Interesting observation: If you change the "stake" amount to something more reasonable, like say betting 10% of your current wealth instead of all of it, the results are much better. Also increase the number of flips to 1000 to get a better idea of long-term behavior. Somewhere between 0% and 5% of people lose capital, and the average gain is much higher too.
Yep! changing the % bet (or the % win, % loss etc inputs) will affect the overall return profile, both for the individual and the ensemble.
I'm less sure changing the number of flips makes that much of a material difference though - the trend should be pretty clear with around 100 flips - though feel free to play around with the colab notebook to adjust
unsure if you mean to reference the kelly criterion in the comment, and yep that's another key point regarding bet sizing and how to reduce risk. Got a bit tired at the end of the post so gave a bullet on it to reference an older post: https://avoidboringpeople.substack.com/p/having-faith-in-the-kelly-criterion
Interesting observation: If you change the "stake" amount to something more reasonable, like say betting 10% of your current wealth instead of all of it, the results are much better. Also increase the number of flips to 1000 to get a better idea of long-term behavior. Somewhere between 0% and 5% of people lose capital, and the average gain is much higher too.
Which overall makes sense. The more risk you take, the more likely that loss will be incurred, but the larger the potential payoff.
Yep! changing the % bet (or the % win, % loss etc inputs) will affect the overall return profile, both for the individual and the ensemble.
I'm less sure changing the number of flips makes that much of a material difference though - the trend should be pretty clear with around 100 flips - though feel free to play around with the colab notebook to adjust
unsure if you mean to reference the kelly criterion in the comment, and yep that's another key point regarding bet sizing and how to reduce risk. Got a bit tired at the end of the post so gave a bullet on it to reference an older post: https://avoidboringpeople.substack.com/p/having-faith-in-the-kelly-criterion
Really good reminder on path dependence. Thanks!
this is mind blowing, best piece I've read in 2021!
thank you!
Good stuff, thanks Leon!
You’re welcome!
ty! LMK if you learn anything interesting - I only just got around to understanding the topic