Re: The Coinflip Game!
[ QUOTE ]
[ QUOTE ]
Let's say instead of poker, you're playing the coinflip game. You have a really good coin that wins 60% of the time. This is where your edge comes from.
Your equity is 40k. 60% of the time, you will win your first flip and double up. 40% of the time you will lose your flip and be out.
Since your initial equity was 40k, your equity after the first flip (with undetermined results) will also be 40k. If you lose the flip, your equity is 0.
.4x+.6y = 40,000
x=0
.6y=40,000
y= 66,667
In this scenario, after your first flip, assuming you win, your equity is $66,667
Although this is not poker, the parallels to the given example should be obvious.
[/ QUOTE ]
I’m not sure I agree with this. If it’s early in a poker tournament, wouldn’t the correct analogy be “I’m going to flip my 60% favorite coin for 5% of my stack repeatedly with you, and after 100 flips, lets see what the average chip count is for both of us”?
I don't think you can just freeze your equity at one point in time because you are not accounting for your future chip stream in that model.
For example, let's say you and I invest in 2 companies. They are worth $100 now. Your company earn $1 a year, mine earns $2 a year. After one year (ie. flip), you've made $1 and I've made $2. But you can't then say that your That doesn't mean our equity in the companies is now $101 and $102.
-g
[/ QUOTE ]
Your analogy does not apply. I am factoring in future scenarios, while you are not. I am including the original 40k estimate in my formula, while you are not using any such original estimate in your formula.
|