# Understanding Risk **URL:** \ **Category:** Great Debates\ **Created:** [March 28, 2011, 8:06pm UTC](https://boards.straightdope.com/t/understanding-risk/576302 "2011-03-28T20:06:25Z")\ **Posts on this page:** 20\ **Page:** 10
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [March 30, 2011, 6:51pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/181 "2011-03-30T18:51:50Z")
> [@Ruminator](#): > > It’s irrelevant. It IS relevant. If you have $1,000,000 and I have $1,000 and we both put up $1,000 to invest you have risked 0.1% of your what you have. I have risked 100% of what I have. Our individual risk is distinctly different despite the same stakes. ---
**Author:** ![carm](https://avatars.discourse-cdn.com/v4/letter/c/c2a13f/32.png) [@carm](https://boards.straightdope.com/u/carm)\ **Post date:** [March 30, 2011, 7:01pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/182 "2011-03-30T19:01:16Z")
> [@Ruminator](#): > > Well, that’s what it **is** … the standard definition _must_ be understood that way (_even if you don’t agree with it_) so various related postings don’t get derailed with semantic nitpicking. > > But you don’t have to just argue with posters here about the definition. Take that wider expanded definition that you prefer to use out into the real world and see who agrees with you. There are thousands of business startups right now that need investments. Take “_ **carm** ’s philosophical all-encompassing version of investment risk_” to them and ask them to trade their equity for your particular life circumstances instead of $1000. See if any agree with you. What you said earlier: > [@](#): > > Originally Posted by **Ruminator** > > Every business has a price for investment and a point-in-time to invest it to realize certain returns. It is what it is. That’s what “investment risk” is all about. The title of this thread was _not_ “Understanding Investment Risk”. It was “Understanding Risk”. > [@](#): > > Originally posted by **The Free Online Dictionary** > risk (rsk) > n. > > 1. The possibility of suffering harm or loss; danger. > 2. A factor, thing, element, or course involving uncertain danger; a hazard: “the usual risks of the desert: rattlesnakes, the heat, and lack of water” (Frank Clancy). > 3. > > a. The danger or probability of loss to an insurer. > b. The amount that an insurance company stands to lose. > 4. > a. The variability of returns from an investment. > b. The chance of nonpayment of a debt. > 5. One considered with respect to the possibility of loss: a poor risk. The OP never claimed to be explaining the concept of “investment risk”, he was explaining “risk”. Fine. But you cannot fully explain risk if you only focus on one of the five different meanings for the word. Like I said before, had the title been “Understanding Investment Risk”, then there wouldn’t be any disagreement. Since you seem to like the “go to x and see what they say” type arguments, why don’t you go to a [risk assessor](http://en.wikipedia.org/wiki/Risk_assessment#Risk_assessment_and_human_health) and tell them that what they consider to be a “risk”, is in fact, not a “risk” at all, and that they have been wasting their lives at meaningless careers. Or, just admit that “risk” has more than one meaning, and that the OP purported to explain “risk”, and did a woeful job of it. Investment risk ≠ risk. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [March 30, 2011, 7:02pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/183 "2011-03-30T19:02:05Z")
> [@Whack-a-Mole](#): > > If you have $1,000,000 and I have $1,000 and we both put up $1,000 to invest you have risked 0.1% of your what you have. I have risked 100% of what I have. That life-circumstances ratio is irrelevant to the returns you are entitled to receive. > [@](#): > > Our individual risk is distinctly different despite the same stakes. Yes, yes, yes, your “_overall grand scheme-of-life risk_” is different from the millionaire but comparing that is pointless. Suppose the millionaire is investing 0.1% of his money while you invest 100% but the millionaire is bald, overweight, grotesque and hasn’t had sex in 20 years. His whole validation in life is **money**. You on the other hand get hot loving every night and even if you lost 100% of your bank account, you still have your sweet honey to hold you during the tough times. The millionaire would face severe shame and suicidal tendencies if he lost that 0.1% while you would just remind yourself that “money isn’t everything.” Now who takes more “risk”? As I said, comparing particular life situations is pointless and stupid. We are already different in **why** or **how** we bring dollar amounts to the table. Those non-monetary factors have no relevance on the returns (profit) that we are entitled to. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [March 30, 2011, 7:09pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/184 "2011-03-30T19:09:51Z")
