John Larry Kelly Jr. (December 26, 1923 – March 18, 1965), was an American scientist who worked at

Bell Labs Nokia Bell Labs, originally named Bell Telephone Laboratories (1925–1984), then AT&T Bell Laboratories (1984–1996) and Bell Labs Innovations (1996–2007), is an American industrial research and scientific development company owned by mult ...

. From a "system he'd developed to analyze information transmitted over networks," from Claude Shannon's earlier work on

information theory Information theory is the scientific study of the quantification, storage, and communication of information. The field was originally established by the works of Harry Nyquist and Ralph Hartley, in the 1920s, and Claude Shannon in the 1940s. ...

, he is best known for his 1956 work in creating the ''

Kelly criterion In probability theory, the Kelly criterion (or Kelly strategy or Kelly bet), is a formula that determines the optimal theoretical size for a bet. It is valid when the expected returns are known. The Kelly bet size is found by maximizing the expec ...

'' formula. With notable volatility in its sequence of outcomes, the Kelly criterion can be used to estimate what proportion of wealth to risk in a sequence of positive expected value bets to maximize the rate of return."The Man Who Solved the Market", Gregory Zuckerman, 2019 As a substantial warning, the outcome for the Kelly criterion's recommendation on bet-size "relies heavily on the accuracy" of the statistical probabilities given to a gamble's positive expectations.

Early life

He was born in

Corsicana, Texas Corsicana is a city in Navarro County, Texas, United States. It is located on Interstate 45, 56 miles northeast of Waco, Texas. The population was 23,770 at the 2010 census. It is the county seat of Navarro County, and an important Agri-busin ...

. He spent four years in the US Navy as a pilot during World War II before entering the

University of Texas at Austin The University of Texas at Austin (UT Austin, UT, or Texas) is a public research university in Austin, Texas. It was founded in 1883 and is the oldest institution in the University of Texas System. With 40,916 undergraduate students, 11,075 ...

. He graduated with a PhD in physics in 1953.

Speech synthesis: Enter Hal 9000

In 1961, Kelly and colleagues Carol Lochbaum and Lou Gerstman created one of the most famous moments in the history of Bell Telephone Laboratories by using an

IBM 7094 The IBM 7090 is a second-generation transistorized version of the earlier IBM 709 vacuum tube mainframe computer that was designed for "large-scale scientific and technological applications". The 7090 is the fourth member of the IBM 700/7000 s ...

computer to synthesize speech. A demonstration by Kelly and Gerstman took place on May 10, 1961, at a meeting in Philadelphia of the

Acoustical Society of America The Acoustical Society of America (ASA) is an international scientific society founded in 1929 dedicated to generating, disseminating and promoting the knowledge of acoustics and its practical applications. The Society is primarily a voluntary org ...

where a reporter noted that "A machine that talks— and sings— stole the show today as the old Bellevue Stratford vibrated with the speed of sound. The new gadget, a modified mechanical brain, recited passages from Shakespeare and sang musical selections in response to card-punched symbols, which were fed to it." Their voice recorder synthesizer ''

vocoder A vocoder (, a portmanteau of ''voice'' and ''encoder'') is a category of speech coding that analyzes and synthesizes the human voice signal for audio data compression, multiplexing, voice encryption or voice transformation. The vocoder was ...

'' recreated the song ''

Daisy Bell "Daisy Bell (Bicycle Built for Two)" is a song written in 1892 by British songwriter Harry Dacre with the well-known chorus "Daisy, Daisy / Give me your answer, do. / I'm half crazy / all for the love of you", ending with the words "a bicycle b ...

'', with musical accompaniment from

Max Mathews Max Vernon Mathews (November 13, 1926 in Columbus, Nebraska, USA – April 21, 2011 in San Francisco, CA, USA) was a pioneer of computer music. Biography Mathews studied electrical engineering at the California Institute of Technology and the Ma ...

Arthur C. Clarke Sir Arthur Charles Clarke (16 December 191719 March 2008) was an English science-fiction writer, science writer, futurist, inventor, undersea explorer, and television series host. He co-wrote the screenplay for the 1968 film '' 2001: A Spac ...

of '' 2001: A Space Odyssey'' fame visited his friend and colleague John Pierce at the Bell Labs Murray Hill facility and heard this remarkable

speech synthesis Speech synthesis is the artificial production of human speech. A computer system used for this purpose is called a speech synthesizer, and can be implemented in software or hardware products. A text-to-speech (TTS) system converts normal languag ...

demonstration. Clarke was so impressed that he used it in one of the climactic scenes of his novel and screenplay for ''2001: A Space Odyssey'',Arthur C. Clarke online Biography
when the

HAL 9000 HAL 9000 is a fictional artificial intelligence character and the main antagonist in Arthur C. Clarke's '' Space Odyssey'' series. First appearing in the 1968 film '' 2001: A Space Odyssey'', HAL ( Heuristically programmed ALgorithmic compute ...

computer sings the same song as it is being disabled by astronaut Dave Bowman.

