Risk Everything (2007) • Hacker News Board

Re: Risk Everything (2007)

#81

Post by GuB-42 » Tue, Aug 23, 2022, 10:02 AM UTC

kqr wrote: post #15

nme01 wrote: post #12

I see a problem with risking everything that is if your goal is to either make it to the top or make it to the bottom, then risking it all is the way to go. Yet, that’s a poor long-term strategy. Eventually risk will realize and you’ll lose it all.

Your statement sort of assumes the worst case has negative infinity utility. Which, granted, is usually how economists model human behaviour, but perhaps not how humans behave in practise. (If death truly had negative infinity utility, it would overpower the benefit of everything and we couldn't do anything.)

I think it is more about the "risk of ruin" than infinities.

Here is the idea: you go in a casino with $1000, that's your self-imposed limit, you will not die if you lose it, but it means you will stop playing, and you will have no way to recover from your losses, time to go home. That's what ruin is.

And this is something you have to take into account. For example, imagine you find a game where you have 50% chance of losing your bet, and 50% of winning your bet +2%. You can bet up to $1000. In theory, you get the best expectancy ($10) if you play $1000, but since it is your limit, you actually have a 50% chance of losing it all with no other chance to play this profitable game again, the result is you can expect to leave the casino poorer. If instead, you start with smaller bets, slowly ramping up as you play, you will be able to take full advantage of the game indefinitely, and almost certainly end up richer.

Note that in a real casino, games have a house edge, so from a pure money perspective, ruin is not a bad thing because it prevents you from playing more negative expectancy games, and it will happen eventually. But since if like me, you just go there to have fun and consider the house edge to be the price of entertainment, then lowering the risk of ruin is actually the main goal.

Re: Risk Everything (2007)

#82

Post by groby_b » Tue, Aug 23, 2022, 10:10 AM UTC

WJW wrote: post #74

buro9 wrote: post #66

I had to do this when young... I was homeless, rough sleeping. Honestly... it's a terrible piece of advice. Those risking everything have no other choice. If you're reading this person's blog post, if you're on HN... you probably have a choice, and you probably aren't "risking everything". I cannot imagine anyone on here actually choosing to potentially have nothing at all, no network, no funds, no assets, no nothing…

Whenever that comment comes up I feel the urge to just post the wiki entry for the Kelly criterion. If you don't have as many resources as your competitors in the market, reduce your bet size!!! Yes, that may mean you cannot challenge Mark Zuckerberg for yacht size just yet, but it will also mean that you can try again if you fail. Match your ambition to your means. Super risky plans with no room for errors make for…

Of course, when you can barely afford to live, the Kelly criterion does not do anything at all for you. You have nothing that you can afford to lose. Not even miniscule bets.

If you accept the official poverty line as threshold, that'd be ~13% of people in the US. And the poverty line is ~$14k/year - even if you make double that, the amount of money you can risk is really pretty close to zero.

Any risk in that situation is a super-risky plan with no room for error.

Re: Risk Everything (2007)

#83

Post by rramadass » Tue, Aug 23, 2022, 10:12 AM UTC

tomschwiha wrote: post #71

csomar wrote: post #62

This guy has got it all wrong. These guys have everything to win and nothing to lose. They are not taking any risks.

What is more worth than life?

Wolf Larsen from The Sea-Wolf by Jack London;

“Do you know the only value life has is what life puts upon itself? And it is of course over-estimated since it is of necessity prejudiced in its own favour. Take that man I had aloft. He held on as if he were a precious thing, a treasure beyond diamonds or rubies. To you? No. To me? Not at all. To himself? Yes. But I do not accept his estimate. He sadly overrates himself. There is plenty more life demanding to be born. Had he fallen and dripped his brains upon the deck like honey from the comb, there would have been no loss to the world. He was worth nothing to the world. The supply is too large. To himself only was he of value, and to show how fictitious even this value was, being dead he is unconscious that he has lost himself. He alone rated himself beyond diamonds and rubies. Diamonds and rubies are gone, spread out on the deck to be washed away by a bucket of sea-water, and he does not even know that the diamonds and rubies are gone. He does not lose anything, for with the loss of himself he loses the knowledge of loss. Don’t you see? And what have you to say?”

