I have briefly written about definitions before, and how it is silly to argue over them. Yet, I can't help but get into arguments about the definition of "gambling" with people.
My definition is gambling is fairly broad, and, using this definition, people gamble all the time. Thus people that believe that they "don't gamble" struggle to accept my definition. In fact, it was a former colleague refusing to enter to the work footy-tipping competition (for which there was no entry fee and no prize money) because she "didn't gamble", that got me thinking about this in the first place.
This struck me as flawed thinking for two reasons. Firstly, because no money was changing hands, and secondly, because I didn't think it was possible to "not gamble".
I soon realised I was wrong on the first point, and that money changing hands was not a requirement for gambling, however, I couldn't concede the second point - that it was impossible to "not gamble".
Consider the decision whether or not to take out insurance, whether it be car (none, third party, comprehensive) or home (fire, theft, flood) insurance. By giving consideration to all the options, and then deciding on anything other than the most comprehensive cover, are you not gambling? For example, by not including earthquake cover, are you not "gambling" that an earthquake will not occur? Or, that the likelihood of an earthquake occuring does not justify the price being offered by the insurance company? That is, that the odds are in your favour..
Consider also setting up one of the most conservative investment vehicles - the Term Deposit. Do you go for the 3 month term deposit or the 5 year term deposit, or somewhere in between? It depends on whether you think that interest rates are likely to go up or down in that period. If you think interest rates will continue to fall over 5 years, you are better of locking in the 5 year rate now. But how can you know? You can't. Any decision that you make must involve a gamble, to some degree.
So, the way I see it, gambling is any situation in which you consider a risk-reward payoff. Simply by assessing the risk-reward profile, you are gambling. Whether you decide to play or pass, is a gamble you'll just have to take.
Subscribe To
Posts
Comments
Gambling is just another term for a part of the decision making making process, but is loaded with negative connotation.
ReplyDeleteMost decisions are based partly on things we know and partly on things we predict will be true in the future. These predictions are called assumptions and we use a mix of our knowledge, skills, and facts to come up with them.
Assumptions are really the secret sauce of this whole equation. With better quality input you'll hopefully get better quality assumptions, and ultimately better quality results.
But at the low end of the quality assumption spectrum is where you start to enter the world of gambling. Casinos are the extreme low end because no amount of knowledge or skill or data can help you make a better assumption (within legal limits :-)
So just think about about how confident you are with your assumptions before you label it. Its a gray line however where that point is.
Decisions must be made, and even no decision is a decision.
Hi Shimmie,
ReplyDeleteBroadly, I agree with your comment, and think that it's pretty insightful.
I accept that many people hold negative connotations with gambling, and that many people try and avoid associating with anything gambling related.
I disagree that you need to below a certain threshold before it becomes "gambling". An implication of your definition is that you and I could place a bet with each other - say on Betfair - and it's possible that only one of us would be gambling, depending on our underlying assumptions used to make that bet. Each to their own - I think that's silly.
Like you, I think that gambling is a slightly more specific form of decision making. For me, the its simply a decision that involves risk, reward, and uncertainty.
I think that this leads to more sensible decision making, and allows me to focus on "maximizing expectation value", which by definition, is at the highest end of the spectrum. But that doesn't make it "not gambling".