The Magic Economics of Gambling

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    References:
    [1] www.statista.com/statistics/253416/global-gambling-market-gross-win/
    [2] www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_MET_2017.pdf
    [3] wendoverpro/status/1054533498722111488
    [4] www.nber.org/papers/w18237.pdf
    [5] wendoverpro/status/1054533837328281600
    [6] wendoverpro/status/1054534236642795522
    [7] www.its.caltech.edu/~snowberg/papers/Snowberg-Wolfers%20Risk%20Love%20or%20Decision%20Weights-NBER.pdf
    [8] www.football-data.co.uk/blog/favourite_longshot_bias_tennis.php
    [9] economix.blogs.nytimes.com/2010/06/02/the-bp-spill-and-the-favorite-longshot-bias/
    [10] ac-els-cdn-com.ezproxy1.library.usyd.edu.au/S0167268114002194/1-s2.0-S0167268114002194-main.pdf?_tid=6aac86b2-7e4a-46d0-bf4d-5ab70e8db750&acdnat=1540355242_b9bcf6d0549207112968a3467b39a9a0
    [11] www.hbs.edu/faculty/Publication%20Files/08-061_17c22e32-fe06-4b4a-8b5e-e09227fc8104.pdf
    [12] www.commissions.leg.state.mn.us/ladder/120511prizelinkedsavingsFAQs.pdf
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Dwight House
Dwight House

"80% chance of $6.25" is not equivalent to "100% chance of $5" in the real world because a given individual cannot take an infinite amount of gambles. Almost all scenarios where people are weighing options, they have a limited number of times they can perform a given choice. Additionally, the individual is far less concerned with the overall societal balance than their own balance in a given gamble. People, on average, will try to achieve the best odds for themselves and their family at the time over anyone else.

Päev tagasi
Cneq
Cneq

To be fair either I'm really lucky or what but I've won a lot at .4% chances, 1.2%, 2.2% and even all the way down to .3%. Of course it eventually was all lost but the reason it was lost because I decided to usually go bigger at more equal odds. If you're going to gamble go for low, win, cash out instantly, no other way or you're going to hurt.

Päev tagasi
Ps B
Ps B

With casinos, you forget to mention the economic value of the fun of gambling or the experience of it.

2 päeva tagasi
RandomGuineaPig Aviation
RandomGuineaPig Aviation

*perfectly intelligent people go to the roulette table every day* Yea I don't know 'bout that...

4 päeva tagasi
Ben Burman
Ben Burman

Brilliant video 👏

14 päeva tagasi
Kim Jong Un Lol
Kim Jong Un Lol

Whish my dad watched this so I don’t need to work hard on getting something

17 päeva tagasi
boeuf3000
boeuf3000

The insurance company analogy works, but insurance companies can make excuses up to not compensate customers.

26 päeva tagasi
Qwasey Wearycooldoc Inc.
Qwasey Wearycooldoc Inc.

Planes?

29 päeva tagasi
Benjamin Chin
Benjamin Chin

200/1 you get $300 for every $1.... uh

Місяць tagasi
merriamred ladybarber
merriamred ladybarber

Do you want to earn 800 ?.

Місяць tagasi
Connecticut Ball
Connecticut Ball

I picked 80% chance of $6.25 For the rest, I picked the 100% chance of $5.00

2 місяці tagasi
SuperMickyG
SuperMickyG

You've got the payouts on the horses wrong. The 200/1 shot pays 200 dollarydoos for every dollarydoo staked, not 300 dollarydoos. The odds of the 2/1 horse would also not be better than 2/1. You are referring to Favourite-Longshot bias here, which does exist, but not to the extent that it provides a negative margin for the house.

2 місяці tagasi
Henryk Gödel
Henryk Gödel

Most people are paying for the entertainment of the experience that experience being the chance to win money.

3 місяці tagasi
Golf
Golf

casino exists to laundering money

3 місяці tagasi
Avindu Bandara
Avindu Bandara

Guys check this out... You will surely be amazed https://payhip.com/b/EDPj

4 місяці tagasi
1hard2findbro
1hard2findbro

Enlightening 💡

4 місяці tagasi
Xu Huiming
Xu Huiming

I'm somehow the opposite on the $5 thing

5 місяців tagasi
E1craZ4life
E1craZ4life

Xu Huiming So, would you take a 100% chance of $5 or a 50% chance of $10?

