/siberia/ - Off-topic

Nonsense, I haven't worn a tie in more than a decade.

>>810780
is this going to be the new 'red button blue button'

>>810807
the new "how many boxes are in that truck"

I would take 0 dollars if that makes everyone who thinks of these thought experiments die horrible deaths

>>810780
It's not about being stupid, although if you want to maximise your wealth you should take the risk. Again: imagine this was a video game. If you want to be a high scorer, you have to take the risky strategy!

The reason rich people take these risks isn't because they're smarter, it's because they have higher risk tolerance. This is smart in this case, but dumb when they pilot their light aircraft into high tension power cables or get into the carbon fiber submarine.
(And a lot of this is just nurture. A lot of rich kid education is just teaching you that failure isn't fatal and that you can always bounce back - which you can if you have money - while poor kids get the high stakes failure is doom assessments of the public school system.)

>>810780
>>810830
You can't just risk your entire wealth(which we can think of the million dollars as that since it is guaranteed, you can think of it as already having $1 million dollars and then placing that on a bet with a 50/50 probability of netting you $4 million), that's just flat out illogical and nobody smart does it. If you can take the bet more than once, than statistically you will make money on average, but obviously that is only guaranteed after you do it enough times.
https://flexbooks.ck12.org/tecbook/ck-12-interactive-middle-school-math-7-for-ccss-teachers-edition/section/7.2/primary/lesson/using-data-to-estimate-probabilities-math-7-ccss-msm7-ccss-te/

This is just basic statistics.

>>810835
You can, in fact, risk your entire wealth. Again: imagine this is a videogame and you are trying to get the highest score possible (or if you prefer, a speedrun and the lowest time possible). A 50/50 strategy where you either fail, or get a higher score / lower time will always be the dominant meta over a 100% "win but with a lower score/higher time" one in the league tables.

Now, if you're just trying to have a good time, obviously the calculation changes.

>>810848
>blah blah blah
A million bucks would solve all my problems while leaving me plenty to solve my loved ones problems/invest in local organizing. You're just jerking off.

>>810848
You're assuming that you get to do it multiple times easily. Once again it depends on how many times you can perform the bet. If you can do this bet a good number of times, it is statistically guaranteed to make money. This is why one of the fundamental rules of investing is diversification instead of putting all your money into a single stock and even then you don't typically stand to lose the entire amount you invested.

>>810851
Or you could just place part of the million on lower risk investments with less return and be statistically likelier to get a return overall.

>>810854
Idgaf about returns freak, I just wanna live, I just want peace of mind. Anyone asking for more than that is my enemy.

>>810851
I'm not saying you shouldn't take the million, I'm saying that tautologically 50% of the guys that take the gamble will be richer than you.
<But I don't care
Good! Good for you!

>>810852
Even if you can't re-roll, if your aim is to get the best result possible there is no point shooting for a mediocre one.

Again I think we are talking across purposes: I am not advising anyone on which strategy to take. Neither is dumb! But you can't take the safe option and then go "why does he get 2.5m and I only got 1??" (well, you can, but it's silly to reject the explanation: because he used the risky strategy!!)

(As I can't shake the feeling this thread was inspired by an earlier discussion: a case of dumb risk aversion is people putting money in savings accounts with below-inflation returns instead of buying index funds. People will pay money to avoid risk even if the risk is small. e.g. a guaranteed loss is preferred to a small risk of loss, high chance of gain.)

Million every single time. You will spend the rest of your life in regret if you lose that coin toss. Also you can just move to like Thailand or something and live like a king.

>>810879
It's just a very naive understanding of how investing/gambling works and is the reason so many people make no money whatsoever and many lose it all. Let us assume this is a bet than can be taken over and over again and costs 1 million each time.

>Take 1 million dollars, put it on the all or nothing 400% return bet
<Now you have 5 million
>Take 5 million dollars, put it on the all or nothing 400% return bet
<Now you have 25 million
>Take the 25 million…
Exponential money printer! But actually now you are statistically guaranteed to lose it all on one of those bets and have no money.

>>810895
The difference with people who lose their money gambling is that it has an expected negative return (to the gambler). That's how casinos make money. (The mirror image: expected positive return to them.) The original hypothetical doesn't have this, you either gain nothing, 1m or 5m, you never lose money.

Your assumption requires that you actually pay $1m rather than just giving up the chance to get $1m, which stops being equivalent the first time you lose. (e.g. I can surrender 100 potential $1m payouts and retain my current wealth, while if I pay $1m and lose even once then I'm bankrupt.)

Which isn't to say you're wrong as it goes, but it's basically a different case.

>>810830
>And a lot of this is just nurture. A lot of rich kid education is just teaching you that failure isn't fatal and that you can always bounce back - which you can if you have money - while poor kids get the high stakes failure is doom assessments of the public school system.

