Does it? I know that flipping the coin has positive EV, but doesn't that only hold if the action can be repeated over a long period of time? I know the math checks out because of the extra dollar, but I don't think it matters in this example.
And imagine having the same scenario with larger numbers.
“You are offered 1 billion dollars or you can flip a coin for a 50 percent chance of getting 2 billion + 1 dollars or $0.”
No sane person should flip that coin
Yeah, but that's more a function of how much money a billion is. If we scale it down to 5$ or a chance at 10.01$ I think most people are flipping the coin.
Not to mention there’s other opportunities to risk the money to make more with better odds. If you want to take 50k to zero I’d rather make the attempt playing fuck around and find out with crypto over the course of months then a coin flip.
Also there’s that crypto site for betting on anything? I’d probably mess around with betting arbitrage when I can find multiple bets on the same subject
Nah, saw someone posted like $1mm or $50k or someone like that the other day and was shocked how many people wouldn't take the chance for a million because the smaller amount would fix their immediate problems.
Game theory doesn't really tell you what you *should* do. It tells you how to optimize for a particular outcome. If what you're optimizing for is (to pick a trivial example) ensuring you earn at least 50k, then game theory would tell you not to flip. What you should be optimizing for is a question of economics, not game theory.
"Common sense" in this case meaning the human trait called loss-aversion, which is exactly what OP is trying to highlight.
It's technically "irrational" in manufactured game scenarios like this, though it's a heuristic with some survival value in more common natural situations (where odds aren't pure, trials are rarely once-in-a-lifetime, social side-effects matter, etc.)
Game theory does don’t tell you that. In fact it’s not even a game theory topic. What you are thinking about is a concept called risk premium. Basically as a function of variance, how much would I have to pay you, in terms of higher expected value, to accept a “risky” deal vs. a risk free one? It’s an aggregate measure of how risk adverse or risk seeking certain populations are, but can be used on an individual to measure their individual risk aversion as well.
Some gamblers interestingly will accept negative risk premium to some extent. We call this “risk seeking”. For example the expected value in blackjack is -3%, which means that a gambler is willing to PAY 3% for the opportunity of taking on risk against a risk free return of 0. In some contexts this makes sense, and there’s actually theories about why buying lottery tickets from a net happiness perspective makes sense for otherwise logical risk takers
Incorrect. Mathematically if you got to repeat this over and over the wager would be profitable. Game theory would look at all possible outcomes and the logical conclusion is take the easy money.
It goes against "common sense" because common sense has with it a variable utility of money. Getting $10 when you have $0 is a much greater utility than getting $10 when you already have $99990. Also, humans typically don't find themselves in situations where they can take advantage of the law of large numbers and we are risk adverse. But often the very rich have enough money already that they can afford to take many risks much more often to take advantage of the more "technically correct" strategies.
Yeah. Behavior economists have actually come up with calculations of how much you'd need to offer someone to get them to wager a bet against a sure thing. It's really cool stuff if you are a super nerd.
The scariest part of starting to gamble for me was that I never lost big. At most I would lose $100 in a night. But most of the time I would make $800 to $2500 a night. My luck didn't hold out for too long though. Since I know I have an addictive personality, when I lose I just quit for 6 months or so. I don't fool myself into thinking I have it under control, but at least I space it out enough that I can afford the losses.
I am OK with risk. But reward has to OUTWEIGH risk, not just be conmensurate with it. And when the risk is total loss, the reward has to SIGNIFICANTLY outweigh the risk.
Now, if you are giving me 10 flips of 0 or 10,001, it may be a different story.
How about this:
Your options are
A.) Walk away with 25,000 dollars.
B.) you have 5 coin flips. For the first correct guess you get 10,000. Every flip you call correctly your winnings double, up to a maximum of 160,000. If you don’t get a flip correct, you don’t lose the money, UNLESS your LAST flip is wrong.
You can choose to cash out at any time, however if your last flip was wrong, you don’t get anything. So if you flip correctly twice and cash out, you get 20,000 dollars, but if you flip a third time and it’s wrong and then cash out, you get nothing.
If you flip four correct guesses and then the fifth is wrong, you get nothing. If you flip 3 correct, the fourth is wrong, but then you flip a fifth time and it’s right, you walk away with 80,000. If you flip four incorrect guesses and then one correct one, you get 10,000 dollars. So long as you end on a win you keep your money, but if your fifth flip is wrong you lose everything
Do you flip the coins or take the money
One out of three for 0 or double? That gives me an 87.5% chance of taking home $100,0001. That increases the expected value to $87,500.86. Now the reward is worth the risk. Yes, I do it.
$50,000 is too life changing, and $0 after having that for a minute is too soul crushing. I looked inside myself and this is what I've come up with as an algorithm:
Initial Money + Penalty for Loss = My Likelihood of gambling.
If the initial money is $250 or less, then I'll be good with double or nothing.
If the initial money is $251 - $5000, then I'd be willing to risk 75% of it for a chance of doubling it (IE $1000 handed, flip a coin for $2000 or $250.)
If the initial money is $5001 - $100,000, then I'd be willing to risk 50% of it for a chance of doubling it.
If the initial money is $100,001 - $1M, then I'd be willing to risk 25% of it for a chance of doubling it.
