As others have pointed out, I’ve been utterly confused by the linked calculator not telling me whether to use probabilities on 0-1 or 0-100 scale (and accepting meaningless inputs). Also a comment right on the calculator page regarding the question what constitutes wealth should be given, especially regarding the common life situations such as having a mortgage (does it count as negative wealth or not?)
I am also utterly confused by the fact that the article never mentions the strength and timeframe of the compounding effect, and never talks about the base of the logarithms. I’ve learnt that the Kelly criterion is based on the claim “to maximise compounding, maximise the geometric expectation”, but how does that reflect the fact that the compounding effect can be anywhere from significant (like equities with their expected gains of 7-10% a year on average) to insignificant (like a bank account with 0.1% interest rate), and that I may be interested in my net worth either 1 year or 20 years or 200 years from now? With small interest rates and short timeframes, the effect of compounding will be negligible and the answer given by the calculator should be close to the answer based on expected gains/loss without compounding.
As others have pointed out, I’ve been utterly confused by the linked calculator not telling me whether to use probabilities on 0-1 or 0-100 scale (and accepting meaningless inputs). Also a comment right on the calculator page regarding the question what constitutes wealth should be given, especially regarding the common life situations such as having a mortgage (does it count as negative wealth or not?)
I am also utterly confused by the fact that the article never mentions the strength and timeframe of the compounding effect, and never talks about the base of the logarithms. I’ve learnt that the Kelly criterion is based on the claim “to maximise compounding, maximise the geometric expectation”, but how does that reflect the fact that the compounding effect can be anywhere from significant (like equities with their expected gains of 7-10% a year on average) to insignificant (like a bank account with 0.1% interest rate), and that I may be interested in my net worth either 1 year or 20 years or 200 years from now? With small interest rates and short timeframes, the effect of compounding will be negligible and the answer given by the calculator should be close to the answer based on expected gains/loss without compounding.