Expected Value

Table of Contents

• Workflow
• Common Patterns
• Guardrails
• Quick Reference

Core Formula

EV = Σ (Probability of outcome x Value of outcome)

EV = (p₁ × v₁) + (p₂ × v₂) + ... + (pₙ × vₙ)
where probabilities must sum to 1.0

Example: Launch feature with 60% chance of $100k revenue, 40% chance of -$20k sunk cost. EV = (0.6 x $100k) + (0.4 x -$20k) = $60k - $8k = $52k (positive EV, rational to launch if risk tolerance allows)