jakell

3 ms·

1. 1.▲
   by jakell 3y ago

   Great description of a framing I hadn’t considered before, thanks!
2. 2.▲
   by jakell 3y ago

   You can substitute $ for % in my comment if it helps. If you start with $100, your expected wealth after two throws is the average of $225, $90, $90 and $36.
3. 3.▲
   by jakell 3y ago

   Absolutely. The individual is long-run guaranteed to be wiped out. But I disagree with the original author’s way of concluding that fact (ie, that it arises from “losing 5% per round”, which is just false).
4. 4.▲
   by jakell 3y ago

   Exactly
5. 5.▲
   by jakell 3y ago

   The article concludes that a +50%/-40% coin toss on average loses 10% every two tosses because 150% * 60% = 90%, but that ignores the two heads/two tails outcomes. Including those outcomes, ie AVERAGE(225%, 90%, 90%, 36%) = 110.2