• Posts
  • RSS
  • ◂◂RSS
  • Contact

  • Rebrand Betting as a Guarantee

    December 12th, 2013
    betting, ideas
    A: I hear the Red Sox are playing the Yankees again.
    B: You "hear"? I keep talking about it!
    A: Well, yeah. Sorry! Who's going to win?
    B: The Sox, obviously. Though to be fair the bookies are giving them even odds.
    A: Want to bet on it?
    B: Sure. $10 that they win?
    A: If the Sox win, how will you feel?
    B: Awesome.
    A: And if they lose?
    B: Depressed.
    A: So shouldn't you be betting me $10 that they'll lose?
    B: Because then if they lose I'll at least have $10 and if they win I won't care about the $10, reducing my variance? That's logically correct, but it's also disloyal.
    A: What if I sell you a guarantee that the Sox win? Like insurance?
    B: Like I pay you $10 now, and if they lose you give me my money back? I'm not an idiot.
    A: No, you pay me $10 now, and if they lose I'll give you double your money back.
    B: Actually, that seems fair...

    To bet implies you think something is going to happen, and that by your internal estimate of probabilities you expect to come out ahead. So when people talk about insurance as betting it seems strange: flood insurance is a bet that my house will flood? Why would I bet that my house is going to flood? That would be terrible! With gurarantees and insurance, however, people can take exactly the same financial positions but view them differently:

    do nothing bet that Sox win bet that Sox lose buy guarantee that Sox win
    Sox win $0, happy +$10, happy -$10, happy -$10, happy
    Sox lose $0, sad -$10, sad +$10, sad +$10, sad
    There's no difference here between "bet that Sox lose" and "buy guarantee that Sox win" but at least to my non-sports-betting ear only the first sounds disloyal.

    Comment via: google plus, facebook

    Recent posts on blogs I like:

    Be less scared of overconfidence

    deferring to markets • deferring to experts • deferring to low-information heuristics • why they fail • blindness to outliers • what to do instead

    via benkuhn.net November 30, 2022

    Corncob Dolls

    I went to a farm and at the farm I got to see a corncrib and the corn that had fell out of the corncrib that no one wanted I got to use my fingers to take off the corn kernels and once the cobs were empty I put them in a bag and then once I got back to the…

    via Anna Wise's Blog Posts November 7, 2022

    Light Switch

    When I got my loft bed it was just so annoying every morning to have to get out of bed, climb down the ladder, turn the light on, and climb back up, just so I could see stuff. I decided to make a string for my light switch because I really wanted to be abl…

    via Lily Wise's Blog Posts November 7, 2022

    more     (via openring)


  • Posts
  • RSS
  • ◂◂RSS
  • Contact