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As this study shows, psychopaths are much more willing to take advantage of expected gains despite recent losses as opposed to normal people who frequently stop after a series of losses.

Has there been any follow up to this to observe whether psychopaths also take the Kelly Criterion into account? The participation rate was still only 84% for the psychopath group. I didn't see any data that shows whether those that stopped participating were ones whose amount of money in immediate control declined to nothing or near-nothing. If those who lost stopped at some point relative to the amount of money in their immediate control instead of a bad run regardless of money in immediate control, it might indicate that psychopaths are acting more rational than normal because they quit when the Kelly Criterion is being violated, that they quit positive expected values when their "risk of ruin" is greater than ~0%.

Do psychopaths care about the so-called "risk of ruin"?

Kelly Criterion

The math behind the Kelly Criterion was actually originally developed by John L. Kelly, Jr. to maximize data transfer rates relative to risk of data loss due to noisy (error prone) lines. Taking into account those two factors, the amount of data to transfer, the possible loss, and the possible success, choices of which lines to use at which times and amounts of data relative to noise can be quantitatively made to more or less maximize the total expected data transfer rate with an almost certain chance of no loss over time.

Later, Edward O. Thorpe, the first to prove that blackjack can be beat by counting cards, discovered that the Kelly Criterion can be employed to maximize returns from card counting with an almost certain chance of no loss over time (now called the "risk of ruin") when "bankroll" (total amount available for gambling), risk of a single or series of gambles, cost of the single/series of gambles, and payoff of the single/series of gambles are all taken into account.

A formula was also derived to give a risk of total loss, "risk of ruin", from a collection of potential investment choices. When the Kelly Criterion can be strictly adhered to, the risk of ruin is always ~0%.

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it would be helpful to define the Kelly Criterion –  Krysta Aug 22 '13 at 14:05
@Krysta plz note edit –  Cincinnatus Aug 22 '13 at 19:48
@WhyDoYouThinkThatIsTrue I appreciate it! –  Cincinnatus Aug 22 '13 at 21:10

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