MI374: Fortune’s Formula: The Scientific Betting System For Beating Wall Street w/ Shawn O’Malley | The Intrinsic Value Podcast - The Investor’s Podcast Network | Podwise
This podcast episode reviews William Poundstone's "Fortune's Formula," explaining the Kelly formula—a mathematical approach to betting that maximizes returns while minimizing risk. The host details the formula's development by John Kelly, Claude Shannon, and Ed Thorpe, highlighting its application in gambling and investing. A key takeaway is that the formula requires an "edge"—a superior understanding of probabilities—and suggests sizing bets proportionally to one's bankroll. Listeners learn how to calculate the optimal bet size using the Kelly formula and understand its application in making investment decisions based on conviction and risk tolerance. The episode concludes by emphasizing the importance of identifying one's "edge" in investing and considering the half-Kelly formula for reduced volatility.
