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by nighthawk454 647 days ago
I think you've misread. The bankruptcy was in an analogy to poker. The point is if you get _one round_ to play - essentially all or nothing - should you play? No.
2 comments

> The point is if you get _one round_ to play - essentially all or nothing - should you play? No.

On the contrary, in general yes you should, because life as a whole will give you a variety of these sorts of risks. Steve Balmer's offer is just one episode in a lifelong series of risks offered you by the universe at large.

It all depends too if the absorbing barrier is a true absorbing barrier like death.

Bankruptcy would suck but it is not like you have no possibility of another chance like death.

I suspect there is much muddled thinking in this area viewing the death of a LLC as equal to the death of a human.

A coin flip for 20 million dollars if tails, physical death if heads is much different than bankruptcy if heads.

One is a stupid gambler with their life and the other is basically a serial entrepreneur taking asymmetrical bets until the coin comes up tails.

OK, if you value survival, at what odds should you play?
I actually think parkour community and practice teach and handle this very well. Same for free solo climbing.

Imagine you're in your bathroom, choose two tiles and step from A to B.

No problem. What if those tiles were all you had to stand on and you were 30 storeys up suddenly it's a whole different equation and your body instinctively knows it. In fact some of parkour training is learning to master your own fear and confidently execute things you know you can already do in the face of higher stakes.

If I offered you a dice roll and said guess the number, bet 1 dollar I'll pay you 12 on the right guess you'd bet 1 dollar but you wouldn't bet your life on it even though the EV was high. Even if the payout was 1 million you still might not take it (some might)

Edit Thinking about it more, my example is more about factoring in all the risks - a positive EV bet with a large downside risk is not a great one to take even if the risks are small which is where the picking up pennies in front of a steamroller analogy comes from

Yeah, exactly - you wouldn't stake your life on hitting the average case in an n=1 scenario. Parkour community sounds really cool!
You are staking $1.
It's a good question, sort of related to optimal bet sizing. Check out this wiki which another commenter also mentioned: https://en.wikipedia.org/wiki/Kelly_criterion?useskin=vector