Top 15 William Poundstone Quotes

The problem with winning at blackjack and sports betting is that sooner or later a big guy in a suit tells you to leave.

The ultimate compound return rate is acutely sensitive to fat tails.

For reasons mathematical, psychological, and sociological, it is a good idea to use a money management system that is relatively forgiving of estimation errors.

To hedge the bets he made every working day, Meriwether kept a set of rosary beads in his briefcase.

There is a deep connection between Bernoulli's dictum and John Kelly's 1956 publication. It turns out that Kelly's prescription can be restated as this simple rule: When faced with a choice of wagers or investments, choose the one with the highest geometric means of outcomes.

Your second ducat, like your second million, is never quite as sweet.

Bernoulli's real contribution was to coin a word. The word has been translated into English as "utility". It describes this subjective value people place on money.

"Average" isn't so hot at the race track given those steep track takes. "Average" is pretty decent for stocks, something like 6 percent above the inflation rate. For a buy-and -hold investor, commissions and taxes are small.

Carl Friedrich Gauss, often rated the greatest mathematician of all time, played the market. On a salary of 1,000 thalers a year, Euler left an estate of 170,587 thalers in cash and securities. Nothing is known of Gauss's investment methods.

Samuelson, however, hedged his personal bets - by putting some of his own money in Berkshire Hathaway.

Samuelson spotted a mistake in Bacheliers work. Bachelier's model had failed to consider that stock prices cannot fall below zero.

From Adam Smith through John Maynard Keynes, economics had been mostly talk. At Harvard economics was talk. At MIT, Samuelson made it math.

The engine driving the Kelly system is the "law of large numbers." In a 1713 treatise on probability, Swiss mathematician Jakob Bernoulli propounded a law that has been misunderstood by gamblers (and investors) ever since.

The dealer now theorized that Thorp was memorizing the entire deck. He knew exactly which cards remained in the deck and bet accordingly. Thorp said it was impossible for any one to do that.

The story of the Kelly system is a story of secrets - or if you prefer, a story of entropy.