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What makes gambling wrong but insurance right? (2017)

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Re: What makes gambling wrong but insurance right? (2017)

#51

Post by pdonis »

Almondsetat wrote: post #5

Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact, insurance is the exact opposite of gambling. Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that, through statistics, al…

> Gambling is all about risking it all.

I would say that gambling is about paying for entertainment, much like lotteries. Your overall expectation is that you will lose money, but the entertainment value of being able to imagine yourself winning a huge pot compensates for that.

Of course the above assumes that you can afford to lose the amount of money you are gambling. The few times in my life I have gambled, that was always my approach: I set aside an amount I was willing to lose all of, and if I got to the point where it was gone, I stopped. But of course many people who gamble do not take that approach.

Re: What makes gambling wrong but insurance right? (2017)

#52

Post by jethro_tell »

philipov wrote: post #4

Gambling isn't wrong. Gambling is stupid . Hedging risk is not stupid. That's the difference.

However, being sold something like health insurance as hedging risk is bullshit.

There is no risk in needing to provide healthcare to a population, its a given, though its not always equal cost per person.

However, something like crop insurance allows one to take the up front risk of buying a ton of seed and machines while hedging against the off chance that drought, fire, pest or rain ruins a crop before it can be harvested months later.

Re: What makes gambling wrong but insurance right? (2017)

#53

Post by pdonis »

BugsJustFindMe wrote: post #30
Almondsetat wrote: post #23

Earlier quoted context omitted.

You can choose to live your life without insurance, in which case you have to bear all the damage from bad events but you also benefit fully from good events, or you can live your life with insurance, taking less losses from bad events and getting less from good events. As said, it simply reduces variance in your life/business. You have to choose if that's how you want to live your life.

> it simply reduces variance Mostly I agree. That doesn't make it not gambling though.

> That doesn't make it not gambling though.

Yes, it does. As I said in response to you elsewhere, insurance means not accepting huge variance in payoff, whereas gambling means you do accept it. They're opposites of each other. The fact that the counterparties in both cases--insurance companies and casinos--end up making money from all of their customers on net does not mean the two things are the same.

Re: What makes gambling wrong but insurance right? (2017)

#54

Post by yamrzou »

Almondsetat wrote: post #49
yamrzou wrote: post #34

Earlier quoted context omitted.

Insurance companies are like casinos: Playing at a casino, I’m almost guaranteed to lose money (unless I’m a very good poker player — the house and I can both win there); if I’m lucky, I can win big. If I buy insurance, I’m almost guaranteed to lose money; if I’m unlucky, I can get reimbursed for losses. From: The House Always Wins — Casinos and Insurance Companies — https://kriswilliams.medium.com/the-house-always-w…

Yes, you always lose a bit of money with insurance, but life isn't all about money, whereas the whole point of gambling is winning money. Insurance brings other benefits that improve your life.

> Insurance brings other benefits that improve your life.

What other benefits besides the money that covers the losses?

Re: What makes gambling wrong but insurance right? (2017)

#55

Post by andoando »

sailfast wrote: post #45
andoando wrote: post #6

Earlier quoted context omitted.

Insurance is stupid if you are wealthy enough to cover the damages on your own. Insurance for your phone, computer etc for example is certainly stupid for most people.

Being wealthy enough to cover it yourself doesn't mean it's stupid to buy the option to avoid the downside if it's priced properly.

Insurance companies are always going to give you unfavorable odds, unless you think for some reason youre more likely than average to have an accident.

I don't understand why car/home insurance isnt nationalized

Re: What makes gambling wrong but insurance right? (2017)

#56

Post by Almondsetat »

BugsJustFindMe wrote: post #30
Almondsetat wrote: post #23

Earlier quoted context omitted.

You can choose to live your life without insurance, in which case you have to bear all the damage from bad events but you also benefit fully from good events, or you can live your life with insurance, taking less losses from bad events and getting less from good events. As said, it simply reduces variance in your life/business. You have to choose if that's how you want to live your life.

> it simply reduces variance Mostly I agree. That doesn't make it not gambling though.

If gambling and insurance were the same you would be able to both frame insurance as a form of gambling and gambling as a form of insurance.

Re: What makes gambling wrong but insurance right? (2017)

#57

Post by BugsJustFindMe »

pdonis wrote: post #42
BugsJustFindMe wrote: post #15

Earlier quoted context omitted.

> Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. Counter: your belief about insurance is inverted from reality because your notion of what constitutes winning vs losing at insurance is backwards. You lose at insurance by not having any circumstances that lead to payout. You win at insurance by having it actually d…

> You lose at insurance by not having any circumstances that lead to payout. You win at insurance by having it actually do something for you. You are misunderstanding what insurance is for. The benefit that insurance conveys for the person insured is not that it is supposed to make money. It is risk avoidance. Without insurance, you might pay zero, or you might pay a very large sum that you can't afford. With insuran…

> The benefit that insurance conveys for the person insured is not that it is supposed to make money.

Presuming you mean ending with more money than you started, gambling isn't either. Pay in vs pay out has no relation whatsoever to that except in passing.

> It is risk avoidance.

These are the same thing dressed in different names. There's only no making money on health insurance in the sense that you don't get to keep the money, but the only reason you're not "making" that money is because you have just incurred medical debt that the given money is obligated to cover per the terms. It's exactly the same as giving the money directly into your pocket on the condition that you use it immediately to clear your medical debt. You "made" all that money. You just also owe the full amount to someone else too. Consider term life insurance instead, where there is no extreme debt obligated to cover and your next of kin does just actually get a fat check.

Re: What makes gambling wrong but insurance right? (2017)

#58

Post by pdonis »

from-nibly wrote: post #11
Almondsetat wrote: post #5

Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact, insurance is the exact opposite of gambling. Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that, through statistics, al…

First off thats just reinforcing the grayness of the difference. Where exactly on which exact bell curve does gambling stop and insurance start? Second, the one thats even more ambiguous is insurance from the perspective of the insurer. It's just gambling with a payment plan, that HOPEFULLY doesn't turn into a ponzi scheme.

> Where exactly on which exact bell curve does gambling stop and insurance start?

That's not the difference. The difference is that in gambling, you accept a large variance in payoff, whereas in insurance, you don't; you transfer that risk to someone else.

Re: What makes gambling wrong but insurance right? (2017)

#59

Post by pdonis »

leashless wrote: post #38

In insurance you expect to come out ahead in the average case. In gambling you expect to come out behind in the average case. Therefore insurance is rational and gambling is irrational.

> In insurance you expect to come out ahead in the average case.

Not financially, no. On average people who buy insurance receive less in payouts than they pay in in premiums. If that were not the case, nobody would sell insurance because anyone who tried to would go bankrupt.

If you factor in the non-financial benefit of risk avoidance, then yes, people who buy insurance come out ahead--but now not just in the average case, but in all cases, at least as long as the people buying insurance are rational and only buy the amount of risk avoidance they actually need.

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