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At the point you are considered being acquired it might be: 100% chance of a million dollars: $1,000,000 10% chance of a billion dollars: $100,000,000 In whi

At the point you are considered being acquired it might be: 100% chance of a million dollars: $1,000,000 10% chance of a billion dollars: $100,000,000 In which case I would go with the 10% chance because if I had run a startup and got it to be worth $1M, and then I fail I can probably make the $1M easy in the next thing I do.

dalke 12y ago
The expected value estimate isn't sufficient. One should also estimate the risk of ruin more than "probably". If someone got to that point on friends and family money, and/or like Cisco using credit cards for financing, then another way to view this is 0% of bankruptcy vs. non-trivial chance of bankruptcy (including medical bankruptcy) and limited access to new seed money. Of course, if your 90% case is to have a job paying 125K/year then the risk is very low. My point wasn't about you personally but the analysis that should go into this sort of calculation.
- bbcbasic 12y ago
  Hell yes there are lots of variables. It is a big decision. This decision in it's purest form can be seen on the game show "Deal or No Deal" where they choose between an unknown value in a box and a $ amount from the 'dealer'. Even this simplified version of the problem gets the contestant on edge and they really have to think hard about it, talk to their spouse etc.
  - dalke 12y ago
    A gameshow is a sandbox. No contestant will end up bankrupt as part of the show. The worst possible case is winning nothing. While the contestant can be out travel costs and opportunity costs, those are not part of the game itself. Therefore I don't think it really includes a risk of ruin. Now, if the expected value were awarded at each stage, and had to be reported as taxable income, and losing the show required that the contestant pay back the money but still had to pay the taxes, than that would have a real risk of ruin.

dalke 12y ago

The expected value estimate isn't sufficient. One should also estimate the risk of ruin more than "probably". If someone got to that point on friends and family money, and/or like Cisco using credit cards for financing, then another way to view this is 0% of bankruptcy vs. non-trivial chance of bankruptcy (including medical bankruptcy) and limited access to new seed money. Of course, if your 90% case is to have a job paying 125K/year then the risk is very low. My point wasn't about you personally but the analysis that should go into this sort of calculation.

bbcbasic 12y ago
Hell yes there are lots of variables. It is a big decision. This decision in it's purest form can be seen on the game show "Deal or No Deal" where they choose between an unknown value in a box and a $ amount from the 'dealer'. Even this simplified version of the problem gets the contestant on edge and they really have to think hard about it, talk to their spouse etc.
- dalke 12y ago
  A gameshow is a sandbox. No contestant will end up bankrupt as part of the show. The worst possible case is winning nothing. While the contestant can be out travel costs and opportunity costs, those are not part of the game itself. Therefore I don't think it really includes a risk of ruin. Now, if the expected value were awarded at each stage, and had to be reported as taxable income, and losing the show required that the contestant pay back the money but still had to pay the taxes, than that would have a real risk of ruin.