jakell

Great description of a framing I hadn’t considered before, thanks!

You can substitute $ for % in my comment if it helps. If you start with $100, your expected wealth after two throws is the average of $225, $90, $90 and $36.

Absolutely. The individual is long-run guaranteed to be wiped out. But I disagree with the original author’s way of concluding that fact (ie, that it arises from “losing 5% per round”, which is just false).

Exactly

The article concludes that a +50%/-40% coin toss on average loses 10% every two tosses because 150% * 60% = 90%, but that ignores the two heads/two tails outcomes. Including those outcomes, ie AVERAGE(225%, 90%, 90%, 36%) = 110.25%, recovering the more intuitive result that the coin toss gains on average.

The author seems to be confusing mode and mean; the modal path does approach zero.