Sublime

“The name of the game is not to always be right, but to be right often enough.”

Thorp suggests that one of the most common oversights made in the use of the Kelly Criterion is computing the optimal Kelly bet without considering the available alternative investments.24 It is a dangerous error because it generally overestimates [the optimal Kelly size.

Life is short, and the stock market is a slow game. In blackjack, it’s double or nothing every forty seconds. In the stock market, it generally takes years to double your money—or to lose practically everything. No buy-and-hold stock investor lives long enough to have a high degree of confidence that the Kelly system will pull ahead of all others.

recommend Fail-Safe Investing by Harry Browne and I Will Teach You to Be Rich by Ramit Sethi if you’re interested in tactical, low-risk investment strategies.)

A fantastic story about the father of modern portfolio theory, Harry Markowitz, brings this to life. Markowitz considered the optimal mix of assets for his personal portfolio but found it all too complicated to wrap his prodigious brain around. “I should have computed the historical co-variances of the asset classes and drawn an efficient frontier,

imagine that Joe Sixpack offered to sell you a CDS on your $320,000 loan to your friend for $1,600 a year for five years. Joe is doing well, has a million-dollar house with no debt, and is therefore “good for the money.” Happy with $1,600 a year in extra income, Joe continues to sell CDSs on residential mortgages. Unregulated, he sells a thousand j

Third Point LLC, a $17 billion asset management firm.