I just read this cool article in Time magazine about people and risks and reward and took the liberty of paraphrasing it:

There’s plenty to learn about gambling if you’re willing to analyze 27 million hands of online poker. Luckily we don’t have to do that, thanks to academics like Kyle Siler of Cornell University who did his doctoral study on humans handle risk, reward and variable payoffs. Siler specifically looked at poker as a microcosm for the macrocosm we call life.
Siler’s overall finding was that the more hands you win, the more money you’re likely to lose. Although, these implications go much further than a game of poker.
For research purposes Siler limited the extraneous variables by sticking to no-limit Texas Hold’Em with 6 players. He used a software system called PokerTracker that collected and collated information and he began to notice that the number of hands won did not necessarily correlate to the amount of money won. In fact the amount of hands won seemed to correlate more with the amount of money lost.
The reasons for this are actually quite logical. The longer winning players played the more confident they got, the higher the bets, and the likelier the chances of getting blown out on a few very big hands got. It’s the multiple smaller gains that seemed to outweigh the bigger wins and losses in this study. “People overweigh their frequent small gains vis-à-vis occasional large losses,” Siler says.
Small stakes players do better with small-denomination cards- people who don’t gamble much tend to win more with cards ranging from twos to sevens- the theory is that the modest numerical worth of these cards is easier to understand for less experienced players- while they are valuable they are not that valuable.
How does this translate into everyday life? Investing, driving, buying a house or just stepping out the door involves the taking of risks and uncertain rewards. The more times you speed a little the more times you will speed a lot.
“These kinds of calculations are made every day,” says Siler. “Adultery is another good example. People get away with it countless times but they get caught just once and they lose everything.”
People take a lot of small chances and win, but then tend to take big chances and lose big. Siler points out that the entire nation of Iceland went bankrupt during the recent financial crisis buy operating in a similar way, by trusting high-risk, high-reward investments that failed to pay off.
Whether gambling with chips or gambling with life it seems clear that people should gamble only what they can afford to lose — and know when they’re approaching those stakes.