One time bet in your favor... how much?

[QuikSand]

Hypothetical question, but take it as seriously as you can.

You have a one time chance to make a bet on a fair coin, perfect 50/50 odds on h/t outcome. Call it right and you quadruple your money. Call it wrong and you lose it. No replays, this will not be offered again.

You will have enough time to make your own arrangements to free up the funds from your own sources, but you are not able to buy insurance to soften the risk, to use any outside sources of money, or anything else that undercuts the spirit of the question.

How much would you bet?

[Izulde]

$50. I always operate on the principle of only gamble the amount of money it won't hurt you to lose.

[Logan]

$1,000.

$4K is a nice score. When I gamble, $500 is my limit. At these odds it's worth extending that limit, and I can make up that difference by being more frugal for a couple months.

[Lathum]

bet $50, if lose bet $100, if lose bet $200, if lose again coinflip not your game.

[INDalltheway]

As much as I can literally afford. Getting 4:1 on a 50/50 bet made me cream my jeans even though this is only a hypothetical.

[panerd]

So the expected value is doubling my money? Pre-marriage? Probably one of my IRA's (15-20K). Now? Would have to explain to the wife how this is a once in a lifetime but would probably do a couple thousand on the side.

[PilotMan]

My first thought is a grand in my current financial situation. Enough that losing it isn't the end of the world and winning makes a significant financial contribution to my income.

I am not a gambler typically, so the fact that it's a once in a lifetime opportunity doesn't make that much impact on me.

[lighthousekeeper]

Originally Posted by QuikSand

Hypothetical question, but take it as seriously as you can.

You have a one time chance to make a bet on a fair coin, perfect 50/50 odds on h/t outcome. Call it right and you quadruple your money. Call it wrong and you lose it. No replays, this will not be offered again.

You will have enough time to make your own arrangements to free up the funds from your own sources, but you are not able to buy insurance to soften the risk, to use any outside sources of money, or anything else that undercuts the spirit of the question.

How much would you bet?

were you by any chance listening to npr radio today?

[MIJB#19]

When given this opportunity, I think you have to calculate how much money you were planning on throwing away the rest of your life to any lotteries. Add that number up and make the bet. You lose? Never do any lotteries again, these odd will never come back to you. You win? Well, go you!

[digamma]

Originally Posted by INDalltheway

As much as I can literally afford.

Rationally, this.

Does it change anyone's answer if it is an even money bet on a coin massively weighted in your favor?

[Crapshoot]

Originally Posted by digamma

Rationally, this.

Does it change anyone's answer if it is an even money bet on a coin massively weighted in your favor?

I bet it does actually, for a lot of people.

[Buccaneer]

Only as much as I am willing to throw away.

[SteveMax58]

Probably about $5k. It would be a dent & I dont like losing money but I could deal with it.

But getting $20k would be a really nice chunk to & would really set me up much better.

5/20 is probably worth the risk/reward to me. Any higher would feel like a gutshot. Any lower would make me feel like I left something on the table that I could have had.

[Logan]

Originally Posted by INDalltheway

As much as I can literally afford. Getting 4:1 on a 50/50 bet made me cream my jeans even though this is only a hypothetical.

Originally Posted by digamma

Rationally, this.

But what does "literally afford" mean? A month's worth of disposable income? A year's? All your savings?

[britrock88]

Originally Posted by digamma

Rationally, this.

Does it change anyone's answer if it is an even money bet on a coin massively weighted in your favor?

As far as expected value goes, it should.

[Buccaneer]

To me, "literally afford" simply means what I am willing to flush down the toilet and not feel bad about it. Since there is no entertainment value (as one could afford to lose by playing a game), it shouldn't sensibly be more than you throw away without benefits to anyone.

[BishopMVP]

Re: the original question, I'm probably in the $1000 to $1500 camp. Just don't have that much disposable income.

Originally Posted by britrock88

As far as expected value goes, it should.

