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RISK (OF DEATH)-REWARD-RATIOS
Studious gamblers learn to assess carefully the risk-reward ratios in their chosen gambling activities. When the degree of risk is justified by the reward, the skilled gambler takes that risk. Consider the skilled poker player. When he can only beat a bluff, and on the river the pot is offering him 9-to-1, he makes the call if he believes the odds against his opponent bluffing are no greater than 9-to-1. Below 9-to-1, the risk-reward ratio is favorable.
If he has assessed the situation correctly, the player is risking the amount of his call, for a reward which will average more than that. (In practice, many good players assess risk-reward more by feel than through such an explicit analysis. Nevertheless, they develop considerable skill at doing so. They develop a keen sense of risk-reward ratios without always thinking them through arithmetically).
1.Selecting a Car
When someone chooses a car to buy, they usually base their decision on such factors as price, performance, safety, looks, and reliability. Performance, looks, and reliability represent much of the “reward” a card can offer. Price, and especially safety, represent the degree of “risk.” We have all seen the statistics that show the very real risk we are taking each time we sit behind the wheel of a car. Because automobile safety is related to a very great risk, the risk of losing one’s life, it makes sense to consider the risk-reward ratio presented by any car you might purchase. Though the degree to which you value your life is a personal matter, I suspect most people do not put sufficient thought into this assessment. Given the great value most people put on their own lives, if they did think about it they would choose safer poker playing cards.
This is because unless you do not actually put great value on your life, or you put tremendous value on good looking, high performance cards, the rewards offered by any great looking performance car are hardly enough to justify even a small increase in your chance of death (or serious injury). Accordingly, it makes great sense simply to choose the safest car you can afford. Yes, paying more means greater risk of a sort, but not of the magnitude of the safety factor. I would reveal here
what kind of car I drive, but I don’t want to give free advertising to a certain Swedish car company.
2.Climbing a Rock.
Not long ago while visiting a friend’s home I happened upon some rock climbing magazines. They contained numerous features on and references to “free climbing” (if remember the term correctly). This involves rock climbing, often up difficult routes, at great heights, without the safety measure of a belay (i.e., being secured by a rope in case of a fall). Now, the climbers who engage in this seemingly treacherous activity tend to be true experts at what they do. Given their expertise and finely honed judgment concerning the limits of their ability, some undoubtedly argue that their great skill takes most of the risk out of it. On the surface this would appear to be true. After all, many of these climbers are able to complete one extremely difficult climb after another without making what could obviously be a fatal mistake.
Their reward is presumably a greater gratification upon completing such climbs without external safety measures. I believe however, that their pastime suggests a failure to assess correctly the risk-reward ratio of such climbing. Of course it is the risk that they gauge inaccurately. Arguably, they do assess the risk accurately in the near term; their expertise makes it very small. Each time such a climber undertakes a climb he knows that he will almost surely live to tell about it. The chance of him falling on a given climb may be, say, 1 in 1,000 or even less. Where they go wrong however, is in assessing the risk over a large number of climbs. Projecting ahead over a large number of these climbs, the risk that at some point a climber will fall becomes ominously greater.
Assuming 999-to-1 poker odds against a fall on a given climb, if we look ahead 1,000 climbs (Which might realistically be completed over several years) we find that the chance of a fall – which is highly likely to be fatal – becomes about 63 percent! I wonder if many of these climbers would continue their activity if they analyzed its level of risk in this way. As if to prove my point, on the day of writing the paragraphs above, I became aware of some anecdotal evidence in support of my conclusions. I was talking about this climbing example with a long time professional poker player who has both a good feel for and an academic understanding of the math involved in risk-reward assessments. This player, known in the poker world as “Gasmask Mike”, informed me that as a youth he engaged in similar unprotected climbs, though in a purely “amateur” way with no formal background in rock climbing
Thus, they were certainly much easier climbs, but for an untrained climber no less difficult. Mike guessed that he made about 15 of these climbs. He estimated that on a few occasions, he might have had as much as a 20 percent chance of falling. That was before he had taken up poker and become immersed in the constant risk-reward assessments it requires. He noted, “I only made one of these climbs after I got seriously into poker. After that I just better appreciated the math of it, and realized what an incredible risk it was.” (Note that rock climbers can cut their risk of death tremendously simply by using standard equipment and safety procedures.)
3.Selecting a Medical Provider.
If you are diagnosed with a life threatening illness, such as a serious form of cancer, where should you go for treatment? Most people simple seek treatment in their local area or at the nearest medical center that treats that illness. An alternative is to travel to a major medical center which has established itself as a top center for treatment of that illness. Some people take that option, but some cannot afford the additional expense of such travel, or simply find it too inconvenient. Here the reward is monetary savings and convenience which must be weighed against the potential for an increased risk of death. (There are also emotional elements involved in being away from home and work for extended periods. For the sake of discussion I will specify that I am talking about cases in which this is not a major issue.)
I contend that when a leading treatment provider has established a track record indicating that treatment there should increase your chance of survival by some statistically significant amount, you should seriously consider traveling there if you are at all able to afford it. Are not the expense and inconvenience worth, say, an eight percent better chance of survival? I suspect that many people receive treatment providers there who are fully trained and qualified to help them. They see that as meeting their requirements. While their local physicians may indeed be so qualified, when you are dealing with your life isn’t it wise to look for someone who is not only qualified, but is the best in the field? Weighing risk against reward suggests it is certainly we all risk our lives every day. To minimize our risk of death in the near term would, in fact, drain the vitality from most of our lives.
We would never leave our homes. Nevertheless, the examples above suggest that in some areas people may not recognize what is really a disturbingly large increase in their risk of death. Once they do recognize it they can often cut that risk significantly with little loss of the rewards they seek. Moreover, a familiarity with poker gambling theory and a good feel for risk reward-ratios can help in recognizing such situations. The conclusion? Poker saves lives.