Pascal’s Wager is a suggestion that was posed by French philosopher Blaise Pascal that even though the existence of God cannot be determined through reason, a person should act as though God does exist. Why wager that way? Because the consequences of each wager are very, very different.
As financial author William Bernstein points out, the crux of the wager is this: “If a supreme being doesn’t exist, then all the devout has lost is the opportunity to fornicate, imbibe, and skip a lot of dull church services. But if God does exist, then the atheist roasts eternally in Hell.”
But what does Pascal’s Wager have to do with investing and financial decision-making? Pascal demonstrated that the consequences of any decision should be carefully considered before accepting the risks involved (in case you are wrong in your choice). As a result, Pascal’s Wager can be used to help investors make all kinds of financial decisions. Let’s start with one of the basics.
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