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Dan Robinson
@danrobinson
Replying to
@SBF_FTX
@SBF_Alameda
and 4 others
This part really is a language debate, but saying that it is defined by optimizing for log(wealth) IMO makes it sound like it’s driven by preferences about marginal utility of wealth, which it isn’t. Would prefer “maximizing log return” or “maximizing annualized rate of return.”
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Dan Robinson
@danrobinson
Replying to
@SBF_FTX
@SBF_Alameda
and 4 others
Perhaps the more important is the latter (annualized return), or equivalently “average log return over time.” All equivalent. But with these latter terms it is much more obvious why you might want to optimize for them if you care about compound interest
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SBF
@SBF_FTX
Replying to
@danrobinson
@SamuelShadrach4
and 3 others
twitter.com/SBF_Alameda/st to be clear I think you're not understanding correctly what Kelly is here. You're saying we should define Kelly as a thing which is *not* Kelly but is instead the other different thing that you believe.
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SBF
@SBF_FTX
Replying to @SBF_FTX @danrobinson and 4 others
But "maximizing annualized rate of return" is *not* kelly in general! It's only Kelly in some very specific situations. e.g. if you only have a single coin flip ever and it's in 1 year then max annualized rate of return = max return = max linear EV != kelly
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Dan Robinson
@danrobinson
Replying to
@danrobinson
@SBF_Alameda
and 4 others
How about “maximizing expected geometric growth rate”? Or “maximizing average log return over time.” All equivalent, but this gets at the WHY. I like Kelly because I want to maximize compounding growth, not because I have preferences about the log of my wealth.
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