Fortune's Formula
, subject: Ed Thorp, Claude Shannon, gambling, information theory, and investing, 2005
Fortune’s Formula follows Ed Thorp and Claude Shannon in one story and records how Shannon performed as an investor.
About the book
Poundstone turns the Kelly criterion into a narrative history, following the idea from Bell Labs through blackjack, horse racing, hedge funds, and Wall Street. Rather than promise a winning formula, the book shows why edge and bet size must be considered together—and how even a favorable strategy can fail when it ignores risk of ruin.
Why read it
Best if You want an account of Ed Thorp and Claude Shannon that includes Shannon’s investment record and his Teledyne investment.
Key themes
- Two central figures, one story
- Shannon’s investing record, with a specific case
Evidence and original sources
Sources: official Founders episodes — #90, #92, #93, #94, #95, #222, #428
This record is supported by 9 public evidence rows linked to original Founders episodes.
- Charlie Munger (Poor Charlie's Almanack) — The host says Munger's book introduced him to Fortune's Formula, calls the premise fascinating, and commits to covering it soon.
- Ed Thorp and Claude Shannon — This episode is a highlights walkthrough of William Poundstone's Fortune's Formula, focusing on Claude Shannon and Ed Thorp.
- Ed Thorp (A Man for All Markets) — The host points listeners to the prior week's Founders episode on Fortune's Formula for more on Claude Shannon.
- Henry Singleton (The Outsiders) — David says he covered Claude Shannon's Teledyne investment in his Fortune's Formula episode.
- Claude Shannon — Host references his earlier Founders episode on Fortune's Formula, which covered Claude Shannon's investing record.
- Ed Thorp (My personal blueprint) — David references his earlier coverage of Fortune's Formula on Founders #92.