3 ms·
> but if they take negative expected value options then yeah I'd call them suckers. A "negative expected value option" is founding basically any startup. :-)
by aleph_minus_one 3y ago
> but if they take negative expected value options then yeah I'd call them suckers.
A "negative expected value option" is founding basically any startup. :-)
How can this contradiction be resolved?
Simple: startup founders don't look for the (negative) expected value, but for the, say, 5 % quantile gain (i.e. the gain that they will only exceed with a probability of 5 %). This gain is sufficiently large.
- yjftsjthsd-h 3y agoI can't tell, but just to make sure - I mean https://en.wikipedia.org/wiki/Expected_value https://en.wikipedia.org/wiki/Expected_value , not the most likely outcome. And on that basis, a 5% chance of winning the lottery is still very unlikely to be compelling if the other 95% are that you lose it all. So... yeah, very frequently, at least from a financial perspective (and maybe otherwise) founding a startup really does look like a sucker's game to me. Not always, certainly, but often.
- aleph_minus_one 3y ago> I can't tell, but just to make sure - I mean https://en.wikipedia.org/wiki/Expected_value https://en.wikipedia.org/wiki/Expected_value , not the most likely outcome. Of course. I'm not talking about investors investing money into a startup (in such a case, the expected value is better positive), but about some irrationally optimistic person who starts a startup because he deeply believes in his startup concept. Hoping in general that your startup concept works or even has a positive expected value is in my opinion indeed like buying lottery tickets.