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Here’s the key defect: you have only so much money. The amount you wager each round grows exponentially, so it won’t take long before you’re betting the farm just to make up your losses. It’s a bad strategy for generating wealth when you’re taking a small but nonzero chance of risking your livelihood for a puny dollar. Eventually you’ll go bankrupt, and if this happens before your jackpot, then you’ll be out of luck.
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A disconcerting 28 percent of participants went broke despite having an advantage, and a shocking two thirds bet on tails at some point in the game, which is never rational. On average, the participants walked away with $91 (winnings were capped at $250). This might seem like an ample take for someone starting with $25, but the researchers calculated that over the 300 coin tosses time allowed for, the average winnings of players using the optimal strategy (described below) would be more than $3 million!
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Economists warn that although the Kelly criterion works for generating wealth, casinotice.com it’s still a gamble with pitfalls of its own. For one, it assumes that you know your probability of winning a bet, which can be true in many casino games but less so in fuzzy domains such as the stock market. Also, Kelly asserts that in the coin-toss experiment, you’re most likely to grow your wealth if you keep betting 20 percent of it. But if you have $1 million to your name, it’s perfectly reasonable not to want to gamble $200,000 on a coin flip. At some point, you will need to price in your personal level of risk aversion and adjust your fiscal decisions to respect your own preferences.
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However, it’s important to remember that not all casinos use this approach. Some new platforms may focus more on innovative features, superior gaming experiences, or exceptional customer service to distinguish themselves.