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Fortune's Formula

www.amazon.com/Fortu..
Category: Books
Fortune's Formula is a fascinating study of the connections between such seemingly unrelated topics as gambling, information theory, stock investing, and applied mathematics. The story involves the stunning brainpower of men such as MIT professor Claude Shannon, who single-handedly invented information theory, the science behind the Internet and all digital media; Ed Thorpe; and John Kelly of Bell Laboratories, who developed the "Kelly criterion," a now-legendary investment strategy for maximizing growth while controlling risk. Initially, Shannon and Thorpe took Kelly's theory to Las Vegas and applied it to roulette and blackjack. Later, they took it to Wall Street and cleaned up--Shannon made a personal fortune while Thorpe created the highly successful hedge firm Princeton-Newport Partners. They both discovered that Kelly's system was particularly effective when applied to arbitrage (minute price differences that result from market inefficiencies). As Poundstone ably demonstrates, the merits of Kelly's criterion are still hotly debated today.
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Timmy4210 gaylord , mi

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What Ben Mezrich Wants To Be
I'm a big fan of Ben Mezrich young-guys-beating-the-odds-to-get-rich kind of books, but while he's mostly entertainment, this book is much more detailed/strategy focused which is the way it should be. I'm actually writing a new book that is very strategy centric like this one rather than focus on character development, interesting conversation blah blah blah. I wont give this one 5 stars though because in the end, the strategies detailed aren't very practical for every schlubs like you and me so while it's an interesting read that is definitely thought provoking, it aint making me my fortune anytime soon...as my upcoming book should help readers achieve :)

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Tim New York, NY

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MUST-READ - modern portfolio theory + corp finance is all BS
"Fortune's Formula" is an awesome story behind the power of the Kelly Criterion: http://en.wikipedia.org/wiki/Kelly_criterion

It's what every talented investor and trader already does naturally (like Buffett, Carlos Slim, and Bill Gross). Which is increasing the size of your bets when the odds are strongly in your favor, but never taking a bet that risks disaster. The Kelly strategy maximizes long-term wealth and out-performs all others.

This story is the tale of Ed Thorp, guy who ran one of the most successful hedge funds back in the 90s, was PIMCO's Bill Gross's mentor, and Claude Shannon, the founder of information theory. Together, they've proved winning strategies used today mathematically, the same ones used in winning at blackjack, and backing it up with their actual performance trading in the markets - unlike most academics who are full of bullshit theories and can't back it up.

Unfortunately, nearly all of modern portfolio theory and corporate finance today, and Wall St at large, has largely been driven by the MIT/Chicago school of thought which has popularized short-sighted concepts like CAPM, markowitz bullets, beta, and efficient market theory.

Ed Thorp and Claude Shannon present the other side of the story. One that hasn't been popularized because of academic politics, but is actually used by the best investors in the real world.

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2 of 2 people have found this review helpful.
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Sayem Brooklyn, NY

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