Comparison of roulette, poker and insurance
There are many various types of betting, most of them have one thing in common - you bet a rather small amount of money and there is a very small chance that you will win a lot of money. Why are there no lottery tickets for $1 where you would have 50% chance for winning $1.90? Or 80% chance for winning $1.10? I guess people just wouldn’t buy them. But why do people buy tickets for $1 where they have 1 in a million chance for winning $100 000? I can not think of any other reason than that they are stupid.
Comparison:
Insurance - you pay just little money and if something highly unprobable happens you can get a lot of money
Lottery - you pay just little money and if something highly unprobable happens you can get a lot of money
Roulette - you choose how much you want to risk, but you will lose on average 1/37 of what you bet
Poker - depends mainly on your knowledge of statistics and psychology compared to your opponents’, you choose how much you want to risk
Betting with friends - has the best positive expectation if you have the right friends and know how to do it, reminds me of a former classmate who lost every single bet he has made (he thought he’d write a 500 page book, run faster than marathon winners, and so on…)
Post edit: Stowawaying is another type - you have a very high percentage to win a very small amount and a very small percentage to lose quite a huge amount.
As a side note, I face the same problem over and over when writing to the blog - I have a lot of very good ideas (at least I think so), but I am too lazy to put them in proper order (I just write what I think of, the order is more or less random) and generally play with it a bit, I just write it all down and publish it. Otoh this has the advantage that it forces you to find out the connections yourself, so maybe that would be a good excuse for my laziness. 
Posted on 2006-04-14 at 9:09 pm, filed under random thoughts. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
Jestli chceš sázet s kurzem třeba 1,5, tak na sport. Nikdo ti nebrání vsadit na jeden zápas. Pravda ale je, že většina lidí vsází na víc.
No, myslim, že tě studium ekonomie bude bavit… Dělej do pojišťovnictví tam použiješ stejné znalosti psychologie a statistiky jako v pokru…
Obecně platí: malé riziko -> malý zisk (a naopak) a stejně tak malá likvidita -> velký zisk - to je jenom pro případ, že by ses příště vrhl na kapitálové trhy… (Tam se dá taky fakt hodně a docela rychle získat, akorát je to o hodně náročnější…)