Expected value is a game theory principle that comes up quite often in my daily life. In general, people don’t understand this basic concept, and situations where I end up trying to explain it to someone come up fairly regularly. Well, trying to explain how buying a lottery ticket is like buying quarters for dollars is one thing, but one of the more…interesting situations regarding the public’s general ignorance of EV occurred when out to dinner with two friends. This is that story.
One friend is a male gamer. The other is a guest of mine: a younger female for whom I care deeply.
The meal goes swimmingly; we ordered a bunch of food and shared between us. The only thing more wonderful than the food was the conversation. A total and utter delight.
The check comes, and I insist on paying for my guest. She reluctantly accepts, and I ask my gamer friend if he wants go game it. For those not in “the know”, this means that we play the credit card game to randomly determine who has to pay for all of the other players’ meals.
He obviously agrees, so I put in two cards–one for me and one for her–and he puts in one. The server comes over and, with her help, we randomly decide who is going to pay. My cards are obviously both pulled safely. Bemoaning his luck, he gives his card to cover the bill.
She then enthusiastically thanks him for paying for her meal.
My friend and I both kind of motion that I was actually the one paying for her, to which she responds,
“why, is it not his money?”
This is when I realize that I would be hard pressed to explain it to her without looking like a complete ass. You see, I would basically be arguing to prove that I paid for her, and to what end? It would only be for her thanks, which would then be tainted (or absent) because I had to coerce it out of her. It turns out that recognition for kindness has a tendency to diminish when you have to verbalize a dissertation on expected value in order to (maybe, begrugingly) receive it.
Catching me faltering, she prompted me to explain. When I hesitated again, she insisted, stating, “I’m not stupid!” I assured her that I did indeed know and believe that she wasn’t stupid, but after trying for a moment to collect my thoughts, I failed to come up with a way of explaining it that didn’t make me out to be a dick. I just said it was nothing with an awkward, forced smile and told her not to worry about it.
She was contented by this, and thanked my friend once again for dinner.
-AJ Sacher
I’m not sure if it was intended, but it seems to me like there were two cases of EV going on here.
First, the obvious one between you and your friend. You have more to gain from gaming it out than your friend.
The second though is more subtle and is between you and the girl. You can game it and win, and she will not know to thank you for the meal. Or you can game it and lose; you’ll still get a thanks, but it’ll hinge towards the awkward side of things… at best probably a smile and shake of the head, at worst you’ll just look silly or reckless. Or you can not game it and pay, but receive her gratitude.
Now, it’s just a matter of weighing the potential gain from winning (+$$, -Thx) to losing (-$, potentially awkward Thx), and to where you’d stand from not playing (—, Thx). In the end, you’d end up having to assign a dollar amount to the thanks or realize that no realistic dollar amount is worth losing the thanks.
@Ryan
What you forgot to take into account is the positive experience of “thrill of gambling”. This is the whole reason for taking neutral dollar EV flips in the first place.