> [@carm](#): > > The title of this thread was _not_ “Understanding Investment Risk”. > > It was “Understanding Risk”. Yes but the OP post #1 explained the context of the title. The end game was sharing of profits and to work backward from that, you come to “investment risk”. But… even if the OP titled it “Investment Risk”, I really don’t think this thread would turn out that much differently. Profits and equity do not come from sob stories about bad knees or breathing toxic fumes. Profits go to those who invest money. I thought that’s what the OP was trying to explain. > [@](#): > > The OP never claimed to be explaining the concept of “investment risk”, he was explaining “risk”. I believe the OP actually did in post #1. ---
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [March 30, 2011, 7:10pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/185 "2011-03-30T19:10:41Z")
> [@Ruminator](#): > > Yes, yes, yes, your “_overall grand scheme-of-life risk_” is different from the millionaire but comparing that is pointless. It is NOT pointless. That is what risk is! It is not that we both put the same amount into the pot. It is what that amount means to us. Take the poker example. I bet $1000. You might have $500 in front of you or $5000 in front of you. Your decision to call the bet is absolutely informed by what you currently have. You can go all-in and hope things work out (if you have $500). If you lose you are out of the game. Or you can call (if you have $5000) and if you lose then no biggie. You can play another hand. If you do not understand this I want to play poker with you. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [March 30, 2011, 7:19pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/186 "2011-03-30T19:19:35Z")
> [@Whack-a-Mole](#): > > It is not that we both put the same amount into the pot. It is what that amount means to us. But you cannot compare subjective fuzzy things such as life circumstances and what “amount X means to person Y.” Your ratio of investment-as%-networth is as flawed as any other formula you want to use. The fact that you even attempt to do so just highlights that certain philosophical issues are important to you. Well, I also favor my set of non-monetary philosophical issues but they don’t matter. There’s no point in comparing them to dole out “fairness” or “profits”. > [@](#): > > I bet $1000. You might have $500 in front of you or $5000 in front of you. Your decision to call the bet is absolutely informed by what you currently have. You can go all-in and hope things work out or you can call and if you lose then no biggie. You can play another hand. But it the extra piles of chips you have in front of you are IRRELEVANT to the payout of that particular hand. Likewise, the life circumstances surrounding an investment into a startup business are irrelevant to the payout of that particular business. ---
**Author:** ![carm](https://avatars.discourse-cdn.com/v4/letter/c/c2a13f/32.png) [@carm](https://boards.straightdope.com/u/carm)\ **Post date:** [March 30, 2011, 7:31pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/187 "2011-03-30T19:31:44Z")
> [@Ruminator](#): > > Yes but the OP post #1 explained the context of the title. The end game was sharing of profits and to work backward from that, you come to “investment risk”. > > But… even if the OP titled it “Investment Risk”, I really don’t think this thread would turn out that much differently. > > Profits and equity do not come from sob stories about bad knees or breathing toxic fumes. Profits go to those who invest money. I thought that’s what the OP was trying to explain. > > I believe the OP actually did in post #1. Some quotes from the OP: > [@](#): > > That’s the point of this thread: understanding risk. The owner risks losing everything and ending up in the poor house. The dishwasher does not. Claiming that the dishwasher does not risk being in the poor house if the restaurant closes. > [@](#): > > Why are you so resistant to understanding risk? Implying that he alone knows what “risk” is, that everyone else is wrong. > [@](#): > > Originally Posted by **Voyager** > Your notion of risk here is bizarre > [@](#): > > Originally Posted by **Emacknight** > Yes, I realize it is bizarre to a lot of people, which is why I started this thread, to help people understand what risk means. Again, no mention of “investment risk”, and the high & mighty attitude that he is the sole harbinger of truth, and we are all wrong. > [@](#): > > Originally Posted by **Evil Captor** > I’m sorry, this whole thread is invalid because “risk” has not been properly defined as yet. To me “risk” means … > [@](#): > > Originally Posted by **Emacknight** > I need to stop you right there. It doesn’t matter what YOU think risk means. Again, this time after **Evil Captor** made a good point, that everyone else was talking about “risk” in a general sense, while he was talking about it in a very narrow sense. > [@](#): > > Originally Posted by Evil Captor View Post > Money is FAR from the only measure of risk > [@](#): > > Originally Posted By **Emacknight** > Nonsense. Starting to see a pattern yet? ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [March 30, 2011, 7:43pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/188 "2011-03-30T19:43:46Z")
