DanAbrams999
12-13-2004, 10:53 AM
Pot-Odds Justice: The responsibility of a good
social contract is to preclude rational criminals
(remember poker strategy analogy).
(Side note on my poker expertise: I was the Post
Producer of the World Poker Tour and I’ve won numerous
“small buy-in”, casino poker tournaments).
David Sklansky has written most of the most important
books on poker and gambling. He coined the term
“pot-odds”.
Definition “Pot-Odds”:
The ratio of the cost of the bet to the reward
relative to the chance of winning.
Examples:
Let’s say I was going to offer to flip a fair coin,
you call a side, and you could win five dollars for
every one dollar you bet. That is wonderfully
profitable for you because 50% of the time you lose a
dollar and 50% you win five dollars. If I offered you
75 cents for every dollar you wagered that would be
unprofitable for you. This is how casinos make most of
their money. A roulette wheel might have 38 spots but
betting a single number only gets you 35 to 1 on your
wager.
No-Limit Hold’em Poker Example:
You have the Ace of Hearts and the Nine of Hearts.
The board shows Jack of Hearts/Six of Hearts/Eight of
Spades/Three of Clubs
That means you have 4 cards to a flush (which would be
a great hand) so you need one more. There are 13 of
each suit and you have 4. So 9 are left.
Let’s say your opponent boastfully (and foolishly)
shows that he has two Aces (Ace of Diamonds and Ace of
Clubs). He has the best hand right now but there’s one
more card to come.
There are 52 cards in the deck and you know of 8 of
them. So 44 are unaccounted for. Of which, 9 would
make your flush and thus give you the winning hand.
Therefore you have better than a 1in 5 chance of
winning the hand.
If there is $100 in the pot and then your opponent
bets $10 then you should call even though you know he
has the best hand (at the moment). Because 4 times out
of 5 you’ll lost the ten bucks but the fifth time
you’ll win $110 ($100 + the $10 he bet). This is a
profitable call.
But if there is $100 in the pot and your opponent bets
$200 then you shouldn’t call. Because 4 times out of
five you’ll lose $200 and the fifth time you’ll only
win $300 ($100 + the $200 he bet). This would be an
unprofitable call.
Okay, enough poker.
How does this relate to the real world?
I think pot-odds should be considered when creating
punishment schedules, particularly for white-collar
crimes.
It is common knowledge that car companies, when
contemplating a recall based on a known dangerous
flaw, make an equation. They multiply the number of
cars times the rate-of-incidence times the likelihood
of a lawsuit times the likely cost of settlement/jury
loss and end up with a number. If that number is less
than the cost of a recall then they normally choose
not to recall. This dastardly calculus is considered
“good business” and it is only marginally tempered
with the “bad PR” that risking lawsuits might bring.
But this kind of decision-making must also occur when
deciding whether to commit fraud or otherwise steal by
way of accounting. If you’re a potential white-collar
criminal you are considering the pot-odds of the
crime. The myriad Wall Street scandals prove the
crimes are rampant. But if you’re only going to get
caught X percent of the time and pay-off is Y and the
negative consequence is Z then you can solve the
equation and decide whether to deliberately commit the
crime.
I believe we should be free. And so anything we are
not free to do must be a crime. If some might choose
to commit a crime they must be punished. And that
punishment should serve as justice, protection and
disincentive. If we want “punishments to fit the
crime” we must consider the pot-odds or else some will
exploit the system and there will be rational
criminals.
If running a red light earned you a 10% of your income
fine plus three months in jail I can assure you the
number of car accidents in this country would drop
enormously.
If stock market fraud earned all involved actual jail
time as well as forfeiture of 100% of their assets
(and similarly affected all of those with fiduciary
responsibility) I can assure you that corporations’
accounting books would be significantly cleaned up.
If we want a fair and effective social contract we can
never enable there to be rational criminals. There
will always be irrational criminals but laws should
make every reasonable citizen a law-abiding person.
Thanks for taking the time to read and consider my
arguments.
Thanks again and keep fighting the good fight.
