> If you make a mistake in your probability estimation in your favor, then great, you win more, but if you make a mistake against, it bites you and you lose mor

> If you make a mistake in your probability estimation in your favor, then great, you win more, but if you make a mistake against, it bites you and you lose more than you would have thought. There are two mistakes we can make due to inaccurate probability estimation that are not on our favor: Betting too little, and betting too much (relative to the actual Kelly optimum with the true probabilities). I believe betting too much is disproportionately worse than betting too little. But I haven't seen a direct argument for why this would be so. The Nick Yoder Blog post is interesting, but he basically says: people just happen to be risk averse, and that's the reason we happen to want to bet less than the Kelly optimum. > Most people assign a negative value to risk. That’s why we pay a premium to insurance companies to haul away excess risk. But I don't think a psychological disposition is the right explanation here. The original video I linked to suggests that it is actually irrational to bet the estimated Kelly optimum when the probabilities are estimated. No matter whether you are psychologically risk averse or not.