Escaping the odds and a formula for life (2024)

Summary

September 16, 2024 We all make bets in life—on our careers, relationships, and decisions. This is a personal story that might change how you approach your own bets, too. From an escape room adventure in Vegas to an obsession with the perfect betting strategy, a friend’s simple question, How should I bet to maximize my returns?, led me down a rabbit hole of math and puzzles, ultimately uncovering the Kelly Criterion. As I deciphered the formula, I realized it extends far beyond finance or gambling. A few times a year, my two closest friends and I meet in a new city to reconnect and recharge. We all live in different parts of the U.S., so it’s our chance to catch up. Our latest hobby? Escape rooms—and no, we’re not exaggerating when we say we do three or four of them back-to-back. This time, we chose Las Vegas. Our partners think our hobby is strange, but not as much as the taxi drivers who drop us off at sketchy spots on the outskirts of Vegas. "Oh, it’s an escape room," we say casually. "We lock ourselves up in a room and solve puzzles to escape." Best leave the rest to their imagination. Over coffee before our session, my friend Chris shares his latest side project: an AI/ML model to predict (American) football games. As a software engineer and sports fanatic, he’s eager to test his model with a few bets. He poses a question: "Given a set of predictions, how should I bet to maximize my returns?" We pause. "What do you mean?" "My model predicts the probabilities of teams winning. Based on that, I want to figure out the best way to place my bets." "Don’t payouts affect your decision? A higher payout would influence your bet, right?" "Exactly. I want to factor in the expected returns and bet on games with favorable odds," he says. "And what about confidence intervals? Shouldn’t your model’s confidence in each prediction guide your bet?" He nods but waves it off. "I want to keep it simple. I just want to know how to spread my bets. I can’t drop all my money on one game...