After graduating, he moved across the country and began working at the Massachusetts Institute of Technology (MIT) – which, coincidentally, spawned the MIT Blackjack Team. Thorp earned his first professor job at New Mexico State University. He taught mathematics here from 1961 until 1965. Mit Professor Blackjack, the casino in san clemente, what is poker hand problem, slots in lake zurich.

Many gambling legends make their mark in casino gaming and fade away. While these legends may get rich from their exploits, they never attain fame in any other niche.

Edward Thorp is an exception to the norm. The “Father of Modern Card Counting” is not only a blackjack icon but also an investment guru.

The 21 true story reveals that the real MIT Blackjack Team was led by three individuals, none of whom were professors. Arguably, the most notable is Bill Kaplan, a Harvard Business school graduate who had also done his undergraduate studies at Harvard. John Chang and J.P. Massar were also very much the basis for 21 's Micky Rosa. Thorp is an American hedge fund manager who began his career as a professor of mathematics at MIT. In between those two endeavors he visited Las Vegas, played some blackjack, became enamored of the game’s continually changing house edge and wrote the most famous book on gambling ever which he titled Beat the Dealer. In reality, the MIT blackjack team was not founded by an MIT professor, nor was it the brainchild of one man as depicted in the film. Three former MIT students lead the blackjack team at various points in the team’s history. In fact, the MIT blackjack team wasn’t born at MIT at all. It was all started by a Harvard graduate.

With an $800 million net worth, Thorp is something of a mini Warren Buffet. In fact, he gained much of his fortune by betting on Buffet’s company, Berkshire Hathaway.

You can read more about Thorp and his stellar blackjack and investing accomplishments below. You’ll also see if it’s possible to emulate Thorp’s rise to success today.

Why Is Edward Thorp a Blackjack Genius?

Born in 1932, Edward O. Thorp’s early live revolved around schooling. He graduated from the University of California with a Ph.D. in math.

After graduating, he moved across the country and began working at the Massachusetts Institute of Technology (MIT) – which, coincidentally, spawned the MIT Blackjack Team.

Thorp earned his first professor job at New Mexico State University. He taught mathematics here from 1961 until 1965.

During his time at New Mexico State, Thorp listened to colleagues discuss how the house can’t be beaten in gambling. He decided to put this theory to the test.

Using an IBM 704 computer, Thorp began studying the probabilities of blackjack. Drawing inspiration from the Kelly criterion, he eventually developed card counting and betting schemes that could beat the game.

Blackjack card counting wasn’t new at the time. A group of former Army veterans named “The Four Horsemen” devised a rudimentary counting system. However, their strategy could only lower the house advantage—not beat it.

He developed the “Thorp Count,” which is capable of giving players a notable edge in single-deck blackjack games. At the time, single-deck blackjack was widely available in Nevada.

So, he traveled to Nevada with Manny Kimmel, a professional gambler and former bookmaker. They first visited casinos in Lake Tahoe and Reno, winning $11,000 in profits over one weekend.

He and Kimmel also hit Las Vegas casinos during the trip. They continued their winning ways and used disguises to hide their identities.

In 1962, Thorp decided to put his blackjack knowledge into writing. He released Beat the Dealer, which taught amateurs how they could profit from blackjack. Beat the Dealer immediately became a New York Times bestseller after selling 700,000 copies.

Success in Other Gambling Ventures

Thorp didn’t set out to beat blackjack for the money. Instead, he did so as an academic exercise to prove that the house can be toppled.

After showing that card counting works, he set out on other gambling related pursuits. While a professor of mathematics at the Massachusetts Institute of Technology (MIT), he became the first gambler to use a roulette computer.

Thorp, an MIT colleague, and his wife, Betty, visited Las Vegas to play roulette. They wore a mini computer to calculate the wheel and ball velocity. They’d use this information to predict the ball’s resting spot and place bets accordingly.

Of course, roulette computers are illegal in every gambling jurisdiction today. But Thorp used one before any jurisdictions outlawed them.

His gambling successes didn’t come without their downsides. Casinos caught onto his exploits and tried every trick in the book—and even some not in the book—to stop him.

Casinos regularly served him alcohol in hopes that he’d take the bait and start losing. Thorp even noticed that the accelerator linkage on his car had been altered while driving home from Vegas.

He didn’t directly accuse any of the casinos of trying to cause him harm. However, he did note that readers could draw conclusions on who tampered with his vehicle.

Move Into the Investment World

Edward Thorp conquered the gambling world when he didn’t even care about the winnings. Already one of the top professional gamblers without trying, he decided to move onto another pursuit.

