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A bit of a definitional issue -- the interpretation is mostly wrong; the solution is the correct solution to *a* question but not to *the right question to be asking*

Dan Robinson

@danrobinson

Dec 2, 2020

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@SBF_FTX

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@SBF_Alameda

What makes it the wrong question?

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It's trying to maximize EV[log(money)] instead of EV[money]. This is probably wrong in and of itself as an assumption to make. But if you *do* want to make that assumption, then e.g. you have to consider all of your assets that don't have anything to do with the pool.

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

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and

Proponents of the Kelly criterion almost never use it with their own money. Do you think most people’s preference is actually to maximize log(wealth)?

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and

The Kelly criterion does not assume that you prefer to maximize log(wealth). It assumes that you would prefer having more wealth to having less wealth, and it guides you to the strategy where you have more wealth than any other strategy in 99.99...% of worlds (in the long run)

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Causation is tricky, but Kelly is mathematically equivalent to maximizing log(wealth), so assuming one gives the other.

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and

I think you're being a bit glib with the second half there? Like I could equally say "maximize linear EV assumes you'd prefer having more wealth than less wealth, and it guides you to the strategy where you are able to get the largest possible wealth by a factor of 999999999..."

3:14 AM · Dec 3, 2020Twitter Web App

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Hmm I don’t think EV(wealth) maximization actually maximizes wealth in the best possible world, right? It doesn’t reach the highest peak What EV(wealth) maximizes is sum of wealth across all possible worlds

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Peak-maximization would mean buying lottery tickets and such even at negative EV

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