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Ralsina.Me — Roberto Alsina's website

The lottery as a rational investment.

There is a prej­u­dice that the poor play lot­ter­ies be­cause they are lazy, can't save and are gen­er­al­ly stupid and are hurt­ing them­selves by chas­ing the fan­ta­sy of win­ning in­stead of sav­ing pen­nies. You know what? It's bull­shit.

When I was in high school (about 13 years old), I once had a plan to make mon­ey: I would play the lot­tery. Here's the mech­a­nism I had in mind.

I would play $1 in the quiniela. Quiniela pays $700 for each $1 you bet, and you have to choose a num­ber be­tween 000 and 999. My idea was: I can bet the $1 my par­ent give me ev­ery day, and there's a chance I make $700. If I had $700 I could buy any­thing a 13-year old kid may wan­t. With $1? Not so much.

Of course you are right now think­ing: What a mo­ron! He has a 0.001 chance of win­ning and it pays 700 to 1, so it's a los­ing bet! Bzzzzzt!

Let's start with some sim­ple sim­u­la­tion code:

import random

n = 476

for tests in range(10000):
    for w in range(1000):
        q = random.randint(0,999)
        if n == q:
            break

    print(w)

Short ex­pla­na­tion: run 10000 sim­u­la­tions of this pro­cess:

  • We play each day for 1000 days.

  • If we win, we stop.

  • If we don't win in 1000 days we stop.

  • We record the num­ber where we stop.

So, I ran it. Here's a graph of the re­sults

histogram

So, how many nev­er won any­thing? In my da­ta set: 3699 play­ers out of 10000 nev­er won any­thing.

How many ac­tu­al­ly lost mon­ey? 5030 play­er­s.

And how many won mon­ey? 4967 play­ers won mon­ey.

2910 play­ers won in less than 350 plays.

3 play­ers got ex­act­ly even mon­ey, win­ning in their 700th play. For them, this was ex­act­ly the same as sav­ing their mon­ey.

So, is it a good idea to play a lot­tery like this? It's a coin toss. Half the time, you end with no mon­ey. Half the time, you end with more mon­ey than if you had saved.

If you are bet­ting dis­pos­able in­come (a suf­fi­cient­ly low amount that "it does­n't hurt"), it works out. You have a fair chance (50%) of a re­ward at least as good as sav­ing the mon­ey, and a de­cent chance (25%) of a re­ward twice as good.

And you have a fair chance (50%) of los­ing mon­ey. But you would lose it very, very slow­ly and pain­less­ly. ¿How well do you think stocks com­pare to that? ¿And what are the bar­ri­ers to en­try on both games?

In short: play­ing the lot­tery is not ir­ra­tional, re­al­ly, it's just a sav­ings plan. It sure was a bet­ter idea than buy­ing can­dy!

The Joy of Materialism

Re­cent­ly I was de­light­ed to read in Bo­ing Bo­ing posts by a mod­ern Sto­ic. The de­light was be­cause it put in­to words some­thing I had been grap­pling with for years and nev­er re­al­ly grasped: peo­ple have re­placed phi­los­o­phy with re­li­gion.

It used to be that some­one would call him­self a sto­ic, or a cyn­ic, or a he­do­nist, or what­ev­er, and oth­ers would un­der­stand that he was telling them the prin­ci­ples that rule his life.

A life phi­los­o­phy! You could choose, from the buf­fet of the last 3000 years of thought, what you thought made most sense, and try to use it as a bea­con to guide you through a (hope­ful­ly) hap­py life.

Nowa­days, so­ci­ety seems to have re­ject­ed that idea, and the clos­est thing most peo­ple have is re­li­gion, fol­low­ing what his sect says, or athe­is­m, de­fined by re­jec­tion of re­li­gion.

The main dif­fer­ence (as I see it) be­tween a life phi­los­o­phy and a re­li­gion is that a re­li­gion usu­al­ly im­plies the oth­ers are wrong. If you are not of my sec­t, you will not be in heav­en with me.

