Classical utilitarians take the $30m gamble and give it away when they win
But most people who are or were into gambling arenât into gambling THAT kind of money.
if its after taxes and someone doesnt own a house lets say they buy a house with the money. now they have an extra $2,500 a month that doesnât need to go to rent. thats nice but they had a coin flip of getting an extra $100,000 a month just in interest w/o touching the principal (generational wealth) that would have allowed them to live in 5star hotels and fly first class on a permanent vacation for the rest of their life not to mention being able to do serious charity for others at a personal level.
the $2500 will most likely just go on stuff like newer cars, phones and other material stuff that doesnât move the needle as much as they might expect unless they have some plan to live like walden in the woods.
This is all I can think of when people mention taxes in a fantasy scenario of guaranteed $950k vs 45% chance of $30 million.
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oh nice, thatâs a good idea for a grift, actually.
Iâve been saying exactly this since the hypothetical was first posted.
You can just pop this into a Kelly calculator (and full Kelly betting is a very aggressive strategy) and it will just tell you whether the amount you should risk is more or less than 950K. If your personal utility function for additional wealth is very different from the default Kelly assumption, then you can adjust accordingly (either by estimating or if youâre really motivated doing the actual math).
I am a little surprised by this. I am more shocked by how people donât understand that this is a very thinly disguised bankroll management problem that has already been studied quite a bit. Itâs like people are trying to derive this stuff from first principles, when concepts like risk of ruin and utility functions should be well known to people who gamble more frequently and far more proficiently than the average human.
These type of calcs explain precisely why it makes sense for some people to take the 950K and for others to take the much higher EV proposition.
Congrats on being in a place where the risk of things going on the way they are is small enough that you can take a shot at the 30mill. Thatâs not where a lot of folks in the thread are at.
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Iâm surprised no one has done the math. (No, Iâm not.)
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I did.
Does the Kelly calculator include your current wealth, wages, debt, and expenses?
Why didnât you post the breakeven point?
Unreliable transportation is expensive. A nice upfront capital investment is nice in this regard
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It asks for your bankroll. The way I interpret that is that we take out what we need to live on* and the rest is bankroll. That should account for most of the wealth, debt service and expense categories.
Wages is a bit tougher to do as it would require some projecting. But I guess you estimate the net present value of your labor/skills based on your current income and any changes that you foresee.
*even âwhat we need to live onâ will vary from person to person based on risk tolerance and a variety of other factors.
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That wasnât the poll question and would require more calculation that what I did. All I needed to do is figure out which option was better. Quantifying how much better would require more detailed assumptions. That was unnecessary when the answer was obvious.
Essentially this should be negative for half of USAians and it should tell you to take five hundred bucks now, yeah?