Terg Feb 12, Tadas Talaikis rated it really liked it Shelves: Then they ask the person who is doing the tapping how confident they are that the person listening will be able to guess the song — generally people say they are fortuns confident. Like Thompson sampling, the Kelly criterion has been reinvented many times; Poundstone lists at least 4 inventors: They realized that there was even more money to be made in the stock market. With that said, I would recommend this book to people who are nerdy in certain ways. Lists with This Book. What is a little remarkable to me is how well Shannon did financially by 3 early venture capital investments, and how little Shannon contributed intellectually after his information theory paper; I had always somehow assumed that Claude Shannon, a genius who had offhandedly made a major contribution to genetics simply because his advisor forced him to work on genetics, and had created fully-formed ponudstone theory, had died in the s or something, because how else would such a genius have not made further major contributions?
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Shades of HFT. Thus, notorious characters like Bugsy Siegel enter into a book about statistics as gambling becomes a major revenue source replacing the loss of alcohol. So Thorp moved onto roulette and the stock market. Which sounds a bit paradoxical. And the risk of buying warrants can be offset just buy buying or selling short just some of the underlying stock. Thorp made money off warrants, and then published the strategy for increasing the credibility of his new hedge fund, and moved onto convertible bonds by applying similar reasoning: the bond should have a certain value which reflects the probability that the stock will spike high enough to make the built-in option worth exercising, and since stocks should follow a random walk, all you need to know is the variance… inventing Black-Scholes.
In one amusing anecdote, Black-Scholes used their pricing model to spot a particularly mispriced warrant; then the company changed the terms of the warrants, wiping out the warrant holders and Black-Scholes, in a way that insiders had known was coming and sold all their warrants. Thorp returned to trading eventually, and in terms of his lifetime performance: In May Thorp reported that his investments had grown at an average 20 percent annual return with 6 percent standard deviation over The gift consists of one million dollars to be invested entirely in stocks, with the university limited to withdrawing only 2 percent a year.
The fund is expected to compound exponentially in inflation-adjusted dollars. Ultimately, Thorp hopes, it will fund the most richly endowed university chair in the world, and will help draw exceptional mathematical talent to UC Irvine. What is a little remarkable to me is how well Shannon did financially by 3 early venture capital investments, and how little Shannon contributed intellectually after his information theory paper; I had always somehow assumed that Claude Shannon, a genius who had offhandedly made a major contribution to genetics simply because his advisor forced him to work on genetics, and had created fully-formed information theory, had died in the s or something, because how else would such a genius have not made further major contributions?
But no! Shannon died in ! Poundstone explains that Shannon was simply too unambitious and perfectionist to work hard on any big topics or write up and publish properly any of his findings! One of the more depressing demonstrations that raw genius is not enough. One downside is that despite the involvement of Jimmy Savage, Poundstone never mentions the connections to subjective Bayesianism, personal interpretations of probability, or Thompson sampling.
'Fortune's Formula': Wanna Bet?
By William Poundstone. Those words should all be plurals. Fortunately for the casual reader, Poundstone balances the heavy helpings of statistical scrutiny with the fascination of cultural voyeurism, taking readers inside the unfamiliar worlds of gambling and investing. The information-science genius Claude Shannon, for example, is depicted as a unicycling, juggling eccentric whose "toy room" includes "a flamethrowing trumpet and a rocket-powered Frisbee. The light contracted his pupils, making his reactions harder to read.
FORTUNE FORMULA POUNDSTONE PDF