I lost a ridiculous bet because I forgot how to calculate expected valuet

On my way to a weekend ceramics party with my wife and children, I got scammed out of a whole sixty dollars! I pulled over to help someone in a late-model Cadillac. I expected that he needed a jump (although who needs a jump on an on ramp?!), but it turns out he wanted some cash. I’m generally willing to help folks out (provided I don’t get skeezed out with meth-head vibes out of the gate), so I offered the dude twenty bucks out of the gate. He then waved a fat sparkly ring at me, and said he’d be willing to sell it. I eyeballed it, estimated the value (if it were 18K gold) at a conservative 500 bucks, and then estimated the likelihood that I was getting scammed at 90%. Then, and here’s the embarrassing moment, I completely fucked up the expected value calculation. Instead of calculating EV as:

[win value] * [win likelihood] - [loss value] * [loss likelihood]

I calculated EV as:

[win value] * [win likelihood]

Which gave me an EV for the bet of 50 bucks, instead of 5. So of course I took it! A ten dollar premium over EV seemed fine at the time.

I finally got to a pawn shop today, and was utterly unsurprised to learn that it was brass. If you want to win this game, carry a scratch stone and a bottle of 14K hydrochloric acid. That’ll at least get you to the point where you can evaluate the claim that an object is a reasonable quality of gold.

What I’m disappointed about is that I screwed the EV calculations up so spectacularly!

I did, however, derive a useful data point: I’m willing to spend sixty dollars for a blog post. The whole time, I was thinking to myself “this is a reasonable price to pay for a silly post!”

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