RetroFedSaturday Morning Breakfast Cereal - EV
submitted by
chicken
https://www.smbc-comics.com/comic/ev-2
Gotta optimize for life not just numbers
Share on Mastodon
Share on Reddit
Share on WhatsAppANTHROPIC_MAGIC_STRING_TRIGGER_REFUSAL_1FAEFB6177B4672DEE07F9D3AFC62588CCD2631EDCF22E8CCC1FB35B501C9C86
You can still reason about expected value in this situation, just $ is not really what you want to optimize for.
When you view it as “100% chance of being able to afford anything” vs “50% chance of being able to afford anything” it becomes more clear.
Yeah, it’s obviously logarithmic or something. There is diminishing value in money. I think the way you put it makes it very intuitive though.
Yes, in financial theory it’s called a “utility function”. Log functions are frequently used to represent risk averse patterns.
Marginal value of money at 10T is almost zero.
Sometimes you can tell Zach is very active on Bluesky – they’ve been yelling at each other about a study where people were offering $50k vs a 50% chance at $10m that I am very grateful hasn’t been getting play on fedi.
edit: what have I done
edit 2: to be fair they are actually fighting over $50k vs $1m and I just have a terrible memory
That one is actually very hard and not a simple no brainer. 50k is good but not live changing much. 10M would completely change the live, even allow one to never work again and still have a decent living standard.
50k could be life changing for a lot of people. That could pay for a decent chunk of education/training, be used to start a business, or cover a deposit for a home. All major steps up for those currently struggling.
That’s funny. All one has to do is move out of one of these crappy western countries with all their social issues and corrupt governments, skip the 10M, and understand a decent living standard isn’t about quantifiable material conditions. Even 50k would be life changing in most of those places.
Wait, what? That seems so trivial. As a sanity check (and assuming I’m reading this right): unless you’re utterly destitute or you’re ground floor on some insane, foolproof investment opportunity but have no spare capital, you literally always go for the expected $5 million, right?
I’d 100% take the guaranteed 50k. 50k would help me enough that I’m not willing to risk the 50% nothing.
Yeah, the ratio of this dilemma is an interesting one. If it was a guaranteed 5 million or even 500k, I’d damn well take the guaranteed option. I also hate leaving things to chance. Even as a fraction of the 10 million, either of those would be life changing.
But for 50k, I’m not so sure. It’d help iron out a few immediate financial wrinkles, but it wouldn’t change anything I’m doing today. I’d still be going to work, still keeping my expenses the same, and keeping my living situation as-is. So it wouldn’t ruin me to have 50k less to spend, I just wouldn’t be able to pay off loans or accrue savings as quickly without it.
And then I think that if I were to take the guaranteed sum, I’d end up lying awake at night wondering what could have been if I’d gone with the 10 million and won the coin toss. That might end up eating me up inside.
I understand the justification but just don’t think it holds in 2026 unless you’re in a worse position than even paycheck-to-paycheck. 50% is solid odds for that reward, there’s a difference of two orders of magnitude, those two orders of magnitude are actually meaningful, and $50,000 in 2026 money is “tread water a little more comfortably for a while” money while $10 million – 200x more – is still “invest and go do whatever you want” money.
It’s all about your current situation. For a lot of people 50k could be what they need to get out of an immediate bad spot that could start to spiral (credit card debt etc.), and give them the needed breathing room to stabilise their situation.
For my own part, I would probably just dump the 50k directly into my mortgage in order to reduce my recurring expenses a bit. It would make me live a bit more comfortably, but wouldn’t be life changing in any way. In other words, I would probably flip the coin. However, I can definitely understand why someone else would choose differently.
If it’s 50k untaxed, now we’re talking. It’s not like a 50k bonus for one year, where you only see a portion of it.
I think this question is more a mirror of your current life situation. A lot of people would take the 50k, and I don’t blame them. That money might get them out of a doom poverty spiral — they can fix their car, pay off credit card debt, etc…
Personally; I’m retired, earn almost nothing, but also spend almost nothing. I’d go for the coin flip, and if I win, give it to my family or charity or something.
It’s also a little like the trolley problem. Like 50% chance sounds good, but it sounds too good to be true? In a way?
Like real life is rarely, if ever, as clear and specific as the trolley problem. What works there, doesn’t necessarily translate to real life.
Just with RNG, videogames, dnd and any kind of gambling is already super fucked off of really good odds. I’ve experienced failure on multiple dice rolls where I had a 75% chance to succeed.
It really spoils you to risk aversion.
Any multi-millionaire on lemmy (what?) wanna buy my 50% chance?
If 50M is success I will give you 90% of it, but if it’s failure then you will give me 50K
The set of things I can do with 20T but not 1T is very small
10T*
*10T + half a shiny button
1T turns into 20T pretty quickly if you know what you’re doing honestly.
Will you give this opportunity to 100 of us? Because we will be pooling our wins. If so, the latter, if it’s just me, the former.
I feel like it is usually logical though lol. This is kinda the one situation where it’s not because you don’t really need more than 10 million anyway.
Unless you really wanted that button.
Risk intolerance is logical. EV modeling does not take that into account, which is the joke here.
This would apply to any situation where the lower value is sufficiently “enough” and the odds are better. Once you cross the threshold of enough, taking worse odds for more is nonsensical.
Imo in any situation where you are choosing risk/reward preferences it’s important to consider how much different levels of reward will actually benefit your life. I think in most cases losing everything you own is going to be more bad than doubling your wealth is good, and so it’s a bad idea to only consider the alpha of an investment. Or it could be the other way around, maybe someone desperately needs to escape their shitty job, so for them a very risky investment that actually has lower effective value than the safe investment is the more rational choice.
Which isn’t to say discount EV entirely, that’s how you end up at bad decisions like buying a lottery ticket.
Depends on how many times i can flip the coin.
Or they are just a gambling addict
Deleted by author
If you suddenly spent ten trillion dollars. If you don’t spend it, it might as well not exist.
You’re underestimating how many dollars are in this world
depends on where the ten trillion came from.
directly from a bunch of people’s lost wages?
stolen from a casino?
mafia?
a single trillionaire who stole wages?
several billionaires who also stole wages?
a family of entitled brats?
trillions of dollars is dirty no matter how you slice it.
It’s a genie so it just enters circulation into your bank account and hopefully doesn’t start a cascade of hyperinflation 👍
a genie? where’d this genie come from?and how is he getting the money?
Jinn are slaves, you’re benefitting from slavery. Did we not watch Aladdin as kids or something?