• @xmunk@sh.itjust.works
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    121 year ago

    How is this video calculating that a 50% chance of 80% gain and a 50% chance of 50% loss yields a positive expected gain? An alternating string of heads and tails will drive your money to zero - a 50% loss (1/2) would be balanced by a 100% gain (2/1) in a fair system.

    • @simple@lemm.ee
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      1 year ago

      Because if you gamble in small increments the odds are in your favor. If you gamble your entire wealth then you’ll likely lose.

      Lets say you’re gambling in $5 increments. The odds are 50/50, if you lose then you’ll have $2.5, and if you win you’ll have $9. That’s a 50% chance to lose $2.5 and a 50% chance to gain $4, the actual risk is if you lose too many times in a row that you don’t have enough money to gamble with. Otherwise, you’ll slowly gain money.

      • @xmunk@sh.itjust.works
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        21 year ago

        Ah, I was assuming that the premise was all-in on each gamble. It’s true that it will work with small increment gambles.

    • @limitedduck
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      1 year ago

      This is true if you’re betting everything you have. By not having shrinking bets after losses you can tap into the net gains. Compare 1 win followed by 1 loss with $100 start:

      Win is $100+$80 = $180

      Loss is $180-$90 = $90

      Compare with fixed bets of $50 with bank of $100:

      Win is $100+$40 = $140

      Loss is $140-$25 = $115