And that’s even if there is an error. A reckless financier who accepts a 89% chance of losing it all for an 11% chance of dectupling their empire would be rational if they truly had linear utility for money.
But of course no human financier has a utility function, let alone one that can be expressed only in terms of money, let alone one that’s linear in money. So in this hypothetical, yes, there is an error.
(SBF said his utility was linear in money. I think he probably wasn’t confused enough to think that was literally true, but I do think he was confused about the math.)
But of course no human financier has a utility function, let alone one that can be expressed only in terms of money, let alone one that’s linear in money. So in this hypothetical, yes, there is an error.
(SBF said his utility was linear in money. I think he probably wasn’t confused enough to think that was literally true, but I do think he was confused about the math.)