Asymmetric outcomes. What are they and how can they affect your betting?

First things first, let’s start with explaining what exactly are asymmetric outcomes. Each of the events occurring usually has two possible outcomes. They are called asymmetric when the upside (winning or earning a return) is significantly larger than the downside.

While it might sound quite complicated at first, there are tons of examples of asymmetric outcomes in your everyday life. Usually, it is something that is highly unlikely to happen, however, with potentially significant returns on one side and comparably tiny losses on the other one. In order for the concept to actually make sense, the significant return, even though highly unlikely, has to completely outweigh the tiny investment, making it reasonable to take upon the action.

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In such a scenario a person that is involved is basically risking (or practically giving up) one unit of utility (in the worst case), for a chance to acquire potentially limitless returns. If you would like to learn more about this phenomenon, please check out the work of one prolific author, trader, and statistician Nassim Taleb who has covered the topic extensively.

While you are trying to figure out what everyday-life situations are related to asymmetric outcomes, let us tell you this - sports betting is very much one of them. If you are familiar with betting, then you must already know what it takes to reach success in sports betting. Finding the right approach, an efficient model or strategy could be quite hard, time- and resource-consuming. 

Despite the inevitable losses that are tagging along the way to the betting success, punters are still taking on the risk. The reason behind it is that the payoff (upside) of finding the right approach opens up limitless opportunities that are far greater than all the potential losses combined. That is exactly why experienced punters are willing to take smaller losses to achieve profitability in the long run.

Confidence in sports betting

Speaking about sports betting, the best example of asymmetric outcomes are longshots. Betting on longshots involves predicting the outcomes of highly unlikely to happen events, however, with potentially high returns.

We have already told you numerous times that betting on something has to come after a thorough analysis, thus make sense. Well, let us give you another perspective. Once again, betting on longshots is a good example of utility over logic. However, in order to make it easier to understand, let’s use the lottery as an example.

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The first things that come to your mind when you hear the word «lottery» are huge jackpots and very rare winnings. It is a perfect example of asymmetric outcomes since the constant purchasing of a rather cheap lottery ticket is nothing else but a constant loss of a single utility (downside). Nevertheless, people still buy these tickets regardless. The thing is that the upside of buying lottery tickets promises such a huge amount of utility in return, which is significantly larger than the downside of it, that taking that constant loss actually starts making sense. Do not get it twisted, though. It makes zero to no sense playing the lottery if you look at it from the monetary perspective, but the picture looks completely different if you are considering the utility aspect of it. Thus, regardless of how bizarre it might sound, gambling on an extremely unlikely event becomes very logical.

You might have heard about it or not, but there is something called the risk of ruin. It is finance & investing concept that finds its application in sports betting very well. In short, it means to basically stay in the game and keeping your budget alive, however, taking on all the available risks anyway. This concept is tightly linked with a proper staking method or betting model. A proper betting strategy is vital for your betting and will ensure you are not emptying your pockets right away. Whether you are simply betting on longshots or trying to build an efficient betting model, your ultimate goal should be to take advantage of all the opportunities in the way to be able to continue your betting adventure and not being shut down completely. Running out of budget will simply eliminate your chances of profiting. If you would like to learn more about how to manage your budget properly, please click this link.

Just remember the golden rule of betting, bet as much as you can afford to lose!