I’ll now bring another illustrative example, which even transitions a little to my main activity.
First of all: I would like to reassure you that as a child I too heard, learned and internalised the sentence: “If you want to bet, you also want to cheat”.
And as a long time obedient child (you don’t have to believe everything) I have stuck to it for just as long.
I even remember a “bet” I wanted to make wildly as a child, with one of my brothers: is that petrol station there on that corner an Aral petrol station or not? I was even prepared to bet 10DM of my pocket money on it. My brother protected me from that, I saved up, because I was wrong. But these kinds of bets are quite different from those of my later professional life. It’s a bet on an established fact, based on “knowledge”. And not a bet on a future event. So the difference here: Someone knows, and he really wants to cheat the other, ignorant person (so much for my rational thoughts on the origin of the saying). A bet on facts.
A bet on an imminent event – sporting events are suitable here – is in principle a fair bet. After all, no one knows yet how it will turn out (there have probably been one or two exceptions, but I won’t mention the name Hoyzer, you were just thinking that).
But I am firmly convinced that you, dear reader, also bet, even very regularly. Congratulations, by the way, if you are not successful, because those are just the unlucky ones. You demand an explanation? All right, here you go:
Well, first of all: surely you have insurance, health, car, life, pension, social, hull, liability, theft, fire, legal protection, a few others? Everybody has them, you can’t do without them. You even have to have some of them, the so-called compulsory insurances. The state even tells us to bet.
So every insurance policy is a bet. I cannot spare you this insight. Anyone who takes out an insurance policy is betting on a certain event. In case of “success”, he gets paid money. However, the event on which he is betting is usually an unpleasant one. So you don’t want to win the bet. In principle, one bets on one’s misfortune. In a car, in the household, it is even called an “accident”, the opposite of “case”, i.e. the case that is not supposed to happen. So you bet on an accident or your own misfortune and at the same time hope that it won’t happen. That’s why insurance companies have the most ostentatious buildings. They can save themselves a reasonable or correct payout ratio, because the bettor himself does not want it to happen. He even wants to lose, that’s the land of milk and honey for the provider (at this point a short example from my gambling life, where there is also a kind of insurance bet: If someone, as an ardent fan of a team, fervently wishes for its success, then he may even bet on the opponent in the hope that he will not win. I used to call this “financial insurance against emotional setbacks”; the payout rate is rather subordinate. But only real fans do this, who can then celebrate despite the financial loss).
It is even worth thinking about the term “insurance”. The term includes the word “safe”. In principle, people are looking for security and the ability to plan. Since one intuitively knows that security cannot be achieved, one tries to prevent cases where something unplanned happens. Then you have made provisions for the eventuality. You put it out of your mind. Secured, now I don’t have to worry about it any more.
Curiously, the people who reject betting the most are the ones who make the most and the worst bets. The person with the greatest need for security wants to insure himself against all eventualities. To do so, he must insure himself much, well and abundantly. And it is precisely the insurance policies that not quite as many people take out that pay the worst odds.
Together we beat them
If you ever ask a mathematics student what they want to be when they grow up, a common answer is “I’m going to be an actuary.” In the free economy, pretty much the only job where you really believe pure mathematicians.
And I’m messing with them now: They make huge arithmetical errors. But I’m also happy to apologise again immediately if I ever get the answer that they make these mistakes consciously, or at least that they know about them but there’s no need for action.
Fortunately, there is the famous thought experiment. And I’m going to do one now, will you come with me? Well, thank you, I’m glad.
So we get together and intend to damage the insurance companies. We’ll do it secretly, of course. But you have done your bit to make it a little less clandestine, by buying this book. But still. Secretly. So how do we do it?
Well, let’s take life insurance. So these esteemed mathematicians have calculated an average life expectancy. According to this, the premiums and also the payout amounts are calculated. And everything is calculated with a solid advantage, i.e. profitably.
We now simply do the following: We take a medicine man. Someone who can simply see how a person is doing. And who is also capable of not concealing the truth. And he estimates our life expectancy individually. He might also ask about our lifestyle, but a really good medicine man doesn’t really need to do that.
Then we go by his results. And if someone is far below the average life expectancy, then that person takes out a life insurance policy. If someone is close to the average or even above the average, then that person does not take out insurance. I still ask you not to think I am too naive: I know that the average life expectancy depends on age and gender. So those who have already reached 60 have a higher expectation than those who are only 30, that goes without saying. And women still live a little longer than men. But nevertheless, there is the life expectancy that the insurance company assumes and the one that the doctor predicts (with unsparing honesty).
Fortunately, this is only a thought experiment. The one point that makes one think about it is that there is hardly a bet where one likes to have an advantage less than the one where one bets on one’s own (early) demise. Secondly, this advantage is relatively ineffective, since all the “profit” you make is only given to the survivors and not to yourself. But still, advantage is advantage. The good thing is that everyone can decide for themselves and also use this advantage (along the lines of: “Joethe dead, Beethoven dead and I’m not particularly well”).
On the other hand, I’m happy to admit that I’ve taken out more than one life insurance policy myself. And although the thought that I might have an advantage (see above) did cross my mind, it was the consideration that had the least influence on the decision. I just wanted to leave something for the children in case….