Alright, let’s talk about this thing called Fortune’s Formula. I bumped into it a while back, probably reading some random article online, maybe trying to figure out how not to lose my shirt dabbling in some side investments. Wasn’t looking for a magic wand, just curious, you know?
First look? Seemed kinda complicated. Lots of talk about math, probabilities, edges. Stuff that makes your eyes glaze over if you’re not careful. I grabbed a book about it, the famous one, tried to get my head around it. The core idea seemed simple enough: figure out how much of your money to bet on something based on how likely you think you are to win, and what the payout is.
My First Go At It
So, I thought, okay, let’s try this. Not with my life savings, mind you. I started small, almost like a game. I had this little pot of money I used for trying out stocks. Nothing serious, just learning.
- Step 1: Pick something. Found a company I thought I understood reasonably well. Felt like it had a decent chance of going up.
- Step 2: Guess the odds. This was the tricky part. How sure was I? 60%? 70%? And what was the potential gain versus loss? Made some rough guesses. Probably totally wrong, looking back.
- Step 3: Apply the ‘idea’. Didn’t use the strict formula at first. Just the concept: if I felt more confident and the potential payoff looked good compared to the risk, I’d put in a slightly bigger chunk of my little ‘play money’ pot. If I was unsure, just a tiny bit.
Did it work? Well, I didn’t suddenly become a millionaire. Shocking, I know. Sometimes it seemed okay, other times my guesses were way off and I lost a bit. The formula didn’t make my guesses any better, that became pretty clear fast.
The Real Problem Wasn’t the Math
After messing around with this for a bit, I realized the hard part isn’t the formula itself. You can find calculators online for that stuff. The real beast is knowing the inputs.
What are the actual odds of winning? What’s your real edge? In a casino game like blackjack, maybe skilled players can figure that out reasonably well. But in the real world? Investing? Business decisions? Even deciding how much time to put into learning a new skill versus just doing your job?
You’re mostly just guessing. You think you have an edge, you feel like the odds are in your favor. But it’s fuzzy. Life isn’t a clean deck of cards. It’s messy. Information is incomplete, things change, unexpected stuff happens all the time.
I remember trying to apply this thinking to a side project I was considering. Spent ages trying to figure out the ‘probability of success’ and ‘potential return’ to decide how much weekend time to sink into it. Ended up just confusing myself more. In the end, I just went with my gut feeling, tempered with a dose of ‘don’t spend time you can’t afford to lose’.
What Stuck With Me
So, do I use Fortune’s Formula every day? Nope. Not the actual calculation. But the experience hammered home a couple of things that stuck:
- Position sizing matters. A lot. Don’t bet everything on one thing, no matter how sure you feel. Seems obvious, but emotion can make you do stupid things.
- Be honest about uncertainty. Acknowledging that you don’t know the exact odds is crucial. It stops you from getting overconfident and betting too big based on shaky assumptions.
- Focus on survival. The formula is really about maximizing growth without blowing up. The ‘not blowing up’ part is probably the most important lesson for regular folks.
It became less about a magic formula and more about a mindset. A reminder to manage risk, to not be greedy, and to accept that most of the time, we’re operating with imperfect information. It’s a tool, or rather the idea behind the tool, that encourages a bit more discipline in decision-making, whether it’s about money or just how you spend your time and energy. And that’s probably the most practical takeaway I got from wrestling with it.