Of course, looking for undervalued stocks has never been a closely guarded strategy. But Beat the Market discusses doing so in an in-depth manner.

Encouraged by another successful book, Thorp launched his own hedge fund called Princeton Newport Partners. For 20 years, Princeton Newport became one of the most-successful hedge funds in the game before disbanding.

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It netted an average annual return of 19.1% during this span. It was also the first fund to successfully employ quantitative analysis in the stock market.

Big Success With Berkshire Hathaway

Founded in 1969, Princeton Newport Partners had plenty of general success. However, no move by Thorp nor this hedge fund was as big as buying Berkshire Hathaway stock.

Thorp met Berkshire’s owner, Warren Buffet, in 1968. He didn’t actually invest in the company, though, until 1982, when its stock was $982.50 per share.

Waiting to buy didn’t hurt Thorp too badly. Each Berkshire Hathaway share is worth over $297,000 today.

During an interview with Barron’s, Thorp describes his meeting with Buffet and how he ultimately decided to buy their stock years later:

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“One good stroke of good fortune was meeting Warren Buffett in 1968. It led me to realize that I needed to invest in Berkshire Hathaway, although I didn’t do it until 1982. It’s my single investment in the stock market. […] I also have some hedge funds, but I consider them not as good as Berkshire, so I use them to spend and finance other things I do.”

Where Is Ed Thorp at Today?

Even at 87 years old, Edward Thorp is still active in the trading world. After 30+ years of successful trading, he’s currently worth $800 billion.

The Beat the Market and Beat the Dealer author continues to reap profits from his Berkshire Hathaway shares. Thorp hasn’t divulged exactly how many shares he owns.

However, he did note that Berkshire Hathaway is the only stock in his portfolio. Considering that Berkshire is one of the best-performing companies over the past few decades, this is definitely a good thing.

Can One Still Go From a Casino Pro to a 9-Figure Investor?

Edward Thorp didn’t just start playing real money blackjack at a time when the game was vulnerable. He invented the original method for beating it!

He and Kimmel made $11,000 during their first weekend of using the Thorp Count. When adjusted for inflation, this amount is worth over $95,000 today.

Assuming you knew Thorp’s secrets in 1961, you could’ve made seven figures by hitting different casinos. You’d have earned eight figures when accounting for inflation.

From here, you could’ve taken the money and invested it to eventually make yourself worth $100 million or more (nine figures). Of course, this scenario amounts to nothing more than hindsight.

Thorp quickly blew the cover off his secrets with Beat the Dealer. Kimmel wasn’t happy about this either, because he planned on making a long and lucrative career out of card counting.

Thorp’s revelation kicked off a game of cat-and-mouse between players and casinos. The latter have been aware of and looking for card counters ever since.

They’ve also added decks to the shoe and instated unfavorable rules (e.g. 6-to-5 natural blackjack payouts) to thwart advantage players.

Of course, gamblers have used various means to improve the card counting practice. They use systems that account for multiple decks (e.g. Hi-Lo) and training programs to improve their skills.

In the end, you need to be a much better counter to make serious profits today. Even at that, you won’t be regularly raking in the kind of money that Thorp did.

You might be able to earn six figures and parlay some of that money into successful investments. But you shouldn’t expect to mimic Thorp’s career through counting cards and investing alone.

Conclusion

Edward Thorp is one of the exclusive members of the Blackjack Hall of Fame. Perhaps nobody is more deserving of this honor than Thorp given that he invented modern counting.

But the former mathematics professor has proven that his skills go beyond the art of gambling. He also successfully ran a hedge fund for two decades that provided nearly 20% returns annually.

Thorp is worth $800 million today, meaning he doesn’t exactly need to worry about money for the rest of his life. His net worth should only continue increasing given the long-term success of his one-and-only holding, Berkshire Hathaway.

Edward Oakley Thorp (born August 14, 1932) is an American mathematics professor, author, hedge fund manager, and blackjack researcher. He pioneered the modern applications of probability theory, including the harnessing of very small correlations for reliable financial gain.

