32 of 34 people found the following review helpful
Mobsters, mathematicians and economists,
This review is from: Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street (Hardcover)
I found this to be a very exciting and informative book. Once I started, I was hooked: I couldn't put it down because I wanted to learn more -- not just about the formula but all the intellectual controversy surrounding it and the cast of characters involved. This book tells the story of the 'Kelly criterion' and how certain people used it to beat the casinos and earn consistently above-average returns in the stock market. The cast of characters extend from famous organized crime figures (Bugsy, Longy Zwillman, etc.) to Claude Shannon, father of information theory, to Milken, the junk bond king, and many more.
You can view this book as a study on the history of an idea, as a study of the financial markets, or as a social study of gambling and investing. There are many faces to it. I wouldn't say it is a book on finance, or a book on history, but a bit of everyhting really. It definitely is not a book on 'how to beat the market', don't look for that here. The book does give a good explanation of the Kelly formula, in my opinion, but the whole controversy surrounding it, as well as the story of Ed Thorpe, was much more interesting for me.
If you are interested in finance or financial history, math, or gambling, or how ideas evolve and why certain ideas are better known than others, you should read this book. I think that mathematically sophisticated readers can be a bit disappointed because there is no rigorous treatment of Kelly criterion. But the basic ideas of CAPM, efficient markets hypothesis, the essence of Kelly formula, and random walk, are explained quite succintly and clearly, in my opinion.
The only problem I had with the book was that the author went off in tangents quite a bit, which sometimes distracted from the main story. For instance, right after the description of Kelly formula, there is a discussion of Edgar Hoover's horseracing bets. It seems that the author had a lot of material, may be too much, that he did not want to cut, but also did not know where to put. That detracted from coherence somewhat, which is why I am giving this 4 stars. But at the end of the day, I am feeling better for having read the book -- I learned a lot, and it was an easy and interesting read. Definitely worth the money and time.
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Showing 1-3 of 3 posts in this discussion
Initial post: Aug 14, 2010 9:47:17 AM PDT
Mr. Ed in Toronto says:
Actually I thought its tangents were an intentional strategy that added to the fascination by showing the surprising interrelationships between unlikely people and ideas. It reminded of that terrific TV series called "Connections."
Posted on Nov 27, 2010 4:46:41 AM PST
Last edited by the author on Nov 27, 2010 4:50:24 AM PST
I'm confused. Kelly is a form of money-management, intended to answer the what-is-the-optimal-bet-size question. Where one can completely quantify an edge (e.g. card counting, assuming perfect implementation of the strategy), Kelly is the most effective use of a bankroll; it can be somewhat helpful in establishing a bet size to reflect the risk when a bettor has an uncertain and less precise edge (Kelly really shouldn't be used in these situations, since Kelly may adjust wager size on any or every single bet).
It follows, then, that developing an edge is foremost; you can not win money betting without an edge.
Basically, it seems that the book uses a come-on title. While it may, despite that, be a good book, it misinforms the prospective buyer.
In reply to an earlier post on Mar 28, 2011 4:12:37 PM PDT
Bruce D. Wilner says:
Yes, read a book and instantly become a billionnaire.
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