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Comment by WJW | Hacker News Reader

Whenever that comment comes up I feel the urge to just post the wiki entry for the Kelly criterion. If you don't have as many resources as your competitors in the market, reduce your bet size!!! Yes, that may mean you cannot challenge Mark Zuckerberg for yacht size just yet, but it will also mean that you can try again if you fail. Match your ambition to your means. Super risky plans with no room for errors make for great movies, but are terrible ideas in real life.

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Of course, when you can barely afford to live, the Kelly criterion does not do anything at all for you. You have nothing that you can afford to lose. Not even miniscule bets.

If you accept the official poverty line as threshold, that'd be ~13% of people in the US. And the poverty line is ~$14k/year - even if you make double that, the amount of money you can risk is really pretty close to zero.

Any risk in that situation is a super-risky plan with no room for error.

It seems we agree that below the poverty line people should not make uncertain bets, because they have nothing they can afford to lose. Not betting when you can't afford it is exactly what the Kelly criterion proscribes, no?

You were replying to a person who were pretty clearly implying the position that the game is rigged. It's reasonable to assume your comment was meant to dismiss it as "you're just playing it wrong". I understand after your second comment that that was not the intention, but the first comment could be read as that.

> I feel the urge to just post the wiki entry for the Kelly criterion.

Apparently not that strong of an urge ;-).

For those (like me) who didn't know it yet: https://en.wikipedia.org/wiki/Kelly_criterion

> It is valid when the expected returns are known

Sounds like a great way to lose money.

I'm sure this is referring to the expected value in something like say, a dice throw. If the chances of winning when picking a certain number are 1/6 and the payoff is 6x the investment then the expected returns after a large mount of attempts are known and would be zero. I'm sure this is widely applicable in gambling.

Exactly the right term to use: Expected Value. If we have 1/6 chance of winning and each win gives us 6x, we have an EV of 0.

Poker is a great game to learn to understand EV/variance.

I wonder what the expected value of entrepreneurship is?

I rather suspect it is significantly negative, because most new businesses fail and the venture capital system means gambling with someone else's money.

Not to mention the rules are known in gambling, such as required minimum bets. Business has no such courtesy. The criterion is worthless if your small bets always result in failures because you need capital to get going.

If the preconditions arent met but you are sure they are, yes.

> Match your ambition to your means.

"Suck it up" as the ultimate in life advice to those born less lucky lacks a certain something to the more empathetic folks out there.

that is not analogous to 'suck it up' its calibration. Kelly criterion applied to blackjack for example. Play 5 dollar min bets, 100 max if you have a 30k purse and play perfectly. you wont withstand volatility iver 100 hours.

I hope this clarifies your misunderstanding

That may just be reality. The Disney movies telling everyone they can be princesses may be the cruel ones at the end of the day.

You will not have the same opportunities. Look closely at the ones you have and don't ignore them for sour grapes.

Anything more than "sucks to be you" requires opportunity or real costs and basically no one is willing to do.

Heck even the cases of tutorship are reserved for the lucky talented ones.

How do you reduce your bet size when you're betting years of your life?

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