I really enjoyed reading this book. It has a great blend between storytelling, facts and drama. Many of the ideas presented makes you want to try it out or research further.

It does not go into fine details about the inner workings of the math, but it provides enough references to allow you to explore further by yourself. It starts of in the early 1900 explaining how early wire service revolutionized the gambling industry. Many storied are told about how the mob and gambling was intertwined. Later Edward Thorpe is introduced and how he invented a system to beat casino blackjack for a sure win.

Everything revolves around how to gain an edge in betting, that be blackjack, roulette, horses or the stock marked. The book uses storytelling in a great way, so it never gets boring. Histories of gangsters and mathematicians battling in casinos to gain the edge is ever exciting.

When any bet is bound by a known probability the amount to bet becomes very important. Different systems are in use for betting size, among others the, fixed-wager, bet-it-all, martingale and Kelly. It is explained why the Kelly system is the optimal system to maximize the expected return without any risk of going broke. Where the other systems either are to risky or not getting the optimal return. It is shown that even if you have an edge, lets say a coin that has a 55% chance of getting heads. The expected return for continuous bets are very different depending on the betting system. Most system can be proved to have a 100% probability of going broke in the long run. Where Kelly protected the better from ruin. The volatility will still be large though.

The concept with Kelly is to scale the betting size based on the betters amount of money and the probability of each bet.

*f = (bp – q) / b*

where

b = net odds, (b to 1 – meaning getting $b back on a $1 bet)

p = probability of winning

q = probability of loosing

f = percentage of bank roll to bet

This concept can be expanded to use in the stock market. It is used by Edward Thorpe when investing in the hedge fund, Princeton-Newport Partners from, 1968-1988, it was dissolved because of trials against some of the owners on tax fraud charges. Not because the investment strategy was flawed.

All in all i will recommend this book to anyone interested in betting or how betting and investing relates.

A sure 5/5 stars

## My thoughts on application of Kelly and other principles in the book

To apply Kelly we need a way to evaluate the probability of a bet on a stock going up/down and by how much. This is no small feet in it selves. And afterwards we can apply Kelly to know the position size we should take.