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

Bell Labs Nokia Bell Labs, commonly referred to as ''Bell Labs'', is an American industrial research and development company owned by Finnish technology company Nokia. With headquarters located in Murray Hill, New Jersey, Murray Hill, New Jersey, the compa ...

. 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 mathematical study of the quantification (science), quantification, Data storage, storage, and telecommunications, communication of information. The field was established and formalized by 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 for sizing a sequence of bets by maximizing the long-term expected value of the logarithm of wealth, which is equivalent to maximizing the long-term expected ...

'' 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

Early life

He was born in

Corsicana, Texas Corsicana is a city in and the county seat of Navarro County, Texas, United States. It is located on Interstate 45, 50 miles southeast of Dallas, Texas, Dallas. Its population was 25,109 at the 2020 census. Corsicana is considered an important ...

. 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 university, public research university in Austin, Texas, United States. Founded in 1883, it is the flagship institution of the University of Texas System. With 53,082 stud ...

. 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 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 ''vo''ice and en''coder'') 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 wa ...

'' recreated the song '' Daisy Bell'', with musical accompaniment from

Max Mathews Max Vernon Mathews (November 13, 1926 – April 21, 2011) was an American pioneer of computer music. Biography Max Vernon Mathews was born in Columbus, Nebraska, to two science schoolteachers. His father in particular taught physics, chemistry ...

. Arthur C. Clarke 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 langua ...

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 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, computer scientist, cryptographer and inventor known as the "father of information theory" and the man who laid the foundations of th ...

at Bell Labs. Together they developed a

Game theory Game theory is the study of mathematical models of strategic interactions. It has applications in many fields of social science, and is used extensively in economics, logic, systems science and computer science. Initially, game theory addressed ...

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, colloquially referred to as Vegas, is the most populous city in the U.S. state of Nevada and the county seat of Clark County. The Las Vegas Valley metropolitan area is the largest within the greater Mojave Desert, and second-l ...

with M.I.T. 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 correlatio ...

, and made very successful forays in

roulette Roulette (named after the French language, French word meaning "little wheel") is a casino game which was likely developed from the Italy, Italian game Biribi. In the game, a player may choose to place a bet on a single number, various grouping ...

and

blackjack Blackjack (formerly black jack or ''vingt-un'') is a casino banking game. It is the most widely played casino banking game in the world. It uses decks of 52 cards and descends from a global family of casino banking games known as " twenty-one ...

using this method, later called the

, making a fortune as detailed in the book ''Fortune's Formula'' by William PoundstonePoundstone, 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 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 investor and philanthropist who currently serves as the chairman and CEO of the conglomerate holding company Berkshire Hathaway. As a result of his investment success, Buffett is ...

, Bill Gross and Jim Simons 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 Elwyn Berlekamp, 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. Axcom was the outsourced manager for Renaissance Technologies Corp hedge fund flagship, the Medallion Fund. In 1990, Axcom was acquired by its part-owner, fellow mathematician and founder of Renaissance, Jim Simons.

Death

A heavy smoker who could go through six packs of cigarettes a day, Kelly died of a

stroke Stroke is a medical condition in which poor cerebral circulation, blood flow to a part of the brain causes cell death. There are two main types of stroke: brain ischemia, ischemic, due to lack of blood flow, and intracranial hemorrhage, hemor ...

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