Gambling Theory Mathematics for Life
I am a bit of a maths nerd and data geek, as well as wannabe professional gambler, and I have come to realise that there are many parallels between the mathematics of gambling theory and life. The basic theories that any serious punter uses to determine their gambling actions can similarly be applied to life. And just like how knowledge and skill can be the difference between winning and losing your wagers, they can also be the difference between a positive and negative life.
My Gambling Background
Before I delve into the mathematical theory of gambling I will share my experiences in gambling to give you a better understand of where I coming from.
Firstly, for many people the word gambling will have negative connotations. They associate it with problem gamblers who pour their hard-earned money into useless gambling games, often with no procedure in place, and generally end up in debt and cause massive problems in their lives. That's not me.
My gambling is not any riskier than stock trading, forex trading, or any other form of investment. What do these people do when making decisions? They gather data, analyse it, determine the likelihood of certain events occurring, and then invest their money accordingly. That is exactly what I do but for sports instead. The game is no different, in fact it is probably better because I actually know about sports, whereas I wouldn't know how to tell one stock from another.
But I am not here to discuss the pros and cons of gambling. I am just demonstrating that I actually know a fair bit about this stuff and I have had enough experience over the past few years to realise how closely related gambling theory is to my belief system for how to live life
Mathematical Expectation
The key concept to understand is mathematical expectation which, to put simply, is the amount that you can expect to win or lose per bet. It is easy to calculate - just multiply the each possible gain or loss by the probability of those outcomes and sum the results. Still confused? Let's look at a simple example: the coin toss.
If we were betting on an unbiased coin toss we could assume that the result would be 50% heads and 50% tails. If I were betting $1 each time for the possibility of winning an extra $1 if I was correct then the expectation of this situation would be calculated as:
(0.5 x 1) + (0.5 x -1) = 0
Therefore the expectation of this action is that I would break even over the long term. There is no advantage to either player. However, if you were feeling generous and decided to offer me a $2 win each time I was correct then my expectation for this event would be:
(0.5 x 2) + (0.5 x -1) = + 0.5
This is known as a positive expectation and if we were to play the game 100 times I could expect to win $50. The opposite of positive expectation is a negative expectation - where the long term result of the game is expected to result in a loss. In the coin toss example this would happen if I were wagering more than the payoff for winning. For example if I bet my $1 each time but was only winning $0.50 my expectation would be:
(0.5 x 0.5) + (0.5 x -1) = - 0.25
If I were to play this game 100 times I would expect to lose $25.
That is mathematical expectation at its simplest level. The three examples above illustrate what neutral, positive, and negative mathematical expectation looks like and how they work long-term.
How Mathematical Expectation Applies to Life
Hopefully you now understand the basics of mathematical expectation, the foundation of professional gambling, because it is actually applied everywhere in our lives. Just like every betting action has an expectation applied to it, so does every action in our life. Every decisions we make contributes to our overall expectation of life, which can be neutral, positive, or negative.
Just like the gambler who bets on an event with a negative expectation can expect to lose money long-term, you can expect a negative effect on your life over the long-term if you perform actions with negative expectations.
But what are negative expectation actions in life? I say it is anything that does not contribute positively to your life and the life of those around you. That is, anything negative.
Have you ever been rude, mean, or inconsiderate to someone? Or have you every spent your time stressing and worrying over small things? Or have you ever purposefully taken advantage of someone or something? These are examples of actions we perform in life that have a negative expectation. Our lives are poorer because of these negative actions and the long-term result is a negative and unhappy life.
Luckily positive actions have the opposite result. Any positive action you perform has a positive expectation for your life. By being kind, loving, and caring towards yourself and others you will develop a life with a positive expectation. A life where only positive outcomes are expected.
Perform Positive Expectation Actions Only
If you had to gamble for your life would you choose to place bets with a negative expectation? Would you choose these bets where you would expect to lose? No, you wouldn't but this is exactly what you do with your actions every day of your life.
Every negative thought and every negative action in your life brings with it a negative expectation. So why continue to be negative? Focus your energy on positive actions that yield a positive result for your life. Be kind, donate, listen, help, and above all love yourself and others.
Make a series of small positive actions and your life will become ultimately positive.