Discussion about 10,000BTC Bet (Official)

[myrkul]

What you're saying here is that any venture that has it much riskier than average should never be expected to payout?

No, just that you should never risk what you're not prepared to lose, and if you lose it, accept the fact that you lost it, by taking a bad risk.

You're still considering risk a binary concept. It's not. Would you say the same statement about a venture with low risk? You need to define the risk you refer to in terms of the probability it will not pay. Then you can estimate how much to invest.

Risk may be a sliding scale, but results are binary. Either the risk pays off, or it doesn't.

And until it does, you have to act as though it will not. Any other course is inviting disaster.

[organofcorti]

What you're saying here is that any venture that has it much riskier than average should never be expected to payout?

No, just that you should never risk what you're not prepared to lose, and if you lose it, accept the fact that you lost it, by taking a bad risk.

You're still considering risk a binary concept. It's not. Would you say the same statement about a venture with low risk? You need to define the risk you refer to in terms of the probability it will not pay. Then you can estimate how much to invest.

Risk may be a sliding scale, but results are binary. Either the risk pays off, or it doesn't.

And until it does, you have to act as though it will not. Any other course is inviting disaster.

How do you decide how much to invest in any given scheme then?

[muyuu]

(Not that I think it matters. I would be quite literally stunned if Matthew defaults.)

You think he will pay?

I fully expect him to, but I wouldn't risk too much anyway.

[myrkul]

What you're saying here is that any venture that has it much riskier than average should never be expected to payout?

No, just that you should never risk what you're not prepared to lose, and if you lose it, accept the fact that you lost it, by taking a bad risk.

You're still considering risk a binary concept. It's not. Would you say the same statement about a venture with low risk? You need to define the risk you refer to in terms of the probability it will not pay. Then you can estimate how much to invest.

Risk may be a sliding scale, but results are binary. Either the risk pays off, or it doesn't.

And until it does, you have to act as though it will not. Any other course is inviting disaster.

How do you decide how much to invest in any given scheme then?

Standard risk/reward calculation. But I never risk more than I can afford to lose. I understand that I am taking a risk, and I may not be able to recoup it. I don't assume that anything I "have coming" will actually come.

A pessimist is never disappointed.

[DigitalHermit]

What you're saying here is that any venture that has it much riskier than average should never be expected to payout?

No, just that you should never risk what you're not prepared to lose, and if you lose it, accept the fact that you lost it, by taking a bad risk.

You're still considering risk a binary concept. It's not. Would you say the same statement about a venture with low risk? You need to define the risk you refer to in terms of the probability it will not pay. Then you can estimate how much to invest.

Risk may be a sliding scale, but results are binary. Either the risk pays off, or it doesn't.

And until it does, you have to act as though it will not. Any other course is inviting disaster.

How do you decide how much to invest in any given scheme then?

Standard risk/reward calculation. But I never risk more than I can afford to lose. I understand that I am taking a risk, and I may not be able to recoup it. I don't assume that anything I "have coming" will actually come.

A pessimist is never disappointed.

Yes, never invest more than you are willing to lose. That's not pessimism, that's realism!

[organofcorti]

What you're saying here is that any venture that has it much riskier than average should never be expected to payout?

No, just that you should never risk what you're not prepared to lose, and if you lose it, accept the fact that you lost it, by taking a bad risk.

You're still considering risk a binary concept. It's not. Would you say the same statement about a venture with low risk? You need to define the risk you refer to in terms of the probability it will not pay. Then you can estimate how much to invest.

Risk may be a sliding scale, but results are binary. Either the risk pays off, or it doesn't.

And until it does, you have to act as though it will not. Any other course is inviting disaster.

How do you decide how much to invest in any given scheme then?

Standard risk/reward calculation. But I never risk more than I can afford to lose. I understand that I am taking a risk, and I may not be able to recoup it. I don't assume that anything I "have coming" will actually come.

A pessimist is never disappointed.

If you invest in multiple investments, in amounts inversely proportional to the level of risk, then in the long run you can expect a particular return (and, assuming you calculated the risk correctly, any difference is variance). If you assumed the investments never matured, it would make financial planning difficult.

[myrkul]

If you invest in multiple investments, in amounts inversely proportional to the level of risk, then in the long run you can expect a particular return (and, assuming you calculated the risk correctly, any difference is variance). If you assumed the investments never matured, it would make financial planning difficult.