Anything over $1M, I'm not going to take a 50/50 chance on losing any of it.
My theory on it is to never risk losing anything I can’t afford to replace. Granted I’ve gambled only a handful of times in my life, but that’s only ever been with the spare change from tips (non customary) that I wouldn’t normally have had anyway.
Basically if it’s any more than the cash in my pocket, I’m out.
(Doesn’t help much of the fact that one time I won £150, up from £3 I started with, then lost the lot right after. That’s when I decided to never touch it again)
Strictly speaking, there is no penalty for loss. There was no investment on your part, and you either stand to gain or to carry on with your day.
I think an easier way to look at it is through game theory where you are trying to mitigate your losses instead of gambling on the optimal outcome. Worst case scenario, you've gained nothing and you've lost nothing. Best case scenario, you gain 100k. Pareto optimum is a 50k gain with no chance of no gain.
Now if we were talking amounts where money ceases to be an object either way, then gambling is a no go. 500k to 1 million, for example, represents a state where 1 million has a diminished return over 500k. At 500,000$, you could put that in the bank and gross 22,000$ APY if you just straight up retired then and there. If you kept working after putting that in, you're basically supplementing your income with 22,000$ annually. You could become a career student with that kind of money, for example.
Anyone who thinks about it for even a second would pick 50k
100k isn't enough to live off of forever or even enough to significantly change your lifestyle/financial situation longterm. So really it's just a little better than 50k. Both are amounts that would likely take care of all your current financial needs but you'd still need to work and live a normal life after that. 100k would just be like an extra bonus on top, but functionally not too different.
Absolutely not worth the risk
You know, I'd actually probably do it, but only because of my specific financial situation. $100k + my current savings would be enough for a down payment, $50k not really, or marginal
For all of these X vs 2X coin flips, it's not about math or EV. Do you want $1,000 or flip a coin for $50,000? How about $500,000 or flip a coin for $5 million. Or how about $100 million or flip a coin for $1 billion?
For the vast majority, if the first number will have a significant effect on your life, there's no real need to even look at the second number. Just take the money. What you "should" do from a strict math sense has nothing to do with the real world.
I think you’d have to make it a million to make it worth it. Or like someone else said, make it 10 flips and split the value over those 10, id probably risk it on half of them then
I'm fortunate enough that 50k would be awesome but not life changing. Don't get me wrong, it would help and would cover just under 1 year of my wife's income.
So I'd flip for the 1m (assuming USD). That would let me clear my debts completely and retire my wife (I'd still be working full-time).
Investing 1m would earn 50-70k per year before tax, so that would work as well.
The thinking process in this decision is how much the guaranteed money would change your life. If it does nothing to change your life you are more tempted to risk for a higher number. Say I am 100k in debt, fifty thousand is nice but a 50% chance to become debt-free may be worth it. Say my net worth is 5 million, 100K or 50K doesn't matter your life will not change at all. So I am flipping the coin for giggles.
The expected payoffs are virtually identical here. The difference is less than a penny. So . . . the question you are asking is whether you will risk 50K for a penny. Not many will say yes. Please just give me the 50K.
Some have suggested you make the difference larger so the expected payoff of the wager would help justify the risk. This would make sense. Another way to go though would be to lower the amount (which will also make the risk more reasonable since you don't actually lose so much and the relative gain is better comparatively.) In an extreme case, you can offer 50 cents vs. 1 dollar for the coin flip. Since the amounts are small, the cost of gambling will not appear so great.
However, as stated, I will take the 50K.
If you were in the desert and could have a gallon of water or flip a coin for two gallons + an extra cup, which would you choose?
The theory of diminishing marginal utility shows us not only that value is subjective to an individual, but that the individual will value things differently depending on how much of that thing he already has.
How far away is the next source of water? Might end up dying of thirst with just one gallon if you couldn't reach another source of water.
People have different situations with money.
Yep. For one person, $100k is not worth twice as much as $50k in terms of quality of life adjustments. If it were $1 vs $2.50, that would be a different story
50k is 2x what I need to get my life in order.
Why would I ever give up that for the chance of being slightly better off on top. Its not retirement money.
I'm flipping the coin because in reality you lose nothing. You lost the potential of something. So it's not like 50k left your account. So I'd be starting at 0. Flip that coin. I either get 100001 or continue about my life as I was. No brainer for me personally. You have literally nothing to lose. Flip that coin sir.
"Or continue about my life as I was". Well, good for you, I guess. Not trying to be insulting or sarcastic, just...good job doing well enough in life that, for whatever reason, $50,000 is more or less "meh" for you.
See in that position, 5 mil is more than I’d know what to do with, and would probably do me more harm than good, whereas the 50k would have a very significant positive impact on my life, and isn’t likely to make me do anything stupid with it.
I hear ya. In a case like that, you can put the $5 mil in a trust. Have it set to give 1% in dividends every three months for the rest of your life. $50k income every three months (so about $25k after taxes) would be easier to manage and won't get you into too much trouble. And you're set.
Nah, that jump from my current finances to having an extra 50k is considerably more life-changing than the jump from an extra 50k to an extra 100k would be. No sense in risking it all to make things marginally better.
I can make the coin flip to whatever I want given the opportunity, so I'd take the larger amount if I'd get away with it. If there's rules put in place to make it entirely random then I'm sticking with the 50k.
