Variance: The Reason Why Rich Get Richer And Poor Get Poorer

The math and psychology behind long term gains and losses!

Hemanth
Street Science
Published in
9 min readJul 30, 2022

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Variance: The Reason Why Rich Get Richer And Poor Get Poorer — An illustration showing a see-saw, where a stick figure is anxious on the higher end and another stick figure is happy on the lower end. Money from the anxious stick figure rolls down the see-saw into the seat of the happy stick figure. This metaphorically depcits how the rich get richer and poor get poorer.
Rich vs. Poor Seesaw: Illustrative art created by the author

Variance is not the first word that comes to mind when you think about why the rich get richer and the poor get poorer. But in this essay, we will not only see why this is the case, but also find out what expected utility theory has to say about this phenomenon as…

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