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# Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street

by

In 1956 two Bell Labs scientists discovered the scientific formula for getting rich. One was mathematician Claude Shannon, neurotic father of our digital age, whose genius is ranked with Einstein's. The other was John L. Kelly Jr., a Texas-born, gun-toting physicist. Together they applied the science of information theory—the basis of computers and the Internet—to the prob
...more

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Paperback, 400 pages

Published
September 19th 2006
by Hill and Wang

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Start your review of Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street

An engaging multi-biography/history of the repeatedly-reinvented Kelly criterion, mixed in with overviews of Claude Shannon, John Larry Kelly, Jr., Ed Thorp, and their famous gambling adventures in beating blackjack and roulette and, as some of the first ‘quants’, the stock market. (Like Thompson sampling, the Kelly criterion has been reinvented many times; Poundstone lists at least 4 inventors: Kelly, Leo Breiman, Bernoulli, and Henry Latané.)

Poundstone starts with the early mob and the ‘number

...moreThe formula to make a fortune is essentially this – if you are going to bet you need to be sure you have some sort of edge (not necessarily a ‘sure thing’, but an edge), in this book the gamblers gener ...more

The title and subtitle are pretty overblown and don't really indicate what the book is about. The "fortune's forumula" referred to in the title is pretty dang interesting though -- the Kelly criteria, which is the optimal percentage that should be wagered given the odds.

I didn't realize that there even was a optimal bet, but it turns out that overbetting is actually worse t ...more

Getting rich maybe isn't the purpose of life, but all else being equal it's probably not a bad idea. In the worse of comedian Bill Hicks, "Money can't buy happiness, but it can buy a jet ski. And you never see an unhappy person riding a jet ski."

Anyhow, one of those scientists was Claude Shannon, the i ...more

However, what I did manage to get from it that there's potential order behind the "luck", and that stories about "systems" ...more

I feel I came away with a better understanding of the hedge fund/junk bond scandals of the 80's and 90's, as well as an appreciation of the e ...more

Very interesting subject, but author bogged it down with an endless barrage of trivial irrelevant minutiae. All those disparate useless factoids about the Mob, Claude Shannon's marriage life, LTCM, Paul Samuelson's biography - all these seemingly unrelated strands were forcibly meshed together in a disjointed manner. Many chapters flash by without any link to the Kelly Criterion itself.

For a better book on Edward Thorp, read his biography A Man For All M ...more

Dec 08, 2008
Bo
rated it
it was amazing

Recommends it for:
anyone who enjoyes gambling, investing, or the Sopranos!

Recommended to Bo by:
amazon

I really enjoyed this book. Who knew that MIT, Vegas Casinos, mobsters, and Wall Street all had so much in common? The stories in this book are fascinating! However, the most useful part of the book is the explanation of the relationship between information theory and betting/investing. I wish I had read this book 10 years ago.

A well-researched, entertaining narrative spanning from the early days of Bell Labs and the information age, to wall street scandals and racketeering charges. Full of history and biographical nuggets, it's a tale ultimately about risk, uncertainty, and putting your money where your mouth is.

Utterly fascinating. Gambling, mobsters, mathematicians, economists, hedge funds, greed, and how it’s linked together by some early genius and freak timing. Part history lesson, part text book, part novel, all true, it flows beautifully. For anyone who is interested in math, the financial markets, or Las Vegas, this book is a fun read.

Poundstone tells the story of how one formula changed the way casinos look at card counters, how a mathematical co ...more

It's non fictional account of a few people who were behind "fortune's formula". This formula tells you how much of your total net worth to invest in any particular investment. All you have to do is figure out the expected payout of the investment based on information you have.

Does it work? Yes, if you have accurate data.

The investments have to have an expected payoff of greater than 0: meaning you will make some money on average--even though there is some chance of losing ...more

Jan 02, 2016
Chip
rated it
it was amazing
·
review of another edition

Shelves:
mathematics,
statistics

In 2015 I read Gertner's The Idea Factory: Bell Labs and the Great Age of American Innovation a fascinating look at AT&T's R&D department. Fortune's Formula expands upon Shannon's contribution to gambling and Wall Street. Shannon took his coworker John Kelly's formula Gmax=R (The Kelly Criteria) to Vegas with Edward Thorp to stack the odds against casinos and win blackjack games hand over fist. Thorp eventually published his own book Beat the Dealer: A Winning Strategy for the Game of Twenty-One
...more

“Fortune’s Formula” is the Kelly Criterion from J.L. Kelly Jr. who was a mathematician at Bell Labs in the 1950s. Essentially the formula gives the optimal size of bets in order to win as much as possible over time while reducing the risk of ruin. The thing for the reader to realize is that the Kelly Criterion has no utility unless the bettor or investor has an advantage. That needs to be repeated: on an even bet, such as ...more

Where the real value of this book lies is its extended discussion on what risk is and how you can go about handling it in your own investments and life. It's for this I'd recommend it to anyone. The Kelly formula is less about mathematics and mostly about dealing with risk in an optima ...more

With that said, I wish Poundstone had gone into more detail explaining how the Kelly Criterion works in games (or investments) with more than 2 possible outcomes. Instead, he just informs us that there are people out there using this formula for such scenarios such as horse racing, investing, etc.

Most importantly, I like that Fortune's Formula caused me to go and ...more

I highly recommend this book. Not just for investors, but also for any curious mind.

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jeux de hasard | 2 | 3 | Aug 31, 2020 01:59AM |

William Poundstone is the author of more than ten non-fiction books, including '

*Fortune's Formula*', which was the Amazon Editors' Pick for #1 non-fiction book of 2005. Poundstone has written for The New York Times, Psychology Today, Esquire, Harpers, The Economist, and Harvard Business Review. He has appeared on the Today Show, The David Letterman Show and hundreds of radio talk-shows throughout t ...more## Related Articles

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