Gambling (Against the Gods)

Gambling

Human beings have always been infatuated with gambling because it puts us head-to-head against the fates, with no holds barred.

Should you refrain from acting in the hope that time will shift the probabilities in your favor? Hamlet complained that too much hesitation under uncertainty is bad, because overdeliberation will ruin spontaneity, but once you act, you forfeit the option of waiting until new information comes along. Not acting has value, and the more uncertain the outcome, the higher the value of procrastination.

The growth of trade transformed the principles of gambling into wealth creation, and the inevitable result was capitalism (the epitome of risk-taking). But capitalism could not have thrived without two innovations that had been unnecessary up until that point. The first was bookkeeping, a humble activity that encouraged the spread of the new techniques of numbering and counting. The second was forecasting, a much less humble and more difficult activity that connects risk-taking with profit.

Pascal’s Wager

We sometimes make decisions based on experience, on experiments we or others have made. But we cannot conduct experiments to prove the existence or absence of God. The only alternative is to explore the future consequences of believing in God or rejecting God. We cannot ignore the issue, since by merely living, we are forced to play the game.

Pascal explained that you could not decide to believe in God. You either believe or you don’t. The decision is whether you want to act in a way that will lead to believing in God – such as living with pious people. The person who lives this way is betting that God is. The person who can’t be bothered is betting that God is not.

Monte del Paschi

Farmers used insurance because they were so dependent on nature. Their fortunes were affected by many factors outside their control like drought or flood.

In Italy, farmers created agricultural cooperatives to insure each other against bad weather. The Monte del Paschi, which became one of the largest banks in Italy, was an intermediary for these arrangements. Similar arrangements exist today in developing countries that are highly dependent on agriculture.

The insurance process works this way. Insurance companies use premiums paid by people who have not lost something, to pay off people who have. The same is true for casinos, which pay off winners from the pot that is replenished by the loser. Because insurance companies and casinos are anonymous, the exchange is less visible. Yet the most intricate insurance and gambling schemes are merely variations on what Monte del Paschi did.

If you’re an entrepreneur and you want a quick guide to know what to think about before launching you business, check out The Myth of Entrepreneurship.

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Related posts:

1. Will It Fly Summary (7/10)
2. Habit 6: Synergy (The 7 Habits of Highly Effective People)
3. The Wealth of Nations Summary (8/10)
4. Chapter 4: The Feeding of the Nine Billion: Farming After 10,000 Years Ago (The Rational Optimist)