National coin-flipping contest - kcchongnz

Tan KW

Publish date: Tue, 30 Dec 2014, 09:09 PM

"I would like you to imagine a national coin-flipping contest. Let's assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise, and they all call the flip of a coin. If they call correctly, they win a dollar from those who called wrong. Each day the losers drop out, and on the subsequent day the stakes build as all previous winnings are put on the line. After ten flips on ten mornings, there will be approximately 220,000 people in the United States who have correctly called ten flips in a row. They each will have won a little over $1,000.

Now this group will probably start getting a little puffed up about this, human nature being what it is. They may try to be modest, but at cocktail parties they will occasionally admit to attractive members of the opposite sex what their technique is, and what marvelous insights they bring to the field of flipping.

Assuming that the winners are getting the appropriate rewards from the losers, in another ten days we will have 215 people who have successfully called their coin flips 20 times in a row and who, by this exercise, each have turned one dollar into a little over $1 million. $225 million would have been lost, $225 million would have been won.

By then, this group will really lose their heads. They will probably write books on "How I turned a Dollar into a Million in Twenty Days Working Thirty Seconds a Morning." Worse yet, they'll probably start jetting around the country attending seminars on efficient coin-flipping and tackling skeptical professors with, " If it can't be done, why are there 215 of us?"

Discussions

3 people like this. Showing 8 of 8 comments

limko1

An interesting parody.

2014-12-30 21:33

willnck

Referring to anyone in particular,KC?Have a happy 2015!

2014-12-31 11:11

kcchongnz

Thanks Tan KW for publishing this article.

Just to clarify, the statement was copied and pasted from a website on an article written by Warren Buffett, just for convenience. That is why the statement is in parenthesis " ". Otherwise some people will shout plagiarism.

This coin flipping thingy is not originated from Buffett, I think. It is widely used in teaching of market efficiency in finance.

2014-12-31 11:25

Alphabeta

The message is if you place your bet purely base on chance rather than the fundamental of the business. The survival rate is low in the long run, the winners are just lucky.

2014-12-31 11:30

Tan KW

@kcchongnz, join http://klse.i3investor.com/blogs/stock_pick_2015/67467.jsp ?

2014-12-31 11:35

kcchongnz

Posted by Tan KW > Dec 31, 2014 11:35 AM | Report Abuse
@kcchongnz, join http://klse.i3investor.com/blogs/stock_pick_2015/67467.jsp ?

Tan KW, thanks for the invitation. I can tell you in your list of confirmed participants there are many good investors. They may not emerge that great during the last "competition" but they really are good.

I will continue to share my stock picks progressively and hope to get constructive feedback. That I have been doing all the time, haven't I? I can't just give you a list you know what I mean.

2014-12-31 11:42

kcchongnz

Posted by willnck > Dec 31, 2014 11:11 AM | Report Abuse
Referring to anyone in particular,KC?Have a happy 2015!

No, not referring to anyone, but a suggestion that one shouldn't over-rate his skill and thinks that everyday is Sunday in Bursa, and take unnecessary risks like margin financing and swing the fence etc.

Stay high in your capital structure. Invest and not speculate. And a happy new year to you too.

2014-12-31 11:55

aunloke

Good write up, but 2015 will be a tough year let's see how all these sifus perform,

2014-12-31 11:56

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