Skip to main content
The boards are getting a new home!

We're pleased to announce an update is coming to the community boards. We are migrating the boards to a new platform. The site is currently in read-only mode and we will bring it back online as soon as the migration is complete.

Monday, September 26th 8AM EST: The migration is taking longer than expected, we need a few more hours to bring the site back online. | The Motley Fool Community
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
The following sort of problem is increasingly fascinating to me, perhaps because it constitutes a profitable, prudent kind of thinking to which I'm not predisposed...

In Roger Lowenstein's excellent "Buffett --The Making of an American Capitalist", there is a passage which reads as follows:

"As Buffett liked to relate the [insurance] business to poker, it is illustrative to consider his response to an actual wagering proposition. Every other year, he got together with Tom Murphy, Charlie Munger, and some other pals for a golf and bridge weekend in Pebble Beach, California. The men did a lot of betting, and at one session, in the early eighties, Jack Byrne, the GEICO chairman, proposed a novel side bet. For a "premium" of $11, Byrne would agree to pay $10,000 to anyone who hit a hole-in-one over the weekend. Everyone reached for the cash --everyone, that is, except for Buffett, who coolly calculated that, given the odds, $11 was too high a premium. His pals could not believe that he --by then, almost a billionaire-- would be so tight and began to razz him for it. Buffett, grinning, noted that he measured an $11 wager exactly as he would $11 million. He kept his wallet zipped."

In another section of Lowenstein's book, he quotes National Indemnity's Jack Ringwalt, whom Buffett greatly admired and who profoundly observed, "There is no such thing as a bad risk. There are only bad rates."

Both of these quotes obviously allude to the same fascinating principle, but I wonder how this principle would best be mathematically represented. Any thoughts?
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.