I was spending some time researching the Kelly Criterion and read on Wikipedia about a study that I found hard to believe so I looked it up. It's called "Rational Decision-Making Under Uncertainty: Observed Betting Patterns on a Biased Coin" by Victor Haghani and Richard Dewey in 2016.
It's mind dumbing how stupid the majority of the test subjects were. They were college finance students and young professionals at financial firms. They were told a coin was biased to come up heads 60% of the time. Their task was to try to maximize their money in 30 mins starting with $25. They got to keep what they won up to $250 so it was in their interest to do as well as possible.
The results were shocking. 28% went bust, and 1/3 ended up with less money then they started with. Only 21% reached the maximum $250 payout amount. What I thought was the most surprising is that 48% bet on tails over 5 times. They usually did this after they had a string of heads, assuming a tail was more likely to come up (probably using gamblers fallacy thinking).
It's hard to believe so many intelligent people did this bad after being given such good odds. The take away for me is that most gamblers will still mess up due to poor money management, even if they are given an advantage. I know this isn't that shocking. Attached is the study if you want a good laugh.
https://poseidon01.ssrn.com/delivery...074006&EXT=pdf
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