Why predicting the future is more than just horseplay

April 24, 2017 --Three years out of a PhD in physics in 1953, John Kelly Jr. published a breakthrough paper about insider information in horse racing in an unlikely place: the Bell Labs Technical Journal. By the time it was in print, the paper's title had been scrubbed of its references to gambling – the AT&T executives didn't care for Bell Labs to be so directly associated with horse racing – but the content remained. Dr. Kelly had not just cracked the mathematics underlying a type of gambling, but he had also revealed deeper patterns about the nature of prediction. When the odds posted by the track are different from the odds determined using insider information, Kelly's formula explains how to take those differences and place the best bets possible, mathematically speaking. The formula is powerful in its simplicity.