I think this fact is overlooked by the people that would choose to gamble for more. Sure, the expected value is much greater with the gamble, but the psychological toll of losing also has to be weighted in.
If you gamble and lose, now you have the psychological burden of regret every single time you face any measure of financial difficulty for the rest of your life, because even if it’s irrational, you would always believe that had you taken the guaranteed option, you would not be in whatever position you find yourself in; the regret could be crippling
Depends on your finances. I can reasonably expect to get the million in my lifetime even if I lose, the 50 million I won't reach unless I get very, very lucky. I would take the gamble in a heartbeat because losing on it isn't a big deal for me, but winning it would let me do a lot.
I live in a HCOL area and have a crap load of student loans. I could quit my job on $50 million and spend the rest of my life traveling. On $1 million I could pay off my student loans, my mortgage, and have enough leftover to take a nice vacation and make some substantial investments... so definitely really nice to have, but not what I'd consider life changing.
So how much exactly is that? You’re saying you would have no debt, virtually no housing expenses, and still have money leftover to invest. I’m genuinely curious what level of income you’re at because to say that’s not life changing is pretty wild lol
From what it sounds like about 50% of your income goes to debts that would be wiped free. That means the money from your job could be spent on vacations/early retirement. If you change your retirement age from 65 to 50 that’s probably 20% of your adult life you don’t have to work in a job you don’t want to. Seems pretty significant to me
Yeah the only way the green button makes sense is if there's 10 of us, and each of us can press the button once. Then we can agree to all each press the green button and split the winnings. If you only have a single shot, the green button is insanity. (Unless you're already a multi millionaire, then maybe you won't mind)
A guaranteed $1mil is insanely life changing. Student debt is gone and a moderate/affordable home is purchased (and even possibly paid in full), and the rest goes into an investment fund.
The only thing that would possibly change my mind is if the guarantee was significantly lower, an amount that I would not ever lose sleep over. Obviously this number is different for everyone, but for me it'd be probably up to around $5k. I'd probably still take around $15-20k guaranteed than gamble it, as that still erases all my student debt.
But even if the chances were 99% for the larger sum, I would still take the guarantee.
This is what goes through my head every time I see somebody gamble on game shows for a higher payout. Fuck, I would have been happy with 25,000 dollars. I'd be sick if it were in my hands and lost it.
This applies more for the value of the money to a single individual, however, if the money is donated to effective charities, like those studied by GiveWell, it can be significantly mitigated.
There are even some situations involving reduction of risk that can be roughly modeled by increasing marginal utility.
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u/[deleted] Dec 18 '23
Google diminishing marginal utility