[fighterpilot]

X = P(bad_outcome) * magnitude_of_badness

Y = your net worth

You can trade-off one with the other.

People with lots of Y will be more happy to reduce Y in order to reduce X, because the marginal utility of Y declines with larger values of Y, whereas marginal utility of X remains roughly the same irrespective of values of Y.

> Fires happen often enough, but some events are low enough probability not to worry about.

This ignores the second part of X, which is magnitude_of_badness. Your house burning down has a smaller magnitude_of_badness than society collapsing which will likely lead to death.

It's also ignoring the marginal utility of wealth for large values of Y. Even if X is small, people with large Y will be more happy to reduce Y in order to reduce X.