You will lose the big wins. Think of it as a less extreme version of divesting when the whale comes along.
OK that makes sense. But what if I also increase to *over* 1% when the fishes are playing? Like Oleander pointed out, would I not be diluting all the other investors that don't actively manage their account?
Hmm, yes. That way you could get closer the true kelly criterion. But you will not be able to react to a sudden max bet, and that will have a bad effect in the long run for you.