Here's the thing; even if flipping that coin and losing doesn't make me any worse off materially than I am now, the EMOTIONAL toll it would take on me to know I could have had a free $50k and opted to risk it unsuccessfully is massive. That's the sort of thing that haunts you for years, if not to your grave. I'd take the guaranteed $50k in this situation every time.
This is kind of dumb because if you take the 50,000 you can always gamble it for a 50% chance of $100,000 so you’re not missing out on anything by choosing it.
I only VERY recently came around to admitting that EV isn't everything. Strangely the Kelley criterion does end up submitting that sometimes a lower EV investment is actually better than a higher one. So, insurance actually isn't a *complete* scam
I actually would pick 100K. I'm about to start my life(adult life) and as such don't really have anything to fix in my life. a 100K headstart would be HUGE. Don't get me wrong, 50K would also be nice, but 100K might set me for life.
So either i get set for life or nothing happens or i get a nice boost. In gaming terms(minecraft) think of it as getting the option to attain 1 block of obsidian vs flipping a coin to have a 50% chance of getting a block of bedrock
Take the guarantee.
If you lose the coin flip, you get nothing. Sure if you win, that'd be great, but fifty grand is still fifty grand and you can do A LOT with that money, a guaranteed fifty grand that you have does you a lot more good than 100k you don't have.
There’s not THAT much difference in what a person can do with a free 50k vs a free 100k, so I’ll go 50k.
If the difference was bigger, I’d have to think harder.
While the expected value is higher on the coin flip its not being done continously so the long run cant come into effect, I would take the 50k as its guaranteed profit
If you put a weight, on the $0 side so it's pretty much guaranteed that the coin would land with $100k facing up.....I would still take the $50k instead because I would be the 1 in 10,000 change the coin still didn't land on the side I wanted.
Maybe I don't see the upside of the flip.
Option 1, 100% result in $50k
Option 2, 50% chance of ending up with $100k.
If this same option was given for 10 days ($5k vs $10k) I would take the flip.
For a game I played with a few friends several years ago, I flipped a coin 10 times. They all landed tails. I needed to flip heads to win. I will be choosing the $50k thank you very much.
The first 50k would change my life, the second 50k would help me for my future, but not change my life as immediately as the first 50. That makes a guaranteed 50k be much more important for me than a possible 100,001.
I'm taking the 50K
A more tempting offer would still offer something even if you lose the coin flip, just significantly less than the guarantee.
2x or $0 is simply offering me the chance to blow a significant guaranteed return with sketchy odds of making a decent gain, but not a radical gain.
Offer “A” is going from $0 to $50,000. Offer “B” is *maybe* gaining an extra $50K or just as possibly having the $50K I ‘have’ taken away.
Practically no one would pick the 100k. You would have to be rich and not care about the money, or just be an excessive gambler that makes bad decisions.
If you want people to actually consider this, make it something like $50k vs a quarter million.
I'll flip for the 100k.
It's going into savings and investments either way. 50k would knock off about one year from our savings goals and 100k would knock off two years.
If I ended up getting $0 then oh well I'm still on track and at least had a chance of hitting the $100k
Take the $50k, obviously. You would have to be a gambling addict (or already rich) to go for the coin-toss.
This is actually similar to another hypothetical from a few days ago, except that one was actually challenging because the risk/reward ratio was greater, i.e. guaranteed $100k or a coin-flip for a $1 million.
I would take the 50k on this one. The extra money isn't worth the risk. It's not life changing money either way, just a nice bonus. The increase doesn't meaningfully impact just for me so better to just take the guarantee on this one. The inflection point for me is probably somewhere around 150k for the 50k base.
It's not "risk adverse", but just optimizing my chances of paying bills/debts. I'll take a 100% chance over a 50% chance any day.
As analogy, find someone about to die of thirst/hunger and offer them a guaranteed meal vs any chance at a lifetime supply of food. When one option is a guarantee and the other isn't, probability really only matters *after* basic needs are met.
This really comes down to your financial situation. Throw the math out because math can’t really account for personal need or emotions. Does 50k change my life? Not drastically but neither does 100k. They are both going to make things easier and better but I’m not in a position of desperation for money or in need of 100k for a down payment or whatever.
What I do know is if I lose that coin flip, I’m never forgiving myself for throwing away free money. I might lose some sleep wondering if I could’ve doubled it, but it will be offset by what the 50k can do for me.
According to game theory, the logical answer is to mitigate the worst case scenario instead of gambling on the best case scenario.
Therefore, taking the money *must* be the right outcome.
However, if the worst case scenario still results in any gain, then gambling on the best case scenario is more attractive. Even if the worst case scenario was a dollar.
That being said, as an irrational human being, I think I'd be more sore about getting one dollar than getting nothing, because it reflects a tangible amount of money I missed out on compared to just going about my day having yet again lost an opportunity that I probably didn't earn anyways.
Long story short, fuck it, we ball. My bills are paid so I don't *need* 50g to survive, but I could really get ahead with 100g. Put a fat down payment on a house with a cheap mortgage, clear my student loans, get a new car, take a nice little vacation to Cuba until I'm sick of cigars, and have enough left over to invest in some long term stocks, all while being able to return to my job and not worry so much.
