Comment by danpalmer
16 hours ago
Expected value usually assumes these things happen in isolation, and they don't. They are good at representing the isolated upside, but rarely do they account for the downside.
In this case a 1% chance of $1bn represents an expected value of $10m. If you accept the cost of litigation as $10m (for example), then your expected value is actually zero. And if you think about the outcomes of the 99% of cases, bankruptcy is hugely painful.
One can always play silly games with expected value. If the "value" of a human life is $10m (supposedly a figure used by some governments), you could pose all sorts of expected value scenarios, but when it's your life that all goes out of the window.
> In this case a 1% chance of $1bn represents an expected value of $10m.
This case has a 0% chance of anything because of the statute of limitations and no legitimate claim that would allow for decades-long tolling. He'd file suit, NVIDIA would file a motion to dismiss, the court would probably give him one chance to amend (to make an argument about tolling) and then it would be dismissed with prejudice.
If the full agreement had a prevailing-party attorney fee clause, this guy could end up paying NVIDIA's legal fees.
The straightforward expected value calculation doesn't account for nonlinear utility in a one-off event. Gaining a billion dollars is not a thousand times better than losing a million dollars.