How I Beat the Dealer and the Market - From Las Vegas to Wall Street

The first part of the book was interesting- card counting, stocks, etc. Unfortunately the second was just a re-hash of financial concepts and Thorp's views on Wall Street. I finally just gave up and skimmed it.

This is an extraordinary book that all investors should study, and is also fascinating in terms of human interest and mathematical analysis. Almost everyone has heard of Warren Buffett and most investors know of John Bogle, but Edward Thorp remains better known as the mathematics professor who figured out how to beat casinos than as the investment manager who either invented or perfected many of the great quantitative investing strategies over nearly fifty years.

What people sometimes overlook is how outstanding these three men are. Of course Warren Buffett was more successful than any other stock investor, but while only a few other managers managed to beat the average stock over extended periods of time, Buffett's results are better than the best stock of any with at least a 30 year track record since 1926. John Bogle built the company that delivered extraordinary results for investors, and changed the entire retail investment industry from one that made managers wealthy while subtracting value from investors (after taxes, fees, expenses, inflation and a regrettable investor tendency to get into the market after upswings and out after downswings) to one with a wide variety of sensible investment products (still not the majority, alas); and he gave the management company away to fund investors rather than keeping it to make himself a billionaire.

Buffett is the kind of investment manager economists love, he created trillions of dollars of economic value by shrewdly directing capital to better uses. Bogle is beloved of finance professors, he exploited the efficiency of financial markets to tilt the playing field in favor of retail investors instead of against them. Thorp is revered by scientists, he studied the inner workings of financial markets from an outsider's perspective and created an extraordinary statistical track record. He didn't create the economic value Buffett did, or help as many investors as Bogle did, but he did it essentially without ever losing money (he did have a very few months with small losses, but no longer periods). Buffett has had some brutal downswings along the way, as have investors in Bogle's index funds.

But it's not the track record alone that makes Thorp unique, there are other statistically overwhelming track records out there (many people would vote for James Simons' track record as better, although it was for a shorter period than Thorp's, it was done with far more money and higher total returns). The other scientists who used similar mathematical techniques to eliminate the losses from investments before 1990--people like David Shaw, Peter Muller and Ken Griffin--are fanatically secretive. Thorp has described all his secrets (well, he did hold back a few technical details from time to time, but never the basic ideas that would allow any quant to exploit the same principles) in books, articles, interviews and presentations.

Despite Thorp's long-term record of transparency, only about 20% of this book covers material from earlier books and articles. It does describe Thorp's adventures in beating blackjack, baccarat and roulette, as well as the convertible arbitrage strategy detailed in Beat the Market, but in fairly quick overviews. What's new is a comprehensive autobiography, from mad scientist kid growing up during the Great Depression, to humble, sensible, older rich guy enjoying life, with a lot of interesting stops along the way.

There are also trenchant discussions of financial markets, people, politics and life. It's hard to overstate how insightful these are. Thorp is a top professional mathematician who brings a logical rigor to all his topics, but he's also a guy who actually tried his ideas and learned many lessons along the way. He tried as an outsider without preconceptions or connections, which makes it much easier to relate to his experiences than to an author who worked his or her way up through established institutions. There's no obfuscating jargon or excuses for the corrupt and dishonest aspects of Las Vegas, Wall Street and Washington. There's also little anger. Thorp has an engineer's honesty: this is what works, this is what doesn't work and why, if you can't face the truth don't ask me the question. Thorp will tell you want to do and how to do it, but he's not going to do it for you.

The book is written clearly and stylishly, enough to entertain even readers with no interest in mathematics or gambling (whether in casinos or with securities). Although it covers a vast range of topics, it all hangs together naturally on the personality of the author. There's only one Edward O. Thorp, and everyone can profit from getting to know him better.

For a brilliant mathematician there is a tension between reaching for legacy (publishing papers that advance quantitative civilization) or monetizing his superior quantitative skills (proprietary investment strategies). Numerous luminaries have struggled with this tension including: Fischer Black, Myron Sholes, Robert Merton, William Sharpe, Mark Rubinstein, among many others. Many of them attempted to do both with various degree of success. Among the mentioned luminaries several were more successful on the publishing bit (option formula papers) vs. the monetizing bit (spectacular failures of portfolio insurance and LTCM).

