Margin of Safety: How to Apply It to Betting
Stock investors have this concept called the “margin of safety”, which is the difference between a stock’s intrinsic or fundamental value, and its market value. If a stock’s fundamentals are solid and worth miles above its market value, then a good investor will buy it. Put in another way, a stock with a higher margin of safety is a better buy in the market.
So what does all of this have to do with betting? Think about why the investor would bother to calculate that margin of safety in the first place. We all know how volatile stock prices can be. In the same way, we also know that our bet will not always be “on the money”.
That’s why number games allow for bets where the player can wager whether the value of a ball is over or under a certain number. Not every player can say with confidence: “Ah! This next one will be 37!” There’s more room for error when you can say: “This next one will be below 33.”
As you can see, calculating “margin of safety” in the betting context is a lot more complicated. You need to have a good estimate of the next number that will come up, then create a minimum-maximum range that you can base your bets on. For example, you’re not sure whether the next number will be exactly 30. But, based on trends, you can be reasonably sure that no number will be above 30. Therefore, you bet “under”.
Are there any concepts outside the field of betting that you’ve applied in your betting strategies? Share them in the comments section.