Yup, anything less than 100% would be lower, but I do think there is something to the sentiment (and I suspect many people would rather have a 90% chance of winning a lower EV proposition than a 50% chance of a higher EV).

Let's say we set the EV at $1.50 for every $1 wagered, would you rather have a 90% chance of winning 1.67x, a 75% chance of winning 2x, a 30% chance of winning 5x, or a 10% chance of winning 15x?

What if we upped that EV to $3 for every $1 wagered, so you can really start getting into some lifestyle-changing amounts? Would you start going for a high-risk play that could set you up for life, or go for a relatively easy and safe play to pick up a few thousand?

[CU Tiger]

100k

[cuervo72]

"So, what kinda cash does everyone here have?"

[Autumn]

Chance that half of the people in this thread get robbed by next week? anyone taking bets on that? "Oh, 5K you say? What's your location again?"

[CU Tiger]

Originally Posted by Autumn

Chance that half of the people in this thread get robbed by next week? anyone taking bets on that? "Oh, 5K you say? What's your location again?"

Ahem

Originally Posted by QuikSand

You will have enough time to make your own arrangements to free up the funds from your own sources,

There not even half that much in the gun safe and its pretty darn inpenetrable as far as home safes go.

[BrianD]

EV doesn't play into this, does it? You want to make the high EV plays because over the long run, you will come out ahead. In this case, there is no long run. There is no eventuality of coming out ahead. You have one 50/50 shot and that is it.

[SportsDino]

About $25,000, but I am a gambler type to begin with.

I rarely want a one-time rapid loss situation like this, but the favorable odds make it an interesting bit of speculation.

As for the spectrum of similar bets:

25% chance with 8 times payoff = $5,000
- Same expected value (2x), but risk of the one-time loss is important.

75% chance with 2 times payoff = $30,000
- Lower expected value (1.5x)

75% chance with 2.66666 times payoff = $40,000
- Same expected value (2x), lower risk makes it more interesting

This is not an unfamiliar situation if you are dealing with speculative situations like the stock market, while there is some reaction time in the market if you assume it is operating efficiently the arrival of previously unexpected information functions much like this situation. A common bet I have made in the past is 'will a merger happen in the next year for a company', often this is a bet of putting a bunch of money in there and it stays flat to soft gain/loss, but it is possible the merger will double the share value or maybe even the situation has the potential for a big loss (no merger and the company's value detiorates).

Information helps to weight the coin, but in the end you need to stake an amount of money and react to what falls out. Risk Aversion is important, it is all well and good to say what an expected value is, it is another thing to be able to live without a portion of money. If you had few obligations, you could bet the farm on this quadruple bet (assuming you can get a career as a farm hand) and in one situation end up with 4 farms and retirement, or in the other a loss of everything and the need to work 10 hour days again. I'd argue at 20-30 most people are actually better off gambling away whatever they accumulated to then, as long as you have your day job things will not be too much different in your day to day life.

The opposite, a 50/50 shot that ends up taking all your money is not too rare. Get sick, lose a job for an extended period of time, over extend on your house and it goes underwater... when you don't have much it takes very little really to wipe it out. This is why I think the need to take big gambles in life is an important skill to acquire, most don't involve handing over all your money in a one time quadrupling, but often there are chances that have costs (often in time and effort and risking your neck/ego) that have big payoffs that we summarilly reject due to the natural human risk aversion. The summation of all those 0's is of course 0, you only get the 'sure money' wins. On the other hand, it seems the modern world's sure money more and more revolves around driving or keeping people in bankruptcy, to the point that cautious hard work may make it difficult to survive, yet alone thrive.

[INDalltheway]

Originally Posted by BrianD

EV doesn't play into this, does it? You want to make the high EV plays because over the long run, you will come out ahead. In this case, there is no long run. There is no eventuality of coming out ahead. You have one 50/50 shot and that is it.

I think you HAVE to take advantage of the EV you have in this bet though. You will never (general public) find a bet that you will be getting 4:1 on a 50/50 proposition. I would live a very frugal lifestyle and save as much money as possible to make this bet.

