
Thinking about Danny Devito - jmorin007
http://sethgodin.typepad.com/seths_blog/2008/05/thinking-about.html
======
bdouglas1
not that i know the actual equation that seth is using, nor do i have
knowledge of the values of the variables he's using...

i'm pretty sure that betting on being successful as a "devito" is much like
betting on a long shot at a horse race.

i'd rather bet on the field. lower payout, but way better odds...

peace

~~~
nostrademons
It's the parimutuel system at work - your expected payout depends not just on
how fit your choice is, but how fit it is relative to everyone else's
expectations.

Godin's point - and this is echoed in Nassim Taleb's books, along with the
research that spawned _Blink_ \- is that there's a built-in cognitive bias
towards putting your money on the "expected" winner, and that most people
don't realize that the odds already take the favorite's fitness into account.
So your expected payoffs are often bigger with long shots, because most of the
people betting follow the same mental heuristics.

Even better is to do as Warren Buffett does (or appears to do), and calculate
the actual odds. Then you bet only if the posted odds are significantly in
your favor vs. the actual odds.

