In this intriguing summary by John Mount, he introduces the Kelly bet allocation strategy, a high variance system for exploiting bias in gambling. However, a unique card game called “Next Card Bet” presents a risk-free version of the Kelly strategy with zero variance. By following the Kelly strategy, which maximizes the expected logarithm of the stake, players can safely double their stakes by determining the color of the final unseen card. Surprisingly, implementing this strategy in Python yields a consistent return of 9.08 times the initial stake, showcasing how the Kelly strategy can defy expectations and achieve zero variance under specific conditions. The proof behind this zero variance phenomenon is intricate, linking the Kelly strategy to portfolio management. This exceptional result challenges conventional wisdom in gambling strategies and offers valuable insights into exploiting uncertainties effectively.
https://win-vector.com/2024/12/19/kelly-cant-fail/