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Kelly Can't Fail

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389 points jmount | 2 comments | 19 Dec 24 23:07 UTC | HN request time: 0.401s | source
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JohnMakin ◴[20 Dec 24 02:50 UTC] No.42467834[source]▶
Kelly criterion is one of my favorite game theory concepts that is used heavily in bankroll management of professional gamblers, particularly poker players. It is a good way to help someone understand how you can manage your finances and stakes in a way that allows you to climb steadily forward without risking too much or any ruin, but is frequently misapplied in that space. The problem is kelly deals with binary results, and often situations in which this is applied where the results are not binary (a criteria for applying this) you can see skewed results that look almost right but not quite so, depending on how you view the math
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amluto ◴[20 Dec 24 03:03 UTC] No.42467902[source]▶
> particularly poker players

The Kelly criterion seems excellent for many forms of gambling, but poker seems like it could be an exception: in poker, you’re playing against other players, so the utility of a given distribution of chips seems like it ought to be more complicated than just the number of chips you have.

(I’m not a poker player.)

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fernandopj ◴[20 Dec 24 17:04 UTC] No.42472749[source]▶
Chris "Jesus" Ferguson "proved" an application of this theory back in ~2009 [1]. He was a the time promoting Full Tilt and commited to turn $1 dollar bankroll to $10000 by applying a basic strategy of never using more than a low % of his bankroll into one tournament or cash game session.

So, if one's skill would turn your session probability to +EV, by limiting your losses and using the fact that in poker the strongest hands or better tourney positions would give you a huge ROI, it would be just a matter of time and discipline to get to a good bankroll.

Just remember that for the better part of this challenge he was averaging US$ 0.14/hour, and it took more than 9 months.

[1] https://www.thehendonmob.com/poker_tips/starting_from_zero_b...

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1. kelnos ◴[20 Dec 24 20:23 UTC] No.42474654[source]▶
> Just remember that for the better part of this challenge he was averaging US$ 0.14/hour, and it took more than 9 months.

But consider the rate of return! He turned $1 into $10,000 in 9 months. Could he then turn that $10k into $100M in another 9 months?

Or if he'd started with $100 instead of $1, could he have turned that into $1M in 9 months? That would still be incredibly impressive.

Certainly the game changes as the bets and buy-ins get higher, but even if he couldn't swing the same rate of return with a higher starting point and larger bets (though still only betting that same certain low percent of his bankroll), presumably he could do things like turning $5k into $1M. Even $100k into $1M would be fantastic.

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2. lupire ◴[20 Dec 24 21:25 UTC] No.42475196[source]▶
I think the challenge is that the larger you bet, the harder it is to find people who are bad at basic strategy poker but willing to bet against you for a long series of bets.