by Harry Edwards
Mathematical expectation depends on the situation and environment
The advantage is ratio of mathematical expectation that can be dynamically used as a control measure to limit participation to the most optimal situation or environment. This makes it a crucial variable for summarizing all sorts of risk taking situations especially in military and business environments.
- The higher the magnitude of the advantage — the more favorable will be the outcome and the lower the risk of loss.
- The reverse is also true — which means that the advantage can be used as both a profit and loss function.
The following animation depicts this relationship with the variation around the normal curve — which reflects on the magnitude of risk as shown by the vertical bar adjacent to it.
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In business situations — when the advantage is higher money is compounding at a faster rate and with lower variability. This means that if you know the advantage — and how to use it to dynamically value information — you would be able to make make money over the long haul with fewer assumptions than is otherwise possible.
Additionally, the advantage can be used across all asset classes, values and time frames — typically with only dozen or so advantage values. The benefit in having this level of simplicity is that more people can easily evaluate and use the measure to make smarter decisions with markets, business ventures and/or reward to risk situations.
One of the key purposes of this blog is to explain and demonstrate why and how the advantage can typically be generalized to help you capture the competitive advantage in almost any situation and environment more efficiently than other decision making factors.
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