berkshiremystery Posted August 29, 2011 Author Share Posted August 29, 2011 I'm now about 3/4th through, and I'm curious to know if the book had the same impact on others who have ready it: Did it make you want to punch Paul Samuelson in the face? He comes across as so arrogant and borders on intellectual dishonesty... Great that you enjoy the book. It's not only your impression that you have of Samuelson... ::), also mine. But haven't we known that Samuelson also hedged his opinion by doing the opposite what he arrogantly teaches. He made a sizable investment in shares of Berkshire Hathaway. We can only assume that his conscience was salved by the profits he made. So weird. ??? ----------------------------------- Anyway, here's another great video that explains the Kelly Criterion: Understanding Kelly Criterion 2008-08-02 (6:10min) The Kelly Criterion has applications in gambling and stocks. This video explains the concept and how to use it in a variety of situations. There are 4 examples, including coin flipping, stock investing, football betting, and lotteries. http://img571.imageshack.us/img571/2646/understandingkellycrite.jpg Link to comment Share on other sites More sharing options...
berkshiremystery Posted August 29, 2011 Author Share Posted August 29, 2011 I also compiled in this post two great articles, one written by Mauboussin, the other by Peter M. Lupoff . Size Matters. The Kelly Criterion and the Importance of Money Management. by Michael J. Mauboussin mmauboussin@lmfunds.com Legg Mason Capital Management February 1, 2006 http://www.capatcolumbia.com/MM%20LMCM%20reports/Size%20Matters.pdf --------------- Edge/Odds – The Kelly Formula and Maximizing Returns 2010-03 by Peter M. Lupoff of Tiburon Capital Management LLC, NYC http://tiburonholdings.net/uploads/Kelly_Formula_Letter.pdf Link to comment Share on other sites More sharing options...
beerbaron Posted August 29, 2011 Share Posted August 29, 2011 Return optimization is theorically good but you need to make assumptions of the payout ratio of the bet. This proves much more complicated then evaluating the price of the business. I often used 50/50 in the past, which is a bit stupid but you need to start somewhere... A good way to solve the problem would be to have a feedback that corrects your assumptions, but that feedback would become valid after a lot of data points have been made. It could take 20 years before you truly know that when you tough you had 10% chance it really met you had 5%. BeerBaron Link to comment Share on other sites More sharing options...
Liberty Posted August 31, 2011 Share Posted August 31, 2011 I've just finished the book and enjoyed it a lot. I recommend it to others here! Link to comment Share on other sites More sharing options...
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