> [@Ruminator](#): > > But you cannot compare subjective fuzzy things such as life circumstances and what “amount X means to person Y.”… > But it the extra piles of chips you have in front of you are IRRELEVANT to the payout of that particular hand. Likewise, the life circumstances surrounding an investment into a startup business are irrelevant to the payout of that particular business. 😕 Didn’t I tell everybody to Google “Kelly Criterion”? If you did and didn’t understand, start a GQ thread for enlightenment. We’re trying to fight ignorance here, but you have to help too. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [March 30, 2011, 7:44pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/189 "2011-03-30T19:44:02Z")
> [@carm](#): > > Starting to see a pattern yet? Yes I certainly do! A few more comments about these word games… The exchange was: > [@carm](#): > > The title of this thread was not “Understanding Investment Risk”. > > It was “Understanding Risk”. > [@Ruminator](#): > > But… even if the OP titled it “Investment Risk”, I really don’t think this thread would turn out that much differently. You see, it really doesn’t matter if **emacknight** originally titled it _“Investment Risk.”_ The tendency for anyone who disagrees is to mangle _any and all words_ until it suits their particular idealogical beliefs. If the OP was _“Understanding Investment Risk”_, we’d have posters pleading that _“investment”_ should also cover _“investment of physical labor, sweat, etc? I don’t accept your limited definition of investment.”_ If those posters then kept using that approach because they felt that the OP left the door open by titling it _“Investment Risk”_ instead of _“Capital Investment Risk”_ , the door would **still** be open because then the word _“capital”_ would be semantically beat to death. _“Shouldn’t capital include sweat and physical labor? I don’t accept your limited definition of capital.”_ …and on and on, forever, recursively, until all 500,000 words in the dictionary are used to prove the point that profits go to workers who _do not_ invest money at the beginning. Pick any title with any words and that’s what will happen. Resistance is futile. How about we all pretend that all 500,000 words have been beat to death in this thread and call it a day? Any and all words can be used to describe the quintessential effort provided by paid employees. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [March 30, 2011, 7:46pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/190 "2011-03-30T19:46:17Z")
> [@septimus](#): > > 😕 Didn’t I tell everybody to Google “Kelly Criterion”? If you did and didn’t understand, start a GQ thread for enlightenment. We’re trying to fight ignorance here, but you have to help too. Not relevant. Kelly Criterion is about a series of bets. ---
**Author:** ![carm](https://avatars.discourse-cdn.com/v4/letter/c/c2a13f/32.png) [@carm](https://boards.straightdope.com/u/carm)\ **Post date:** [March 30, 2011, 7:55pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/191 "2011-03-30T19:55:07Z")
> [@Ruminator](#): > > You see, it really doesn’t matter if **emacknight** originally titled it _“Investment Risk.”_ > > The tendency for anyone who disagrees is to mangle _any and all words_ until it suits their particular idealogical beliefs. > > If the OP was _“Understanding Investment Risk”_, we’d have posters pleading that _“investment”_ should also cover _“investment of physical labor, sweat, etc? I don’t accept your limited definition of investment.”_ I have no idea what you’re talking about here. I don’t even disagree with the point of the OP (that employees should get paid, and investors should take the profit). I took issue with the arrogance of the OP in assuming that he was the sole authority on what constituted “risk”, despit being shown, via dictionary definition, that the word encompasses far more than he thinks. I also disagreed that the restaurant owner was the only one who risked being in the poorhouse if the restaurant closed. The OP is _clearly, completely and utterly wrong on both points._ As I said earlier: > [@](#): > > Originally Posted By **carm** > What is actually happening in this thread, is you are trying to force your own, extremely narrow definition of risk onto everyone else. To you, risk = capital invested. That’s fine, but don’t expect everyone else to share that opinion. Especially when the dictionary disagrees with you. > > To say the staff risk nothing if the company folds is fine. It’s not correct by any normal definition of risk, but by your definition it is both 100% correct and 100% obvious. > > What is the debate here again? ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [March 30, 2011, 8:01pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/192 "2011-03-30T20:01:38Z")
> [@Ruminator](#): > > Not relevant. Wrong again. > [@Ruminator](#): > > Kelly Criterion is about a series The series can be as short as 1. > [@Ruminator](#): > > of bets. or investments. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [March 30, 2011, 8:06pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/193 "2011-03-30T20:06:33Z")