If you don't share my phi­los­o­phy... well, I ex­pect you will take a dif­fer­ent path through your life than I would have tak­en. But if it works for you and does­n't hurt oth­er­s, why should I give a damn?

So here's my life phi­los­o­phy as I see it to­day. It's not how I saw it yes­ter­day, and sure­ly is not the same it will be to­mor­row.

From now on, when I say I "be­lieve" some­thing, it's short­hand for "my per­son­al life phi­los­o­phy im­plies that". It should be ob­vi­ous why such a short­hand is need­ed.

I am a ma­te­ri­al­ist. No, that does­n't mean what you think it does, at least not in this con­tex­t. What I mean is that I am not a du­al­ist, or a spir­i­tu­al­list, I am not an ide­al­ist or a vi­tal­ist, and not a phe­nom­e­nal­ist.

What it means is that I be­lieve that re­al­i­ty is ma­te­ri­al. I don't ac­cept that im­ma­te­ri­al things have any sort of "re­al­i­ty". Or at least that their re­al­i­ty is of a to­tal­ly un­in­ter­est­ing kind.

This means that I don't be­lieve in soul­s. I be­lieve the Tur­ing test is a rea­son­able test for con­scious­ness. I be­lieve if there was an en­ti­ty that act­ed like a hu­man, we ought to treat it like a hu­man. I be­lieve I am not in­trin­si­cal­ly dif­fer­ent from a ro­bot that could do what I do.

I be­lieve the pur­pose of life is to have a good time. I be­lieve ev­ery­one is as en­ti­tled to a good time as I am. I be­lieve part of hav­ing a good time is be­ing sur­round­ed by hap­py peo­ple. I be­lieve peo­ple that hurt oth­ers are a buz­zkill and should­n't be al­lowed to do it.

I be­lieve in pur­pose, and I be­lieve I cre­ate my own pur­pos­es and that makes them bet­ter than if they were giv­en to me. I be­lieve in be­ing kind to oth­ers be­cause they are all I have.

I be­lieve in learn­ing, be­cause we are sur­round­ed by won­der­s. I be­lieve the Egyp­tians piled up lots of very heavy rock­s. I be­lieve Sat­urn is pret­ty. I be­lieve giv­ing the mer­it of those things to aliens or gods is an in­sult to the Egyp­tians and adds noth­ing to Sat­urn.

I be­lieve in mak­ing things and fight­ing against lo­cal en­tropy. I be­lieve that a cer­tain end makes things bet­ter and more pre­cious. I be­lieve in love, be­cause I know I feel it and it's pre­cious.

So there.

Machine of Death: A Collection of Stories About People Who Know How They Will Die (Machine of Death, #1)

Cover for Machine of Death: A Collection of Stories About People Who Know How They Will Die (Machine of Death, #1)

Review:

I got this book as a free PDF af­ter read­ing about it at Won­der­mark. I had not read any short sto­ry col­lec­tions in a few years and had for­got­ten the best thing about them: if some piece is weak, it goes away quick­ly.

A lot of the sto­ries are good, some very good (Ran­dall Munroe's for in­stance) and some... some are not so good.

There is one that had me laugh­ing for min­utes and was just a sin­gle line. The last one is just *killer* short fic­tion.

I think the col­lec­tion would have im­proved if a big­ger "canon­i­cal" frame­work had been es­tab­lished by the ed­i­tors, since there are con­tra­dic­to­ry lines ev­ery­where, but hey, it's a high con­cept book, it's fun to read, and it's pret­ty cool.

Memorias de un ingeniero

Cover for Memorias de un ingeniero
  • Au­thor: Al­fre­do de Ho­ces
  • Rat­ing: ★ ★ ★ ★ ★
  • See in goodreads

Review:

I read this by rec­om­men­da­tion of my friend Nico César and... it's so much fun even the span­ish slang did­n't both­er me.

From now on, egg car­tons will nev­er be the same thing for me.

