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Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street Posters
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List Price: $15.00Amazonaws.com's Price: $10.20 You Save: $4.80 (32%)
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Binding: Paperback
Dewey Decimal Number: 795
Fabric Type: 9780809045990
Fax Number: 1st
Legal Disclaimer: 0809045990
Maximum Color Depth: Hill and Wang
Metal Type: Hill and Wang
Publisher: 1
Region Code: 400
Total External Bays Free: September 19, 2006
Total Firewire Ports: Hill and Wang
Total Parallel Ports: September 19, 2006
Hill and Wang
Features:- ISBN13: 9780809045990
- Condition: NEW
- Notes: Brand New from Publisher. No Remainder Mark.
Editorial Review:
Amazon.com Review:
Fortune's Formula is a fascinating study of the connections between such seemingly unrelated topics as gambling, information theory, stock investing, and applied mathematics. The story involves the stunning brainpower of men such as MIT professor Claude Shannon, who single-handedly invented information theory, the science behind the Internet and all digital media; Ed Thorpe; and John Kelly of Bell Laboratories, who developed the "Kelly criterion," a now-legendary investment strategy for maximizing growth while controlling risk. Initially, Shannon and Thorpe took Kelly's theory to Las Vegas and applied it to roulette and blackjack. Later, they took it to Wall Street and cleaned up--Shannon made a personal fortune while Thorpe created the highly successful hedge firm Princeton-Newport Partners. They both discovered that Kelly's system was particularly effective when applied to arbitrage (minute price differences that result from market inefficiencies). As Poundstone ably demonstrates, the merits of Kelly's criterion are still hotly debated today.
Poundstone has a tendency to meander in his writing, but his asides are so revealing and interesting that they add, rather than detract, from the narrative. The book also includes a cast of fascinating and colorful characters as varied as Ivan Boesky, Warren Buffet, Rudolph Giuliani, and notorious mobsters such as Bugsy Siegel and Meyer Lansky. In explaining the lasting impact of the work done by Shannon, Thorpe, and Kelly, Poundstone even explains Kelly's system for those wishing to follow his formula, offering readers both theoretical and practical lessons. Whether viewed as a how-to guide or straight scientific and financial history, Fortune's Formula proves an entertaining and illuminating analysis of "the most successful gambling system of all time." --Shawn Carkonen
Product Description:
In 1956 two Bell Labs scientists discovered the scientific formula for getting rich. One was mathematician Claude Shannon, neurotic father of our digital age, whose genius is ranked with Einsteinâs. The other was John L. Kelly Jr., a Texas-born, gun-toting physicist. Together they applied the science of information theoryâthe basis of computers and the Internetâto the problem of making as much money as possible, as fast as possible.
Shannon and MIT mathematician Edward O. Thorp took the âKelly formulaâ to Las Vegas. It worked. They realized that there was even more money to be made in the stock market. Thorp used the Kelly system with his phenomenonally successful hedge fund, Princeton-Newport Partners. Shannon became a successful investor, too, topping even Warren Buffettâs rate of return. Fortuneâs Formula traces how the Kelly formula sparked controversy even as it made fortunes at racetracks, casinos, and trading desks. It reveals the dark side of this alluring scheme, which is founded on exploiting an insiderâs edge.
Shannon believed it was possible for a smart investor to beat the marketâand Fortuneâs Formula will convince you that he was right. William Poundstone is the bestselling author of ten nonfiction books, including Labyrinths of Reason and The Recursive Universe, both of which were nominated for the Pulitzer Prize. In 1956 two Bell Labs scientists discovered the scientific formula for getting rich. One was mathematician Claude Shannon, neurotic father of our digital age, whose genius is ranked with Einstein's. The other was John L. Kelly Jr., a Texas-born, gun-toting physicist. Together they applied the science of information theoryâthe basis of computers and the Internetâto the problem of making as much money as possible, as fast as possible.
