In this book, the prolific William Poundstone presents strategies gleaned from numbers theory, statistics, probability and human behavior that his further research indicates can improve your chances of more accurately predicting situations such as whether a pitcher will throw consecutive fastballs, the frequency of a card player’s bluff, how to outwit the stock market and outguess office football pools, and, of course, how to win at rock-paper-scissors. Some explanations by Poundstone, author of Are You Smart Enough to Work at Google?, make sense. Others are less convincing.
In the chapter on “Outguessing a Ponzi Scheme,” Poundstone asserts that Bernie Madoff’s annual return on investment wasn’t “too good to be true…. Other money managers have racked up better records,” he writes. As an example, Poundstone cites Jim Simons, who started his Medallion Fund two years before Madoff. “Since 1988, Medallion’s returns have averaged 45 percent per year,” writes Poundstone, emphasizing that Simons is a mathematician who hires other mathematicians to invent secret trading algorithms. According to Poundstone, Simons didn’t see the Ponzi in Madoff’s scheme because Madoff’s returns weren’t unreasonably high. It’s a stretch to believe that Poundstone’s pithy tips might enable readers to suss out a Madoff-style schemer where Simons couldn’t.
Poundstone clearly delights in digging up studies and parsing theories, but his conclusions fail to dazzle. Still, for those who like brain teasers and enjoy studying patterns such as the mathematical underpinnings of a winning streak or the numerical patterns in winning lottery numbers, this book delivers.
by William Poundstone
Little, Brown; $26