Percentages considered dangerous: the Clarin story

Short in­tro for for­eign read­er­s: the largest news­pa­per in Ar­genti­na (Clarín) is in a cat­fight with the gov­ern­men­t. There­fore, we are treat­ed dai­ly to sto­ries in the news­pa­per about how ev­ery­thing is ter­ri­ble and the gov­ern­ment is go­ing to eat our chil­dren, and sto­ries in the of­fi­cial TV chan­nel about how Clar­in wants to im­plant danc­ing con­tests and bi­ased news in­to our pre­frontal lobes.

The fam­i­ly sub­si­dies are a re­cent pol­i­cy that can be eas­i­ly de­scribed: if you have a kid and you send him to school, you get a lit­tle mon­ey ($220). That's be­cause hav­ing kids in school is a good thing. This has caused school en­roll­ment to in­crease a lot in one year, mean­ing a ton of poor kids are now back in school in­stead of work­ing in the streets or just stay­ing at home.

Since it's hard for Clarín to go ahead and say that's bad, it has to find an an­gle. How about say­ing that in­fla­tion (which has been rais­ing) is mak­ing the sub­si­dies use­less? It's an idea.

Hav­ing said that, it's hard to take this sto­ry and not say... dudes, you are giv­ing bi­ased jour­nal­ism a bad name.

Here's the ti­tle and in­tro:

The raise in food prices has elim­i­nat­ed a big part of the fam­i­ly sub­si­dies.

De­pend­ing on what in­di­ca­tors you use, the ero­sion can reach 92%

Tak­en at face val­ue, that's pure non­sense. In or­der for that to be right, it wuld mean that the pe­so has lost 92% of its val­ue and it has lost be­tween 10% and 20% de­pend­ing on what you com­pare it with.

What they did in­stead is take the cost of a bas­ket of ba­sic goods that has raised 36.2% (ac­cord­ing to some es­ti­mates) and con­vert that raise in­to pe­sos. That's $404. Which is 92% of the fam­i­ly sub­si­dies you get if you have two kid­s.

What's the prob­lem? Well, of course the prob­lem is that it makes no sense, be­cause it's com­par­ing two un­re­lat­ed things.

Let's con­sid­er two mo­ments in time, at the be­gin­ning of the sub­si­dies and one year lat­er. The basked of goods has raised from $712 to $1116.

Let's con­sid­er the case where that fam­i­ly on­ly has the sub­si­dies, both par­ents are un­em­ployed and re­ceive no help at al­l:

They have gone from cov­er­ing 62% of their ba­sic needs to cov­er­ing 40% so they are ob­vi­ous­ly worse off now than a year ago. But not 92% worse, no mat­ter how you cut it.

A bit more re­al­is­tic: the fam­i­ly had some in­come oth­er than the sub­si­dies. Imag­ine on­ly the moth­er works clean­ing hous­es part time. That means she makes per­haps $500 dis­count­ing trav­el ex­pens­es.

So, a year ago, they made $940 and cov­ered 132% of their ba­sic need­s, and now they cov­er on­ly 84%.

But that ig­nores that pret­ty much ev­ery­one has had pay rais­es in the last year, pre­cise­ly be­cause of in­fla­tion. So as­sume she got a very mod­est raise: 10%, and she now gets $550.

That means she went from cov­er­ing 132% to 89%.

Of course with­out the sub­si­dies they would have gone from 70% to 49%! Try telling that moth­er that the sub­si­dies have lost 92% of their val­ue, and she'll laugh in your face.

Of course that means they are des­per­ate­ly poor, and yes, their salaries are worth less (if you take those num­bers at face val­ue, gen­er­al in­fla­tion was much less than 30%).

But those $440 are some­thing that was not there be­fore. It is not a bad thing, and it is not a use­less thing. And most cer­tain­ly it's not a thing that has lost 92% of its val­ue in a year.

Shame on you Clarín for try­ing to use "math" to con­fuse peo­ple.


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