What's the difference between gambling and investing?

Earlier in my career I worked for one of Australia’s most successful professional gamblers. He taught me to think of the world in terms of probabilities as a way to find mispriced bets – ones where the offered odds more than compensate for the risks. This way of quantifying uncertainty is a key tenet of investing, but I learned this is not the way to value stocks. For you to estimate the intrinsic value of a company using probabilities you need to judge a variety of outcomes and what you’ll earn under each scenario. The problem is that not only...

Earlier in my career I worked for one of Australia’s most successful professional gamblers. He taught me to think of the world in terms of probabilities as a way to find mispriced bets – ones where the offered odds more than compensate for the risks. This way of quantifying uncertainty is a key tenet of investing, but I learned this is not the way to value stocks.

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