22 päeva tagasi
Hanan Alhaddad
Hanan Alhaddad

Warning ,gambling is forbidden by god

5 місяців tagasi
DevonC90
DevonC90

Ned Flanders was right.

5 місяців tagasi
Zhi Han Lee
Zhi Han Lee

7:30 Think the issue about plane crashes might also depend on what you use as the denominator for calculating its probability. If it's all the flights in the world then the probability is probably low, since the stakes are high (there's quite a lot of delay in evacuation after an emergency occurs in aviation, compared to other transport modes, due to things like the need to dump fuel and find a diversion airport, and during that delay the aircraft might no longer still be in 1 piece e.g. SR111), leading to a highly-regulated industry. However if the denominator is only the planes that have been in an accident than I imagine the probability is higher. I don't recall seeing as frequently, among other transport modes, accidents with a ~100% fatality rate e.g. JA123, AF4590, QZ8501, MS604, JT610

5 місяців tagasi
The Stigmeister
The Stigmeister

2 to 1 odds does not pay out $3 for $1 bet: https://youtu.be/7cjIWMUgPtY?t=397 It would double the bet, so it would pay $2 Reference: https://en.wikipedia.org/wiki/Odds

5 місяців tagasi
Krik
Krik

Best gambling qoutes on Instagram @gambling_circle

5 місяців tagasi
Prateek
Prateek

This video is filled with inaccuracies. Behavioral economics is difficult to grasp intuitively, but you made some pretty incorrect analogies there

5 місяців tagasi
Lewis Gray
Lewis Gray

200/1 odds returns 201 for each dollar not 300. 6:43

6 місяців tagasi
Saadman Yasar
Saadman Yasar

The House Always Wins

6 місяців tagasi
ХОРОШО
ХОРОШО

Casinos not just sell loses, it sells entertainment.

6 місяців tagasi
J L
J L

I didn't hear mention of entertainment being a motivation for patrons. I know I will lose money gambling but the thrill of winning has a value to consumers.

6 місяців tagasi
cormac23432342
cormac23432342

1$ at 200/1 does not return 300$. It returns 201$

7 місяців tagasi
Paul Page
Paul Page

Casino gambling and lotto are rigged games that always favors the house.

7 місяців tagasi
Staying Out The Way
Staying Out The Way

This is a stupid explanation of gambling hes leaving out so many factors juat by saying essentially you lose 94 cents for every dollar you play. Btw playing black or red is a suckers play on roulette. You play 3 numbers every spin they pay out like 38x

7 місяців tagasi
Pat
Pat

if you go see a movie you will loose the 10$ but get 2 hrs of entertainment. if you gamble 10$ you could win more, break even or loose all the 10$ all the while you are entertained and prob get a free drink.

7 місяців tagasi
Pat
Pat

just go and look at the quarterly Nevada gaming commission revenue per casino and games.

7 місяців tagasi
Cody'sLab
Cody'sLab

The only reason I have car insurance is I am legally required to have it for liability.

7 місяців tagasi
kevin wilson
kevin wilson

Sports betting no different

7 місяців tagasi
Milquetoast Eugenicist
Milquetoast Eugenicist

Double Zero American Roulette is for Mushes. Now let me go put a c-note on 11.

7 місяців tagasi
Magnusmaster
Magnusmaster

Now explain how people buy loot boxes in videogames when it's cheaper to buy a game without loot boxes and it's way more fun.

7 місяців tagasi
Mitchell Lerich
Mitchell Lerich

The reason people buy into low probability big wins is because most people that gamble can't afford too. Gambling feeds off the poor.

7 місяців tagasi
Keanu-sama
Keanu-sama

Except intrest is basically nothing

7 місяців tagasi
Aston Dence
Aston Dence

Wendover? more like Bendover

7 місяців tagasi
Shivansh Shukla
Shivansh Shukla

Doesn't the background music around 11:00 sounds like Arriving Somewhere But Not Here - Steven Wilson?

7 місяців tagasi
s.f.w.l
s.f.w.l

You want a big gamble with low risk? Buy bitcoin and don't touch them for 5 years, than sell them for a big profit!

7 місяців tagasi
JoeAceJR
JoeAceJR

Insurance should be optional.

7 місяців tagasi
Jon C
Jon C

The guaranteed $ can keep playing and winning infinite money, the non-guaranteed win, can lose and it's game over...

