I agree that if you take a bet at fair odds you are purchasing variance. I think Charles' explanation below doesn't make it clear that the reason that the bet happens is because there is a disagreement about what fair odds are, which could happen because one party is misinformed about or ignorant of some relevant facts, or because one party has insider/secret information not available to the other party. So you may think you're making a bet on a 50% likely outcome, but I know something that allows me to believe that it's really only 20% likely... from my point of view my expected return is 1.4x my bet, not 0.5x. (I think. I'll know I'm wrong if Charles expresses even more enthusiasm for wagers with me.)
On Sun, 2024-01-28 at 12:00 +1300, Charles Haynes wrote: > There are a few ways to set a betting line. The two most common in > this case are "over/under" where you disagree about the likelihood of > some value - a typical example would be the value of bitcoin on some > date. One of you picks a value they think is 50/50, and the other can > bet that the value will either be "over" or "under" that value. The > bet would be at even money. The second would be to give odds for the > occurence of an event. So an example would be someone who says "Nikki > Haley has no chance! She should just drop out!" and I would offer > them odds of, say, 10000:1 that Nikki Haley is elected president in > 2024. In both cases I'd also say the maximum I'd be willing to wager. > (10000:1 is not fair odds, I believe the current betting line is > closer to 300:1 against.) > > — Charles > > On Sat, 27 Jan 2024 at 16:58, Yeddanapudi Radhika > <[email protected]> wrote: > > I'm definitely influenced by the endowment effect when it comes to > > hoarding books on my shelf and there is definitely loss aversion in > > this context. I'm wondering if the sunk cost fallacy explains why I > > cling on to my place even though it's costing me an arm and a leg > > to retain it although there are other variables acting on me like > > having built a whole life around the location of said place (smells > > like a justification and it probably is). I'm not sure I > > completely understand "setting a betting line". > > > > On Fri, Jan 26, 2024 at 3:45 PM Charles Haynes via Silklist > > <[email protected]> wrote: > > > One other way that economics (and specifically behavioural > > > economics) has changed my way of looking at the world is that > > > I'm now more aware of my own paradoxical behaviours. Like the > > > endowment effect and the sunk cost fallacy. I have also found one > > > tool to be particularly valuable and that's the notion of > > > "setting a betting line." Which is a way of measuring my > > > confidence in something. One thing I've noticed though is that > > > people who do this are not always completely honest with > > > themselves. In theory you should be willing to take "either side" > > > of such a bet, but when I set a line like that, I'm often > > > reluctant to take one side of the bet - which means I've set the > > > line wrong and I'm lying to myself about how likely I really > > > think something is. > > > > > > I'm not sure I explained that well, but in practice it works out > > > to me asking people "how much are you willing to bet" if they say > > > something I disagree with - and sometimes ending up actually > > > making wagers with people. If you see me say something you think > > > is outrageous I encourage you to ask me to put my money where my > > > mouth is. :) > > > > > > — Charles > > > > > > On Fri, 26 Jan 2024 at 23:01, Jeremy Bornstein > > > <[email protected]> wrote: > > > > I would definitely do this for USD $500/day. For one, I am > > > > convinced that it's in the realm of things that I (and most > > > > people) would get used to quickly enough for the unpleasant > > > > aspects to fade to tolerability or even pleasure. Also, I may > > > > have some minor masochistic tendencies... but not enough of > > > > them to do this for $100/day. > > > > > > > > I don't believe absolutes such as "no amount of money" for > > > > things like this. Imagine a million dollars, or more. Even for > > > > people who have sufficient access to funds for their own direct > > > > use, that would represent a huge amount of leverage for helping > > > > other people, which I think most folks would eventually decide > > > > made the agony worth it. > > > > > > > > Of course, this potentially opens up the thought experiment to > > > > other things even less universally appealing than cold showers, > > > > but I'm not sure that actually discussing those possibilities > > > > would be sufficiently edifying or amusing for us. > > > > > > > > Jeremy > > > > > > > > P.S. Apologies for the previous empty mails... it looks like my > > > > mail client had