Thorp is the author of Beat the Dealer, which mathematically proved that the house advantage in blackjack could be overcome by card counting.^[1] He also developed and applied effective hedge fund techniques in the financial markets, and collaborated with Claude Shannon in creating the first wearable computer.^[2]

Thorp received his Ph.D. in mathematics from the University of California, Los Angeles in 1958, and worked at the Massachusetts Institute of Technology (MIT) from 1959 to 1961. He was a professor of mathematics from 1961 to 1965 at New Mexico State University, and then joined the University of California, Irvine where he was a professor of mathematics from 1965 to 1977 and a professor of mathematics and finance from 1977 to 1982.^[3]

Computer-aided research in blackjack[edit]

Thorp used the IBM 704 as a research tool in order to investigate the probabilities of winning while developing his blackjack game theory, which was based on the Kelly criterion, which he learned about from the 1956 paper by Kelly.^[4][5][6][7] He learned Fortran in order to program the equations needed for his theoretical research model on the probabilities of winning at blackjack. Thorp analyzed the game of blackjack to a great extent this way, while devising card-counting schemes with the aid of the IBM 704 in order to improve his odds,^[8] especially near the end of a card deck that is not being reshuffled after every deal.

Applied research in Reno, Lake Tahoe and Las Vegas[edit]

Thorp decided to test his theory in practice in Reno, Lake Tahoe, and Las Vegas.^[6][8][9]Thorp started his applied research using $10,000, with Manny Kimmel, a wealthy professional gambler and former bookmaker,^[10] providing the venture capital. First they visited Reno and Lake Tahoe establishments where they tested Thorp's theory at the local blackjack tables.^[9] The experimental results proved successful and his theory was verified since he won $11,000 in a single weekend.^[6] Casinos now shuffle well before the end of the deck as a countermeasure to his methods. During his Las Vegas casino visits Thorp frequently used disguises such as wraparound glasses and false beards.^[9] In addition to the blackjack activities, Thorp had assembled a baccarat team which was also winning.^[9]

News quickly spread throughout the gambling community, which was eager for new methods of winning, while Thorp became an instant celebrity among blackjack aficionados. Due to the great demand generated about disseminating his research results to a wider gambling audience, he wrote the book Beat the Dealer in 1966, widely considered the original card counting manual,^[11]which sold over 700,000 copies, a huge number for a specialty title which earned it a place in the New York Times bestseller list, much to the chagrin of Kimmel whose identity was thinly disguised in the book as Mr. X.^[6]

Thorp's blackjack research^[12] is one of the very few examples where results from such research reached the public directly, completely bypassing the usual academic peer review process cycle. He has also stated that he considered the whole experiment an academic exercise.^[6]

In addition, Thorp, while a professor of mathematics at MIT, met Claude Shannon, and took him and his wife Betty Shannon as partners on weekend forays to Las Vegas to play roulette and blackjack, at which Thorp was very successful.^[13]His team's roulette play was the first instance of using a wearable computer in a casino — something which is now illegal, as of May 30, 1985, when the Nevada devices law came into effect as an emergency measure targeting blackjack and roulette devices.^[2][13] The wearable computer was co-developed with Claude Shannon between 1960–61. Thefinal operating version of the device was tested in Shannon's home lab at his basement in June 1961.^[2] His achievements have led him to become an inaugural member of the Blackjack Hall of Fame.^[14]

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He also devised the 'Thorp count', a method for calculating the likelihood of winning in certain endgame positions in backgammon.^[15]

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Stock market[edit]

Since the late 1960s, Thorp has used his knowledge of probability and statistics in the stock market by discovering and exploiting a number of pricing anomalies in the securities markets, and he has made a significant fortune.^[5] Thorp's first hedge fund was Princeton/Newport Partners. He is currently the President of Edward O. Thorp & Associates, based in Newport Beach, California. In May 1998, Thorp reported that his personal investments yielded an annualized 20 percent rate of return averaged over 28.5 years.^[16]

Bibliography[edit]

• (Autobiography) Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market, 2017. [1]
• Edward O. Thorp, Elementary Probability, 1977, ISBN0-88275-389-4
• Edward Thorp, Beat the Dealer: A Winning Strategy for the Game of Twenty-One, ISBN0-394-70310-3
• Edward O. Thorp, Sheen T. Kassouf, Beat the Market: A Scientific Stock Market System, 1967, ISBN0-394-42439-5 (online pdf, retrieved 22 Nov 2017)
• Edward O. Thorp, The Mathematics of Gambling, 1984, ISBN0-89746-019-7 (online version part 1, part 2, part 3, part 4)
• Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone
• The Kelly Capital Growth Investment Criterion: Theory and Practice (World Scientific Handbook in Financial Economic Series), ISBN978-9814293495, February 10, 2011 by Leonard C. MacLean (Editor), Edward O. Thorp (Editor), William T. Ziemba (Editor)

See also[edit]

References[edit]