I’m sure rich kids are also drilled that failure is doom. They’re probably morally harassed about “being exceptional”

>>810900
Nah, you gotta shrug failure off and try again or you wallow in self pity. Look at Trump for this to a comical degree, bounced from disaster to disaster until he was billionaire president.

>>810904
That’s because Trump has connections. He was using his daddy’s name to get the hookup.

If Trump actually went the honest working man’s route for bouncing back from constant failure by mere elbow grease and wit alone, he would’ve killed himself several times over

Just because you’re rich doesn’t mean you’re automatically encouraged to splurge out.
You still have to have some safety net, whether in connection and/or academic degree

(Believe it or not, Trump went to college)

>>810780
50% are good odds, but I'd rather have the security of just taking the 1 milly. I'm not greedy, and you're really asking me to choose between
<immediate gain with no drawbacks
<taking on the possibility of loss in exchange for a substantially greater gain
the risk averse choice makes sense for most because you stand to gain anyway, unless 1 million to you is chump change, in which case you might opt to gamble a bit.

I do not look like that. that is a stick figure and I don't own any ties.

rich people can also bounce back with connections.
i remember someone who had a albanian grandfather tell me enver hoxho took all his grandfather's land and money and he had to move to britain. he arrived with almost nothing but he was able to rebuild quickly. funny enough the grandson said it was good that hoxha took all his shit and it was deserved.

>>810848
If you had a million dollars would you go to the nearest casino, walk up to the roulette table, and put it all on red? Would you consider this a wise use of your money?

>>810891
>>810913
Ya, for real. I think whoever made that is dumb and didnt phrase the question correctly. Are they saying that failing at the 50% chance of 5 mil means you get 2.5 mil or fucking nothing? It's not clear at all and makes a huge fucking difference.

>>810848
>Again: imagine this is a videogame
but it isnt

>>810936
>Ya, for real. I think whoever made that is dumb and didnt phrase the question correctly. Are they saying that failing at the 50% chance of 5 mil means you get 2.5 mil or fucking nothing? It's not clear at all and makes a huge fucking difference.
No I think it means exactly what it says. By the formula for 'expected value' the result is 2.5 mil. I think it's intentionally supposed to be sarcastic and point out the absurdity of the coin flip for 5 mil being a better choice than the guaranteed 1 mil by EV. If this actually was something you could do multiple times, then the EV would matter, but since in this something that can only be done once it's quite obviously foolish on its face.

If we got to do the choice 100 times, then the 100*~2.5 would statistically give you a much higher sum than 100*1 but in the proposition of the single coin flip it doesn't make sense to choose that option.

>>810994
The problem like I was trying to get at before is it really matters how much money we have. Since there is no information given, all we can assume is we have no money currently. Which there for the missed guaranteed loss of $1 million means our entire net worth. To bet your entire net-worth on a single bet that has a 50% chance of returning 400% or 50% chance of losing our entire net-worth, the choice is foolish. If we had a net-worth prior to the coin flip that means that the loss of guaranteed $1 mil means nothing to us, then the question is irrelevant.

>>810994
>>810998
And this is why they talk too about risk tolerance in investing, why if you're younger you have a much higher risk tolerance than if you're retired and living off your savings. When you're young and you have another source of income, and you know you can make that $1 million or whatever sum you are risking on the bet back from your other source of income, than taking a highly risky bet might be worth it too you, if you are living off of the $1 mil, then there is no way you would take such a bet because you'll never have a chance to have that money again.

>>811001
Irony is, young people have less savings due to having to start out in a questionable job market.

>>811002
Basic point I'm making is how acceptable the risk is dependent on being able to hypothetically make this bet more times so the percent deviation evens out to a better level of risk. That means having a secondary source of income, that means not putting it all on one single bet even if it has very favorable odds like in the hypothetical OP question.

Another thing to think about is you're never going to regret losing out on hypothetical money as much as losing your real money. The hypothetical $4mil to be lost in the bet vs the hypothetical $1mil, especially if the sum lost actually means something to you.

Anyway if you guys like this kind of high stakes gambling you guys should look more into futures and trading psychology and risk management that go along with based on people's real world experience and strategies.

What is the Risk of Ruin in Trading?

>A high win rate does not guarantee success if your losses are uncapped. Your goal as a professional trader is to minimize the Risk of Ruin, which is the probability of losing so much trading capital that you can no longer continue.

<The 1-2% Rule

>Many disciplined traders limit risk to approximately 1% to 2% of account equity on a single trade. This approach helps the account withstand inevitable losing streaks, which are a statistical reality of trading. In smaller accounts, where percentage-based risk may be impractical due to contract tick values and minimum stop distances, traders often manage risk using a predefined fixed dollar amount per trade, such as $50 or $100, rather than set percentages. Ignoring sound risk limits can lead to accelerated capital erosion.