There’s a number of ways that we
might consider risk in this scenario.
Let’s look at first, this idea of what’s
the chance you might lose it all.
So, you put out your bets
on the thousands tables.
The coins are flipped, in that event,
what’s the chance you’ll lose all,
all of your money?
In the single bet case where you put all
of your money on a single table, and
the outcome is determined by the flip of
a single coin, remember, even though it
is biased in your favor, there still is
a 49% change it’ll come out against you.
So if you put all of your
money on a single table for
one coin, there’s a 49% chance
that you’ll lose all of it.
That’s pretty high.
I mean consider that in
the context of would you put your
savings account on
a single bet like that?
Now, I want you to think a little bit,
consider the multi-bet case where we put
one token on each of the 1,000 tables.
So there’s 1,000 coin flips and
our return is determined by
the result of all those
individual thousand coin flips.
What is the chance that we
would lose it all in that case?
Well the answer to that is that it’s
the probability that we lose on
the first table, times the probability
that we lose on the second table,
times the probability
we lose on the third.
And as you can see, we do this for
all of the thousandth table and multiple
those probabilities altogether, and
that’s the probability we would lose
everything in the multiple bit scenario.
That is a very, very small number.
It’s point four nine to
the one thousandth power.
How small is it?
Let’s try and
calculate it on a calculator.
So it’s 0.49 raised
to the 1,000th power.
Let’s see how small that is.
It’s so small it’s not even a number.
That’s how small it is.
Okay, let’s look at another
way to evaluate risk.