Within this domain, Ed Thorp’s path is original. He often passed up opportunities to publish his work. He uncovered the exact same option valuation formula as Black & Sholes a couple of years before they did. But, he did not publish it foregoing a potential Nobel Prize in economics. He did not care as he was busy making a lot of money applying the formula.

But, Thorp was not one to hoard proprietary knowledge forever. Whenever he uncovered a quantitative system to extract a statistical advantage from the casinos or the markets, he was releasing a book on the subject including: “Beat the Dealer” in 1966 on card counting and “Beat the Market” in 1967 on arbitrage strategies with convertible bonds and other investments. Thus, you will not learn much “proprietary” knowledge from this book that he has not already published.

Thorp has an unusually bright mind. As a high school Junior he places among the very best students in California in a Statewide Chemistry contest and as the very top one in Physics. He is a genuine speed reader. Following his junior year, he reads 60 great American novels during one single summer. He is always about 2 classes ahead of his age, and always the brightest kid in the class. He is not boastful about it. He never says it. It is just obvious when he discloses objectively what his scholastic achievements were. He will complete later a Ph.D. in mathematics that will direct him to his lifelong ventures in gambling and investing.

His many successes are not always well accepted. Thorp did represent a lethal threat to the casino industry. His “Beat the Dealer” unloads an army of card counters on the casinos. The casino industry will return the favor by poisoning him twice and dismantling his car breaks. Somehow, he survives those incidents. So, the industry simply bares him from gambling at their casinos. On Wall Street he also has a few sour experiences including an IRS and FBI investigation in late 1987 who will eventually force the closure of his first hedge fund. Those investigations were triggered by Rudolph Giuliani, NY US Attorney, in an effort to go after Michael Milken and Drexel Burnham.

Within the fields of investments and mathematics he meets and works with a lot of people including Claude Shannon (founder of Information Theory), John Kelly (physicist and developer of Kelly criterion), Warren Buffet, D.E Shaw, William Sharpe, Fisher Black, Bill Gross (the bond king) and many others.

Back in 1991, he is hired as an advisor to assess the soundness of the Bernie Madoff fund. He concludes that the fund is a Ponzi scheme because his investment strategy is associated with some risk (he is long the market and only partially hedged). Yet, the fund never ever loses any money (not in a single month). Thorp uncovers in 1991 what Harry Markopoulos will uncover in 1999. Madoff will run out of cash flow during the 2008 financial crisis when numerous investors will ask redemptions.

In the last few chapters, Thorp provides much general insights. In chapter 26, he addresses the question: can you beat the market? Surprisingly, he makes a persuasive case that investing in index funds provides far superior returns to active management. The index fund has lower fees, lower trading costs, lower tax liabilities, and is better diversified. Those advantages over time are nearly unsurmountable for the active stock picker. Nevertheless, within the same chapter he dismantles the Efficient Market Hypothesis as unrealistic. And, that there are many inefficiencies one can exploit. However “most market participants have no demonstrable advantage…” Thus, chasing market inefficiencies is not a sport for the masses and even most experts.

Chapter 29 about the financial crises is an excellent history of our financial system going back to 1929. Thorp describes with clarity the entire alphabet soup of acronyms associated with the financial crisis including: CDOs, CLOs, CDS, AIG, etc. But, just as powerful is his analysis that both 1929 and 2008 were caused by excessive leverage in the system. In 1929, investors could purchase stocks on margin with only 10% down. When stock prices eventually flattened, the margin calls were like a tsunami blowing down a castle of cards. Afterwards, margins were regulated by the SEC and not to exceed 50% (no less than 50% down). 2008 was due to the same phenomenon but exacerbated within the housing sector. Borrowers could now borrow the entire price of their home (0% down) with inadequate income. Their main source of repayment was refinancing after the interest deferral on the mortgage had expired (teaser rate reset). When home prices stopped rising, the house of cards collapsed. Part of the dynamite that will blow up the housing bubble was manufactured back in 2004, when the SEC allowed the 5 major Wall Street investment banks to triple their leverage from 11-to-1 to 33-to-1. By tripling their leverage they reduced their equity cushion to withstand only a 3% decline in assets. In 2008, 3 of the 5 either collapsed and/or did not survive as independent entities (Bear Stearns, Lehman Brothers, Merrill Lynch). The other 2 (Morgan Stanley, Goldman Sachs) survived only due to temporary bail outs and bailing out an entire system of counterparties around them (AIG, Fannie Mae, Freddie Mac).

