comment by eukaryote ·
2019-09-28T21:42:11.381Z · LW(p) · GW(p)
I don't like taking complicated variable-probability-based bets. I like "bet you a dollar" or "bet you a drink". I don't like "I'll sell you a $20 bid at 70% odds" or whatever. This is because:
A) I don't really understand the betting payoffs. I do think I have a good internal sense of probabilities, and am well-calibrated. That said, the payoffs are often confusing, and I don't have an internal sense linking "I get 35 dollars if you're right and you give me 10 dollars if I'm not" or whatever, to those probabilities. It seems like a sensible policy that if you're not sure how the structure of a bet works, you shouldn't take it. (Especially if someone else is proposing it.)
B) It's obfuscating the fact that different people value money differently. I'm poorer than most software engineers. Obviously two people are likely to be affected differently by a straightforward $5 bet, but the point of betting is kind of to tie your belief to palpable rewards, and varying amounts of money muddy the waters more.
(Some people do bets like this where you are betting on really small amounts, like 70 cents to another person's 30 cents or whatever. This seems silly to me because the whole point of betting with money is to be trading real value, and the value of the time you spend figuring this out is already not worth collecting on.)
C) Also, I'm kind of risk averse and like bets where I'm surer about the outcome and what's going on. This is especially defensible if you're less financially sound than your betting partner and it's not just enough to come out ahead statistically, you need to come out ahead in real life.
This doesn't seem entirely virtuous, but these are my reasons and I think they're reasonable. If I ever get into prediction markets or stock trading, I'll probably have to learn the skills here, but for now, I'll take simple monetary bets but not weird ones.
Replies from: rossry, rossry
↑ comment by rossry ·
2019-09-29T01:59:11.495Z · LW(p) · GW(p)
(continued, to address a different point)
B and C seem like arguments against "simple" (i.e., even-odds) bets as well as weird (e.g., "70% probability") bets, except for C's "like bets where I'm surer...about what's going on", which is addressed by A (sibling comment).
Your point about differences in wealth causing different people to have different thresholds for meaningfulness is valid, though I've found that it matters much less than you'd expect in practice. It turns out that people making upwards of $100k/yr still do not feel good about opening up their wallet you give you $3. In fact, it feels so bad that if you do it more than a few times in a row, you really feel the need to examine your own calibration, which is exactly the success condition.
I've found that the small ritual of exchanging pieces of paper just carries significantly more weight than would be implied by their relation to my total savings. (For this, it's surprisingly important to exchange actual pieces of paper; electronic payments make the whole thing less real, ruining the whole point.)
Finally, it's hard to argue with someone's utility function, but I think that some rationalists get this one badly wrong by failing to actually multiply real numbers. For example, if you make a $10 bet (as defined in my sibling comment) every day for a year at the true probabilities, the standard decision of your profit/loss on the year is <$200, or $200/365 per day, which seems like a very small annual cost to practice being better calibrated and evaluate just how well-calibrated you are.
↑ comment by rossry ·
2019-09-29T01:38:57.423Z · LW(p) · GW(p)
Hi! I've done a fair amount of betting beliefs for fun and calibration over the years; I think most of these issues are solvable.
A is a solved problem. The formulation that I (and my local social group) prefer goes like "The buyer pays $X*P% to the seller. The seller pays $X to the buyer if the event comes true."
The precise payoffs aren't the important part, so long as they correspond to quoted probabilities in the correct way (and agreed sizes in a reasonable way). So this convention makes the probability you're discussing an explicit part of the bet terms, so people can discuss probabilities instead of confusing themselves with payoffs (and gives a clear upper bound for possible losses). Then you can work out exact payoffs later, after the bet resolves.
(As a worked example, if you thought a probability was less than 70% and wanted to bet about $20 with me, if you "sold $20 at 70%" in the above convention, you'd either win $2070%=$14 or lose $20-($2070%)=$6. But it's even easier to see that you selling a liability of $20p(happens) for $2070% is good for you if you think p(happens)<70%.)
You've right that odds are a terrible convention for betting on probabilities unless you're trying to hide the actual numbers from your counterparties (which is the norm in retail sports betting).