A bet is not an investment. Especially one such as this. This is 100% risk. You're offering to pay out with only someone's word that they will pay. Reference my reply to Joel. One of those bets you can make reasonable assumptions on. One you cannot. Guess which one is which.

[organofcorti]

If you invest in multiple investments, in amounts inversely proportional to the level of risk, then in the long run you can expect a particular return (and, assuming you calculated the risk correctly, any difference is variance). If you assumed the investments never matured, it would make financial planning difficult.

A bet is not an investment. Especially one such as this. This is 100% risk. You're offering to pay out with only someone's word that they will pay. Reference my reply to Joel. One of those bets you can make reasonable assumptions on. One you cannot. Guess which one is which.

Every investment is a bet. Your estimation of this one is that it has 100% risk, meaning it is impossible that it will pay off. From your point of view there's no point investing at all and there is guaranteed to be no return. If you were really that certain, you coud make a killing selling risk insurance to the people that did make a bet with Matt. How certain are you?

[myrkul]

If you invest in multiple investments, in amounts inversely proportional to the level of risk, then in the long run you can expect a particular return (and, assuming you calculated the risk correctly, any difference is variance). If you assumed the investments never matured, it would make financial planning difficult.

A bet is not an investment. Especially one such as this. This is 100% risk. You're offering to pay out with only someone's word that they will pay. Reference my reply to Joel. One of those bets you can make reasonable assumptions on. One you cannot. Guess which one is which.

Every investment is a bet. Your estimation of this one is that it has 100% risk, meaning it is impossible that it will pay off. From your point of view there's no point investing at all and there is guaranteed to be no return.

No. 100% risk means nothing is guaranteed. You're right that every investment is a bet, but not every bet is an investment. In this case, especially, it can't be called an investment, except on Matt's end. He is investing a very large amount of money in his reputation (and Pirate's). Everyone else is risking smaller amounts of money, but no less their reputation.For what possible return? Double their money? If Matt's reputation doesn't tank, that is.

Matt loses his bet and pays out: He loses money, but gains reputation.
Matt loses his bet and doesn't pay out: He loses his reputation, but keeps his money.
Matt wins his bet: He gains money, and reputation

Seems a pretty good deal, if he has the money to lose.

Matt loses his bet and pays out: Everyone else gains a little money.
Matt loses his bet and doesn't pay out: Everyone else gains nothing, loses nothing. (Malinvestment based on this bet notwithstanding)
Matt wins his bet: Everyone else loses money or reputation

Yeah. I know a sucker bet when I see one. Matt's a frigging genius.

[Matthew N. Wright]

Guys, investments and bets are not the same thing. You're both confusing a "gamble" with "risk". Gambling is risky, but risk is not a gamble. Gambling involves blind luck. When you walk across a tight rope, you're risking your life, but it's hardly blind luck. Anyone making this bet is basically blindly gambling. If you invested in pirate without even bothering to research his business model, find out his info, etc, you're also basically gambling, but only -you-. Others who invested in him may not be gambling, they may be just taking risk. I am taking a risk with this bet. I believe I know what he's doing and I believe it is not a ponzi. I am taking a risk of being wrong, but to me it is hardly "dumb luck". That said, since I have absolutely no control or even influence on payment, I admit that I could succumb to dumb bad luck and lose on a shit technicality (couldn't make it to the bank on time, lost his password, electricity cuts out, tornadoes takes out his house, any number of things).

[organofcorti]

Guys, investments and bets are not the same thing. You're both confusing a "gamble" with "risk". Gambling is risky, but risk is not a gamble. Gambling involves blind luck. When you walk across a tight rope, you're risking your life, but it's hardly blind luck. Anyone making this bet is basically blindly gambling. If you invested in pirate without even bothering to research his business model, find out his info, etc, you're also basically gambling, but only -you-. Others who invested in him may not be gambling, they may be just taking risk. I am taking a risk with this bet. I believe I know what he's doing and I believe it is not a ponzi. I am taking a risk of being wrong, but to me it is hardly "dumb luck". That said, since I have absolutely no control or even influence on payment, I admit that I could succumb to dumb bad luck and lose on a shit technicality (couldn't make it to the bank on time, lost his password, any number of things).

From a math standpoint, it doesn't matter if the investment is a "gamble" or just "risky" If you know the probability and variability of return, you can put a value on the bet/investment.

