Lone Ranger Economics

"Playing the Odds? Even When You Could Lose?"

You win some and you lose some. Tragedies and miracles are a part of sports and life. Hopefully you win a lot more than you lose. Even if you lose more than you win, you could still come out on top. So what we need to do is evaluate the probability, weigh the possible risks as well as the potential rewards and use our “smarts” to see what is best for our situation. Let’s take a look at this from a basketball scenario:

Suppose there is a basketball shooting contest (carnival style) that costs $10, where you get 1 free throw, 1 NBA three pointer, and an NBA half-court shot. Yet you get a payout as follows:

$10 for the free throw made $25 for the three pointer made $100 for the half-court shot made

This is a numbers game, so maybe this is the reason I've thrown numbers at you in XC practices throughout the years! The average person would probably not break even on this game. Let’s assume the average person would have the following chances:

Free Throws 50% 3 pt 10% Half-Court 2%

The only way to lose money on this is if you miss all three shots. The probability of that is (1.00 - 0.50) x (1.00 – 0.10) x (1.00 – 0.98) which is 0.441, or about 44% of the time.

The only way to break even is to make the first one, then miss the other two (which is the exact same probability for the 50% free throw shooter missing the first). So 44% of the time, you would break even. The other 6% of the time, you would come out ahead, but significantly ahead. This is about what it is like if someone just goes and randomly picks a stock.

A decent high school player should do pretty well. So we will get Troy Prince-Butterfield to play this game and he supposedly has the following shooting percentages:

Free Throws 80% 3 pt 20% Half-Court 5%

The only way Troy would lose money on this is if he misses all three shots. The probability of that is (1.00 - 0.80) x (1.00 – 0.20) x (1.00 – 0.05) which is 0.152, or about 15% of the time.

The only way for him to break even is to make the first one, then miss the other two (which is four times more likely for an 80% free throw shooter missing the first). So about 61% of the time, he would break even. The other 24% of the time, Troy would come out ahead, but significantly ahead. This is about what it is like if someone does the research when picking a stock.

I assess the situation with Silver to be more like a Damian Lillard opportunity. He has the following shooting percentages:

Free Throws 95% 3 pt 50% (uncontested) Half-Court 30% (He was better than this in the 2021 All-Star game)

The only way Damian would lose money on this is if he misses all three shots. The probability of that is (1.00 - 0.95) x (1.00 – 0.5) x (1.00 – 0.30) which is 0.0175, or less than 2% of the time.

The only way for him to break even is to make the first one, then miss the other two (which is 20 times more likely for a 95% free throw shooter missing the first). So about 33% of the time, Damian would break even. The other 65% of the time, he would come out ahead, but significantly ahead, especially since he is deadly outside of the 3 point line. This is about what it is like if someone does the research and knows he found a big winner. BTW, there is over a 14% chance Damian would make all three and take home $135. Not bad on a $10 risk. In fact, it would make sense to play the odds and only get money off Damian if he had to make all three. You would lose 86% of the time, but the 14% of the time you would win, you would get back 13.5 times your money. That payoff more than compensates for the losing efforts. So you could lose more than you win, but still come out on top. I am sure that was probably the case with the broken slot machine in Reno.

So when looking at the odds, it is not just how often you win and how often you lose, it also matters how much you win and how much you lose.

When looking at the long-range charts of Silver, the potential for it to skyrocket the next few years is incredible.

I really think that the possibility of losing with Silver over the next few years is negligible, and the potential payout is too big for me to pass up. In fact, when you look at the possibility of increased inflation this next year or so, keeping money in the banks has a high risk of loss. With the slight risk of the banks going under this year, it makes sense for me that putting money in the “Silver House” bank is a safe haven all should consider.

Hi Ho Silver, AWAY!