How much would it take for you to risk ?
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Psychological literature shows that we are more sensitive to small losses and than small gains, with most people valuing a loss around 1.5-2.5 times as much as a gain. This means that we often turn down reasonable opportunities for fear of the loss. However over the course of our lives we will be exposed to many risks and opportunities and this invariably means that taking every small reasonable bet will leave us better off than saying no to all of them.
NOTE: The video is not saying to accept every bet, only those with reasonable odds (preferably in your favour), and those which if you lose would not cause significant financial or other damage. In those cases it is wise to be loss averse!
Filmed by Adrian Tan
Thanks to Physics Girl for suggestions on previous versions of this video. https://www.youtube.com/physicswoman
Video Rating: / 5
Okay, this also does not ‘value’ the irreplaceable value of your time. We are all going to die. We cannot get our time back. The time you take to do this must be compensated. So so-called ‘loss aversion’ must also allow for this compensation. For more ideas, see ‘Kelly Criterion,’ because the ‘endowment’ each game player has also has an effect on whether the bet is worth engaging in (i.e. a person with only $10 as an endowment cannot engage in the bet at any price, whereas someone with a $1,000 endowment would be indifferent about the bet, even at a much lower compensation). In addition, there is such a thing as ‘hyperbolic discounting’ which would affect whether a person would continue in n-games. Even though each ‘trial’ of the n trials of the game has no memory from the previous trial, the experience of the proposer and chooser has an effect on whether they continue to the next trial.
3:45
that guy must have REALLY wanted the mic
Not me saying yes to the first 10 for 10
The bet has problems. What you need to do to assess risk is make the bet asymmetrical. Give them a 95% chance of losing $10, but a 5% chance of winning $10,000. Then run the experiment again with the same odds, but add an element of skill for being able to predict future outcomes.
Whether or not I take single bet depends on how much $10 is to me. I'd totally take a $1 bet with the same odds because the $1 loss isn't that much to me, Maybe I'd take the $10-$20 one time bet. But the reward would have to be much better to risk $100 on a single toss and there's a number not to far above that where I wouldn't risk that amount for even astronomically good payoff [and a 50% chance of loss] (But if it were offered, I might get a group together to reduce my exposure). The multi-bet case skews things in favor of my taking the bet, even at higher stakes. Then the only question is "do I have to pay up after each bet and the game ends when I can't, or do we play on until the end and settle then.". That control the upper limit of my stakes (can I survive 5 losses in a row or something like that).
The fact is if the money is significant, taking the bet usually means the loss is harder than the gain. If I take the bet and lose, I could loose my home, not taking the bet I keep the status quo, winning the bet, I keep my home and maybe get a second. The quality of life difference between homeless and stable is much worse than the quality of life difference between stable and having 2 homes.
If I'm already homeless, I go without eating most days, I have $10 and you are offering me a 50% chance to get two more meals at the cost of going hungry again, then yes I'm taking the bet. The upside is much better for me than the down side (I heard that early on in FedEx, the CEO couldn't make payroll. He put all the liquid assests on a roullet wheel and and hit. In this case he couldn't make payroll (no bet) and will loose the company. If he lost, he still couldn't make payroll and will loose the company. He made a bet at just less than 50%. If he won, he could make payroll and the company would go on).
So there are rational reasons to be risk adverse in some cases.
Think about the shame if you lose on camera! You’ll be the laughing stock! It’s more than just the actual value you’re risking, it’s more than that for the contestants.
I'd take the 12 to 10
Such great analogy to investing. I definitely will use this in my financial work.
Technoblade in that situation : sir i will bet on your entire stock
Well the first thing I thought when you said 12 was "can we make the bet more times", so whn you would ask me, if more times is yes, than on 12 to 10, if only one time, I would be certainly more careful, but I would totaly go for 15, probably even 12 if it wouldnt seem you would go higher
Gamblers fallacy watch out lol
2 reais ou um presente misterioso?
i must be a degenerate gambler bc i would’ve taken the first bet
Where did he find these people
What if it's only 10 dollars bet from both sides?
is it worth playing it 100 times?
People are staggeringly risk averse and bad at math.
its been 9 years and i still love your old vids as much as the new ones!
you are like a role model for me and i love evrything you do pls never stop 😀
Team Abhi and Niyu❤
“This video will only make money if half a million people see it” – Gets 7 million views and counting. I guess in this case, everyone is a winner ❤
If the gain is more than $10 I will accept (Rick, age 9)