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Sucker Games

toluakinola.substack.com

4 pointstakinola5 comments

"A classic example is your boss offering you a high-risk critical project without adequate resources or support and nothing more than an attaboy and a hearty slap on the back. This is called being set up to fail. If you are dumb, you charge forward with nothing but grit and optimism and join the pile of corpses of those that have died trying. If you are smart, you help your boss understand the risks and figure out a plan to mitigate them. If your boss is unwilling to face up to the challenges, then you figure out your plan to get out of that situation as quickly as possible. Thinking ahead is always a good way to anticipate and side step sucker games."

This characterization assumes that you are risk-averse or risk-neutral. There exist quite some people who are risk seekers.

Risk seekers are willing to take a wider std deviation of outcomes, but if they take negative expected value options then yeah I'd call them suckers.

> but if they take negative expected value options then yeah I'd call them suckers.

A "negative expected value option" is founding basically any startup. :-)

How can this contradiction be resolved?

Simple: startup founders don't look for the (negative) expected value, but for the, say, 5 % quantile gain (i.e. the gain that they will only exceed with a probability of 5 %). This gain is sufficiently large.

I can't tell, but just to make sure - I mean https://en.wikipedia.org/wiki/Expected_value , not the most likely outcome. And on that basis, a 5% chance of winning the lottery is still very unlikely to be compelling if the other 95% are that you lose it all. So... yeah, very frequently, at least from a financial perspective (and maybe otherwise) founding a startup really does look like a sucker's game to me. Not always, certainly, but often.

> I can't tell, but just to make sure - I mean https://en.wikipedia.org/wiki/Expected_value , not the most likely outcome.

Of course.

I'm not talking about investors investing money into a startup (in such a case, the expected value is better positive), but about some irrationally optimistic person who starts a startup because he deeply believes in his startup concept. Hoping in general that your startup concept works or even has a positive expected value is in my opinion indeed like buying lottery tickets.

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