Michael Covel speaks with William Poundstone. Poundstone is the author of Fortune’s Formula, a book about the Kelly criterion. This is risk management at its heart. All great trend traders have had to deal with Kelly. Covel and Poundstone discuss Claude Shannon; the connection between Al Capone, the Kelly formula, bookmaking, and the telephone industry; Bell Labs and information theory; why, when betting, if there’s a small chance of losing everything, you will eventually lose everything; criticisms of the Kelly criterion; Ed Thorp, blackjack, and card counting; Long-Term Capital Management; Martingale vs. Kelly; and early development of the Black-Scholes formula.