Re: Risk Everything (2007)

#84

Post by kqr » Tue, Aug 23, 2022, 10:13 AM UTC

GuB-42 wrote: post #81

kqr wrote: post #15

Earlier quoted context omitted.

Your statement sort of assumes the worst case has negative infinity utility. Which, granted, is usually how economists model human behaviour, but perhaps not how humans behave in practise. (If death truly had negative infinity utility, it would overpower the benefit of everything and we couldn't do anything.)

I think it is more about the "risk of ruin" than infinities. Here is the idea: you go in a casino with $1000, that's your self-imposed limit, you will not die if you lose it, but it means you will stop playing, and you will have no way to recover from your losses, time to go home. That's what ruin is. And this is something you have to take into account. For example, imagine you find a game where you have 50% chance o…

You are correct. For economic opportunity evaluations, it often superior to treat 0 as having negative infinite utility (e.g. ruin aversion). My comment was about more everyday situations where that is clearly not how people behave.

Re: Risk Everything (2007)

#85

Post by abm53 » Tue, Aug 23, 2022, 10:14 AM UTC

nme01 wrote: post #64

abm53 wrote: post #47

Earlier quoted context omitted.

Perhaps more realistic is to approximately Kelly-bet your way through life.

Exactly what I had in mind. Just to make my point more understandable: if I own an apartment and I pursue my dream and sell it so that I can invest it in my startup, that’s risking it all. Does such strategy have a positive outcome in the long run (even if by outcome we only mean happiness however it’s measured)? I doubt that. Bringing down risk taking to a simple “risk it all” is a trivia that is maybe inspiring but…

That said, I think the point made by others that your non-tangible assets (education, knowledge, personal network) should be included in your capital when considering your bet size is a valid one.

Losing your apartment isn't really an absorbing state if you can still take a salaried job, re-accumulate, and then continue to make further bets.

Re: Risk Everything (2007)

#86

Post by avg_dev » Tue, Aug 23, 2022, 10:14 AM UTC

This is a crazy story. It is a tale of compassion and human perseverance against nature.

But parts of it really bother me. To equate risking everything for a chance at a decent life with the struggles of foundership is discarding the inherent worth of life. The two are not equivalent things. The former is about basic dignity and human rights and the chance to live a happy life and the latter is about trying to build something.

I don't discount the challenges founders face; on the contrary I have tried it and failed spectacularly; it is not easy and that it requires a set of skills that is hard to learn and harder still to master.

> We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

- from the US Declaration of Independence

I believe strongly in that, and I will say further that I believe that all human beings are created equal, and have inherent rights. Many countries have similar mottos: https://en.wikipedia.org/wiki/Life,_Liberty_and_the_pursuit_...

I believe it is a disservice to humanity to compare foundership and basic human rights and dignity.

> Luck On a day when it really counted, they had some of it. But it dawns on me that luck is just the product of all these other qualities.

Really struggling with this quote. It is in my opinion a serious mistake to believe that luck is not a factor. I have been extremely lucky; I was born in a democratic country and I had easy access to health care and education, and by god I had access to a computer at a young age. These accidents of birth are nothing more or less than luck, and they made a tremendous difference in my life and had a significant positive impact on my life. Even in my own city, people are suffering in poverty, have a lack of access to medical care, etc. These people simply don't have the good luck that I have had.

As other commenters like buro9 have mentioned,

> Those risking everything have no other choice.

Re: Risk Everything (2007)

#87

Post by Arisaka1 » Tue, Aug 23, 2022, 10:27 AM UTC

boffinism wrote: post #65

"But it dawns on me that luck is just the product of all these other qualities" This, to me, highlights the flaw in the whole article. They nearly died. They were saved by a chance encounter with a friendly boat. This encounter was SO OBVIOUSLY not a product of their own motivation, boldness or any of the rest of that guff. This is the worst form of survivor bias.