Sincerely,
Dan Abrams
(Not the Dan Abrams from MSNBC)
social contract is to preclude rational criminals
(remember poker strategy analogy).
(Side note on my poker expertise: I was the Post
Producer of the World Poker Tour and I’ve won numerous
“small buy-in”, casino poker tournaments).
David Sklansky has written most of the most important
books on poker and gambling. He coined the term
“pot-odds”.
Definition “Pot-Odds”:
The ratio of the cost of the bet to the reward
relative to the chance of winning.
Examples:
Let’s say I was going to offer to flip a fair coin,
you call a side, and you could win five dollars for
every one dollar you bet. That is wonderfully
profitable for you because 50% of the time you lose a
dollar and 50% you win five dollars. If I offered you
75 cents for every dollar you wagered that would be
unprofitable for you. This is how casinos make most of
their money. A roulette wheel might have 38 spots but
betting a single number only gets you 35 to 1 on your
wager.
No-Limit Hold’em Poker Example:
You have the Ace of Hearts and the Nine of Hearts.
The board shows Jack of Hearts/Six of Hearts/Eight of
Spades/Three of Clubs
That means you have 4 cards to a flush (which would be
a great hand) so you need one more. There are 13 of
each suit and you have 4. So 9 are left.
Let’s say your opponent boastfully (and foolishly)
shows that he has two Aces (Ace of Diamonds and Ace of
Clubs). He has the best hand right now but there’s one
more card to come.
There are 52 cards in the deck and you know of 8 of
them. So 44 are unaccounted for. Of which, 9 would
make your flush and thus give you the winning hand.
Therefore you have better than a 1in 5 chance of
winning the hand.
If there is $100 in the pot and then your opponent
bets $10 then you should call even though you know he
has the best hand (at the moment). Because 4 times out
of 5 you’ll lost the ten bucks but the fifth time
you’ll win $110 ($100 + the $10 he bet). This is a
profitable call.
But if there is $100 in the pot and your opponent bets
$200 then you shouldn’t call. Because 4 times out of
five you’ll lose $200 and the fifth time you’ll only
win $300 ($100 + the $200 he bet). This would be an
unprofitable call.
Okay, enough poker.
How does this relate to the real world?
I think pot-odds should be considered when creating
punishment schedules, particularly for white-collar
crimes.
It is common knowledge that car companies, when
contemplating a recall based on a known dangerous
flaw, make an equation. They multiply the number of
cars times the rate-of-incidence times the likelihood
of a lawsuit times the likely cost of settlement/jury
loss and end up with a number. If that number is less
than the cost of a recall then they normally choose
not to recall. This dastardly calculus is considered
“good business” and it is only marginally tempered
with the “bad PR” that risking lawsuits might bring.
But this kind of decision-making must also occur when
deciding whether to commit fraud or otherwise steal by
way of accounting. If you’re a potential white-collar
criminal you are considering the pot-odds of the
crime. The myriad Wall Street scandals prove the
crimes are rampant. But if you’re only going to get
caught X percent of the time and pay-off is Y and the
negative consequence is Z then you can solve the
equation and decide whether to deliberately commit the
crime.
I believe we should be free. And so anything we are
not free to do must be a crime. If some might choose
to commit a crime they must be punished. And that
punishment should serve as justice, protection and
disincentive. If we want “punishments to fit the
crime” we must consider the pot-odds or else some will
exploit the system and there will be rational
criminals.
If running a red light earned you a 10% of your income
fine plus three months in jail I can assure you the
number of car accidents in this country would drop
enormously.
If stock market fraud earned all involved actual jail
time as well as forfeiture of 100% of their assets
(and similarly affected all of those with fiduciary
responsibility) I can assure you that corporations’
accounting books would be significantly cleaned up.
If we want a fair and effective social contract we can
never enable there to be rational criminals. There
will always be irrational criminals but laws should
make every reasonable citizen a law-abiding person.
Thanks for taking the time to read and consider my
arguments.
Thanks again and keep fighting the good fight.
Sincerely,
Dan Abrams
(Not the Dan Abrams from MSNBC)