>>If you bet 99% of your money on a coin flip, you'll eventually lose a flip and have too little money to take advantage of future coin flips.
You are comparing Kelly bets to being stupid so of course Kelly wins. Kelly maximizes just one thing - log of bankroll. If your utility is not logarithmic it's not optimal to use Kelly bet sizings and if your utility is logarithmic with some multiplier then you need to adjust Kelly as well (which btw gamblers using Kelly are doing as pure Kelly criterion is universally considered too risky).
>>The first is the return from the next coin flip, which when you have an edge, makes you want to bet as much as possible on this flip. The second is the return from all future flips, which makes you want to bet less so that a poor result doesn't permanently diminish your ability to make bets.
While pure result diminish (or kills) your ability to make money from further bet betting it all and winning increases it. If you want to maximize EV of total amount of money you bet all at every turn and this is the optimal solution to optimize that. If you want to optimize logarithm of total amount of money you bet Kelly. If you want to maximize more conservative utility then you bet something else. There is nothing magical about Kelly criterion other than that.
I guess one thing you can say about the Kelly criterion without mentioning utility is that if Alice uses the Kelly criterion and Bob uses some other strategy (which is still of the form "bet some fixed proportion of your money each turn") then the probability that Alice has more money than Bob tends to 1 as the number of turns increases.
Of course in the cases where Bob has more money he might have much more money, so this fact isn't very relevant to them unless they have appropriate utility functions.
Another thing that occurs to me is that your utility function is changed by the opportunities you expect to encounter. If your utility function for money would normally be U_0, and you are about to be allowed to make a bunch of bets, then your current utility function, U_-1, is equal to the expectation of U_0 under the probability distribution that results from you betting optimally starting with however much money you have.
Maybe there's a family of utility functions for which if U_0 is in that family then U_-1 is approximately logarithmic? Then that would be a good justification for using the Kelly criterion if you have a long string of bets ahead of you. On the other hand I just checked the HARA (https://en.wikipedia.org/wiki/Hyperbolic_absolute_risk_avers...) family of utility functions, and they're all stable under the process I described. So there are certainly a lot of functions that don't become logarithmic.
You are comparing Kelly bets to being stupid so of course Kelly wins. Kelly maximizes just one thing - log of bankroll. If your utility is not logarithmic it's not optimal to use Kelly bet sizings and if your utility is logarithmic with some multiplier then you need to adjust Kelly as well (which btw gamblers using Kelly are doing as pure Kelly criterion is universally considered too risky).
>>The first is the return from the next coin flip, which when you have an edge, makes you want to bet as much as possible on this flip. The second is the return from all future flips, which makes you want to bet less so that a poor result doesn't permanently diminish your ability to make bets.
While pure result diminish (or kills) your ability to make money from further bet betting it all and winning increases it. If you want to maximize EV of total amount of money you bet all at every turn and this is the optimal solution to optimize that. If you want to optimize logarithm of total amount of money you bet Kelly. If you want to maximize more conservative utility then you bet something else. There is nothing magical about Kelly criterion other than that.