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Samuelson spotted a mistake in Bacheliers work. Bachelier's model had failed to consider that stock prices cannot fall below zero.
William Poundstone
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William Poundstone
Age: 69
Born: 1955
Born: March 29
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More quotes by William Poundstone
Expectation is a statistical fiction, like having 2.5 children.
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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.
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The story of the Kelly system is a story of secrets - or if you prefer, a story of entropy.
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Kelly was aware that there is one type of favorable bet available to everyone the stock market.
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Use entropy and you can never lose a debate, von Neumann told Shannon - because no one really knows what entropy is.
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Samuelson, however, hedged his personal bets - by putting some of his own money in Berkshire Hathaway.
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A bit is worth 10,000 basis points.
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Your second ducat, like your second million, is never quite as sweet.
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People tend to be clueless about prices. Contrary to economic theory, we don't really decide between A and B by consulting our invisible price tags and purchasing the one that yields the higher utility, he says. We make do with guesstimates and a vague recollection of what things are “supposed to cost.”
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Paradox is thus a much deeper and universal concept than the ancients would have dreamed. Rather than an oddity, it is a mainstay of the philosophy of science.
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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.
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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.
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The best paradoxes raise questions about what kinds of contradictions can occur-what species of impossibilities are possible.
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At a bare minimum, understanding entails being able to detect an internal contradiction: a paradox.
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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.
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In real conversations, we are always trying to outguess each other.
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Shannon's most radical insight was that meaning was irrelevant.
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The ultimate compound return rate is acutely sensitive to fat tails.
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Are there any mythical beasts which aren't simple pastiches of nature? Centaurs, minotaurs, unicorns, griffons, chimeras, sphinxes, manticores, and the like don't speak well for the human imagination. None is as novel as a kangaroo or starfish.
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There were many at Bell Labs and MIT who compared Shannon's insight to Einstein's. Others found that comparison unfair - unfair to Shannon.
William Poundstone