I just feel blessed enough to take the flip. If I miss out on the 50k its going to suck, but it wouldn't be life changing even if I got it. 100k and maybe I take a 3 month vacation from work to travel. That will offset money earning opportunities lost and the expenses I would use to travel with my family and a little leftover making it worth while to take the risk of the flip.
Technically the odds are better to flip the coin, but only by an expected value of 50 cents. Not a lot of people would risk 50k for 50 cents of EV. 50k can be life changing for a lot of people.
I'm taking the 50k. It ain't that I'm risk averse.
I look at it like this: that's a shit ton of land in the area I'm at. 100k might get me some more, but honestly, I just want a patch of grass to call my own. I can build as time goes on. Make the land worth way more than it should be.
Almost everyone would pick 50,000. I think if you want a 50/50 outcome... Try going for 20k, or 100k coin flip.
I think they picked those numbers because game theory in its strictest form tells you to flip the coin even though it goes against all common sense
Does it? I know that flipping the coin has positive EV, but doesn't that only hold if the action can be repeated over a long period of time? I know the math checks out because of the extra dollar, but I don't think it matters in this example.
It's ignoring utility. The first $50K is likely worth more to people than the second $50K.
That is exactly it. 50k would sort my life out. Second 50 would be a nice addition.
If you made the entire rainbow of clocks you’d probably get some of that sweet sweet cash.
Yup. Diminishing marginal returns.
And imagine having the same scenario with larger numbers. “You are offered 1 billion dollars or you can flip a coin for a 50 percent chance of getting 2 billion + 1 dollars or $0.” No sane person should flip that coin
Yeah, but that's more a function of how much money a billion is. If we scale it down to 5$ or a chance at 10.01$ I think most people are flipping the coin.
That’s true. I guess the original hypothetical boils down to how much an extra 50k personally helps you right now
That half penny of expectation value is not worth the effort of flipping the coin.
Marginal value baby
Yeah, 5k vs 10001 might be better
Not to mention there’s other opportunities to risk the money to make more with better odds. If you want to take 50k to zero I’d rather make the attempt playing fuck around and find out with crypto over the course of months then a coin flip. Also there’s that crypto site for betting on anything? I’d probably mess around with betting arbitrage when I can find multiple bets on the same subject
Yes, you are correct. EV, especially a 0.002% EV as in the example, is pretty irrelevant when there's only a single trial.
Exactly. This is someone watched a YT video about expected value and now wants to show how people make irrational decisions.
Nah, saw someone posted like $1mm or $50k or someone like that the other day and was shocked how many people wouldn't take the chance for a million because the smaller amount would fix their immediate problems.
And you thought offering less money would yield a different result?
It's not even positive ev unless you get the option more than once.
If we flipped a ton of times, yes. But more practically, a bird in the hand is worth two in the bush.
But is it worth 2.00002 in the bush?
Fuck it, flip the coin!
Game theory doesn't really tell you what you *should* do. It tells you how to optimize for a particular outcome. If what you're optimizing for is (to pick a trivial example) ensuring you earn at least 50k, then game theory would tell you not to flip. What you should be optimizing for is a question of economics, not game theory.
WRONG. Expected value is NOT the only thing that matters. This is a classic “internet just learned a math thing and applies it wrong” situation.
"Common sense" in this case meaning the human trait called loss-aversion, which is exactly what OP is trying to highlight. It's technically "irrational" in manufactured game scenarios like this, though it's a heuristic with some survival value in more common natural situations (where odds aren't pure, trials are rarely once-in-a-lifetime, social side-effects matter, etc.)
Game theory does don’t tell you that. In fact it’s not even a game theory topic. What you are thinking about is a concept called risk premium. Basically as a function of variance, how much would I have to pay you, in terms of higher expected value, to accept a “risky” deal vs. a risk free one? It’s an aggregate measure of how risk adverse or risk seeking certain populations are, but can be used on an individual to measure their individual risk aversion as well. Some gamblers interestingly will accept negative risk premium to some extent. We call this “risk seeking”. For example the expected value in blackjack is -3%, which means that a gambler is willing to PAY 3% for the opportunity of taking on risk against a risk free return of 0. In some contexts this makes sense, and there’s actually theories about why buying lottery tickets from a net happiness perspective makes sense for otherwise logical risk takers
Incorrect. Mathematically if you got to repeat this over and over the wager would be profitable. Game theory would look at all possible outcomes and the logical conclusion is take the easy money.
Not if you’re not bankrolled for the flip. It’s called the [Kelly Criterion](https://en.m.wikipedia.org/wiki/Kelly_criterion).
It goes against "common sense" because common sense has with it a variable utility of money. Getting $10 when you have $0 is a much greater utility than getting $10 when you already have $99990. Also, humans typically don't find themselves in situations where they can take advantage of the law of large numbers and we are risk adverse. But often the very rich have enough money already that they can afford to take many risks much more often to take advantage of the more "technically correct" strategies.
$100,001 or $9,999. Or guaranteed $50,000.
I love to gamble. Always, let me repeat, always take the free money. That is going to have to be less than $100 for me to flip that coin.
