Post: #1

Had a weird thought today. And wanted to share it with you guys since there are alot of smart cookies here...

Imagine you had 200 thousand dollars to start a new business.

OPTION ONE: You start up a new business. And you have a 2/3 chance of going bust within the first three years.

OPTION TWO: You find a big casino - and place all your start-up money on red. You have a close to 50% chance of doubling your money (especially here in Europe where there is no Double Zero on the wheel). And all without any hard work on your part.

Which option seems the more rational? This is a serious question.

At first glance it seems OPTION ONE is the better of the two. Of course - the country as a whole would probably be fucked if everyone did this. But on an individual basis it would be the better strategy.

However - most people on an instinctive level feel OPTION TWO is the better and safer one. Even after listening to the argument above.

The above is similar to the 'illusion of control' people have when driving their cars versus flying on a plane. Even though being on a plane is statistically safer.

Anyway - not sure if the above is really dumb or not. Just want to see if I have messed up my analysis?

Also - I got thinking about this since I sometimes think it is rational for a 20 year old guy to place 200 grand on red and hope for the best. If he wins then great. And if he fails - he still has enough time in life to work off the debt. Indeed - his situation wouldn't be too different from somebody graduating from University.

Here is a video of someone who actually did this by the way...

http://www.youtube.com/watch?v=zGCdBsOIKYA

Cardguy

Post: #2

The difference lies in the amount positive you can be. Betting on one bet the maximum value is he doubles his money. (What about taxes though I assume you pay taxes on winning which hurts your odds significantly.) With a business however, though it has 2/3 probability of failing it has the possibility of making near infinite amounts more.