macrocephalopod

Clearly you will either lose or gain $100 depending on how the cards fall, but that’s just luck. Measuring success in Sklansky dollars instead of real dollars removes an element of chance from the game, making performance measurement more reliable.

If your per-hand profit in real dollars is going up, that could be because you’re getting better but it could just be luck. If your Sklansky dollar profit is going up, that’s likely to be because you’re getting better.

Sports betters can use a similar heuristic. Instead of measuring profit in real dollars, assume the odds immediately before the start of the game are accurate, and measure your profit in terms of how much the odds moved in your favour from when you bet to when the game started.

By removing the randomness from the game from your measurement, you can zero in much faster on your true edge and calibrate your bet size and frequency more appropriately.

An application in finance is transaction cost analysis. If you measure execution slippage vs arrival price, it’s very noisy. Instead measure it vs a VWAP over your execution window, or if measuring slippage in single names, adjust the benchmark to take account of how much the …

this only work for small ish participation rates right? in the extreme if you're 100% of volume over an interval your fill price is the VWAP so you have no slippage relative to VWAP but you may have massively bid up the price relative to arrival

this is a very Jessica objection , just saying

“Your nerdy quant methods break down when you are cRuShInG sIcK sIzE like me”