Real Savers Don't Gamble

05.12.08 | Money Management | 1 Comment | by Fred Siegmund

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Real savers do not gamble.

Now I'm not talking about a bet in your football pool at the office or a game of cards with friends on Saturday night — that's fun and entertainment. I'm talking about repeated bets in commercial casinos or state lotteries. Gamblers gamble by placing bets day after day, or month after month.

There is a reason why. Suppose you bet a dollar on the flip of a coin. For a head you win a dollar, for a tail you lose your dollar. You probably recognize that bet as fair; your chance of winning a dollar just equals your chance of losing a dollar.

But suppose you play the game day after day after day. Each day your chance is the same, but after 100 days you might win 56 out of a 100 to be $6 up. After another 100 days, you might win 47 and be up only $3.00.

Keep playing and the laws of large numbers take over. Play the game 10,000 times and you can only expect to win $5,000 but lose $5,000. Play the game long enough and in the parlance of chance, your expected return will be zero: nothing.

Real savers will not be happy earning nothing.

What is true for a private game of coin flipping is also true for all fair bets. Parties to a fair bet will earn nothing unless one of them stops soon after they have a stretch of good luck.

Now we all know the state lotteries and commercial gambling casinos are earning money. State lotteries and casinos earn money because they are allowed to tilt the odds in their favor and the laws of large numbers take over to earn them a return.

The state legislatures have gambling commissions to make sure the casinos and lottery boards do not get carried away and stack the game too much.

Maybe you've heard the phrase "Real women do not pump gas," or "Real men do not eat quiche." Well, "Real savers do not gamble."

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com

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