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Started By
Message
re: PowerBall just short of $ 1 billion, Mega Millions at $20 million
Posted on 3/29/24 at 2:06 pm to chinhoyang
Posted on 3/29/24 at 2:06 pm to chinhoyang
quote:
An 85% chance of winning $240.0m has a value of $204.00 m. You might not be able to sell your chance for $200m, but you could probably get close.
But the big point was that you could sell your 85% chance of $240m for a lot more than $5.0 million.
Someone understands risk/decision models and expected values.
0
Posted on 3/29/24 at 2:12 pm to LittleJerrySeinfield
quote:
But who are you going to sell it to? Anyone who could afford it, doesn't need it.
If I have learned anything about the mega wealthy it is that the only thing they truely love in this world is becoming even more mega wealthy.
When Warren Buffet is lying on his death bed and they ask him for any final words or requests he will tell them to check his stock ticker.
Posted on 3/29/24 at 2:54 pm to Longhorn Actual
quote:
driving 100mph on the way to the store to save $$ on fuel
An Easter Egg reference to a legendary thread, well done.
Posted on 3/29/24 at 3:48 pm to chinhoyang
quote:
Are you? An 85% chance of winning $240.0m has a value of $204.00 m. You might not be able to sell your chance for $200m, but you could probably get close. But the big point was that you could sell your 85% chance of $240m for a lot more than $5.0 million.
Lol. Are you legitimately taking that deal if you’re the one holding 200 mil and I’m selling the 85% chance to make 40 more?
Posted on 3/29/24 at 4:46 pm to rocksteady
quote:
Lol. Are you legitimately taking that deal if you’re the one holding 200 mil and I’m selling the 85% chance to make 40 more?
There is a mathematical expected value (EV) and an individual's risk tolerance. You are addressing risk tolerance.
Mathematically speaking, the EV of that decision node is $204m. The alternative is worth $5m ($5m x 100%). Total EV is $209m. You SHOULD take the $204m option. It's mathematically worth 40x more.
If losing $204m leaves you broke, you probably won't take it.
If you're a fund worth billions, then you'd take that expected value for the 85% probability and negotiate off of it. As long as you don't pay > $203.99m, you'd take it.
If it's a one-time deal, you'd probably negotiate it down quite a bit from the EV of $204m because your single event could catch an outlier.
If it's a recurring opportunity - meaning if you lose this one you have another crack at it later - then you'd be willing to get closer to the $204m because the law of large numbers says the greater the number of iterations, the closer to the expected value the outcomes will cluster. Meaning over time, it's going to hit 85% of the time.
5.1 wins to cover 1 loss. 5.1 in 6 attempts is ... 85%. If you pay exactly the EV and do it enough times, you'll always break even. The value to you is the difference you negotiate ($204m less whatever you pay...that's what you're capturing over time).
This post was edited on 3/30/24 at 9:59 am
Posted on 3/29/24 at 6:06 pm to Longhorn Actual
quote:
If it's a one-time deal, you'd probably negotiate it down quite a bit from the EV of $204m because your single event could catch an outlier
Right. Of course I’m considering it a one time deal. Ole chinho strutting in here like he’s gonna make the tough call of picking 5 million, rolling for 240, or simply selling his roll for guaranteed 200 million. Decisions decisions. It would be negotiated down by a massive amount
Posted on 3/29/24 at 6:57 pm to rocksteady
A $5 million nest egg could have me drawing $200k+/year forever with no effort. It is an easy choice to me.
This post was edited on 3/29/24 at 6:58 pm
Posted on 3/29/24 at 7:05 pm to udtiger
My niece went into a C-store and bought 2 identical lottery tickets. I questioned why she did it. She replied that if she had to split with someone else, she would get 2/3 of the pot.
Posted on 3/29/24 at 7:19 pm to udtiger
None because I like my money
Posted on 3/30/24 at 9:47 am to rocksteady
quote:
Right. Of course I’m considering it a one time deal. Ole chinho strutting in here like he’s gonna make the tough call of picking 5 million, rolling for 240, or simply selling his roll for guaranteed 200 million. Decisions decisions. It would be negotiated down by a massive amount
Nobody was strutting. Even if you sold the 85% chance for $20m, you are still four times better off.
I was pointing out the stupidity of the OP, as the real decision is a no brainer.
Posted on 3/30/24 at 9:55 am to udtiger
I've always used jackpocket to buy tickets for grins. How many people have actually won any large pots using the app? Or do they just announce where the app sourced the tickets?
Posted on 3/30/24 at 10:23 am to udtiger
The mega millions of course. That 15% would definitely frick me!
Posted on 3/30/24 at 11:48 am to LittleJerrySeinfield
quote:
But who are you going to sell it to? Anyone who could afford it, doesn't need it.
Rich people don’t invest?
Posted on 3/30/24 at 3:24 pm to udtiger
quote:
You have a 100% chance at winning the Mega Millions
Or
A 85% chance of winning the Powerball.
Which do you take?
mega millions!
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