Top positive review
One person found this helpful
Do you want to get rich quickly?
on 23 January 2011
Fortune's Formula by William Poundstone can be said to be about the Kelly Criterion; a way to deal with uncertainty that gives the best return for your money without running the risk of bankruptcy, and which can be used in gambling and buying stock. But the book is much more. It is also about Daniel Bernoulli who knew about it more than 200 years ago. It is about Claude Shannon and his information theory. It is about Edward Thorpe and how he used the Kelly Criterion to make an awful lot of money. It is about mobster and dodgy investment funds. It is about blackjack, roulette, and horse racing. And it is about economists, their theories, and their feud with the people using the Kelly Criterion. All these topic are presented in an engaging and often even amusing style.
I would gladly have given five stars except for two things. First, there are simply too many topics, and it was not always clear to me what some of them had to do with the main subject of the book. For example, at various places in the book it is hinted that Shannon made a lot of money on Wall Street using some secret theory of his own. At the end it turns out that such a theory has never existed. Second, the mathematics is sometimes a bit sloppy. For example, when I tried to use Shannon's Rebalanced Portfolio I could not make money from a random walk as described in the book. It only worked when I assumed that the size of the fluctuations of a stock price was constant.