been in a running broken state. > > > > > > > > > > > > > Clearly I cannot afford this but I still want to test the > > > > > longevity/sustainability of this decision - that USD 500 is > > > > > enough. > > > > > > > > > > Can you convince yourself that you receive 500 dollars worth > > > > > of health, motivation and resilience benefits to withstand > > > > > 180 seconds of 12-15 centigrade water every. Single. Day. for > > > > > a week? > > > > > > > > > > My assumption is that you’ll decide it isn’t worth it, even > > > > > for USD 500. > > > > > > > > > > My motivation for cold showers (6 months of pure agony, I’ll > > > > > add) is twofold and deeply personal -watching my father die - > > > > > cancer- and be miserable about being cold, and my own mental > > > > > health benefits enormously from it (it is the hardest thing I > > > > > can do in a day, everything else is a piece of cake). But no > > > > > amount of money would incentivise me to do this. > > > > > > > > > > Huda Masood > > > > > +91 9886796967 > > > > > > > > > > > > > > > On Fri, 26 Jan 2024 at 02:37, Charles Haynes > > > > > <[email protected]> wrote: > > > > > > I would do the shower thing for somewhere between USD$100 > > > > > > and USD$500 per day. ($100 is probably not enough, $500 > > > > > > definitely is.) > > > > > > > > > > > > One learning about money is that looking at investments > > > > > > daily makes me unhappy and that for me the "asymmetry of > > > > > > happiness" is real - that losing $100 makes me more unhappy > > > > > > than winning $100 would (and it's not just about the non- > > > > > > linearity of the value of money, but it may be an endowment > > > > > > effect). So in circumstances where good and bad things are > > > > > > both likely to happen relatively frequently I try to > > > > > > "smooth out" the frequency by checking less often. > > > > > > > > > > > > On Fri, 26 Jan 2024 at 07:52, Huda Masood via Silklist > > > > > > <[email protected]> wrote: > > > > > > > Tell me then, in what other areas of your life have you > > > > > > > applied the new learnings with money? > > > > > > > > > > > > > > I find the human relationship with money extraordinarily > > > > > > > interesting. My current social experiment is asking how > > > > > > > much could I pay them to take a 3 minute cold shower > > > > > > > every day, for a whole year. No hot water before or > > > > > > > after. > > > > > > > > > > > > > > I’ve had no takers so far. Everyone wriggles out with > > > > > > > some condition or the other. No amount of money is > > > > > > > incentive enough. > > > > > > > > > > > > > > But they’d happily do it if family was in danger or they > > > > > > > could work half time for the same pay. > > > > > > > > > > > > > > I find that very telling. > > > > > > > > > > > > > > Huda Masood > > > > > > > +91 9886796967 > > > > > > > > > > > > > > > > > > > > > On Thu, 25 Jan 2024 at 18:27, Christopher A Kantarjiev > > > > > > > via Silklist <[email protected]> wrote: > > > > > > > > On 1/24/24 10:16 PM, Udhay Shankar N via Silklist > > > > > > > > wrote: > > > > > > > > > > > > > > > > > Very interesting thought. The most thought-provoking > > > > > > > > part is "changing > > > > > > > > > your mental model" which resonated with me, because > > > > > > > > the mental model > > > > > > > > > which causes this to be an issue in the first place > > > > > > > > is "Am I being taken > > > > > > > > > advantage of?" (which is completely different from > > > > > > > > "Can I afford this?" > > > > > > > > > which requires a separate thread, I think.) > > > > > > > > > > > > > > > > Yes ... I grew up in a household where my father > > > > > > > > tracked every penny of > > > > > > > > expenses and basically invented a double-entry > > > > > > > > bookkeeping system so he > > > > > > > > could resolve his cash accounts Sunday night. I guess > > > > > > > > it was "fun" for > > > > > > > > him, but hell for everyone else when he wandered the > > > > > > > > house saying "where > > > > > > > > did I spent twelve cents?". > > > > > > > > > > > > > > > > It came both from a history of not having enough (he > > > > > > > > lived through WWII > > > > > > > > in Germany) and a fear of being taken advantage of ... > > > > > > > > which I, somewhat > > > > > > > > unfortunately, inherited. > > > > > > > > > > > > > > > > Those two things were very intertwined in my attitude > > > > > > > > towards money, and > > > > > > > > this experience was a big step in learning to let go of > > > > > > > > them. > > > > > > > > > > > > > > > > > > > > > > > > -- > > > > > > > > Silklist mailing list > > > > > > > > [email protected] > > > > > > > > https://mailman.panix.com/listinfo.cgi/silklist > > > > > > > >
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