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Fortune's Formula
Book

Fortune's Formula

The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street

William Poundstone
Hill and Wang, 2005
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Editorial Rating

9

Qualities

  • Innovative

Recommendation

This is a fascinating book about the sociology of ideas and, specifically, about information theory. Author William Poundstone explores how Claude Shannon, the major developer of information theory, affected finance, investing and gambling. These activities seem disconnected, but they all rely on managing uncertainty. Like any great idea, information theory attracted major personalities: gamblers, mobsters, academics, economists, traders and people who just wanted to make money. The story weaves through a collection of memorable people (from seventeenth-century mathematicians to Ivan Boesky) to present pertinent mathematical and scientific theories, and to explore how people used them. At times, the connections between events seem strained, but they all come together. This book is encyclopedic, exceptionally informative, and packed with great stories and characters. getAbstract.com enthusiastically recommends it to anyone seriously interested in investing, the sociology of ideas, or gambling. Indeed, read it twice: once for its theories and practical investment advice, and the other to relish its personalities.

Summary

Searching for a Sure Thing

In 1956, Claude Shannon worked at AT&T’s Bell Labs in Orange, New Jersey. The Massachusetts Institute of Technology (MIT) aggressively courted him for its faculty because of his work on information theory, the science behind today’s computers, and the field of digital communications. Shannon had the idea of developing the binary code of zeroes and ones to simulate the "on" and "off" positions in electrical circuits. Due to this work, he was one of the inventors credited with building the first computer. Based on a 1948 paper he wrote, Shannon was also known for shaping the ways that information theory contributed to developing the entire digital age. Applied in the real world, his paper led to multiple inventions including cell phones, HDTV, DNA sequencing and fiber optic cable.

Shannon was born in Petoskey, Michigan, in 1918. He picked up his grandfather’s interest in investing. Graduating from the University of Michigan in 1936, he happened to see a postcard inviting applicants to work on a new MIT computer, the Differential Analyzer. Shannon met with the computer’s inventor, Vannevar Bush, who hired him. The computer, the size of a...

About the Author

William Poundstone is the author of nine nonfiction books, two of which (Labyrinths of Reason and The Recursive Universe) were nominated for the Pulitzer Prize.

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