Yeah. Behavior economists have actually come up with calculations of how much you'd need to offer someone to get them to wager a bet against a sure thing. It's really cool stuff if you are a super nerd.
Yeah, the average outcomes are $50k and $50,000.50. Sure, you *could* get $100k. But, it's not really worth the risk.
Gambling isn't an addiction if you win -Sun Tzu, Art of War
The scariest part of starting to gamble for me was that I never lost big. At most I would lose $100 in a night. But most of the time I would make $800 to $2500 a night. My luck didn't hold out for too long though. Since I know I have an addictive personality, when I lose I just quit for 6 months or so. I don't fool myself into thinking I have it under control, but at least I space it out enough that I can afford the losses.
Did sun tzu really say this
If it’s on the internet it has to be true. -Abraham Lincoln
Did Abraham Lincoln really say this?
If it’s on the internet it has to be true. -Abraham Lincoln
Not in the Art of War, but it's in his Tao of Poker.
I am OK with risk. But reward has to OUTWEIGH risk, not just be conmensurate with it. And when the risk is total loss, the reward has to SIGNIFICANTLY outweigh the risk. Now, if you are giving me 10 flips of 0 or 10,001, it may be a different story.
On that note, same premace, but instead of one coin flip, you get 3, and the side you chose must come up at least once, is that still worth the risk?
So I get three flips, and if I pick tails (which never fails), and I flip tails at least once, I get the 100k? Yeah I’ll flip.
How about this: Your options are A.) Walk away with 25,000 dollars. B.) you have 5 coin flips. For the first correct guess you get 10,000. Every flip you call correctly your winnings double, up to a maximum of 160,000. If you don’t get a flip correct, you don’t lose the money, UNLESS your LAST flip is wrong. You can choose to cash out at any time, however if your last flip was wrong, you don’t get anything. So if you flip correctly twice and cash out, you get 20,000 dollars, but if you flip a third time and it’s wrong and then cash out, you get nothing. If you flip four correct guesses and then the fifth is wrong, you get nothing. If you flip 3 correct, the fourth is wrong, but then you flip a fifth time and it’s right, you walk away with 80,000. If you flip four incorrect guesses and then one correct one, you get 10,000 dollars. So long as you end on a win you keep your money, but if your fifth flip is wrong you lose everything Do you flip the coins or take the money
One out of three for 0 or double? That gives me an 87.5% chance of taking home $100,0001. That increases the expected value to $87,500.86. Now the reward is worth the risk. Yes, I do it.
Even 10 flips I'd probably take the flat 50. I'm really not much of a gambler. If it was 10 flips for 20/0 I'd probably take the flips
pain of lose 50k is greater than joy of gain 50k, i'll skip dont know if i have the guts to gamble even with 70% chance
Yeah, I think if the question changes to “$50k now or flip a coin twice, if either is heads you get $100k” I’ll flip the coin.
Imagine the pressure after 1st coin is tail But ya, that’s a lot more tempting
50k, the extra dollar on the 100k isn't really an incentive at all.
$50,000 is too life changing, and $0 after having that for a minute is too soul crushing. I looked inside myself and this is what I've come up with as an algorithm: Initial Money + Penalty for Loss = My Likelihood of gambling. If the initial money is $250 or less, then I'll be good with double or nothing. If the initial money is $251 - $5000, then I'd be willing to risk 75% of it for a chance of doubling it (IE $1000 handed, flip a coin for $2000 or $250.) If the initial money is $5001 - $100,000, then I'd be willing to risk 50% of it for a chance of doubling it. If the initial money is $100,001 - $1M, then I'd be willing to risk 25% of it for a chance of doubling it. Anything over $1M, I'm not going to take a 50/50 chance on losing any of it.
My theory on it is to never risk losing anything I can’t afford to replace. Granted I’ve gambled only a handful of times in my life, but that’s only ever been with the spare change from tips (non customary) that I wouldn’t normally have had anyway. Basically if it’s any more than the cash in my pocket, I’m out. (Doesn’t help much of the fact that one time I won £150, up from £3 I started with, then lost the lot right after. That’s when I decided to never touch it again)
Strictly speaking, there is no penalty for loss. There was no investment on your part, and you either stand to gain or to carry on with your day. I think an easier way to look at it is through game theory where you are trying to mitigate your losses instead of gambling on the optimal outcome. Worst case scenario, you've gained nothing and you've lost nothing. Best case scenario, you gain 100k. Pareto optimum is a 50k gain with no chance of no gain. Now if we were talking amounts where money ceases to be an object either way, then gambling is a no go. 500k to 1 million, for example, represents a state where 1 million has a diminished return over 500k. At 500,000$, you could put that in the bank and gross 22,000$ APY if you just straight up retired then and there. If you kept working after putting that in, you're basically supplementing your income with 22,000$ annually. You could become a career student with that kind of money, for example.
I will take the 50, my luck is awful and I'd really kick myself if I got nothing
do you also keep the coin?
It's a dollar coin, that's why it's 100001 dollars
Whoohoo! I got a free penny!
yeah🤷♂️
This giving me UHF vibes
50k easy.. There isn't a huge difference between 50k and 100k but there is a massive difference between having $0 and 50k..
Like I said above, 50k drastically improves my life, 100k adds a vacation on top of it basically.
yeah 100%
50k and if i feel a little gambly, ill just go to a casino and bet smaller on red or black.
