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.
Conversation
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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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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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..."
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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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so in every example we've been talking about they *are* the same.
they don't have to be but they usually are.
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What? This is a distant tangent from what we’re talking about but maximizing EV is generally not the same as maximizing maximum possible outcome, right?
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It happens to be in e.g. st petersberg, hold USDC vs hold ERC20 token vs LP, classic Kelly question, etc.
The thread tying them together is that they're repeated games where you're trading off risk vs EV, and in anything exactly matching that description then max EV = max upside