1. ^Peter A. Griffin (1979) The Theory of Blackjack, Huntington Press, ISBN978-0929712130
2. ^ ^abcEdward O. Thorp. 'The Invention of the First Wearable Computer'(PDF). Edward O. Thorp & Associates. Retrieved April 26, 2010.
3. ^'Founding professor of math donates personal, professional papers to UCI Libraries'. UCI News. UC Irvine. June 12, 2018.
4. ^Understanding Fortune’s Formula by Edward O. Thorp Copyright 2007 Quote: 'My 1962 book Beat the Dealer explained the detailed theory and practice. The “optimal” way to bet in favorable situations was an important feature.In Beat the Dealer I called this, naturally enough, “The Kelly gambling system,” since I learned about it from the 1956 paper by John L. Kelly.'
5. ^ ^abTHE KELLY CRITERION IN BLACKJACK, SPORTS BETTING, AND THE STOCK MARKET by Edward O. Thorp Paper presented at: The 10th International Conference on Gambling and Risk Taking Montreal, June 1997
6. ^ ^abcdeDiscovery channel documentary series: Breaking Vegas, Episode: 'Professor Blackjack' with interviews by Ed and Vivian Thorp
7. ^The Tech (MIT) 'Thorpe, 704 Beat Blackjack' Vol. 81 No. I Cambridge, Mass., Friday, February 10, 1961
8. ^ ^ab'American Scientist online: Bettor Math, article and book review by Elwyn Berlekamp'. Archived from the original on April 23, 2007. Retrieved March 18, 2006.CS1 maint: BOT: original-url status unknown (link)
9. ^ ^abcdIt's Bye! Bye! Blackjack Edward Thorp, the pensive professor above, is shaking the gambling world with a system for beating a great card game. He published it a year ago, and now the proof is in: it works David E. Scherman January 13, 1964 pp. 1–3 from SI Vault (beta)(CNN) Quotes: 'The unlikely trio was soon on its way to Reno and Lake Tahoe, where Thorp's horn-rimmed glasses, dark hair and fresh, scrubbed face hardly struck terror into the pit bosses. (p. 1)', 'But Edward Thorp and his computer are not done with Nevada yet. The classiest gambling game of all—just ask James Bond—is that enticing thing called baccarat, or chemin de fer. Its rules prevent a fast shuffle, and there is very little opportunity for hanky-panky. Thorp has now come up with a system to beat it, and the system seems to work. He has a baccarat team, and it is over $5,000 ahead. It has also been spotted and barred from play in two casinos. Could it be bye-bye to baccarat, too? (p. 1)' and 'But disguises frequently work. Thorp himself now uses a combination of wraparound glasses and a beard to change his appearance on successive Las Vegas visits. (p. 3)'
10. ^Breaking Vegas “Professor Blackjack.”Archived December 21, 2008, at the Wayback Machine Biography channel Rated: TVPG Running Time: 60 Minutes Quote: 'In 1961, lifelong gambler Manny Kimmel, a 'connected' New York businessman, read an article by MIT math professor Ed Thorp claiming that anyone could make a fortune at blackjack by using math theory to count cards. The mob-connected sharpie offered the young professor a deal: he would put up the money, if Thorp would put his theory to action and card-count their way to millions. From Thorp's initial research to the partnership's explosive effect on the blackjack landscape, this episode boasts fascinating facts about the game's history, colorful interviews (including with Thorp), and archival footage that evokes the timeless allure and excitement of the thriving casinos in the early `60s. '
11. ^'Blackjack Hero profile'. Blackjackhero.com. Retrieved April 26, 2010.
12. ^A favorable strategy for twenty-one. Proceedings of the National Academy of Sciences 47 (1961), 110-112
13. ^ ^ab'Poundstone, William: Fortune's Formula : The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street'. Retrieved April 26, 2010.
14. ^Anthony Curtis. 'Las Vegas Advisor on Ed Thorp'. Lasvegasadvisor.com. Retrieved April 26, 2010.
15. ^Chuck Bower (January 23, 1997). 'Cube Handling in Races: Thorpe count'. bkgm.com. Backgammon Galore. Retrieved May 8, 2013.
16. ^'Thorp's market activities'. Webhome.idirect.com. Archived from the original on October 31, 2005. Retrieved April 26, 2010.

Sources[edit]

Mit Professor Blackjack Rules

• Patterson, Scott D., The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, Crown Business, 352 pages, 2010. ISBN0-307-45337-5 via Patterson and Thorp interview on Fresh Air, February 1, 2010, including excerpt 'Chapter 2: The Godfather: Ed Thorp'

External links[edit]

• Edward O. Thorp at the Mathematics Genealogy Project