Quote from: ranlo on June 18, 2014, 05:06:05 PM

When you use the word "Kelly" here, is that just meaning 1%, or is there some other meaning for the word?

John Larry Kelly, Jr. was a mathematician from Bell Labs. He is most famous for using a voice synthesizer in the early 1960's to have a computer sing "Daisy, Daisy, give me...". Arthur Clarke was visiting a friend at Bell Labs at the time and worked the song into 2001, A Space Odyssey".

But he also developed the Kelly Criterion. One of the results of the Kelly Criterion which dooglus used is that for a bet with 1% house edge for even money bets only the optimal amount for the investors to bet is 1% of the house bank.

It should be noted that the Kelly Criterion changes for different payouts. For instance if the player selects a profit of 50%, Kelly Criterion says he should be allowed to bet up to 2% of the bankroll. Presumably dooglus thought that would complicate the rules and he assumed that the majority bets would be 1:1 return.

Even Kelly supporters usually argue for fractional Kelly (betting a fixed fraction of the amount recommended by Kelly) for a variety of practical reasons, such as wishing to reduce volatility. Hence the phrase "half Kelly".

Kelly died of a stroke on a Manhattan sidewalk at the young age of 41 in 1965. It is reported that he never used his own criterion to make money.

Quote from: dooglus on June 18, 2014, 06:59:34 PM

It turns out that Kelly recommends you risk the same amount of your bankroll as the house edge percentage. Since JD has a 1% house edge, "full Kelly" means 1%.

Technically it recommends you do that only if betting a profit of 100% (i.e. 50%-HE/2 probability of winning). It changes if you select another profit.