On... Not All Gambles are Created Equal

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Some people called investing in stocks as gambling. Some people say everything is a gamble. Perhaps we’re getting too deep into the weeds. Does the definition really matter?


It all actually sits on a spectrum. On one end, business can be considered a gamble but less risky with more predictable outcomes. On the other end is probably lottery or slot machines, where it is riskier and the outcomes more random. A good way in my opinion to look at it is through the EMV (Estimated Monetary Value). This is because whether it is business or the stock market, it can be quite similar to buying the lottery. Some people may choose to ignore it, but in investing or business, a lot of luck is involved.


I used Grok for a very quick look at some scenarios and it calculated a bunch of EMV’s based on some very loose assumptions and historical data. You can compare the results below. The actual EMV values are not as important as they’re not normalized for invested amount. The core comparison is whether it is a positive or negative EMV ‘gamble”. 


SnP500. EMV = S1055, with an invested amount of $10k. Assumptions: Scenario 1 – 73% chance of $2000 profit. Scenario 2 – 27% chance of $1500 loss.

Food Truck Business. EMV = $20k, with an invested amount of $100k. Assumptions: Scenario 1 – 25% chance of $150k profit. Scenario 2 – 25% chance of 30k profit. Scenario 3 – 20% chance of 20k loss. Scenario 4 – 30% chance of 70k loss.

Café Business. EMV = -$8500, with an invested amount of $250k. Assumptions: Scenario 1 – 20% chance of $200k profit. Scenario 2 – 25% chance of $50k profit. Scenario 3 – 20% chance of $80k loss. Scenario 4 – 25% chance of $180k loss.

Massage Business. EMV = $6100, with an invested amount of $60k. Assumptions: Scenario 1 – 25% chance of $180k profit. Scenario 2 – 30% chance of $100k profit. Scenario 3 – 20% chance of $20k loss. Scenario 4 – 24% chance of $40k loss.

Powerball Lottery. EMV = -$1.627, with an investment amount of $2. Assumptions: Scenario 1 – 0.0000007% chance of $5 million profit. Scenario 2 – 99.99% of $2 loss.

Roulette. EMV = -$0.27, with an investment of $10. Assumptions: Scenario 1 – 48.6% of $4.86 profit. Scenario 2 – 51.4% chance of $5.13 loss.


You can say that everything is a gamble and that’s fine. But the question is it positive or negative EMV?




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