Other commenters are wrong in saying that the payout is different for an adversarial choice.
The crux of the payout derivation is: we can only cover 1 number in step 1, 2 in step 2, 4 in step 3, 8 in step 4, and so on. You can choose your initial number in binary search randomly, and as long as you meet the above condition is met (# of possible numbers covered in each step), payout should be same as 0.2
If I 'know' that my opponent is adversarial, then I might assume that he's not picking from the set of 100 possible numbers, but actually from a smaller set of 'adversarial' numbers, like the set that will always take 6 or 7 guesses using the naive binary search approach, and I can adjust my strategy accordingly.
This is basically a turf-war between wifi (802.11) and cellular (802.22) people. I think this announcement was to pre-empt 802.22 from taking over tv white-space band and making it popular, because there is a TV-whitespace standard being developed (802.11ah) from the 802.11 folks (aka wifi folks) but is a couple of years away from production.
5% is pretty conservative, especially if you're in it for the long haul. If you look at any 30 year average pretty much since 1920, it tends to be 9% or more:
Please, please do not use 9% as your expected investment return. The numbers touted over the past decade & a half are mostly an artifact of the post WWII period.
Furthermore, consider the demographic issue of boomers retiring. These boomers are forced sellers, in other words returns will be muted for the foreseeable future because of the larger class of people who will sell equities in order to fund their retirements.
The equity risk premium is closer to 4% over cash, which in today's markets means your expected returns should be between 4.25% & 5%.
If you include tricks that most working class doesn't have the ability to pull off effectively, I believe that the returns will likely continue at that rate, and so does my financial advisor. Stuff like tax harvesting, margin borrowing, offsetting dividends with margin interest, carrying forward capital losses indefinitely, etc.
The simple fact that the majority of the population can't do these things means you get some premium over "regular" investments like mutual funds, CDs, and cash.
That said, it's perfectly fine for us to disagree on this, but no need to be rude (or down vote :P) since really none of us will know who wins this debate for 30 years :)
It looks as though you are taking a much more sophisticated approach to investments. In which case, you are current to have higher expectations. I was more reacting to the general belief among asset managers where they assume they can average 9% by doing little work.
We actually don't disagree, as it were. As long as you are systematic in your approach, continuously question your assumptions, & constantly look for "what ifs".
Zero effort investment return is typically a shade or two under inflation, so even if the absolute number increases your ability to buy stuff steadily decreases, as does your effective net worth.
Agree, but what is "zero effort"? My financial advisor is self-described "lazy" (he's an odd fellow, we're lucky to have him) but he does quite a bit more stuff than your regular Joe does when it comes to managing our money. That's why I believe that 9% or more is still reasonable to expect - even with inflation.
It could go down too, by 4%. Risk works both ways, hence the higher reward. You can't really expect anything, the only thing that you can do is trade risk for potential gain or loss and hope that you jump to the next ice-floe when you should.
Sure, on any given year it can swing wildly, but long term I believe that those who invest in individual stocks ("the rich") will do significantly better than inflation.
It sounds like you're assuming it's a fair game and that everyone gets to participate. The reality is most people don't get to do the things the rich get to do, and their gain tends to come at the everyone else's loss.
For example, the rich often pay a lower tax rate than the middle class due to various tax policies designed to benefit them, such as offsetting margin interest against capital gains or carrying forward capital losses indefinitely. Those gains have to be included in your overall returns and are why the rich are getting further ahead.
That all said, the best way to boost your wealth is to create it from scratch and start a company.
It sounds like you're assuming it's a fair game and that everyone gets to participate. The reality is most people don't get to do the things the rich get to do
Anybody can go to ETrade or Fidelity and buy an S&P index fund. (Or individual stocks, but that usually produces worse results).
carrying forward capital losses indefinitely
That may let "the rich" pay a low effective tax rate one year, but if so it means they paid a high effective rate in previous years where they had capital losses but couldn't use it to offset ordinary income. Getting rid of that offset would put an end to virtually all investing: investors would suffer 100% of their losses but keep only 85% or less of their gains, and that's not even accounting for inflation.
Take a look at the major US stock market indices from 2000 to present: DJSE, S&P 500, NASDAQ. They're flat or down (markedly so for the NASDAQ from its 2011 peak).
Stock investing for retirement is predicated on a market which rises relative to inflation (investing in this regard is an inflation hedge).
Paul Krugman in The Great Unravelling (2003) noted that a stock market which provides consistent returns is also consistently undervalued. Stocks (or any other investment vehicle) are not an automatic win.
> Stocks (or any other investment vehicle) are not an automatic win.
And if something would be an automatic win it wouldn't take long before everybody would be doing it, killing the economy (and whatever it was that was an automatic win) in the process.
Though they take a lot of flak recently, patents and patent protection are crucial for the environment in which any innovator can market his/her products, without fear of the idea being copied and mass-produced by a mega-corporation.
(assuming sarcasm) edit: <- directed to a post that was deleted
Some things just click better for others and some of them require more of an explanation? I don't see what's so baffling about this or why people are complaining about an explanation. Proofs are definitive but they don't really help you understand what's going on a lot of the time.
0.999... confused me when I first encountered it but when I thought about what an infinite number of 9s would mean it clicked better. Something else I didn't initially believe despite proofs was the Monty Hall problem, but imagining it with 1,000 or more doors instead of 3 made it clear why the odds weren't 50/50.
In line with how you were able to understand the Monty Hall problem, one key to understanding this issue is realizing that:
infinity + 1 = infinity
I think the hurdle here is: "0.0001 is between 0.999 and 1, so for every additional 9 you put after that decimal point, I can put another 01 thus making a number between 0.999... and 1." This turns into a race to a non-existent finish line.
Personally, picturing the digits never did it for me. I think I work better when thinking about quantities and values: the infinite number of 9s means the value will continue increasing until it gets to 1. Or just understanding that 0.000...001, an "infinitesimal" quantity, is the same as 0. Something like that.