8 місяців tagasi
David Lloyd-Jones
David Lloyd-Jones

A 1:15 the video claims a fair 50-50 would let you leave with the money you came in with after infinite time. Wrong! With a finite stake playing on a fiar 50-50 proposition you will with certainty go broke. In finite time. You may be rich from time to time, but you will at some point hit zero -- at which point you're out of the game. The end. So much for Wendover's knowledge of "magic economics."

8 місяців tagasi
Alexandre Zajic
Alexandre Zajic

Insurance doesn't exist only because people have loss aversion. It's actually logical, if you grant that there's decreasing marginal utility of money. Spending that extra 3 cents on the dollar to make sure that an accident doesn't leave you in abject poverty is a huge win, because the marginal utility of the universe where your $100,000 accident coverage pays out and you avoid abject poverty is worth a lot more than the universe where you risked abject poverty for the long-run benefit of +$3,000. In other words, though it's negative EV in terms of money, it's positive EV in terms of utility. It's important that loss aversion and the decreasing marginal utility of money are kept as separate ideas. If people had a ton of money like banks themselves, then insurance would be illogical, as you say, and would only exist because of loss aversion. But it exists for a very logical reason, not just couched in human psychological biases.

8 місяців tagasi
Santiago Ruvira
Santiago Ruvira

Insurance works because people are risk-averse. To say that they economically shouldn't work is really ignorant

8 місяців tagasi
クスノギ كوسونوگي쿠수노기
クスノギ كوسونوگي쿠수노기

gambling should be banned 100% and the government should shut down all the casinos why? 1. it exploits the poor for money 2. the profits from casinos do not generate any material wealth

8 місяців tagasi
xMacieX
xMacieX

The 80% option doesn't only come with a "chance of loss", depending on the number of tries you are able to take for example 1 try you have 20% to loose everything and end up with 0$ instead. Even if you are unlcuky because of the nature of the probability there is a certain random factor involved and if you are unlucky this certainly happens because you can't ramp up the sample size to infinty when applying this to reality. So optiopns considering probability are not "woth the exact same". Only if you are able to run enough cycles you are able to achieve these results due to the law of large numbers. Since this doesn't usually apply for many ppl it is totally reasonable to pick the 100% chance chance choice over the other.

8 місяців tagasi
iceshadows911
iceshadows911

I think your study lead you to make a bad premise where the gambled $6.25 is equal to $5. Winning a prize happens only once, and cannot be averaged out over time and therefore it's obvious these two choices aren't equal. One is either $6.25 or $0 and the other is always $5.

8 місяців tagasi
Jacob Larsen
Jacob Larsen

If you can swing the advantage to you favor $100 bet with a 1% edge is worth $1 per bet and the longer you play the more you win it's that easy folks just gain the edge over the house and play a lot to win the same way the casino does

8 місяців tagasi
marek m
marek m

The horse racing gamble is wrong i think. With 2:1 odds you win $2 for every $1 you bet. So if you win, you get $2 plus your original $1 back...so $3. If you bet 2 00:1 . If you win you get $200 plus your original $1... so $201, not $300. Come on guys, are you or are you not degenerate gamblers who should know this?

8 місяців tagasi
Sound Money
Sound Money

Fml hes right.. the moment i went from euro table to american i lost everything

8 місяців tagasi
infinitecanadian
infinitecanadian

Gambling is such a waste of time and money. I don't know why anyone would gamble.

8 місяців tagasi
Asbjørn Olsen
Asbjørn Olsen

Well, there is also the entertainment factor - people think gambling is fun, and maybe they're okay with paying for that through gambling.

8 місяців tagasi
eSwatini
eSwatini

Haven't watched the video but I'm going to assume that he puts planes into this somehow

8 місяців tagasi
Brandon Guerrero
Brandon Guerrero

Sometimes gambling is pure magic especially when you win good money.

8 місяців tagasi
Patient Providence
Patient Providence

FOMO explained.

8 місяців tagasi
Vipul Petkar
Vipul Petkar

7:58

8 місяців tagasi
Vipul Petkar
Vipul Petkar

7:58

8 місяців tagasi
Jack L
Jack L

Those polls only show that most people don't understand basic statistics

8 місяців tagasi
NightCrawller
NightCrawller

Did not understand the tennis example, if anyone can elaborate.