Shannon and MIT mathematician Edward O. Thorp took the "Kelly formula" to Las Vegas. It worked. They realized that there was even more money to be made in the stock market. Thorp used the Kelly system with his phenomenally successful hedge fund, Princeton-Newport Partners. Shannon became a successful investor, too, topping even Warren Buffett's rate of return. Fortune's Formula traces how the Kelly formula sparked controversy even as it made fortunes at racetracks, casinos, and trading desks. It reveals the dark side of this alluring scheme, which is founded on exploiting an insider's edge. "Fortune's Formula may be the world's first history book, gambling primer, mathematics text, economics manual, personal finance guide and joke book in a single volume. Poundstone comes across as the best college professor you ever hand, someone who can turn almost any technical topic into an entertaining and zesty lecture."âThe New York Times Book Review "Seldom have true crime and smart math been blended together so engagingly"âThe Wall Street Journal
"An amazing story that gives a big idea the needed star treatment . . . Fortune's Formula will appeal to readers of such books as Peter L. Bernstein's Against the Gods, Nassim Nicholas Taleb's Fooled by Randomness, and Roger Lowenstein's When Genius Failed. All try to explain why smart people take stupid risks. Poundstone goes them one better by showing how hedge fund Long-Term Capital Management, for one, could have avoided disaster by following the Kelly method."âBusiness Week "Poundstone, a two-time Pulitzer Prize nominee, takes us from chalkboard to stock market and back as he explains the 'Kelly formula' for gambling through the lives of those who developed and exploited the system. It is a rollicking tale about money, mathematics and greed."âBloomberg "A dazzling array of math geniuses, rogues, swindlers, Nobel Prize winners, gun-toting physicistsâall massaging the formulas that give them an edge in creating fortunes."âGeorge J. W. Goodman (aka "Adam Smith"), author of The Money Game and Supermoney "This is a wonderful tale of how mathematics got married to gambling and went off to honeymoon in Las Vegas, before finding ultimate happiness in the biggest casino of allâthe world financial markets. Poundstone has produced a rogues' gallery of mobsters and mathematicians, kneecappers and handicappers, card sharps, professors, systems players, numbers runners, and number crunchersâthe best 'investment advisers' you can find. Anyone interested in playing the markets should buy this book and read it immediately."âThomas A. Bass, author of The Eudaemonic Pie and The Predictors "The true story of the intertwining lives of financial legends, mathematical geniuses and crooked mobsters. Who would you expect to win an intellectual battle between professional gamblers and Nobel Prize winners? This book confirms what I'd long suspected, that the successful gambler knows more about managing money than the most PhD-laden investment banker. Poundstone's book explains that knowledge, and you'll be surprised by its elegance and simplicity. A fascinating book, both a cracking good yarn and a practical guide for investment success."âPaul Wilmott, mathematician, bestselling author, and editor of Wilmott magazine "From bookies to billionaires, you'll meet a motley cast of characters in this highly original, 'outside the box' look at gambling and investing. Read it for the stories alone, and you'll be surprised at how much else you can learn without even trying."âEdward O. Thorp, author of Beat the Dealer and Beat the Market "What a fantabulous book! Fortune's Formula provides a deep but crystal-clear understanding of information theory, card-counting schemes, plunging necklines, mean-variance mapping, junk bonds sold short and gambler's ruin, all part of an epic suspense tale crowded with eccentric geniuses and cold-blooded killers. You'll never follow a horse race, push forward a casino chip or enter a market the same way again. Read this and weep for the edge you only thought that you had, then read it again for a real one."âJames McManus, author of Positively Fifth Street
Average Rating: 
Rating: -
Poundstone does not know from math, but the book's portraits of Thorp and Shannon (two foundational figures in different fields) are quite interesting. What is also interesting is his discussion of "academic dogma vs reality", which shows that economics is much more "social" than a "science" (with scary consequences for our health and wellbeing, since our fearless leaders (eg, Bernanke and Summers) are academic economists.
The Kelly formula itself, while interesting, is of dubious utility ... Read More
Rating:  -
I picked up this book because Mohnish Pabrai, the author of The Dhandho Investor, recommended it. The author describes the Kelly Formula that was developed by John Kelly at Bell Labs in New Jersey and applied by the individuals featured in the book. The formula calculates the optimal fraction of one's bankroll to bet on a favorable bet.
Edge/Odds = Fraction of one's bankroll to bet each time
For example, if you have a 50% chance of winning $100, and 50% chance of losing $50, ... Read More
Rating: -
FF is a gentle introduction to information science and the 'science' of gambling and the stock market. Well worth the read. Fans of WP might be interested to know: FF is something of a departure from WP's earlier books, which are generally both rigorous and challenging treatments of their subject matter. FF is altogether in the popular science mode -- light on rigor and challenge. Whereas WP's earlier books took me some time to read and digest, I dispensed with FF in an afternoon. All in all, though, ... Read More
Rating:  -
The cover says this is the "untold story" and it's no wonder why--I really wonder if William Poundstone is enjoying playing a great joke on his agent and publisher - or helping them put over a huge joke on us. The back of the book says it's an "amazing story that gives a big idea the star treatment" which I now realize meant the main points of the book could have been summed up in much less space, if only all the Homerian adjectives preceeding each name and place (and liberal scattering of adverbs describing ... Read More
Rating: -
It might be a matter of personal taste, since I've found other reviewers with exactly the opposite opinion, but I really enjoyed the book and, given the fact that English is not my first language, it can't be possibly be written as badly as they say. Nevertheless, I found the book truly inspiring. It displays the unlikely social networks that can be build in a complex society, the risks people take, and the rewards some win. I didn't expect a course on "applied Kelly criterion" and much less the ultimate formula ... Read More
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