If you calculate a probability of a payout succeeding an then find after losing an investment that you'd missed some vital information, that doesn't mean the investment model is wrong, just the the risk assessment process was.

All investments are bets. All bets are investments. All bets and investments are gambles. Bets, investments, gambling games all have in common the uncertainty of a payout. Accurately assessing that uncertainty, or risk, is very difficult and in many cases practicably impossible. If you were able to assess the risk and reward correctly though it wouldn't matter what investment vehicle you invested in. As long as you had a very wide portfolio and the expected return better than zero, you'd be ahead.

[muyuu]

Guys, investments and bets are not the same thing. You're both confusing a "gamble" with "risk". Gambling is risky, but risk is not a gamble. Gambling involves blind luck. When you walk across a tight rope, you're risking your life, but it's hardly blind luck. Anyone making this bet is basically blindly gambling. If you invested in pirate without even bothering to research his business model, find out his info, etc, you're also basically gambling, but only -you-. Others who invested in him may not be gambling, they may be just taking risk. I am taking a risk with this bet. I believe I know what he's doing and I believe it is not a ponzi. I am taking a risk of being wrong, but to me it is hardly "dumb luck". That said, since I have absolutely no control or even influence on payment, I admit that I could succumb to dumb bad luck and lose on a shit technicality (couldn't make it to the bank on time, lost his password, electricity cuts out, tornadoes takes out his house, any number of things).

You're forgetting the "eventuality" that he already did as much as saying publicly that he won't pay in full in any case, and interests are frozen violating his original terms and thus your bet.

[myrkul]

All investments are bets. All bets are investments. All bets and investments are gambles. Bets, investments, gambling games all have in common the uncertainty of a payout. Accurately assessing that uncertainty, or risk, is very difficult and in many cases practicably impossible. If you were able to assess the risk and reward correctly though it wouldn't matter what investment vehicle you invested in. As long as you had a very wide portfolio and the expected return better than zero, you'd be ahead.

I agree with everything except all bets are investments. What, exactly, are you investing in at the craps table?

[organofcorti]

All investments are bets. All bets are investments. All bets and investments are gambles. Bets, investments, gambling games all have in common the uncertainty of a payout. Accurately assessing that uncertainty, or risk, is very difficult and in many cases practicably impossible. If you were able to assess the risk and reward correctly though it wouldn't matter what investment vehicle you invested in. As long as you had a very wide portfolio and the expected return better than zero, you'd be ahead.

I agree with everything except all bets are investments. What, exactly, are you investing in at the craps table?

You'd be placing money in an investment vehicle that can be assessed - in the long run - to guarantee a negative return. The risk of this not being a good long term investment is 100%.

If you were the house, I'd say it would be a risky (variance prone) but positive long term investment.

Edit:Matt I appreciate the gentle way you attempted to prod us back on topic, and I apologise for completely ignoring your hint.

[myrkul]

All investments are bets. All bets are investments. All bets and investments are gambles. Bets, investments, gambling games all have in common the uncertainty of a payout. Accurately assessing that uncertainty, or risk, is very difficult and in many cases practicably impossible. If you were able to assess the risk and reward correctly though it wouldn't matter what investment vehicle you invested in. As long as you had a very wide portfolio and the expected return better than zero, you'd be ahead.

I agree with everything except all bets are investments. What, exactly, are you investing in at the craps table?

You'd be placing money in an investment vehicle that can be assessed - in the long run - to guarantee a negative return. The risk of this not being a good long term investment is 100%.

If you were the house, I'd say it would be a risky (variance prone) but positive long term investment.

Edit:Matt I appreciate the gentle way you attempted to prod us back on topic, and I apologise for completely ignoring your hint.

Then let us end this little digression with this statement:

In my estimation, Matt is the house, here. Long-term, he comes out on top whatever happens.

[labestiol]

Reading this thread makes me realize how weak people are in game theory and statistics.
organofcorti : Thanks for defending Maths

[organofcorti]

I disagree. It's that reliance that lost you money. A bet is a risk. You should never rely on a risk paying off.

So, after that chat, can you see why I disagreed with the bolded statement above? It all comes down to the actual risk assessment. If you have assessed the risk of this bet not paying off as less than the risk of Pirate defaulting, then taking the bet with Matthew would be a valid choice. I think what you might mean (correct me if I'm wrong, I'm not trying to put words in your mouth) is that this particular risk appears to you have a guaranteed negative outcome, so one should not rely on the risk paying off.