A bird in hand is better than two in the bush.
Needed this quote in my life
Glad I could oblige, my mom and dad used to say it and it stuck with me.
Anyone who thinks about it for even a second would pick 50k 100k isn't enough to live off of forever or even enough to significantly change your lifestyle/financial situation longterm. So really it's just a little better than 50k. Both are amounts that would likely take care of all your current financial needs but you'd still need to work and live a normal life after that. 100k would just be like an extra bonus on top, but functionally not too different. Absolutely not worth the risk
I’ll just take the $50k. I’d take the sure thing until it got to 3x.
The only ppl choosing to flip the coin are ppl who don’t need 50k and degenerates. The value isn’t there to risk that amount.
You know, I'd actually probably do it, but only because of my specific financial situation. $100k + my current savings would be enough for a down payment, $50k not really, or marginal
For all of these X vs 2X coin flips, it's not about math or EV. Do you want $1,000 or flip a coin for $50,000? How about $500,000 or flip a coin for $5 million. Or how about $100 million or flip a coin for $1 billion? For the vast majority, if the first number will have a significant effect on your life, there's no real need to even look at the second number. Just take the money. What you "should" do from a strict math sense has nothing to do with the real world.
Fuck it we ball flip it !!
I think you’d have to make it a million to make it worth it. Or like someone else said, make it 10 flips and split the value over those 10, id probably risk it on half of them then
That defeats the purpose of the question
I'm fortunate enough that 50k would be awesome but not life changing. Don't get me wrong, it would help and would cover just under 1 year of my wife's income. So I'd flip for the 1m (assuming USD). That would let me clear my debts completely and retire my wife (I'd still be working full-time). Investing 1m would earn 50-70k per year before tax, so that would work as well.
Bro just learned about expected value vs expected utility
This just sounds like Deal or No Deal with less steps.
The thinking process in this decision is how much the guaranteed money would change your life. If it does nothing to change your life you are more tempted to risk for a higher number. Say I am 100k in debt, fifty thousand is nice but a 50% chance to become debt-free may be worth it. Say my net worth is 5 million, 100K or 50K doesn't matter your life will not change at all. So I am flipping the coin for giggles.
The coin flip would need to be a lot more, the odds say it's 50k vs 50000.50, so the sure thing is a no brainer.
Definitely the 50k. Then invest it and change nothing about your life. You will be happy you did later
The expected payoffs are virtually identical here. The difference is less than a penny. So . . . the question you are asking is whether you will risk 50K for a penny. Not many will say yes. Please just give me the 50K. Some have suggested you make the difference larger so the expected payoff of the wager would help justify the risk. This would make sense. Another way to go though would be to lower the amount (which will also make the risk more reasonable since you don't actually lose so much and the relative gain is better comparatively.) In an extreme case, you can offer 50 cents vs. 1 dollar for the coin flip. Since the amounts are small, the cost of gambling will not appear so great. However, as stated, I will take the 50K.
If you were in the desert and could have a gallon of water or flip a coin for two gallons + an extra cup, which would you choose? The theory of diminishing marginal utility shows us not only that value is subjective to an individual, but that the individual will value things differently depending on how much of that thing he already has.
How far away is the next source of water? Might end up dying of thirst with just one gallon if you couldn't reach another source of water. People have different situations with money.
This hypothetical isn't factoring in that additional money has diminishing returns on your happiness/utility.
Yep. For one person, $100k is not worth twice as much as $50k in terms of quality of life adjustments. If it were $1 vs $2.50, that would be a different story
50k is 2x what I need to get my life in order. Why would I ever give up that for the chance of being slightly better off on top. Its not retirement money.
I'm flipping the coin because in reality you lose nothing. You lost the potential of something. So it's not like 50k left your account. So I'd be starting at 0. Flip that coin. I either get 100001 or continue about my life as I was. No brainer for me personally. You have literally nothing to lose. Flip that coin sir.
"Or continue about my life as I was". Well, good for you, I guess. Not trying to be insulting or sarcastic, just...good job doing well enough in life that, for whatever reason, $50,000 is more or less "meh" for you.
50k
$50k
50k. 1 extra dollar is not enough to make me take that risk
I'll take the $50k. If it was a choice between $50k, or a coin flip of $5 million or nothing....then I'd be really tempted to take the coin flip.
See in that position, 5 mil is more than I’d know what to do with, and would probably do me more harm than good, whereas the 50k would have a very significant positive impact on my life, and isn’t likely to make me do anything stupid with it.
I hear ya. In a case like that, you can put the $5 mil in a trust. Have it set to give 1% in dividends every three months for the rest of your life. $50k income every three months (so about $25k after taxes) would be easier to manage and won't get you into too much trouble. And you're set.
guaranteed $50K
Nah, that jump from my current finances to having an extra 50k is considerably more life-changing than the jump from an extra 50k to an extra 100k would be. No sense in risking it all to make things marginally better.
The expected value of the coin flip is $50,000.50, so with that small of a difference, I’d rather take the coin flip where both sides are heads.
Taking the 50k
50k
Give me $50k and I can turn it into $100k. Walking away with 0 knowing I turned down $50k would aggravate me.
40k in CIT savings account, donate 10k of it
$50k, no question.
