Does it help if I restated that as, I think that with high probability if I learned what my “true values” actually are, I’d make at least a 10% change in my resource allocations?
Yes, that’s clear.
So for now I’m pointing out that in at least some plausible scenarios the loss is at least 10%, and mostly just trying to understand why Paul thinks 10% expected loss is way too high rather than make a strong argument of my own.
I had an argument in mind that I thought Paul might be assuming, but on reflection I’m not sure it makes any sense (and so I update away from it being what Paul had in mind). But I’ll share it anyway in a child comment.
Suppose 1) you’re just choosing between spending and saving, 2) by default you’re going to allocate 50-50 to each, and 3) you know that there are X considerations, such that after you consider each one, you’ll adjust the ratio by 2:1 in one direction or the other.
If X is 1, then you expect to adjust the ratio by a factor of 2. If X is 10, you expect to adjust by a factor of sqrt(10)*2.
So, the more considerations there are that might affect the ratio, the more likely it is that you’ll end up with allocations close to 0% or 100%. And so, depending on how the realized value is related to the allocation ratio, skipping one of the considerations might not change the EV that much.
Yes, that’s clear.
I had an argument in mind that I thought Paul might be assuming, but on reflection I’m not sure it makes any sense (and so I update away from it being what Paul had in mind). But I’ll share it anyway in a child comment.
Potentially confused argument:
Suppose 1) you’re just choosing between spending and saving, 2) by default you’re going to allocate 50-50 to each, and 3) you know that there are X considerations, such that after you consider each one, you’ll adjust the ratio by 2:1 in one direction or the other.
If X is 1, then you expect to adjust the ratio by a factor of 2. If X is 10, you expect to adjust by a factor of sqrt(10)*2.
So, the more considerations there are that might affect the ratio, the more likely it is that you’ll end up with allocations close to 0% or 100%. And so, depending on how the realized value is related to the allocation ratio, skipping one of the considerations might not change the EV that much.