8 місяців tagasi
Markus Poremba
Markus Poremba

u miss one important fact: when i have the chance to win 100Dollars with an input of 5 then i hope that i get these 100 dollars faster than spending 100 Dollars

8 місяців tagasi
Jose
Jose

I have a gambling problem the sad part about it is that i have 120 iq and I already have watched this video thrice Is really hard to fight this things

8 місяців tagasi
PseudoTiger
PseudoTiger

So if I win the lottery I should be afraid of dying of terrorism?

8 місяців tagasi
imperatoreTomas
imperatoreTomas

This totally fails to explain tail risk. Tail risk of death or baskrupcy is “more expensive” to buy because if it happens you’re out of business for good. Don’t believe me? Google why put options are “overpriced” and you will see it’s because this downward tailrisk is actually correctly priced and that there is a value to not dying no matter the “risk”

8 місяців tagasi
Spastik
Spastik

I gambled once in my life. My dad gave me $50 to gamble as a "lesson" to show its a waste of money. I was down to $10 and feeling bad about it and then I won $394. Im never gambling again.

8 місяців tagasi
Adrian Rutkiewicz
Adrian Rutkiewicz

100% for getting X is not 25% for getting X*4. Maybe it is mathematically, but not practically. The first option is surety, while the other is a chance of getting 4 times more 1/4 of the time, which in practical terms may mean never. Get a 100 sided die, throw it 100 times and look a the distribution. Chances are that there will be results that occur multiple times and such that do not occur at all. So yeah, 100% for getting X is the same as 100% for getting X*4 every fourth time.

8 місяців tagasi
comic215
comic215

Insurance works because it’s law

8 місяців tagasi
JayBaddAssCutler
JayBaddAssCutler

CHICAGO HEIGHTS?!?!? I went to school at Marian Catholic in the Heights

9 місяців tagasi
Lord Zizumias
Lord Zizumias

I mean I wouldn't have insurance if I wasn't forced to by law.

9 місяців tagasi
JoelJames2
JoelJames2

10:44 Why does that guy look like he is going to murder them?

9 місяців tagasi
Mahad Omar
Mahad Omar

Plot twist he acutally kills them

9 місяців tagasi
Nub Lord
Nub Lord

I personally would always take the $5 even if you have me a chance to win a thousand dollars. I just really hate probability

9 місяців tagasi
E1craZ4life
E1craZ4life

Even over a 50% chance of $10?

8 місяців tagasi
J W
J W

I will teach anyone the secrets of making money gambling if they deposit 4 dollars worth of bitcoins into my bitcoin walllet. Im dead serious. I will hold your hand the whole way. something unfortunate happened to me that depleted my bitcoin account. I just need one adventurous stranger to help me out.

9 місяців tagasi
thomasm1964
thomasm1964

I don't know how it works in the US but, here in Europe, vehicle insurance is not a voluntary option. If you want to drive a car on public roads, then you have to buy insurance. It's nothing to do with me making a intelligent choice about whether insurance is an economically viable gamble: it's the law!

9 місяців tagasi
Ricky
Ricky

I'm not sure what your saying about the 80% of 6.25 = 5.00. Are we talking about a series of one-off rolls of a ten-sided dice in which the outcome isn't effected by previous outcomes? Say you need numbers 1-8 to win 6.25 and numbers 9-10 yield you 0. And say you roll the dice 20 times in row and every roll you get between 1-8, the next roll is still in your favor as you would still have an 80% chance of rolling between 1-8 because it is not effected by previous outcomes.

9 місяців tagasi
BrokenSymetry
BrokenSymetry

The reason why car insurance works is because you don't want risk going completely broke due to potential car accident expenses every time you drive a car

9 місяців tagasi
Rhami Zeini
Rhami Zeini

Would you rather have 6.25 at an 80% chance? Or get $5 guaranteed and not get arrested and have your car impounded by the government

9 місяців tagasi
Marcus Killian
Marcus Killian

The true magic is to win constantly while gambling.

9 місяців tagasi
TheEpicFuzz
TheEpicFuzz

One big problem with this video You keep saying "if you took this deal infinite times", yet if this ever were to happen it wouldn't, it would be once, and that's how the general amount of people would think

9 місяців tagasi
Nadezhda Khlevnaya
Nadezhda Khlevnaya

I like this service, I often take a loan here https://primetimeadvance.com/?cguid=396039e8-9bcb-4d7f-b17c-a05513760d6d

9 місяців tagasi

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