I feel like it is usually logical though lol. This is kinda the one situation where it’s not because you don’t really need more than 10 million anyway.
This would apply to any situation where the lower value is sufficiently “enough” and the odds are better. Once you cross the threshold of enough, taking worse odds for more is nonsensical.
Imo in any situation where you are choosing risk/reward preferences it’s important to consider how much different levels of reward will actually benefit your life. I think in most cases losing everything you own is going to be more bad than doubling your wealth is good, and so it’s a bad idea to only consider the alpha of an investment. Or it could be the other way around, maybe someone desperately needs to escape their shitty job, so for them a very risky investment that actually has lower effective value than the safe investment is the more rational choice.
Which isn’t to say discount EV entirely, that’s how you end up at bad decisions like buying a lottery ticket.
I feel like it is usually logical though lol. This is kinda the one situation where it’s not because you don’t really need more than 10 million anyway.
Unless you really wanted that button.
EV is meaningless in any situation where you only get 1 chance.
It only becomes relevant if you repeat something enough for the law of averages to work out
Risk intolerance is logical. EV modeling does not take that into account, which is the joke here.
This would apply to any situation where the lower value is sufficiently “enough” and the odds are better. Once you cross the threshold of enough, taking worse odds for more is nonsensical.
Imo in any situation where you are choosing risk/reward preferences it’s important to consider how much different levels of reward will actually benefit your life. I think in most cases losing everything you own is going to be more bad than doubling your wealth is good, and so it’s a bad idea to only consider the alpha of an investment. Or it could be the other way around, maybe someone desperately needs to escape their shitty job, so for them a very risky investment that actually has lower effective value than the safe investment is the more rational choice.
Which isn’t to say discount EV entirely, that’s how you end up at bad decisions like buying a lottery ticket.