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How To Calculate Average Outcome

March 7, 2012 By Leave a Comment
Dice five

I love gamblers, they make me look smart

Earlier this week I talked about running the numbers and I mentioned that you should run multiple scenarios and then average them together to see the average outcome.  A reader sent in a question asking how to do that.  So here’s a real quick lesson on calculating expected outcomes.

  1. Come up with all the possible outcomes.
  2. Assign odds to each
  3. Multiply likely outcome by odds
  4. Add together to get predicated outcome

Let’s run through an example.

You’re a gambling man.  A friend offers you a bet.  You will pay him a dollar.  In return, he will roll a dice.

  • If the die shows a 1, 2 or 3, you lose your money
  • If the die shows a 4 or 5, you win 1 dollar
  • If the die shows a 6, you win 2 dollars

Is this a worthwhile bet?  Mmm… it sounds good.  50% chance of losing but 50% chance of winning and one of those possible prizes is worth more than the money I put in….  Hey, numbskull!  RUN THE NUMBERS! [Read more...]

Filed Under: Decision Making, Making More Money, Optimization, Risk Assessment, Saving Money Tagged With: , , , , , ,

Is It Better To Rent Or Buy? Do Your Homework Before Making Decisions

March 5, 2012 By 1 Comment
houses for sale sign

Too many of these are from people who didn't run the numbers

I wrote last week about calculating the value of your time when it comes to whether or not you should haggle.  The point wasn’t that haggling is good or bad, only that you should make an informed decision as opposed to a guess.  I want to expand on that a bit and apply it to other parts of life.

Not all decisions in life require a lot of thinking.  For example, I chose the Mexican place I went to lunch at without doing a giant pro and con list.  The big things though, especially when it comes to money, those should definitely be informed decisions.  Which brings me to the question I mentioned in the heading, is it better to rent or buy? [Read more...]

Filed Under: Making More Money, Optimization, Risk Assessment, Saving Money Tagged With: , , ,

Confidence Building 101

July 14, 2011 By Leave a Comment

Lucky Deck Lottery TicketHere’s a quick little thing you can do to build up some confidence.

  1. Go buy a lottery ticket
  2. Before you check if you won, pause for a moment and imagine all the wonderful things you’ll do with that money.  Imagine the vacations, the dream home, the paid off debts, the kids’ college tuition, your new car, whatever!  Think hard, make it real, feel the joy of all that new stuff.
  3. Now check if you won.

Statistically, you’re now looking at a losing lottery ticket and you feel horrible.  All those dreams, all those wonderful images, washed down the drain of disappointment.  So why the heck did I just have you do this?  Well, besides the fact that I’m a mean bastard, I want you to get a taste of failure and see that it’s really not that bad. [Read more...]

Filed Under: Confidence, Risk Assessment Tagged With: , , , , ,

What Is Confidence?

July 11, 2011 By 1 Comment

ConfidenceConfidence, you either have it or you don’t. If you have it, you’re king (or queen) of the world. People do what you want them to do, your attraction and sex appeal level go way up, your friends look up to you as a leader and people want to be more like you. If you don’t have it, you’re at the bottom of the social pile. No one cares about your opinion (not even your mother!), no one listens to what you have to say and people find you “cute, but not that hot”. In fact, we all know that people with confidence kick all sorts of ass and get all the cool stuff. However, no one I asked could ever really define to me what confidence was.

So I’ve been thinking, if I want to confidence to be one of the primary aspects of my cult members, I better figure out what the heck it is, and quick! Which led me to thinking, what is it that makes confident people special? Why do we look up to them? Why do we follow them? What I ended up realizing is the true meaning of confidence, and also the false meaning, the one most people seem to believe in. [Read more...]

Filed Under: Confidence, Coping With Failure, Risk Assessment Tagged With: , , , ,

Optimize Your Life (And Your 101 Commute)

April 6, 2011 By Leave a Comment

Traffic in BrisbaneI used to hate my commute.  If you’ve ever driven on the 101 during rush hour, you know exactly why.  The only way in which commuting on the 101 during rush hour could possibly be worse is if zombies would attack my car and try to eat my brains at random overpasses.  On second thought, that would probably make the commute better, at least with zombies I could legally try to hit them, something I can’t do with my fellow drivers.  Plus zombies would probably drive better than some of my fellow commuters (yes, I’m talking to you, the asshole in the Prius, driving in the carpool lane at 55mph!), but I digress.  Needless to say, I HATED my morning and afternoon commute.

Now I love my commute.  Ok, maybe that’s an overstatement, I don’t think anyone loves their commute.  But I no longer have barely controllable urges to smash my head into the steering wheel, which is a huge plus as far as I’m concerned.  In fact, I’m relaxed, happy and quite calm.  What changed you ask?  The obvious answer most people would assume is distance.  I am now commuting a shorter distance.  That would be a very reasonable answer but it would also be a very wrong one.  In fact, my commute is longer (29 miles versus 23 miles).  So really, what changed?

The answer is optimization of all factors involved and that’s also what this website is all about.

[Read more...]

Filed Under: Decision Making, Goals, Optimization, Risk Assessment Tagged With: , , ,

Don’t Use Skepticism As An Excuse For Inaction

December 21, 2010 By 3 Comments

Now Is The Time To Try Something NewLast week Tim Ferris, of The 4-Hour Workweek fame, put out a new book called the The 4-Hour Body .  In it he describes the variety of ways in which he’s hacked apart his body and put together a healthy lifestyle.  It’s filled with a lot of tips, entertaining stories and a variety of pseudo science the likes of which every diet book contains.  It’s even got a great section about sexual performance with a hilarious addendum on sperm donation.  I picked up this book because I like Tim’s blog but I didn’t really have an intention to follow any of the ideas in it.

[Read more...]

Filed Under: 30 Day Experiments, Confidence, Decision Making, Losing Weight, Making More Money, Procrastination, Risk Assessment Tagged With: , , , , , ,

Risky Business: Why People Sometimes Make Stupid Decisions

November 19, 2010 By Leave a Comment

Risk FactoryLet me ask you a question. Do you ski? Snowboard? Surf? Mountain Bike? Play the stock market? Drive a car? Have sex? Get on a plane? Ride a roller coaster? Use online banking? My guess is you said yes to at least one of these. In fact, I’m certain you did. Now what do all of these have in common? They each contain an element of risk of course.

[Read more...]

Filed Under: Decision Making, Risk Assessment Tagged With: , , ,