Decisions Are Bets — Use Expected Value
The Expected Value Thinking Grid
Here’s a step-by-step way to apply EV to any real-world decision.
Step 1: Define the Bet
What opportunity or decision are you considering?
Be specific.
Example:
Should I invest ₹50,000 in a short design course that could lead to freelance work?
Step 2: Identify the Outcomes
List at least two possible results:
- Positive outcome: What’s the potential upside?
- Neutral outcome: What if nothing changes?
- Negative outcome: What’s the worst case?
Example:
- Best: Land clients, earn ₹2L within 6 months
- Neutral: Learn skills but no work
- Worst: Course doesn’t help, ₹50K lost
Step 3: Estimate Probabilities
Assign rough percentages to each outcome. Be realistic, not optimistic.
Example:
- Best case: 40%
- Neutral case: 40%
- Worst case: 20%
Step 4: Calculate the Expected Value
Multiply each outcome by its probability.
Outcome
Estimate
Probability
EV Contribution
Earn ₹2L
₹200,000
40%
₹80,000
No income
₹0
40%
₹0
Lose ₹50K
–₹50,000
20%
–₹10,000
Total EV
₹70,000
This means:
Over time, similar decisions would yield an average gain of ₹70K, despite some failures.
That’s a bet worth making.
Step 5: Decide Based on EV — Not Emotion
- If the EV is strongly positive, consider going for it — even if it’s uncertain.
- If it’s neutral or negative, look for better options, reduce risk, or walk away.
The goal isn’t certainty. The goal is reliable value over time.
Example: Quitting a Job to Start Freelancing
Let’s say someone wants to quit their ₹6L job to try freelancing.
They estimate:
- 50% chance to earn ₹10L in the first year
- 30% chance to earn ₹6L (same as now)
- 20% chance to fail and earn ₹2L
EV = (0.5 × ₹10L) + (0.3 × ₹6L) + (0.2 × ₹2L) = ₹5L + ₹1.8L + ₹0.4L = ₹7.2L
Conclusion: EV says this is a better-than-current bet.
So even if there’s risk, it’s not reckless. It’s calculated.
When to Use This Tool
- Career switches
- Education investments
- Business or freelance decisions
- Relocation or high-cost personal bets
- Buying vs. renting, startup funding, bold pitches
Anytime a decision is uncertain and emotional — EV helps you bring clarity.
Opening Hook
Every choice is a bet.
You’re trading time, effort, or money for a possible outcome.
The only question is:
Are you betting smart — or just hoping for the best?
The Big Shift
Most people make decisions based on what feels safest.
Smart thinkers base decisions on expected value.
They don’t ask, “Will this definitely work?”
They ask, “Is this worth the bet?”
Explain and Expand
Think Like a Rational Gambler, Not a Safe Player
We all bet.
Whether it's picking a college, taking a job, investing money, or saying yes to a risky opportunity — you're placing a bet on your future.
Most people bet with fear.
They overvalue certainty and ignore upside.
Expected Value (EV) thinking helps you flip that.
It shows you how to evaluate what something is truly worth — not just what it costs.
Why Most People Get This Wrong
People are wired to avoid loss more than they seek gain.
It’s a brain glitch called loss aversion.
That’s why even good opportunities feel scary:
“What if it doesn’t work?”
“What if I lose time, money, or face?”
But fear-based thinking hides long-term value.
And sometimes, avoiding risk is the biggest risk of all.
What Is Expected Value? (In Simple Terms)
Expected Value = (Probability of Gain × Size of Gain) – (Probability of Loss × Size of Loss)
It’s not complicated math. It’s a decision lens.
It says:
“What am I likely to gain — over time — if I keep placing this kind of bet?”
If the expected gain outweighs the risk — it’s a good move, even if it sometimes fails.
Play Many Smart Bets
The real power of EV thinking comes from repetition.
Even if you lose a few, you build confidence, data, and traction — and most importantly, you stop playing small.
People who use EV:
- Apply for bold roles
- Launch side hustles
- Invest early in themselves
- Try new ideas
- Learn fast from feedback
They're not reckless. They're just betting with structure.
Bonus Tip: Stack Positive EV with Smart Risk Design
If the upside is massive but the downside is survivable — run toward that decision.
Even better? Reduce the downside.
- Can you start part-time instead of quitting your job?
- Can you negotiate a refund on a course if it doesn’t deliver?
- Can you set a clear timeline to reassess?
That’s how you build courage with a safety net.
Make Personal
Where People Go Wrong
🔴 Chasing safety instead of value
Certainty feels good. But it often underperforms long-term.
🔴 Mistaking short-term loss for failure
A smart EV bet can lose once — and still win over time.
🔴 Using EV as an excuse for blind risk
Positive EV ≠ Go all-in. Consider risk appetite, timeline, and context.
Land it Well
When You Don’t Have a Calculator
Ask yourself:
- “What’s the upside? How likely is it?”
- “What’s the downside? Can I survive it?”
- “If I made this bet 10 times, would I win overall?”
You don’t need a spreadsheet. You need a better frame.
Closing Thought
You don’t need perfect certainty.
You need a clear way to evaluate what’s worth it.
Expected Value doesn’t predict outcomes.
It shapes behavior.
It turns vague feelings into smart bets.
And smart bets — repeated over time — create real growth.
So next time you face a risky move, don’t ask:
“Will this work?”
Ask:
“Is this worth the bet?”
Recap Box
🔑 Key Idea:
Every decision is a bet. Use Expected Value to choose bets that pay off over time — not just feel safe today.
Tool:
Expected Value Thinking Grid
A 5-step framework to weigh outcomes, estimate probabilities, and calculate decision worth.
📍When to Use:
Anytime you're facing a risky or uncertain decision — and want to think smart, not scared.