An Introduction To Chance
I'd like to briefly introduce the topic of expected value. This is a method to calculate how profitable any given action you take is. I will use the most simplified case to introduce the concept.
Sample Situation
Suzie gets offered a deal. If she invests 10 dollars, she has a 50% chance to instantly get back 30 dollars. She also has a 50% of losing her money.
Analysis
Should Suzie take this offer? Absolutely. Assuming Suzie has enoigh money in the bank to cover any long bad runs, it is super profitable to accept the deal.
50% = 0.5
Amount to be won: 50$
0.5*30=15
15$ is the amount Suzie will make.
15-10=5
Subtracting Suzie's investment, we are left with 5$.
Suzie makes 5 hypothetical dollars every time she takes this deal. Her ability to withstand the risk of ups and downs is a whole other topic.
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good post!
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