Dance with uncertainty — bet on expected value, not certainty
EV = (Probability of Gain × Size of Gain) − (Probability of Loss × Size of Loss)
Expected Value (EV): Only take bets with positive EV — even if you lose sometimes, the system wins.
Bayesian Probability: Use new data to constantly update your beliefs. Stay rational, not emotional.
Kelly Criterion: Size your bets based on your edge. Never go all-in — protect your ability to keep playing.
Advanced: Stop merely tolerating probability — start designing systems where the odds are in your favor.
EV calculation: 20% chance × 20x gain + 80% × -1x loss = 3.2x expected return → Built a $10B short position → Earned over $1B in a single day
Identified a massive mispricing in mortgage-backed securities → Designed a positive-EV bet via credit default swaps → Made $15B when the housing market collapsed