Flight From Bonds to Stocks 205 
to be won only in case two successive “heads” come 
up, there is one chance in four and the mathematical 
value is twenty-five cents. 
This is so-called “fair” gambling. Any price 
above the mathematical value is unfair gambling, 
and none but a real gambler will pay more than the 
mathematical value, or even so much. The gamblers 
at Monte Carlo do pay about three per cent more 
than the mathematical value of their chances; but 
only conscious gamblers, not investors, participate 
in rouge et noir. In fact, a sound-minded investor 
will pay less than the mathematical value for a chance 
to gain money on a risk. That is, he will trim that 
price by means of a “caution coefficient,” to use a 
term which I employed in my book on The Nature 
of Capital and Income. 
This “caution coefficient” becomes, in practice, 
greater and greater as the risk grows. If my chance 
of getting a dollar is a certainty, there would be no 
reduction on account of the caution factor. If itis 
like the chance of betting on “heads” or “tails,” the 
caution factor may trim the price of the chance down 
from fifty cents, in mathematical value, to say, forty 
cents for the chance to win the dollar. That is a 
reduction on account of caution to 20 per cent. But 
if one bets on two heads in succession, the reduction 
on account of caution would be correspondingly 
greater, so that instead of paying twenty-five cents, 
the mathematical value, the investor might insist on 
a reduction of more than 20 per cent to say, fifteen