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The mathematics of probability that govern the trade-offs of risk and
reward are fundamentally counter-intuitive.
The reason that societies ban pyramid schemes outright, instead of
relying on the market to make them unprofitable, is that most people
trust their intuition, and their intuition leads them astray. If you
were to wait for the market to run its course on a pyramid scheme, the
losses could devastate a whole country, as Albanians found out a few
years ago.
In our days of outwitting casinos around the world, we have come
across many people who thought that they also had a great system, but
were in fact compulsive gamblers who eventually lost everything.
Among the false systems that intuitively feel right, there is none as
insidious and deadly as the Martingale, where a player doubles his bet
after every loss...
The real cause of the financial crisis
reward are fundamentally counter-intuitive.
The reason that societies ban pyramid schemes outright, instead of
relying on the market to make them unprofitable, is that most people
trust their intuition, and their intuition leads them astray. If you
were to wait for the market to run its course on a pyramid scheme, the
losses could devastate a whole country, as Albanians found out a few
years ago.
In our days of outwitting casinos around the world, we have come
across many people who thought that they also had a great system, but
were in fact compulsive gamblers who eventually lost everything.
Among the false systems that intuitively feel right, there is none as
insidious and deadly as the Martingale, where a player doubles his bet
after every loss...
The real cause of the financial crisis
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