The Las Vegas connection: Information theory and its applications to Game theory

John Kelly was an associate of

Claude Shannon Claude Elwood Shannon (April 30, 1916 – February 24, 2001) was an American mathematician, electrical engineer, and cryptographer known as a "father of information theory". As a 21-year-old master's degree student at the Massachusetts In ...

at Bell Labs. Together they developed a Game theory type method based on the principles of

developed by Shannon.John Kelly by William Poundstone website
/ref> It is reported that Shannon and his wife Betty went to

Las Vegas Las Vegas (; Spanish language, Spanish for "The Meadows"), often known simply as Vegas, is the List of United States cities by population, 25th-most populous city in the United States, the most populous city in the U.S. state, state of Neva ...

with

M.I.T. The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of ...

mathematician

Ed Thorp Edward Oakley Thorp (born August 14, 1932) is an American mathematics professor, author, hedge fund manager, and blackjack researcher. He pioneered the modern applications of probability theory, including the harnessing of very small correlati ...

, and made very successful forays in

roulette Roulette is a casino game named after the French word meaning ''little wheel'' which was likely developed from the Italian game Biribi''.'' In the game, a player may choose to place a bet on a single number, various groupings of numbers, the ...

and blackjack using this method, later called the

, making a fortune as detailed in the book ''Fortune's Formula'' by

William Poundstone William Poundstone is an American author, columnist, and skeptic. He has written a number of books including the '' Big Secrets'' series and a biography of Carl Sagan Carl Edward Sagan (; ; November 9, 1934December 20, 1996) was an American a ...

Poundstone, William: ''Fortune's Formula : The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street''
/ref> and corroborated by the writings of

Elwyn Berlekamp Elwyn Ralph Berlekamp (September 6, 1940 – April 9, 2019) was a professor of mathematics and computer science at the University of California, Berkeley.Contributors, ''IEEE Transactions on Information Theory'' 42, #3 (May 1996), p. 1048. DO10. ...

,Elwyn Berlekamp (Kelly's Research Assistant) Bio details
/ref> Kelly's research assistant in 1960 and 1962. Shannon and Thorp also applied the same theory to the stock market with even better results.William Poundstone website
/ref> Over the decades, John Kelly's scientific formula has become a part of mainstream investment theory and the most prominent users, well-known and successful billionaire investors

Warren Buffett Warren Edward Buffett ( ; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway. He is one of the most successful investors in the world and has a net w ...

, Bill Gross and

Jim Simons Jim or James Simons may refer to: *Jim Simons (mathematician) (born 1938), mathematician and hedge fund manager *Jim Simons (golfer) (1950–2005), American golfer *Jimmy Simons (born 1970), Dutch footballer *Jimmy Simons, co-winner of 2001 Primeti ...

use Kelly methods. Warren Buffett met Thorp the first time in 1968. It's said that Buffett uses a form of the Kelly criterion in deciding how much money to put into various holdings. Mathematician and game theorist

, once an assistant to Kelly at Bell Labs, had applied the same logical algorithm for Axcom Trading Advisors, an alternative investment management company that he led after acquiring most of the equity of the co-founder and prior leader, mathematician

James Ax James Burton Ax (10 January 1937 – 11 June 2006) was an American mathematician who made groundbreaking contributions in algebra and number theory using model theory. He shared, with Simon B. Kochen, the seventh Frank Nelson Cole Prize in N ...

. Axcom was the outsourced manager for Renaissance Technologies Corp hedge fund flagship, the

Medallion Fund Renaissance Technologies LLC, also known as RenTech or RenTec, is an American hedge fund based in East Setauket, New York, on Long Island, which specializes in systematic trading using quantitative models derived from mathematical and statisti ...

. In 1990, Axcom was acquired by its part-owner, fellow mathematician and founder of Renaissance,

Death

A heavy smoker who could go through six packs of cigarettes a day, Kelly died of a stroke on a Manhattan sidewalk at the age of 41 on March 18, 1965.

References

Cited references

General references

Bell Labs Text to Speech Systems

American Scientist online: Bettor Math, article and book review by Elwyn Berlekamp

Elwyn Berlekamp (Kelly's Research Assistant) Bio detailsJohn Kelly and Edward O. Thorp

External links

Kelly criterion
– description of Kelly criterion {{DEFAULTSORT:Kelly, John 1923 births 1965 deaths 20th-century American physicists Scientists at Bell Labs People from Corsicana, Texas University of Texas at Austin College of Natural Sciences alumni