[CraigSca]

Bet it all.

[Danny]

I put 5000 down with 4:1 Payout and then bet someone else 6000 (giving them odds so I get 5000 back) on the other result.

[Marc Vaughan]

Probably a months salary - if it paid out then I'd be very very happy, if not then I could cope without crying myself to sleep each night for the following year.

I concur with people indicating that big bets need to be made sometimes, however I'm content with my lifestyle and situation so really don't feel the need to risk it all (when I was younger and had no family I'd probably have rolled the dice and let them drop where they may).

Finally to the people speaking 'rationally' .... rational decisions are just a financial 'equation' imho - all decisions in life should be made on the basis of the long term effect to you in terms of happiness (raw cash me damned imho) ....

For instance the pure economic argument would be to bet as much as you can afford because of the chance of increased return, however for most people the amount of money involved wouldn't buy them long-term happiness, however the loss (if it occurred) could be seriously detrimental to them for a long long time (especially if it affected their relationships etc.).

[BishopMVP]

Originally Posted by SportsDino

The opposite, a 50/50 shot that ends up taking all your money is not too rare. Get sick, lose a job for an extended period of time, over extend on your house and it goes underwater... when you don't have much it takes very little really to wipe it out.

This probably undercuts the spirit of the question as well, but if I was offered this in my current financial situation (mid-20's, zero debt and no kids/wife/sick or elderly family members I'm supporting, but not a ton of liquidity, few assets and a pretty weak credit history since I've avoided going into debt) I think the smartest play would be to max out a bunch of different credit cards and go big. I could probably get back to the same credit rating I have now before I have kids/buy a house if I lost the bet, but a huge win would dramatically change my situation over the next 3-5 years.

[SportsDino]

I did not take debt into account, it depends on your alternative sources of income but you could probably chip in a bit from there. The problem is how long you want to pay for the downside scenario, credit gives that extra kick in the teeth on the loss that makes the psychological hurdle that much harder to overcome.

I mean, that is really the point of the question right, people tend to be wired to avoid risk and it shows in numerous studies of mathematically equivalent and even favorable situations. They even have demonstrated that the same situation worded differently can change peoples answers dramatically.

[Marc Vaughan]

Originally Posted by SportsDino

I mean, that is really the point of the question right, people tend to be wired to avoid risk and it shows in numerous studies of mathematically equivalent and even favorable situations. They even have demonstrated that the same situation worded differently can change peoples answers dramatically.

(while I agree with what you say in the main - especially regarding wording affecting peoples decision making ..)

A lot of those studies though are wholly artificial in that they incorrectly state peoples judgements are wrong by purely analyzing net gain/loss as a sum total across hundreds of peoples decisions.

The issue however is that people making the decision don't get to be those 100 or so people, they're one single person making a decision and weighing up the emotional cost and gain involved.

As I indicated in my prior answer such decisions are generally not as hard and fast as indicated, they aren't a pure monetary gain/loss - its the potential effect of that gain or loss on the persons overall lifestyle and happiness which sways their judgement.

If someone is in a 'good place' then its less likely they'll want to risk it and would require considerably more inducement to do so than someone who has little to lose ...

[dave731]

I'd take out a 401k loan for everything I had in there to do this bet. I set the terms for repayment so I'm good there. Yes it would suck if I lost but it would do so much more good if I won it would be worth the risk IMO.

[Crapshoot]

I'd do $XXX. But here's the other part - if you told me I could have this bet be 4 different tosses (ie, I had this opportunity 4 different times, all in a row), I'd increase my baseline bet by 8x on each toss.

[Logan]

So where's QS with the answer?

[panerd]

I think he is waiting for this answer...

2/3 of my money

[Shkspr]

Originally Posted by Logan

So where's QS with the answer?

Okay, note to everyone: you all lost. Damnedest coin ever. Make all checks payable to Quiksand.