Conversation

Replying to

@SBF_FTX

and

@SBF_Alameda

Do you disagree with the Kelly criterion in general? en.wikipedia.org/wiki/Kelly_cri

Replying to

So: 1) it's not literally *wrong* in that it doesn't make a math error 2) I disagree in general that Kelly is the right way for people to bet because I disagree with its assumptions 3) neither 1/2 are necessary for my argument: Kelly only works if you consider *all* your money

Replying to

and

There are other problematic assumptions snuck in here, e.g. a) the paper assumes that you can only do one or the other forever and can't ever take profit if you don't use an AMM b) the paper assumes that exponential increase in valuation can go on forever

Replying to

and

E.g. see what happens to the math if you assume: a) The person is only using 25% of their money in this particular USD/coin pair and 75% outside of the system b) you only expand out ~10 years

Replying to

and

I think it's also worth noting that if you had tweeted "AMM skeptics should consider what utility curves make sense for them and whether there are more cost efficient ways to manage their risk, in some extremely constrained cases AMMs might be a decent choice" I wouldn't disagree

Replying to

and

This is a relief—I fundamentally disagree (I was worried it was a mathematical rather than a philosophical disagreement!) My log-wealth-maximization maximalism has absolutely nothing to do with differences in individual utility functions

Replying to

I think there are likely some math disagreements snuck in there as well but I'm not sure -- e.g., would you agree that none of the paper holds if you have a linear utility function? Say more about the second sentence? I'm not sure what point you're making.