Summary of William Poundstone's Fortune's Formula

By IRB Media

Get the Summary of William Poundstone's Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street in 20 minutes. Please note: This is a summary & not the original book.Original book introduction: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 theory - the basis of computers and the Internet - to 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.

• Language: English
• Publisher: IRB Media
• Release date: Nov 18, 2021
• ISBN: 9781638157045

IRB Media

With IRB books, you can get the key takeaways and analysis of a book in 15 minutes. We read every chapter, identify the key takeaways and analyze them for your convenience.

Book preview

Insights from Chapter 1

#1

Claude Shannon was a mathematician who revolutionized information theory in the 1940s. He is often referred to as the father of digital computers. His expansive view of technology was adopted by journalists and pundits trying to make sense of the digital revolution.

#2

Claude Shannon, the mathematician who invented the Shannon limit, was also a highly secretive man, and was best known for inventing the digital telephone. He taught at MIT for only a few semesters before retiring due to Alzheimer’s disease.

#3

Shannon was a mathematical genius who spent most of his time solving mathematical equations, circuit diagrams, and drafts of speeches he would never publish.

#4

Claude Shannon, a mathematician and electrical engineer, was a genius with an IQ of over 140. Vannevar Bush was so impressed by Shannon’s work that he suggested he do his doctoral dissertation on genetics.

#5

Claude Shannon, the author of the Black-Scholes equation, met and married his wife, Norma, in 1939. The two had a happy marriage for only three years before they divorced.

#6

Claude Shannon worked at Bell Labs, and when he left Princeton, he took the advice of his psychologist wife and went to work for them. He continued working on his many projects, but never seemed to finish anything.

Insights from Chapter 2

#1

The Project X team, which included mathematician John von Neumann, built a system known as SIGSALY that used the only uncrackable cipher known to man, the onetime pad.

#2

The 1948 paper by Claude Shannon, which explained how much information was contained in a message, changed the world.

#3

Shannon stopped publishing papers around 1970. He had already solved almost all the problems worth solving in information theory, and instead of publishing his work, he moved on to other projects.

#4

Shannon is famous for his no responses to many interview questions. He would spend hours thinking of the perfect reply, and would often take days to craft it.

Insights from Chapter 3

#1

The author’s great-grandfather,