John S.
John S.
Aug 28, 2017 · 2 min read

Feedback from a long time reader and fan (and ex quant trader with an interest in this area)

1) The main idea is not that unknown. Samuelson was writing about ergodicity in the 60's and Kelly’s paper started a big discussion in the econ literature before that. It’s a big topic in econometrics. The difference between expected and compound returns is financial math 101 (e.g. in Hull) and ruin theory is basic actuarial math. So it’s a bit wild to say only 8 people in 250 years got it. Lots of people knew and used ergodicity even if they didn’t use the word. If you mean that certain areas e.g. behavioral econ, psychology, miss the point, yes I totally agree. These charlatans should be called out. Maybe better to give examples of the IYI and BS vendors who failed by not understanding ergodicity, than make a huge and bad generalization of 250 years of thinking.

2) The “recommendations based on the long term returns of the market” example is confusing. “Long term” sounds like time probabilities are used, so why don’t we get those returns? Is it because they’re expected returns not compound returns so not true time probabilities?

3) I read Peters Gell-Mann when it came out. The history is interesting but the main point is the same as in Kelly’s paper (which they barely mention). Kelly said exactly the same about expectation, utility functions, logarithms, risk of ruin, etc. and very succinctly. I don’t get the fuss over this paper but then I’ve read the old classics. People should do that more often, there’s a reason they’re old classics.

4) First you say ergodicity is “very very simple” and then you say Gell-Mann is a genius because he “got it instantly” when told. Getting a simple point doesn’t make you a genius. Anyone reading your book will get it instantly.

5) Once I’m dead, I’m dead, so the death of my family or the rest of humanity can’t bother me. That doesn’t make me a psychopath. Don’t we care about the “system” when we’re alive because doing so increases our chance of staying alive?

Otherwise brilliant, I’m looking forward to reading the finished masterpiece.

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    John S.

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    John S.

    Trading, finance, math, history, boats, baseball