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SBF
@SBF_FTX
Replying to
@SBF_FTX
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.)
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SBF
@SBF_FTX
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.
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SBF
@SBF_FTX
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.
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SBF
@SBF_FTX
Replying to
@breakingthemark
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!
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SBF
@SBF_FTX
Replying to
@SBF_FTX
and
@breakingthemark
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
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