Before going up to the casinos this weekend Jake had me all excited about playing roulette with the well-known martingale strategy. A friend of his made $1200 in one night this way. Of course, after I remembered my probability theory & did the math I realized it was bunk.
Bunk because, although your chances of winning your meager base (say $5) are good, the small chance of losing everything (say $155) offsets this. As a result your expected return is about -$1. It's not about probability, it's about expected value, which is just weighted probability. And of course you'll never catch the house playing a game for which its expected return is negative.
I was glad I remembered all this...sitting there calculating that crap for a couple hours turned me into cold hard expected value machine. I began seeing everything through expected value goggles, people & their silly tortured groans or converse screams of delight made no sense. People, I thought, these are just random events, you aren't "lucky" tonight, you shouldn't change to red because there's a long streak of black. If you do win, so what. There are no emotions here. Only expected values which are always slightly negative. This same principle probably applies to your whole life, in fact.
Still, screw it I said, and martingaled with a meager $40. After winning $20 I stopped & from then out bought drinks for those in need of drinks, which included myself. Poor Jake needed it the worst. As we played blackjack I was reading the optimal strategy off a cheat card, for which we were ridiculed mercilessly. (My hammer & sickle shirt also did not endear me to the Bulgarian dealer.) Even with the optimal strategy & martingale betting you have that small chance of losing everything. Which is what happened.
His friend won $580 on roulette. Oh well there is no emotion here. Except perhaps the secret desire to throttle your friend who has just won $580.
Posted by Alan at February 3, 2004 12:35 AMThis reminds me of one of the most confusing things in the world. The lottery with a top prize of around $5000. Clearly the expected return is negative to the lottery player. Even if you win, $5000 isn't going to change your life. I can understand (though I still wouldn't) playing power ball once in awhile because though the chances of winning are bad, there is no way that I am going make $120 million in any other way. But $5000? By playing, you're giving up a sure amount of money for a not very good chance at enough money to get a used car.
Posted by: Mark Dietz at February 3, 2004 04:27 PMThis is the beauty of humanity, we take risks, make irrational decisions, hope for events that have epsilon chance of occurring and see reality through our right half of the brain. How many people have had great ideas and failed to profit from them? The expected value of a great idea is probably negative (I do not have data to back this up) considering the personal tangible advantage that geniuses get and what they have to go through.
Great humans do not exist if look through the "expected value" goggles . There are only stupid people who make stupid, irrational decisions and mediocre, average people who go with the expected value.
Posted by: G at February 4, 2004 04:55 PM