> [@septimus](#): > > The series can be as short as 1. Oh please. The fact that that the series can be 1 is simply a consequence of mathematical self-consistency and is an academic point. It is not related to the real world use of Kelly Criterion. Please understand the difference between the pedantic use of math vs its actual use especially if you’re going to try and bring it up in a thread. In any case, it’s not relevant. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [March 30, 2011, 8:18pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/194 "2011-03-30T20:18:25Z")
> [@Ruminator](#): > > Oh please. The fact that that the series can be 1 is simply a consequence of mathematical self-consistency and is an academic point. It is not related to the real world use of Kelly Criterion. > > Please understand the difference between the pedantic use of math vs its actual use especially if you’re going to try and bring it up in a thread. > > In any case, it’s not relevant. Wow!! You were wrong that it’s irrelevant; I mentioned that. You were wrong to imply that bets and investments are different in this context; I mentioned that. I wondered where you were confused. Perhaps, your use of “series” meant that that you thought that the notion didn’t apply to a single investment under discussion. So I tried to be helpful if that were your confusion. And now you write “simply a consequence of mathematical self-consistency and is an academic point” and call me pedantic! :smack: Whatever. Anyway, this subthread began when **Whack-a-Mole** challenged you to a game of poker. Based on your responses, I know who I’m betting on. 😃 ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [March 30, 2011, 8:28pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/195 "2011-03-30T20:28:06Z")
> [@septimus](#): > > Wow!! You were wrong that it’s irrelevant; I mentioned that. > You were wrong to imply that bets and investments are different in this context; I mentioned that. I never implied or meant to imply that bets and investments are different. > [@](#): > > Perhaps, your use of “series” meant that that you thought that the notion didn’t apply to a single investment under discussion. The payout from that _particular business_ in relation to the initial point-in-time investment of _that business_ is not something you model with Kelly Criterion. Have you ever actually used Kelly Criterion? I guess you’re hung up on Kelly Criterion because of multiple poker hands? I’m saying those extra hands under consideration _and_ its analogy to multiple business investment decisions is not relevant. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 30, 2011, 8:29pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/196 "2011-03-30T20:29:44Z")
> [@Ruminator](#): > > It’s irrelevant. > > Two people arrive at a supermarket to buy a can of soup. It doesn’t matter if Person A strolls 2 blocks from his house while person B struggled through rain, sleet, snow fighting dragons to get there. It doesn’t matter if Person A is feeding himself while Person B is feeding his dying infant. The price of the can of the soup is the same to both. _It has to be the same._ I can only imagine the idiocy of every toll booth being backed up for miles because everybody has some sob story about their life so the cashier can try to determine a “fair” price for each driver. It’s ridiculous and irrelevant. The price is the same from the viewpoint of the store. Their perceived price might be different. Here’s an experiment we discuss in our behavioral economics class. You have two sets of people buying things - 1 a calculator for $20 and one a disk, say, for $120. You tell both sets of people that if they drive 10 miles to another store they can get a $10 discount. Do they do it? The people buying the $20 item are far, far more likely to do it than the people buying the $120 item, though the discounts are exactly identical, and the cost/benefit of driving is exactly identical. We evaluate based on percentages as much as on absolute numbers. Think of how relatively little effort people spend on evaluating house offer deltas which might be as much as the price of a car but just 5% of the house price. Risk means nothing except in the context of how the perception of risk drives behavior. Saying risk is only counted as an absolute dollar amount makes the whole exercise pointless. ---