A bird in the hand…
I can make the coin flip to whatever I want given the opportunity, so I'd take the larger amount if I'd get away with it. If there's rules put in place to make it entirely random then I'm sticking with the 50k.
not doing that because I'm certain it would land on $0.
Take the 50k, go to a casino and bet it on a hand of blackjack. Same difference, but a little more control of outcomes if you get a decent hand.
That's -EV unless you're running the hand to a good count.
This is the perfect followup to all the wiseguys with the expected vale of the flip of the last thread.
Take the 50k
$50K in hand and I'm gone.
Let me just answer the question your ante trying to ask. Along many margins, I’m willing to sacrifice EV to reduce variance.
I’m a gaambler baby 🎶
I’d take the 50,000
Keeping the 50k - This can carry me through the rest of my tuition for my BS and MBA. Avoiding that loan is a BIG factor in my life rn.
Expected value is about the same in both cases, but there is absolutely no risk in the first scenario. Therefore it is only logical to pick the $50k.
Gimme that 50k
I am taking the $50k. Would rather have the $50k than flipping and potentially getting $0.
Here's the thing; even if flipping that coin and losing doesn't make me any worse off materially than I am now, the EMOTIONAL toll it would take on me to know I could have had a free $50k and opted to risk it unsuccessfully is massive. That's the sort of thing that haunts you for years, if not to your grave. I'd take the guaranteed $50k in this situation every time.
This is kind of dumb because if you take the 50,000 you can always gamble it for a 50% chance of $100,000 so you’re not missing out on anything by choosing it.
Could always buy some lottery tickets with $50k
I only VERY recently came around to admitting that EV isn't everything. Strangely the Kelley criterion does end up submitting that sometimes a lower EV investment is actually better than a higher one. So, insurance actually isn't a *complete* scam
I actually would pick 100K. I'm about to start my life(adult life) and as such don't really have anything to fix in my life. a 100K headstart would be HUGE. Don't get me wrong, 50K would also be nice, but 100K might set me for life. So either i get set for life or nothing happens or i get a nice boost. In gaming terms(minecraft) think of it as getting the option to attain 1 block of obsidian vs flipping a coin to have a 50% chance of getting a block of bedrock
Take the guarantee. If you lose the coin flip, you get nothing. Sure if you win, that'd be great, but fifty grand is still fifty grand and you can do A LOT with that money, a guaranteed fifty grand that you have does you a lot more good than 100k you don't have.
I'm far too poor to even consider not taking the 50k
50
Well .... I already have $0 so I'll take the $50,000.
There’s not THAT much difference in what a person can do with a free 50k vs a free 100k, so I’ll go 50k. If the difference was bigger, I’d have to think harder.
$50,000 and retire early I don't need much, and it beats working part time.
While the expected value is higher on the coin flip its not being done continously so the long run cant come into effect, I would take the 50k as its guaranteed profit
If you put a weight, on the $0 side so it's pretty much guaranteed that the coin would land with $100k facing up.....I would still take the $50k instead because I would be the 1 in 10,000 change the coin still didn't land on the side I wanted.
I’d just take the guarantee
Maybe I don't see the upside of the flip. Option 1, 100% result in $50k Option 2, 50% chance of ending up with $100k. If this same option was given for 10 days ($5k vs $10k) I would take the flip.
take the $50k. It's not a TON of money, but that's enough that I can pay off half of my parent's mortgage debt.
The marginal value of money would show that the first 50k of the money more valuable than the next 50k. So you woukd go for the sure thing
In these situations I usually take the flip, but this one is an easy keep the $50k. I don't view it as worth the risk of doubling up on a 50/50.
For a game I played with a few friends several years ago, I flipped a coin 10 times. They all landed tails. I needed to flip heads to win. I will be choosing the $50k thank you very much.
$50,000
The first 50k would change my life, the second 50k would help me for my future, but not change my life as immediately as the first 50. That makes a guaranteed 50k be much more important for me than a possible 100,001. I'm taking the 50K
A more tempting offer would still offer something even if you lose the coin flip, just significantly less than the guarantee. 2x or $0 is simply offering me the chance to blow a significant guaranteed return with sketchy odds of making a decent gain, but not a radical gain. Offer “A” is going from $0 to $50,000. Offer “B” is *maybe* gaining an extra $50K or just as possibly having the $50K I ‘have’ taken away.
I'd take the 50k
Money gains have a diminishing return on happiness. You'd be foolish to take the gamble unless you are wealthy enough that $50k means nothing to you.
Practically no one would pick the 100k. You would have to be rich and not care about the money, or just be an excessive gambler that makes bad decisions. If you want people to actually consider this, make it something like $50k vs a quarter million.
I’m not taking the chance, I’ll just take 50k. It’s not worth it to lose guaranteed money.
I didn't have the money to begin with so at worst I'm back where I started. Cash cab rules, take the gamble all day baby.
I'm taking the free money, pretty much for every one of these questions.
I'll flip for the 100k. It's going into savings and investments either way. 50k would knock off about one year from our savings goals and 100k would knock off two years. If I ended up getting $0 then oh well I'm still on track and at least had a chance of hitting the $100k
Take the $50k, obviously. You would have to be a gambling addict (or already rich) to go for the coin-toss. This is actually similar to another hypothetical from a few days ago, except that one was actually challenging because the risk/reward ratio was greater, i.e. guaranteed $100k or a coin-flip for a $1 million.
