You also need to take into account the “bet” or investment (time, stress, reputation, money, work) and the amount of the reward or “pot” (profits, pleasure, ability to help others, peace of mind, satisfaction,). Many people, for example, face a decision like whether to go get a job or to start a business. The reward or “pot” in this case, is potentially much higher in the case of being a novelist. This amount divided by your expected $40 bet equals 1.25. It seems likely that many lives have been diminished by chasing after low-probability dreams when high-probability alternatives with a decent reward were there for the choosing.
Is it better for you to be a lawyer or a novelist? Can you make this decision rationally? In poker there is one clear goal – making money. Essentially, this is the idea of investment odds operating at an intuitive or unconscious level.
In the last round of betting, you have three kings. With these many possible options, we have just the usual guides to decision and action, which include feelings, advice from others, and our general intuition about which choices are better.
Your Investment Odds
This isn’t enough information, however, because you haven’t taken into account your investment odds. You estimate that you have a 1-in-5 probability of winning if you stay to the end. The chance of success is lower, but if you do succeed, you’ll have much more satisfaction n your life. The probability of success in the restaurant business may be 15% in general, for example, but you may be so committed and prepared that you have a 85% probability of succeeding. However, this only eliminates some choices, leaving us with a sub-set of acceptable ones. Probabilitism makes it a more conscious and hopefully more effective process.
Copyright Steve Gillman. No one can understand better than you what you value and how you value it, or even how capable you are in a given area. In terms of making money next year, the odds are much better with the job of course, and people know that. To make this an explicit ideology for making decisions in life, we need to understand the idea of “investment odds,” a term used by poker players.
Let’s consider this from another perspective, that of a man who would be far happier succeeding as a movie star than in business. The bet is $40 to you. For deep thoughts, inventions, new product ideas, business ideas, story ideas, political and economic theories, and a free course on How To Have New Ideas, visit : www.999ideas.com
Now you look at each possible choice. This premise is sound, but our knowledge just isn’t up to task of identifying the true odds or the true value of things when it comes to an individual life and the decisions in it.
Probabilitism? I just invented the word to describe an ideology of living life according to the odds, or more specifically, making decisions according to them. We all do this intuitively already. But some choose to go for the business route anyhow, because even if it requires failing several times, the potential “jackpot” is far larger, both in terms of money and personal satisfaction and freedom. If you bet with bad investment odds (below 1), you’ll eventually lose money. Should you stay?
Naturally, these various factors, from how much you enjoy the process, to how probable success is, are individual. The odds of being a successful writer are far lower, and you think you could be satisfied with either career, so you figure the probability of being happy as a lawyer is slightly better.
You can keep the basic idea in mind as you make decisions, and let your intuition operate according to its guiding principle. If, for whatever reason, the odds of him being a star are low enough, and he could be content inheriting his father’s business, choosing the latter would be the right decision. Life, after all, is all about making decisions, and we need some guide for making better ones.
Throw Away The Numbers
The idea, then, is to play the odds, but not just the odds of success. Now to apply this to life decisions.
From that intuitive part of the process, probabilitism extracts the general idea of making choices based on the probabilities of them giving us the most of what we value. Your investment odds are above 1 (above 100% return according to the odds), meaning this is a good bet, the kind you’ll win with over time. You also need to take into account the amount you’ll win and the amount you’ll bet. This is what we already do intuitively. How can you use this then?. In the rest of life there are many goals and values, so you have to recognize the most important one in this case. Researching the two professions you discover that the average novelist makes just $3,000 per year, while as a lawyer you are virtually guaranteed a decent living. Here is the exact formula: [(Expected size of pot)(Probability of winning)] / (Your total bet from this point on).
The “numbers” in such “life calculations” as these are guesses, and not even very educated ones, so probabilitism isn’t ready to be a systematic tool for decision making. You must be the one to decide what “numbers” to plug into a formula like this.
The most common explicit guide to decision making is morality. Money will help with that, but it is a lesser goal, and only important to the extent to which it helps promote the primary goal.
Actually, you have to go beyond the odds of winning the hand, which are merely “event-odds.” The odds of a specific event occurring (your hand winning) aren’t enough information. To be a lawyer, you would have to go through years of schooling that you don’t enjoy, and work hard to pay for it, but you enjoy the work of writing, and can start with very little money.
You expect a pot of $250, which you multiply by the probability of winning (.2, also expressed as 20% or 1-in-5), to arrive at $50. You might see that the highest possible level of life-satisfaction is of primary importance. Your investment is also lower. For example, when a man isn’t sure whether to start a business or keep his job, his intuition may at some point urge him to go for the business, because it has a higher probability of rewarding him according to what he values