People always want to ascribe the smallest slice of pie in luck, so that they get praise for what they achieve. I broke friendships with people who insisted that it wasn't their country's job market that had more opportunities for self-taughts to start their career, but it was their hard work and free will that made them chase the opportunities, which is akin to saying it wasn't the door that was unlocked it was my legs that helped me walk to the door.

Also, I cannot get myself to imagine that the captain of the ship had a plan to have 40 people drifting in the chance that they find someone else to approach them for restocking, and if that's the kind of captain we want more of I'm out.

Re: Risk Everything (2007)

#88

Post by NiloCK » Tue, Aug 23, 2022, 10:39 AM UTC

_zamorano_ wrote: post #70

buro9 wrote: post #66

I had to do this when young... I was homeless, rough sleeping. Honestly... it's a terrible piece of advice. Those risking everything have no other choice. If you're reading this person's blog post, if you're on HN... you probably have a choice, and you probably aren't "risking everything". I cannot imagine anyone on here actually choosing to potentially have nothing at all, no network, no funds, no assets, no nothing…

Daniel Kahneman, in his book thinking fast and slow, has a really good insight on why people in bad situations keep taking bad choices. Google "The fourfold pattern". Basically, he states that there's a cognitive bias where people in situations where a poor outcome is likely to happen, tend to risk too much, and not settle for a bad (but better) outcome that what they already have. If they kept compounding these "bad…

This is detailed pretty will in the book Scarcity, which highlights similar psychological effects among people who have not enough money, not enought time, not enough prestige, not enough room for caloric intake (dieters), etc.

I wish this book were more popular.

Re: Risk Everything (2007)

#89

Post by WJW » Tue, Aug 23, 2022, 10:44 AM UTC

groby_b wrote: post #82

WJW wrote: post #74

Earlier quoted context omitted.

Whenever that comment comes up I feel the urge to just post the wiki entry for the Kelly criterion. If you don't have as many resources as your competitors in the market, reduce your bet size!!! Yes, that may mean you cannot challenge Mark Zuckerberg for yacht size just yet, but it will also mean that you can try again if you fail. Match your ambition to your means. Super risky plans with no room for errors make for…

Of course, when you can barely afford to live, the Kelly criterion does not do anything at all for you. You have nothing that you can afford to lose. Not even miniscule bets. If you accept the official poverty line as threshold, that'd be ~13% of people in the US. And the poverty line is ~$14k/year - even if you make double that, the amount of money you can risk is really pretty close to zero. Any risk in that situat…

It seems we agree that below the poverty line people should not make uncertain bets, because they have nothing they can afford to lose. Not betting when you can't afford it is exactly what the Kelly criterion proscribes, no?

Re: Risk Everything (2007)

#90

Post by adastra22 » Tue, Aug 23, 2022, 10:47 AM UTC

_zamorano_ wrote: post #70

buro9 wrote: post #66

I had to do this when young... I was homeless, rough sleeping. Honestly... it's a terrible piece of advice. Those risking everything have no other choice. If you're reading this person's blog post, if you're on HN... you probably have a choice, and you probably aren't "risking everything". I cannot imagine anyone on here actually choosing to potentially have nothing at all, no network, no funds, no assets, no nothing…

Daniel Kahneman, in his book thinking fast and slow, has a really good insight on why people in bad situations keep taking bad choices. Google "The fourfold pattern". Basically, he states that there's a cognitive bias where people in situations where a poor outcome is likely to happen, tend to risk too much, and not settle for a bad (but better) outcome that what they already have. If they kept compounding these "bad…

Just FYI, pretty much all of Thinking Fast and Slow has been caught up in the replication crisis and repudiated. I don't know about the fourfold pattern in particular.