Through the looking glass
Going through the looking glass
Pinpointing the source of wealth creation, provides a good starting place when looking for a profitable niche in the world of e-business. Instead of having to consider a limitless number of possibilities and examine the techniques and strategies of other people or firms, it is far easier to look for some way in which you can use your own special skills, experience or situation to increase other people's efficiency. This sounds trite, but, it is a highly practical starting point.
It may seem that there is more scope in taking the zero sum game route. Everyday, you probably hear of people making money this way: using blatant zero sum strategies to provide very little value for great sums of money. But, you also hear about people winning lotteries and vast amounts on television quiz shows, so, it doesn't necessarily mean that this is a sensible strategy to pursue.
Ethics aside, it may be worth an investigation to compare the strategies of a wealth creator to that of a zero sum game player. This can be done using the roulette model.
We have already seen the results of zero sum game playing on the roulette wheel. We saw how using a complex system of betting fared worse than a simple strategy of one single gamble. In the former case, the strategy produces an average cost per day of holiday gained of 12.33. the latter did considerable better by reducing the average cost per day of the holiday to 10.27.
To change the nature of the game to a positive non zero sum game between the players, all that is necessary is to arrange for the house to accord a win when the ball falls into the zero slot. In this way the house is adding one thirty-seventh to the players stakes' rather than taking it away.
This emulates real life trading, when the effect of the trade is to increase efficiency. Value or wealth is introduced into the game which, in this case, is like increasing the players' efficiency by one thirty-seventh (just under three percent).
If we now repeat the computer simulation of 5,000 players, with the zero giving wins to the players, rather than to the house, we obtain the following result:
Results of five thousand players going to the casino and using all of their money to make a single bet on red. Zero counts as a win for the player.
Immediately, we see that the average number of days won by each player has increased to 131. This is more days holiday than they would have been able to have with their money if they hadn't gambled. This means the actual cost per day of the holiday has decreased from 10.27 to 9.73. On average, taking a risk is seen to pay when the odds are in the player's favour.
Now, given the choice between playing in a game where the house is winning on the zeros and a game where the house is paying out on the zeros, which game would you choose to play in? Quite obviously you'd choose the latter, so, when contemplating what kind of e-business to go for it makes sense to ensure that you are playing in a game where efficiency is being increased by the business activity.
This is the major attraction of the Internet for people who want to make money. The increase in efficiency that can be achieved by using digital technology has the same effect as a casino paying out on the zero.
This conclusion may be fairly obvious, but, the effects of varying a playing strategy are not. Look back to see what happened when a complex strategy of doubling up was replaced by the strategy of the single bet. The single bet strategy was far superior resulting in a far lesser average cost per day of the holidays. What do you think will happen if the system strategy is employed when the house pays out on the zero?
Figure 2.4 shows the result of another simulation, with the doubling up strategy being used by 5,000 players. This time it is with the zero beingin the favour of the player.
The result of five thousand people playing the roulette system. Zero counts as win for the player.
As you can see from figure 2.4, a far greater number survived in all time periods. Only 231 failed to survive for at least a week. This is only two thirds of the number that failed in the first week when the zero was in favour of the house. This raises the one week survival percentage to over ninety five percent.
The average number of holidays has also increased quite dramatically, with a correspondingly decrease in the average cost per day. These are both better results than the average the players would have got by paying for their holidays directly without taking any risks.
More significantly, these result show that using a strategy of many small bets and doubling after a loss is far more profitable, on average, than making single bets of all the money on the red. This reverses the situation of the normal game where the optimum strategy is to make a single large bet of all the money.