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by adventured 4525 days ago
The $0.23 definitely doesn't properly value the effect of how few actual chances a person has in a lifetime to make a billion dollars, much less for such a trivial amount of time and effort (average American watches three hours of tv per day).

There have been four $580m+ lottery wins in the US in the last 18 months (powerball & mega millions). $2.4 billion split among eight people. The odds were beyond absurd, and yet these people still won. Granted, I like my odds better in the lottery than Buffett's wager.
1 comments
gibybo 4525 days ago
>The $0.23 definitely doesn't properly value the effect of how few actual chances a person has in a lifetime to make a billion dollars

You're right, it probably over values it due to the marginal utility[1] of money and the non-zero value of the risk premium[2]

You have as many chances at winning a billion dollars as you want. All you have to do is make lots of smaller bets strung together. It may seem impossible to string 30 winning red/black roulette bets (starting with a dollar), but actually the odds of winning a billion dollars that way are roughly the same. Technically speaking Casinos don't have the capital to support the super large bets, but you could easily transition into 50/50 bets in the equities markets. There is enough capital there to give you a shot at a trillion dollars. All you have to do is take it.

[1] http://en.wikipedia.org/wiki/Marginal_utility [2] http://en.wikipedia.org/wiki/Risk_premium

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adventured 4525 days ago
You don't have many (zero?) opportunities to trade 10 minutes of your day for a chance at a billion dollars. Particularly without spending any meaningful amount of money or taking on any meaningful amount of risk. The substantial problem with the stock market and casino versions, is you'll have to constantly put your ever larger winnings at risk with each cycle upward. This introduces an extraordinarily massive risk factor - to real assets - to the equation, that you're not accounting for.
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gibybo 4525 days ago
>This introduces an extraordinarily massive risk factor - to real assets - to the equation, that you're not accounting for.

No it doesn't. It's identical, except that rolling your bets gives you the additional option which can only be considered more valuable.

And interestingly in this case, Buffet will actually provide the same opportunity if it comes to it. If you get the first couple rounds of the bracket correct, Buffet will be right there with a check offering to buy you out of your position.

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rahimnathwani 4525 days ago
Upvoted.

If I had (only) 500m USD the chance of me letting it ride with 2x return and 50% chance of winning is precisely zero.

So, with the roulette example, I would never win 1bn USD. From what you say about Buffet's early buy-out, the same may apply in this case.

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