you're not even dealing with a somewhat countable list of distributions -- everything has its own unique distribution! Fortunately, you don't need to model things exactly. A very rough approximation often gives me miles better results than plain gut feeling.

passivate 4y ago

Its not only complicated, its bordering on the impossible. They are simply hand-waving the "analyze your past decisions" part. Its extremely difficult to be introspective like that. You don't know why someone said "yes" to your deal, and not to someone else. You can guess, but there are so many micro things that fall in your favor when you're successful. Context matters, environment matters, and while we can capture our thoughts, we can't always capture the environment in which those events occurred, etc, etc. This is Harvard business review type stuff, excepting each person to accurately weigh and analyze all that is unrealistic. You're going to find examples of people who "read the book" or "attended the lecture" or "sought advice from X" and struck gold, and these examples provide buoyancy for such ideas. >If financial institutions (and crypto players) are using these kind of approaches to make their bets, then isn't the individual investor hopelessly outgunned in the vast majority of cases? When its your job, you're better at it compared to someone for whom its a hobby. And also, larger firms are able to manipulate the market which tilts the balance in their favor.