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Poor People Should Probably Gamble More

ewjordan.blogspot.com

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Re: Poor People Should Probably Gamble More

#21

Post by corin_ »

mattmaroon wrote: post #4

I sure hope nobody reads this and is fooled by it. It's terrible, terrible advice for three reasons. 1. Money has a declining marginal utility. Winning that $130 isn't nearly as positive as losing it would have been negative. The author neglects to mention what happens the other 53% of the time when someone with mounting bills loses the last money they had. Debt spiral is usually the result. Even if the odds were 50/…

Is that a safer bet than blackjack, or are you defining blackjack as "a game of skill"?

(I know it's a smaller house edge than roulette by some way, but not too familiar with craps)

Re: Poor People Should Probably Gamble More

#22

Post by rkosai »

What about the case for a startup? Say, you raise $500k but you "know" (for the sake of argument) you need a million to make the thing work.

No gamble: 0% chance of success * 53%

Put it all on black: non-zero chance of success * 47%

I don't imagine this would go over very well with investors, though.

Re: Poor People Should Probably Gamble More

#24

Post by Dn_Ab »

I do not think the reasoning in this piece is solid. Firstly the concept of expected value only make sense over repeated trials of the same experiment and using it here on a one off is a misapplication. Unless the person is expecting many such tickets. At which point the combination of the person's stupidity and statistical variance will have them broke a lot quicker. The expected value is no more meaningful as a dollar amount as 2.5 is for average number of kids to a family.

The other portion is the fact that the $250 is a sunk cost. Future decisions should be independent of that money lost. Rationalizing gambling using cost relativity since gambling on an already expensive bill "will save you money" is not logical. It won't save you money unless you keep doing stupid things at which point you are already losing alot of money - its on average meaning repeated trials. Simply irresponsible. I'm either gonna win $130 with 47% chance or lose $130 with 53% chance. My $250 bill is sunk and completely independent of this decision and outcome. Otherwise any time I have an expensive bill to pay and will be left with only about $130 why not gamble it save the amount I need to pay in the long run. This is the start of a gambling problem.

Re: Poor People Should Probably Gamble More

#25

Post by araneae »

Tangent:

I always thought state sanctioned lotteries were highly immoral. Sure, they want the tax revenue, but poor people are disproportionately the victims of what feels like fraud. The people believe that have a chance at winning what they most certainly do not.

It's like reverse welfare- taxing the poor and uneducated for the benefit of the masses.

Re: Poor People Should Probably Gamble More

#26

Post by julius_geezer »

araneae wrote: post #25

Tangent: I always thought state sanctioned lotteries were highly immoral. Sure, they want the tax revenue, but poor people are disproportionately the victims of what feels like fraud. The people believe that have a chance at winning what they most certainly do not. It's like reverse welfare- taxing the poor and uneducated for the benefit of the masses.

It's definitely a regressive tax. Generally it offers worse odds than the numbers guys did back in the day.

One could argue that it's better than legalizing casino gambling and inviting Steve Wynn to come into your state and help write the laws.

Re: Poor People Should Probably Gamble More

#27

Post by kscaldef »

Dn_Ab wrote: post #24

I do not think the reasoning in this piece is solid. Firstly the concept of expected value only make sense over repeated trials of the same experiment and using it here on a one off is a misapplication. Unless the person is expecting many such tickets. At which point the combination of the person's stupidity and statistical variance will have them broke a lot quicker. The expected value is no more meaningful as a dol…

The $250 is a sunk cost, but the further $100 penalty if you don't pay is not. That's the critical point that you're ignoring.

Re: Poor People Should Probably Gamble More

#28

Post by ewjordan »

Dn_Ab wrote: post #24

I do not think the reasoning in this piece is solid. Firstly the concept of expected value only make sense over repeated trials of the same experiment and using it here on a one off is a misapplication. Unless the person is expecting many such tickets. At which point the combination of the person's stupidity and statistical variance will have them broke a lot quicker. The expected value is no more meaningful as a dol…

I'm either gonna win $130 with 47% chance or lose $130 with 53% chance. My $250 bill is sunk and completely independent of this decision and outcome. Otherwise any time I have an expensive bill to pay and will be left with only about $130 why not gamble it save the amount I need to pay in the long run. This is the start of a gambling problem.

No, you're missing the point: the $250 is, indeed, a sunk cost. The $100 fee that's going to add on if it's not paid on time, however, is not.

Stripping away all the irrelevant details of the problem, the (completely contrived and artificial, indeed) choice is between:

A) Certainly losing another $100, B) A near 50/50 shot (minus a single-digit house edge) of either winning $130, or losing $230 (lose the $130 bet, plus have to pay the $100 "late fee")

The $250 owed is irrelevant to the problem except to trigger the late fee and set up this payoff structure.

Firstly the concept of expected value only make sense over repeated trials of the same experiment and using it here on a one off is a misapplication.

Whether or not expected value calculations are valid for single shot deals, are you really saying you'd choose option A in this situation, which loses you twice as much as the expected loss in option B?

Re: Poor People Should Probably Gamble More

#29

Post by jrockway »

gojomo wrote: post #8

I clicked through expecting to be disappointed... but by golly, there's something to this. An imminent, disproportionate late-fee can make a less-than-even chance of instant liquidity more valuable than a more-than-even chance of larger loss. Of course, assuming any reasonable credit is available at all, and that the person is not in permanent deficit unable to eventually pay back a loan, would give rise to a dominan…

As in: seconds before BofA or some other institution is about to pillage someone for $30, the 'angel' swoops in with a just-in-time loan, charging the person (in fees and interest) any amount less than $30 -- and lower with more competition.

It's called a credit card or savings account.

If you have a credit card, you can't overdraw it. Or you can link your checking account to it, avoiding the "we're loaning you money even though you didn't ask for it" fee. Or you can have a savings account, and dip into that when your checking account runs out of money. Or you can just not run out of money.

I got hit with an overdraft fee back when I was in college even though I explicitly opted out. I didn't make that mistake again. I stopped using a debit card and started using a credit card again... and now I even get 1.5% cash back. (If this happened to me now, I would have just filed a complaint with the state's attorneys general office. Customer service doesn't want to help? Enjoy the fine and new regulations.)

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