Expected Value is the Profit or Loss from a decision times the probably of that happening.
Box A has a 25% chance of giving you 30 dollars, a 50% chance of giving you 20 dollars, and a 25% chance of giving you 10 dollars. It costs 15 dollars to buy box A, what is your expected value?
30-15=15 ; 15 x .25= $3.75
20-15= 5 ; 5 x .5 = $2.50
10-15= -5 ; -5 x .25 = -$1.25
EV of Profit = 3.75 + 2.50 – 1.25= $5
Note: this is not the expected value of what you will get after paying 15 dollars, it is the profit.
Now onto Coefficient of Variation! Coefficient of Variation is a great tool to see how much more risk an option has compared to another option.
Coefficient of Variation = Standard Deviation/ Expected Value --> This is the overall formula which we will use later, first we begin with:
Deviation = Actual Profit – Total Expected Value
Profit for Box A was $15, $5, and -$5. Expected Value was 5. So deviation is 10, 0, and -10.
Then, we take the deviation and square it giving us: 100, 0, and 100.
Next, we multiply it accordingly by its given percentage .25, .5, and .25.
This gives us 25, 0 and 25. Adding this together gives us the Variance which equals 50.
Standard Deviation = Square Root of Variance
Standard Deviation = 7.07
Finally, Coefficient of Variance = Standard Deviation / Expected Value
Coefficient of Variance = 7.07/5 = 1.414
This doesn’t mean much by itself. 1.414 would be used in comparison to another coefficient of variance (Like a Box B with its own risks/rewards). The lower the Coefficient of Variation, the lower the risk.
“Give Value” is common advice nowadays. “If you give enough value to the world, you’ll get value” they say. But why? How? How does giving your time and energy and being helpful actually help you get more than you put in?
A while back I was at a business conference and a blogger was sharing the “Give Value” insight. He writes and gives away his content for free and after a while a few writers affiliated with the book “The Secret” saw and liked that he was giving so much value and sent massive traffic to his blog. His pointed out that it’s not the people he gave value to that returns value – value is returned from those who were bigger than him who liked what he was doing.
I thought about this idea – the idea that the value doesn’t come from people you target but from people higher up. I want to expand this idea, because I don’t think it works exactly this way.
I think that the rewards from giving value come from neither the act of giving value nor a series of acts. Giving value is a characteristic.Giving value means being a person who genuinely hopes for the best in everyone. I want my characteristic to be so, that when looking at any particular person, I will want that person to be the best they can be and to achieve the most they intend.
When that happens, the way I interact with people becomes different. The words I use are different. People can inherently feel this characteristic and are naturally drawn toward it. And that’s where the rewards come from. People feel this value giving characteristic and want to build upon it, so they give value to it.
My flight is at 7:25. At 6:30, instead of being at the airport, I'm mashing on the buttons of a video poker machine at The Tropicana, playing $125 hands of video poker. I haven't become a compulsive gambler-- I just found out about a casino loophole worth hundreds of dollars, and I'm trying to cash in before heading back to San Francisco.
The loophole is a promotion that several casinos have implemented to draw in new business. The terms are so favorable to the player that, with correct strategy, it is virtually impossible to lose any significant amount of money, but very easy to win hundreds.
Here's how it works at Cosmo, a new casino on the strip with very straightforward promotion rules: if you lose $100 playing machines, they will refund your $100, which must then be played through once. Most people will play this promotion suboptimally, making the promotion worth only around $20. Many more will succumb to compulsive gambling and lose the $100 refund as well.