Conversation

Replying to

9) So, if you have $100k, Kelly would suggest you risk half of it ($50k). This is a lot! But also 75% odds are good.

Dec 11, 2020

10) What about a wackier bet? How about you only win 10% of the time, but if you do you get paid out 10,000x your bet size? (For now, let’s assume you only get to do this bet once.)

SBF

@SBF_FTX

Dec 11, 2020

11) Kelly suggests you only bet $10k: you’ll almost certainly lose. And if you kept doing this much more than $10k at a time, you’d probably blow out. That this bet is great expected value; you win 1,000x your bet size, way better than the first one! It’s just very risky.

SBF

@SBF_FTX

Dec 11, 2020

12) In many cases I think $10k is a reasonable bet. But I, personally, would do more. I’d probably do more like $50k. Why? Because ultimately my utility function isn’t really logarithmic. It’s closer to linear.

107

Replying to

and

Are you saying you would bet more if you only ha $100,000? or you would bet more because you do have more than $100,000 to start?

Replying to

more if I only had $100k

Replying to

and

You do realize the reason you shouldn't bet more than $10,000 is the same reason you gave for not betting it all in #22? You need funding to provide value with future opportunities.

Replying to

eh they're to different degrees; losing 10% of your wealth is a lot less likely to cripple your opportunity to do future things than losing > 50%. life isn't exactly a game of iterated "exactly the same bet". And in practice it matters a lot roughly how much $ you'll need!

Replying to

and

The Kelly criteria isn't about iterating the exact same bet either. It's about maximizing your long term growth rate in games of random chance. The bet can change each time and you still shouldn't bet above the Kelly value.

Replying to

long term *geometric* growth rate, not long term growth rate all-in maximizes long term growth rate

Replying to

and

and it only works if you face nothing in your life but a series of bets that are both (a) uncorrelated and (b) each let you bet up to your entire wealth without any decreasing returns

4:40 PM · Dec 14, 2020Twitter Web App

Replying to

and

which isn't to say Kelly isn't cool! It is cool! but cool is different from "absolutely the right thing to do in all circumstances, the math proves it". there's no such thing as ^ when it comes to betting, at least not in general, without knowing more context.

Replying to

and

The math also proves betting more than the Kelly value is lunacy.

Show replies