[EM] RE : Re: Range voting, zero-info strategy simulation (raphfrk)
Abd ul-Rahman Lomax
abd at lomaxdesign.com
Wed Nov 1 11:49:41 PST 2006
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.
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