So the reliance on the money that may or may not be gained from the bet with Matthew is not generally a bad thing - it is only so because in your assessment of the potential risks and rewards (the variance and expected value of the pay out) that the bet can only cost bettors.

If someone has assessed the opposite, then relying on the the bet should only be done to the extent of the variance in payment you have assessed as being likely.

[stochastic]

What you're saying here is that any venture that has it much riskier than average should never be expected to payout?

No, just that you should never risk what you're not prepared to lose, and if you lose it, accept the fact that you lost it, by taking a bad risk.

You're still considering risk a binary concept. It's not. Would you say the same statement about a venture with low risk? You need to define the risk you refer to in terms of the probability it will not pay. Then you can estimate how much to invest.

Risk may be a sliding scale, but results are binary. Either the risk pays off, or it doesn't.

And until it does, you have to act as though it will not. Any other course is inviting disaster.

How do you decide how much to invest in any given scheme then?

Standard risk/reward calculation. But I never risk more than I can afford to lose. I understand that I am taking a risk, and I may not be able to recoup it. I don't assume that anything I "have coming" will actually come.

A pessimist is never disappointed.

But if you calculate the risk/reward ratio for this pirate default bet then there really is no risk, as the gamblers do not have to put their money in escrow thus no money is being risked.  If they lose the bet they simply walk away and open up a new account.  If they win the bet, maybe they will get paid.  I believe Matthew got the bad bet as he has many people he is betting with and more reputation to lose if he does not pay every single one of those bets.  On the other hand, all the other investors can simply ignore the bet if they lose, lowering Matthew's risk/reward ratio.

[myrkul]

Reading this thread makes me realize how weak people are in game theory and statistics.
organofcorti : Thanks for defending Maths

Were I making an investment portfolio, I would most definitely do it the way he suggests: Diversify, try to pick good risks.

I would not include a wager as part of an investment portfolio. If it is included in any portfolio, it would be in the one labeled "casino money."

I would not count on any individual item in either of those portfolios to pay off, and I would be prepared for (and accept, when/if it came) the eventuality that all of them failed. (Also, I would expect that in the latter portfolio, it leans heavily toward when, rather than if)

I disagree. It's that reliance that lost you money. A bet is a risk. You should never rely on a risk paying off.

So, after that chat, can you see why I disagreed with the bolded statement above? It all comes down to the actual risk assessment. If you have assessed the risk of this bet not paying off as less than the risk of Pirate defaulting, then taking the bet with Matthew would be a valid choice. I think what you might mean (correct me if I'm wrong, I'm not trying to put words in your mouth) is that this particular risk appears to you have a guaranteed negative outcome, so one should not rely on the risk paying off.

I actually don't have any issue with others deciding that Matt's bet is the one to take. If you think Pirate is going to fail to pay out, then it only makes sense to take Matt up on his offer. What I find to be foolish is making investments based on the expectation of receiving a payout from Matt. Or more accurately, blaming Matt for your malinvestments based on the expectation of receiving a payout from Matt.

But if you calculate the risk/reward ratio for this pirate default bet then there really is no risk, as the gamblers do not have to put their money in escrow thus no money is being risked.  If they lose the bet they simply walk away and open up a new account.  If they win the bet, maybe they will get paid.  I believe Matthew got the bad bet as he has many people he is betting with and more reputation to lose if he does not pay every single one of those bets.  On the other hand, all the other investors can simply ignore the bet if they lose, lowering Matthew's risk/reward ratio.

Well, assuming they're willing to walk away. That was the point of "established members only", and his vetting of bettors prior to accepting their bet. Even if Matt gains no money whatsoever, everyone ditches, he still gets rep for putting his money where his mouth is. He can't lose, here, even if he does lose.

[BrightAnarchist]

But if you calculate the risk/reward ratio for this pirate default bet then there really is no risk, as the gamblers do not have to put their money in escrow thus no money is being risked.  If they lose the bet they simply walk away and open up a new account.  If they win the bet, maybe they will get paid.  I believe Matthew got the bad bet as he has many people he is betting with and more reputation to lose if he does not pay every single one of those bets.  On the other hand, all the other investors can simply ignore the bet if they lose, lowering Matthew's risk/reward ratio.

If Matt wins, I will pay him every last satoshi of my bet. To not do this would go against my word and honor.

Additionally, he is providing a great service by allowing people to hedge their situation.