Page 135 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

works because it tilts the odds ever so slightly from the house to the player.
But bet too heavily even when the odds seem in your favor and, if you’re
COBACOBA
wrong, you might lose so much that you don’t have enough money to keep

playing.

There is never a moment when you’re so right that you can bet every chip
in front of you. The world isn’t that kind to anyone—not consistently,
anyways. You have to give yourself room for error. You have to plan on
your plan not going according to plan.

Kevin Lewis, a successful card counter portrayed in the book Bringing
Down the House, wrote more about this philosophy:

Although card counting is statistically proven to work, it does not guarantee
you will win every hand—let alone every trip you make to the casino. We
must make sure that we have enough money to withstand any swings of bad
luck.

Let’s assume you have roughly a 2 percent edge over the casino. That still

means the casino will win 49 percent of the time. Therefore, you need to
have enough money to withstand any variant swings against you. A rule of
thumb is that you should have at least a hundred basic units. Assuming you
start with ten thousand dollars, you could comfortably play a hundred-dollar
unit.

History is littered with good ideas taken too far, which are indistinguishable
from bad ideas. The wisdom in having room for error is acknowledging that
uncertainty, randomness, and chance—“unknowns”—are an ever-present

part of life. The only way to deal with them is by increasing the gap
between what you think will happen and what can happen while still
leaving you capable of fighting another day.