Why We Underestimate Risk by Omitting Time as a Factor
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July 8 (Bloomberg) -- Suppose I offer you a simple gamble.Throw a dice: If you get a six, you win $10; if not, you lose$1. The loss is more likely; the win brings more money. Willingto play?
The generally accepted way for deciding in such cases --developed originally by the French mathematician Blaise Pascalin the 17th century -- is to think of probabilities. The outcomewill always be a win or loss, but imagine playing millions oftimes. What will happen on average?