Nassim Taleb, Absorbent Barriers and House Money
&gt;&gt;So, if you look at the world as repetition of bets, under condition of survival, then mental accounting is not only not irrational but is necessary. Any other strategy would be effectively irrational.<p>No, it&#x27;s still irrational and it doesn&#x27;t matter if there is repetition of bets or just one available. Depending on your total net worth, living conditions and values you have there are good bets and bad bets. A good bet is a bet which maximizes expected utility of your money. It changes depending on your net worth of course. It doesn&#x27;t matter if you have just won or lost (this is mental accounting) it matters what&#x27;s your total net worth is at given time.<p>&gt;&gt;Actually, what I’m saying is even stronger. I am saying that even if you have the edge, in the presence of the probability of ruin, you will be ruined. Even if you had the edge … If you play long enough.<p>He wouldn&#x27;t pass 1st year college math course with that one.<p>&gt;&gt;Unless you engage in strategies designed by traders and rediscovered by every single surviving trader, very similar to what we call, something called the Kelly Criterion, which is to play with the house money<p>He doesn&#x27;t grok what Kelly Criterion is either. Kelly Criterion determines a size of the bet which maximizes  utility of money modeled as a logarithmic funciton. That&#x27;s it. It doesn&#x27;t matter if there is string of bets available or just one bet. If you have just won or lost doesn&#x27;t matter either (only your total net worth at given point).<p>&gt;&gt;And this is called, playing with the market money or playing with the house money.<p>It&#x27;s called being confused about basic math and economic concepts and then criticizing people who worked on those.<p>Typical Taleb: confused, wrong, having no new insights to offer but making up for those with new terms (absorbent barriers, really?) and a lot of words.