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if this actually happened to you in real life. if you chose the 25m and LOST, you would spend the rest of your life regretting it and wondering why you didn't go with the 1m. if you went with the 1m you could instead spend the time to invest and build that money to 25m instead of regretting.
if you took the 25m right now most of us would probably spend/lose it all. if you used the 1m and had the motivation to start a business and invest and LEARN to make money instead of having 25m thrown at you, you would definitely be a more successful person and STAY rich instead of being just temporarily rich.
and to people saying 1m is not a lot: well either you're already affluent or you just don't understand the value of money. you're telling me there's nothing you can do with 1m? really? who said anything about staying in vancouver and buying properties? 1 million liquid cash is no trivial amount. there are plenty of opportunities to make more money with 1m if you're smart about it and don't go buying fancy cars right off the bat.
if this actually happened to you in real life. if you chose the 25m and LOST, you would spend the rest of your life regretting it and wondering why you didn't go with the 1m.
There is definitely more VALUE in taking the 50/50 risk for the $25 million, but this comes down to more than just numbers and logic.
If we lower the values down to the equivalent values:
1) 100% chance for $1
or
2) 50% chance at $25
You'd have to be dumb to not take option #2 each and every time.
This changes when the numbers get to what is stated originally, because $1M is not a trivial number like $1 is. Everyone here should be able to lose $1 without feeling an impact financially. But most people, or nobody, here can lose $1M without it being a huge life-crippling event.
It actually isn't even about picking one or the other... you can look at it as "are you willing to bet $1M for a 50/50 chance at $25M?"
If there was ever a situation like this in the real world, I would take the 50/50 chance at $25M, but I would hedge my bets.
I don't personally have $1M to risk, so I would take on investors.
Offer a 50/50 chance for the investor to get 10x return on their investment.
Surely most people would be willing to part with $1 for a 50/50 chance at $10. Split the $1M into 1 million shares, and people can buy however many shares they are comfortable with.
If some high roller wants to buy all 1 million shares, that's fine. They assume the entire risk.
If we win, I keep the $1M he paid to me, he gets $10M return on his $1M investment, and I get $15M on zero risk.
If we lose, I keep the $1M he paid to me, and he loses $1M.
I get $1M no matter what, plus a 50/50 chance at an additional $15M.
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Quote:
Originally Posted by InvisibleSoul
Spoiler!
There is definitely more VALUE in taking the 50/50 risk for the $25 million, but this comes down to more than just numbers and logic.
If we lower the values down to the equivalent values:
1) 100% chance for $1
or
2) 50% chance at $25
You'd have to be dumb to not take option #2 each and every time.
This changes when the numbers get to what is stated originally, because $1M is not a trivial number like $1 is. Everyone here should be able to lose $1 without feeling an impact financially. But most people, or nobody, here can lose $1M without it being a huge life-crippling event.
It actually isn't even about picking one or the other... you can look at it as "are you willing to bet $1M for a 50/50 chance at $25M?"
If there was ever a situation like this in the real world, I would take the 50/50 chance at $25M, but I would hedge my bets.
I don't personally have $1M to risk, so I would take on investors.
Offer a 50/50 chance for the investor to get 10x return on their investment.
Surely most people would be willing to part with $1 for a 50/50 chance at $10. Split the $1M into 1 million shares, and people can buy however many shares they are comfortable with.
If some high roller wants to buy all 1 million shares, that's fine. They assume the entire risk.
If we win, I keep the $1M he paid to me, he gets $10M return on his $1M investment, and I get $15M on zero risk.
If we lose, I keep the $1M he paid to me, and he loses $1M.
I get $1M no matter what, plus a 50/50 chance at an additional $15M.
Win.
I understand rationale between both choices but it all comes down to the value of the money to the individual.. It doesn't come down to just logic..
How about if you magnified the numbers... 1 billion vs. 25 billion?
I would of normally chose the 25M if it was 1M/25M, but now I will choose 1 billion... Why? Because I'm satisfied with 1 billion.. I don't think it is worth the risk...
I understand rationale between both choices but it all comes down to the value of the money to the individual.. It doesn't come down to just logic..
How about if you magnified the numbers... 1 billion vs. 25 billion?
I would of normally chose the 25M if it was 1M/25M, but now I will choose 1 billion... Why? Because I'm satisfied with 1 billion.. I don't think it is worth the risk...
I agree with that. If I could, I would apply the same proposed system for the $1B vs $25B, as in get investors to make up the $1B.
But if it was just a straight up choice, I might agree with you and take the $1B guaranteed, as that is more than enough to live affluently for the rest of my life.
Can't say the same for $1M though. That's barely enough to buy a house nowadays. Huge difference with $25M.
with 1 mil, you can leave it in the bank and pretty much live off the interested and be set... prolly not the best way to invest... but you will be sure that you will always have 1mil if you really needed the money...
starting a business, you need to be VERY careful.. with how the economy is nowadays... choosing the wrong one and you would loose it..
real estate investment would prolly be top of my list if i really wanted to go into some type of business..
I understand rationale between both choices but it all comes down to the value of the money to the individual.. It doesn't come down to just logic..
How about if you magnified the numbers... 1 billion vs. 25 billion?
I would of normally chose the 25M if it was 1M/25M, but now I will choose 1 billion... Why? Because I'm satisfied with 1 billion.. I don't think it is worth the risk...
+1
Everyone going to have different selection. Its up to see if you are satisfy with a Million or 25 Million. To some, 1 Million is more than they cant even make in 1 or 2 life time. However there are those, 1 Million isn't enough, so they take the risk 25 Million or Nothing and a coin flip chances is a lot higher than lottery.
There is no right or wrong answer. A lot of of situation could change your answer, let's say you are in serious debt, 1M could deal with that problem right away. If you are debt free, and making a lot of money, obvious choice would be selecting 25 M either you win becomes richer or loss but doesn't affect your living.
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Quote:
Originally Posted by Ulic Qel-Droma
take the 1 million. anyone that knows anything about money management would take the 1 million.
50% probability is too shitty.
and for people that say you can't do much with 1 million... wrong. THEY don't know how to use money as a tool.
Anybody who knows anything about investing would tell you that 1MM upfront for a 50% (instant) chance of making 25MM (or lose everything) is a mind blasting opportunity....
What is the success rate of a tech start-up? 5%? 10%?
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