Fortunes Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone - Enjoyable and inspiring tale

Fortunes 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 Kellys 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 Kellys system was particularly effective when applied to arbitrage (minute price differences that result from market inefficiencies). As Poundstone ably demonstrates, the merits of Kellys criterion are still hotly debated today.

Poundstone has a tendency to meander in his writing, but his asides are so revealing and interesting that they add, rather than detract, from the narrative. The book also includes a cast of fascinating and colorful characters as varied as Ivan Boesky, Warren Buffet, Rudolph Giuliani, and notorious mobsters such as Bugsy Siegel and Meyer Lansky. In explaining the lasting impact of the work done by Shannon, Thorpe, and Kelly, Poundstone even explains Kellys system for those wishing to follow his formula, offering readers both theoretical and practical lessons. Whether viewed as a how-to guide or straight scientific and financial history, Fortunes Formula proves an entertaining and illuminating analysis of the most successful gambling system of all time. --Shawn Carkonen

Enjoyable and inspiring tale
It might be a matter of personal taste, since I've found other reviewers with exactly the opposite opinion, but I really enjoyed the book and, given the fact that English is not my first language, it can't be possibly be written as badly as they say. Nevertheless, I found the book truly inspiring. It displays the unlikely social networks that can be build in a complex society, the risks people take, and the rewards some win. I didn't expect a course on "applied Kelly criterion" and much less the ultimate formula to give me advantage in the financial markets or other bet-like places, but a tale about Shannon, Ed. Thorp, Manny Kimmel, the boys at LTCM, etc. Those people who want a course on that should refer to anything derived from Bachelier/Markowitz. Those who like reading for reading, this is an interesting story about gambling.

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