Canonical · Decision-Making · Model
Expected Value
Blaise Pascal · 1654
"Choose the option whose average outcome, weighted by probability, is highest."
Expected value multiplies each possible outcome by its probability and sums them. A 10% chance of winning $100 has an EV of $10 — worth paying up to $10 for. It sounds mechanical, but it's the discipline that separates gambling from investing.
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Up NextSuggested: Continues the theme of Decision-Making
The Casino's Four Gears: Edge, Volume, Sizing, and Bankroll
"A tiny, repeatable statistical edge becomes a near-certain profit only when combined with three other things — enormous volume, bets sized to the edge rather than to conviction, and a bankroll large enough to survive a bad stretch. Miss any one of the four and having an edge stops mattering."
John Kelly Jr.; Edward Thorp · FrameworkContinue→