**Author:** ![BwanaBob](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bwanabob/32/2985_2.png) [@BwanaBob](https://boards.straightdope.com/u/BwanaBob)\ **Post date:** [March 30, 2011, 8:34pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/197 "2011-03-30T20:34:06Z")
> [@emacknight](#): > > …Going back again to gambling, the person that puts down money is the only one entitled to the winnings, and the only person that stands to lose. Under what scenario would you envision spreading around his winnings?.. I don’t see your gambler scenario as the same as your restauranteur, unless the guy’s running a roach-coach one man operation, performing all tasks. A sit-down restaurant is more complicated, relying on expertise and abilities that the owner cannot perform himself. I suggest the scenario is more like this: there’s a paralyzed gambler who has $20 to bet. He has 3 helpers, one guy suggests what casino to go to (like the chef-picking a menu), a gal who picks a number or color to bet on (the waitress-suggesting meals to customers), and a guy who actually puts the chip down for the gamber because he cannot himself (the dishwasher). Each helper gets 25 cents. The bet wins. Should the paralyzed guy get the whole payout? I say no. Nor do I think the 3 helpers deserve a 1/4, but certainly more than the 25 cents they got. Don’t forget that most gamblers don’t just gamble for the rewards - the action itself is part of the compulsion to play - and it’s not free. Think of the 75 cents paid before the actual bet as the vig. And so the salaries of the chef, waitress and dishwasher should be considered part of the price to be in the game. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [March 30, 2011, 8:42pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/198 "2011-03-30T20:42:17Z")
> [@Ruminator](#): > > I guess you’re hung up on Kelly Criterion because of multiple poker hands? So it is the distinction between a series of only one and multiple bets that has you stymied here, after all? And, despite your ferociously pedantic response, it was my comment “The series can be as short as 1” that would have fought your ignorance, had you the grace to heed it? As a thought experiment, imagine you’re gambling and, because of an external schedule, you know your next bet is the last bet of this session. Does your proper bet-size now deviate from its Kelly optimum? And the sub-subthread did arise in the context of a poker game, but even in the earlier context (a man with $10 million contemplating a $1 million investment) is it hard to grasp that this investment is one of a series of further investments? (Relevant, of course, only should you continue to claim, erroneously, that Kelly’s Criterion requires a series of more than 1.) ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [March 30, 2011, 8:49pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/199 "2011-03-30T20:49:27Z")
Two friends decide to bet on the flip of a coin, each puts down $100. They each risk the same $100, and have the same 50/50 odds of success or failure. The issue most face in this thread is the question of is that risk acceptable? If one is rich that $100 is chump change, if the other is poor that $100 is everything he has. What most are describing as “risk” in that scenario is not in fact risk, but risk tolerance. Both friends have the same risk ($100) and the same odds of losing it (50/50). It is now up to each individual player to decide if that risk is acceptable to him/her. Do she have a tolerance for risk? We know the potential downside, $100 loss, and we know the potential upside, $100. If the super sad poor guy is so poor he can’t risk losing $100, he shouldn’t be betting. Now, back to the OP to again understand risk: -\> Owner puts up $10,000 and runs the restaurant unsuccessfully for a year. At the end she closes it, liquidates, and ends up losing all $10,000. She also didn’t get a salary for the year because as the sole investor she is paid from the profits (dividends). -\> Dishwasher invested nothing. She showed up, worked hard, got paid\*. At the end of the unsuccessful year she is now $20,000 richer for her time spent. The idea that the dishwasher is out of a job has no relevance to this discussion. Her employment is based entirely on the health of the industry, not on the restaurant. Both are out of a job, but who lost more? Who gained? Tell me again how much the dishwasher risked. \*In this scenario I am assuming enough solvency to pay staff and creditors. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [March 30, 2011, 8:57pm UTC](https://boards.straightdope.com/t/understanding-risk/576302/200 "2011-03-30T20:57:27Z")
> [@septimus](#): > > So it is the distinction between a series of only one and multiple bets that has you stymied here, after all? And, despite your ferociously pedantic response, it was my comment “The series can be as short as 1” that would have fought your ignorance, had you the grace to heed it? > > As a thought experiment, imagine you’re gambling and, because of an external schedule, you know your next bet is the last bet of this session. Does your proper bet-size now deviate from its Kelly optimum? We are talking about 2 different modeling scenarios. As I said before, _“The payout from that particular business in relation to the initial point-in-time investment of that business is not something you model with Kelly Criterion.”_ If you do not understand that one sentence, you truly do not understand Kelly Criterion. > [@](#): > > is it hard to grasp that this investment is one of a series of further investments? It isn’t hard to grasp, but it isn’t not relevant to my comments. It’s also not relevant to the OPs initial post. [Previous page](https://boards.straightdope.com/t/understanding-risk/576302.md?page=9) [Next page](https://boards.straightdope.com/t/understanding-risk/576302.md?page=11)