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Thread: Ole Peters coin flip problem

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    Senior Member drunk's Avatar
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    Ole Peters coin flip problem

    ....................

    Bloomberg has arecent article about Ole Peters, who challenges traditional economic theory. One of his ideas is a coin flip game where you win +50% of your bankroll for heads, and -40% of your bankroll for tails. Peters posits that this is a bad game, even though it has a positive expected value, because , the most common result is losing over 99% of the starting bankroll.




    https://www.bloomberg.com/news/articles/2020-12-11/everything-we-ve-learned-about-modern-economic-theory-is-wrong





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    Must be quantum entanglement

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    Quote Originally Posted by drunk View Post
    ....................

    Bloomberg has arecent article about Ole Peters, who challenges traditional economic theory. One of his ideas is a coin flip game where you win +50% of your bankroll for heads, and -40% of your bankroll for tails. Peters posits that this is a bad game, even though it has a positive expected value, because , the most common result is losing over 99% of the starting bankroll.

    https://www.bloomberg.com/news/articles/2020-12-11/everything-we-ve-learned-about-modern-economic-theory-is-wrong
    Really dumb example. The whole world knows that if you overbet your bankroll with respect to your advantage, you will eventually go broke. Kelly tells us that overbetting by more than twice your edge leads to eventual ruin, despite having an advantage. In this case, for every two flips, you gain 10%, so your edge is 5% per flip. But, he has us betting our entire bankroll on every flip!! OF COURSE you're going to go bust.

    Let me play this game every minute of every day for the rest of my life, wagering 5% of my current bankroll, instead of all of it, and getting paid 50% of my bet when I win and losing 40% when I lose, and I'll own Peters, the horse he rode in on, and the entire rest of the world!

    Don

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    Quote Originally Posted by DSchles View Post
    Kelly tells us that overbetting by more than twice your edge leads to eventual ruin, despite having an advantage.
    Don

    really? - so, if you have a $100K bank with a 1% edge - let's say wonging - flatbetting - if you bet $2,500 on every hand and raise and lower the bet as your BR fluctuates you're doomed?


    not questioning it - just saying it surprises me quite a bit
    Patriot: the person who can holler loudest without knowing what he is hollering about............Mark Twain

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    Quote Originally Posted by DSchles View Post
    Let me play this game every minute of every day for the rest of my life, wagering 5% of my current bankroll, instead of all of it, and getting paid 50% of my bet when I win and losing 40% when I lose, and I'll own Peters, the horse he rode in on, and the entire rest of the world!

    Don
    And probably his wife !
    G Man

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    Quote Originally Posted by drunk View Post
    really? - so, if you have a $100K bank with a 1% edge - let's say wonging - flatbetting - if you bet $2,500 on every hand and raise and lower the bet as your BR fluctuates you're doomed?


    not questioning it - just saying it surprises me quite a bit
    Yes to all of the above. Fundamental principle of the Kelly criterion.

    Don

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