[EM] RE : Re: Range voting, zero-info strategy simulation (raphfrk)

[Abd ul-Rahman Lomax]

At 11:28 AM 11/1/2006, raphfrk at netscape.net wrote:
>51% chance of getting $200
>100% chance of getting $100

That depends on unstated conditions. However, the second choice must 
be considered the baseline, since it is 100%. It is as if we start 
with $100. Shall we bet it with an expected average return of $102?

How often can we place this bet? How deep are our pockets? How much 
can we afford to lose?

If we make this bet a thousand times a day, it is highly likely that 
we are going to make a daily profit somewhere in the range of $2,000 per day.

So to put the question a different way, if we have a $100,000 
bankroll, would we invest it in a business that has an average 
return, over time, of $2,000 per day, with a risk of -- I'll let 
someone else calculate it -- that is very small that we will lose our 
investment. *Very small*. So small that we can simply forget about it.

Indeed, this is what the House does (i.e, a ganbling establishment). 
It makes a small average profit on many transactions.

So would I take this risk? Damn straight I would. 2% per day return 
on investment? That returns the entire investment in 50 days. If you 
find an investment like this and you don't want to take the 
opportunity, please tell me about it!

The key is the positive average value. If it is negative, it is like 
losing money on every transaction and making up for it with volume....

Now, if it is any degree of trouble to place each "bet," then the 
expected return is not $102, it is less than that by the value of the 
work involved.

If losing $100 would be more than mildly painful, or the average cost 
of placing the bet would be significant, I'd do this as often as I 
could, except see below.

This is with a constant bet. Doubling the bet each time is practically suicide.

Now, would I actually do it? Probably not. In real life, most of the 
only situations which have such accurately determined, predictable 
rates of return are artificially created. Gambling. And I *am* a 
Muslim, and gambling is forbidden. Investment, taking risk, is not.

I have a friend whose family was putting a *lot* of money into oil 
leases and wildcat drilling in a place they suspected had oil. High 
risk. But *extremely* high return if they struck oil. I assume that 
this has not yet panned out (this was ten years ago), because it 
would have been very big news. It would have eliminated the 
dependence of the U.S. on foreign oil for a time. A Muslim, by the way.