This Wednesday, Bloomberg detailed an investment experiment. Sixty-one “quantitatively trained test subjects” were given $25 with instructions that they could wager as often as they wished, as many dollars as they liked, on a metaphorical coin that landed on heads 60% of the time. The maximum payout was $250. Obviously, it made sense to enter the game, as the bet paid off six times out of 10. But how to play?
One approach would be to stake the entire $25 on the first bet. If that wager pays off, the player now possesses $50, and places it all on the second bet. If that pays off, the player has $100, and places it all on the third bet. If that pays off, the player has $200 and can achieve the maximum payout by making and winning a $50 wager.