Ed Thorp, author of 'A Man for All Markets', discusses his journey from beating casinos to Wall Street. He shares his methodical approach, experiences with wearble computers, and encounters with shady characters. The podcast delves into Thorp's fascination with predicting roulette outcomes, the dark side of gambling and cheating in casinos, and his transition to becoming an investor. It also touches on legal cases, the rise of Michael Milken, and the value of time and continuous learning in building a successful life.
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Quick takeaways
Ed Thorp's memoir reveals a methodical person seeking knowledge, financial security, and fun.
Thorp challenges conventional wisdom, seeks edges in gambling games, and values how he spends his time.
Thorp's groundbreaking systems for Blackjack and Roulette challenge the notion that casinos always win.
Thorp's success is built on simplicity, collaboration, and a love for learning, emphasizing the importance of continuous growth.
Deep dives
The Thrilling World of Ed Thorpe: From Wearable Computers to Beating the Casinos
Ed Thorpe's memoir takes readers on a thrilling journey through his life, from his adventures with wearable computers to his success in beating the casinos. Thorpe is a methodical and rigorous individual who seeks knowledge, financial security, and fun. He explores the importance of simplicity in his contributions, which made them invisible in academia but valuable for practitioners. Thorpe's method involves identifying a clear edge in risk-taking and converting it into financial success. He shares his insights on money management, the importance of surviving in order to succeed, and the balance between academic recognition and genuine intellectual curiosity. Thorpe's story is a testament to the power of curiosity, simplicity, and finding ways to beat the odds.
The Power of Genuine Intellectual Curiosity
Ed Thorpe's life is driven by his genuine intellectual curiosity, which leads him to challenge conventional wisdom and seek new possibilities. His exploration of the mathematical theory behind gambling games, especially in Blackjack, reveals his desire to uncover edges and to find ways to win. Thorpe's collaboration with Claude Shannon and their experiments with predicting Roulette outcomes demonstrate the thrill of pursuing knowledge and the unexpected opportunities that can arise from following one's curiosity. Beyond financial success, Thorpe values how he spends his time, the people he shares it with, and the joy of finding work that feels like play.
The Journey of Beating the Casinos and Wall Street
Ed Thorpe's groundbreaking work in developing winning systems for Blackjack and Roulette sets him on a path to beat the casinos and achieve financial success. His collaboration with Claude Shannon, the father of information theory, allows him to publish his findings and gain recognition in the academic world. Thorpe's research and experiments challenge the notion that casinos always win, and he proves that a systematic approach can turn the odds in the player's favor. His insights on money management, the pursuit of edges, and finding balance in life serve as a testament to the power of dedication, intellectual curiosity, and the willingness to challenge conventional wisdom.
Simple Systems, Collaboration, and the Joy of Learning
Ed Thorpe's success in beating the casinos and Wall Street is built on simple systems, collaboration, and a love for learning. He emphasizes the importance of simplicity in his research and the development of winning strategies in Blackjack and Roulette. Thorpe's collaboration with Claude Shannon demonstrates the power of partnering with like-minded individuals and the value of sharing knowledge. Throughout his journey, Thorpe's genuine intellectual curiosity fuels his passion for finding edges and exploring new possibilities. His story serves as a reminder of the joy that comes from finding work that feels like play and the importance of continuous learning.
The Importance of Diversification in Bets and Investments
This podcast episode discusses the significance of diversifying bets and investments. It emphasizes the need to consider dosing, the size of bets, and the importance of not risking everything in one go. The episode references the famous Kelly Criterion published in 1956 by John Kelly, which provides a method to determine the appropriate dosing in bets or investments. It highlights the experiences of Ed Thorp, a mathematician, who applied lessons learned from gambling, such as how to calmly and accurately play a system and manage stakes, to his investment practices. The episode reveals how theories from academia can be applied to various fields like entrepreneurship, investing, and even blackjack.
Cheating in Casinos and Uncovering Corrupt Practices
This podcast episode explores the prevalence of cheating in casinos and the various methods used to gain an unfair advantage. It highlights the importance of developing a strong defense and understanding the tactics employed by dealers to manipulate games. The episode describes how Ed Thorp and his colleagues, through their experiences and interactions with casino insiders, learned about different cheating techniques and exposed the corruption within the industry. It also showcases the challenges faced in reporting these issues to the regulatory bodies, as some individuals within the system were either complicit or corrupted themselves.
Lessons from Warren Buffett and the Path to Investing
This podcast episode highlights the valuable lessons Ed Thorp learned from his interactions with Warren Buffett and his journey into the world of investing. It emphasizes Buffett's ability to evaluate undervalued companies and his focus on outperforming the market in the long run. Thorp contrasts his own investment approach, which involved relative mispricings of securities, allowing him to construct hedged positions and extract positive returns. The episode also explores Thorp's investment in Berkshire Hathaway, his partnership with Jay Regan, and the creation of Princeton Newport Partners, a highly automated, lean, and profitable hedge fund based on Thorp's innovative investment ideas.
Prioritizing Enjoyment and Quality of Life
This podcast episode concludes with Thorp emphasizing the importance of balancing wealth and time spent with loved ones. He shares his reflections on success, noting that true success involves having the best life rather than accumulating the most money. Thorp draws attention to the trade-offs between health, wealth, and time, highlighting how good health and personal fulfillment enrich one's life more than pursuing excessive wealth. He relates his personal experiences of happiness derived from spending time with family and pursuing personal interests, emphasizing that beyond basic necessities, such as food and shelter, the true value lies in relationships and personal fulfillment.
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1. The book reveals a thorough, rigorous, methodical person in search of life, knowledge, financial security, and, not least of all, fun.
2. I learned at an early age to teach myself. This paid off later on because there weren’t any courses in how to beat blackjack, build a computer for roulette, or launch a market-neutral hedge fund.
3. Even though the Goliath I was challenging had always won, I knew something no one else did: He was nearsighted, clumsy, slow, and stupid, and we were going to fight on my terms, not his.
4. I admired the heroes who, through extraordinary abilities and resourcefulness, achieved great things. I may have been inspired to mirror this in the future by using my mind to overcome intellectual obstacles.
5. Rather than subscribing to widely accepted views—such as you can’t beat the casinos—I checked for myself.
6. What matters in life is how you spend your time.
7. Life is like reading a novel or running a marathon. It’s not so much about reaching a goal but rather about the journey itself and the experiences along the way. As Benjamin Franklin famously said, “Time is the stuff life is made of,” and how you spend it makes all the difference.
8. I also believed then, as I do now after more than fifty years as a money manager, that the surest way to get rich is to play only those gambling games or make those investments where I have an edge.
9. Since much of what we were doing was being invented as we went along, and our investment approach was new, I had to teach a unique set of skills. I chose young smart people just out of university because they were not set in their ways from previous jobs. Better to teach a young athlete who comes fresh to his sport than to retrain one who has learned bad form.
10. Whatever you do, enjoy your life and the people who share it with you, and leave something good of yourself for the generations to follow.
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Get access to the World’s Most Valuable Notebook for Founders at Founders Notes.com
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“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth
