Books Financial Planning

Fortune’s Formula

I just finished William Poundstone’s latest book Fortune’s Formula – it’s a great read!

One of my favorite books as I was turning 21 many years ago was “Beat the Dealer” by Ed Thorp, a card counting approach to winning at blackjack. I read and re-read the paperback edition, and had the book’s tearout cards detailing Thorp’s system in my wallet for years (just in case I ended up in Reno or Las Vegas!).

Poundstone tells the full story of Thorp’s later success as an investor applying a technique developed by John Kelly, a colleague of Claude Shannon at Bell Labs. Called the “Kelly formula”, Kelly’s approach involves proportional betting (or investing) where the amount you should bet is in proportion to the odds of winning.

If you enjoy this kind of stuff, this is a great read.

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