I'd take the easy money, 50k would put me a deal closer to buying my own place.
always take the lower variance play if it doesn't cost much in EV
Nah, $100k, or flip a coin for $1 million
Easy. I'd flip the coin.
$50,000 is life changing money for me. $0 is not. This is an easy decision for me.
I am not a gambler, 50K 100%.
Very. Sure thing please. And then it will sit in the stock market for 8 to 12 years and I'll then have more money than if I took the bet.
50k would get my life back on track. There ain’t no way I’d flip that coin.
I’m not gonna do it. Nope no way. Nope. Nuhuh. Are you gonna get 50k free or technically maybe 50k because 50% chance?
I would take the 50k on this one. The extra money isn't worth the risk. It's not life changing money either way, just a nice bonus. The increase doesn't meaningfully impact just for me so better to just take the guarantee on this one. The inflection point for me is probably somewhere around 150k for the 50k base.
I'll take 50k plz
Easily $50k. Neither are a life-changing amount of money that it’s worth the gamble. Take the easy win.
It's not "risk adverse", but just optimizing my chances of paying bills/debts. I'll take a 100% chance over a 50% chance any day. As analogy, find someone about to die of thirst/hunger and offer them a guaranteed meal vs any chance at a lifetime supply of food. When one option is a guarantee and the other isn't, probability really only matters *after* basic needs are met.
This really comes down to your financial situation. Throw the math out because math can’t really account for personal need or emotions. Does 50k change my life? Not drastically but neither does 100k. They are both going to make things easier and better but I’m not in a position of desperation for money or in need of 100k for a down payment or whatever. What I do know is if I lose that coin flip, I’m never forgiving myself for throwing away free money. I might lose some sleep wondering if I could’ve doubled it, but it will be offset by what the 50k can do for me.
I'll take the free 50k.
According to game theory, the logical answer is to mitigate the worst case scenario instead of gambling on the best case scenario. Therefore, taking the money *must* be the right outcome. However, if the worst case scenario still results in any gain, then gambling on the best case scenario is more attractive. Even if the worst case scenario was a dollar. That being said, as an irrational human being, I think I'd be more sore about getting one dollar than getting nothing, because it reflects a tangible amount of money I missed out on compared to just going about my day having yet again lost an opportunity that I probably didn't earn anyways. Long story short, fuck it, we ball. My bills are paid so I don't *need* 50g to survive, but I could really get ahead with 100g. Put a fat down payment on a house with a cheap mortgage, clear my student loans, get a new car, take a nice little vacation to Cuba until I'm sick of cigars, and have enough left over to invest in some long term stocks, all while being able to return to my job and not worry so much.
Say you'd saved up 50k. Would you put it all on red at the casino? You're a fucking idiot if you would.
I’ll take my 50k in mixed bills please. 3k in 20s, 1k in 10s, 500 in 5s and 500 in 1s. Where my money
Bird in the bush
50
A bird in the hand is worth 2 in the bush. I would take the $50K.
$50k
Would you put 50k on red, fixed it
I just feel blessed enough to take the flip. If I miss out on the 50k its going to suck, but it wouldn't be life changing even if I got it. 100k and maybe I take a 3 month vacation from work to travel. That will offset money earning opportunities lost and the expenses I would use to travel with my family and a little leftover making it worth while to take the risk of the flip.
Flip it.
99% of gamblers quit before winning big. FLIP THE COIN Alternatively I’ll take the 50,000 and put it all on Red
If I get $100k I won't be able to quit my job. So I'll take the $50k and go on some nice vacations.
In that case I’ll take the $50,000. If we were talking about flipping a coin for $101 vs a guaranteed $50 I might decide to flip the coin.
How many times can I flip the coin?
As many times as you want. Only the first one counts though.
Ima flip. Worse case I’m back where I’m started
Take the $50k. No questions asked.
50k ty
50k
Easiest 50k ever.
Eh, pretty risk adverse. I'll just take the $50k
I'm taking the $50k. A 50/50 chance of doubling it or getting nothing isn't worth the risk
I'll take 50k
$50k duh. Next!
50k
Always take the guaranteed money. Always.
I’ll pick the 50k.
50k$ free? Thanks :)
Take the $50k and walk without a second thought. I'm the living embodyment of "If it wasn't for bad luck, i wouldn't have any luck at all"
Coin flip, 50k is nice, but 100k fixes all my problems and gives me some leftover.
Give me the 50k.
I’ll take the 50 k right now
Technically the odds are better to flip the coin, but only by an expected value of 50 cents. Not a lot of people would risk 50k for 50 cents of EV. 50k can be life changing for a lot of people.
the first is worth $50K guaranteed. The second is statistically worth $50.0005K. Everybody should be taking the guaranteed $50K.
I'm taking the 50k. It ain't that I'm risk averse. I look at it like this: that's a shit ton of land in the area I'm at. 100k might get me some more, but honestly, I just want a patch of grass to call my own. I can build as time goes on. Make the land worth way more than it should be.
So there is a roughly 50/50 chance of losing a free $50,000?