John Larry Kelly, Jr

John Larry Kelly, Jr. (1923–1965), was a scientist who worked at Bell Labs. He is best known for formulating the Kelly criterion, a formula to determine what proportion of wealth to risk in a sequence of positive expected value bets to maximize the rate of return.

He was born in Corsicana, Texas. He spent four years in the US Navy as a pilot during World War II before entering the University of Texas at Austin. He graduated with a PhD in Physics in 1953.

In 1961, Kelly and colleagues Carol Lochbaum and Lou Gerstman created one of the most famous moments in the history of Bell Telephone Laboratories by using an IBM 704 computer to synthesize speech. Their voice recorder synthesizer vocoder recreated the song Daisy Bell, with musical accompaniment from Max Mathews. Arthur C. Clarke of 2001: A Space Odyssey fame visited his friend and colleague John Pierce at the Bell Labs Murray Hill facility and heard this remarkable speech synthesis demonstration. Clarke was so impressed that he used it in one of the climactic scenes of his novel and screenplay for 2001: A Space Odyssey, when the HAL 9000 computer sings the same song as it is being disabled by astronaut Dave Bowman.

John Kelly was a remarkable character. Apart from being a physicist he embodied certain stereotypical Texan character attributes being a tough guy, recreational gunslinger and a daredevil pilot all at the same time. He was also an associate of Claude Shannon at Bell Labs. Together they developed a Game theory type method based on the principles of information theory developed by Shannon. It is reported that Shannon and his wife Betty went to Las Vegas with M.I.T. mathematician Ed Thorp, and made very successful forays in roulette and blackjack using this method, later called the Kelly criterion, making a fortune as detailed in the book Fortune's Formula by William Poundstone and corroborated by the writings of Elwyn Berlekamp, Kelly's research assistant in 1960 and 1962. Shannon and Thorp also applied the same theory to the stock market with even better results.

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