Thorp solution to improve the resilience of the financial system is to mandate the decrease in leverage throughout the financial system. If mortgage borrowers had to put 20% down and Wall Street had still no more than 11-to-1 leverage the crisis of 2008 would have been avoided.

In his last chapter sharing what he learned, I really like his take on education. Think of your brain as a blank operating system and education as software. The more and better software you acquire through education the more capable is your brain. Given that, he feels like the “software” of our education system should be improved. Statistics, probabilities, logic & critical thinking, and financial management should be introduced earlier. That’s so every high school graduate could make better life choices and in turn society could more likely avoid crises of any kind.

Ed Thorp grew up during the depression. Both of his parents worked hard and believed in education. Ed showed signs of unusual ability as he was growing up. His dad would supply him with books that most people would consider beyond his age level. Occasionally tested by unbelieving adults, he could remember pertinent parts of any book in great detail. His book chronicles a series of very interesting intellectual adventures. His pursuits varied from making the very dangerous nitroglycerin to gambling pursuits, also somewhat dangerous, and starting his hedge funds. He doesn't show you how to get rich, but he does give you examples of how he thinks through problems and challenges to invest more successfully and more important to live a more fulfilling life.

Several of his teachers were of great help in supplying him with guidance and advanced books beyond his grade level. He had a great gift that he could read and understand even chemistry and physics books that were very advanced. Thorp also enjoyed experimenting especially with chemicals. In fact he went so far as to synthesize explosives, and came close to real trouble when he made nitroglycerin. Fortunately he managed not to blow himself up. He also sold newspapers and was constantly trying to make selling more efficient and profitable. He saved most of his earnings and put the money in US savings bonds for his college education.

He was in high school during World War II with both parents working different shifts. He also had the challenge of having 10 of his mothers’ Philippine relatives live with them for several years. It became obvious to Thorp that there would be no money for his college education. Since he was doing a great deal of chemistry he decided to compete in a state-wide contest on chemistry for a four year scholarship. His chemistry teacher was very dedicated and supplied old tests to study from. Thorp consistently scored 99 to 100 on the tests. This was a time when slide rules were becoming popular, but he didn't feel he needed one since he thought he could do the problems rapidly in his head. His teacher tried convincing Thorp to take the test the next year in his, senior year, when his knowledge would be greater. He decided to take the test immediately and unfortunately found they had made the test much more difficult. He could not do all the mathematics in his head or by hand in the time allotted. So didn't get the chemistry scholarship. Next year he competed for the physics scholarship, but this time he got himself a very good slide rule and came in first. He wound up going to UC Berkley since the living expenses around his first choice the California Institute of Technology was too expensive.

About this time his parents decided to get a divorce, it turned out that his mother in addition to working her shift was also having an affair with a neighbor. Thorp and his father had no inkling of the affair but apparently her relatives did.

Thorp started off as a chemistry major and found that his first chemistry professor is not interesting or stimulating. So he makes the point of acting bored in class and when called out he responds by insulting the professor. At this time he had a student deferment from the armed services. He faced expulsion from the university and induction into the army. He was terrified enough by the situation he got himself into that he instituted a mental process to evaluate his response before making it. Despite his love of chemistry he decides to switch to physics and later to math because of this incident. Along the way he marries Vivian who is from a well off Jewish family. Throughout he has a great interest in gambling. He researches if it is possible to find a system that increases his chance of winning by math or by studying how a roulette wheel works so he can take advantage of it. His interest does not seem to be just in the profits, but mostly in gaming the game itself.

In particular he analyzes the game of 21 and realizes that counting the cards that have been played and are no longer in the deck, can drastically change the odds in his favor. In any given situation there are 10 values for the dealers next draw, while there were 55 different pairs of cards available to the player. How do you find the changing odds for these 550 total possibilities? He did some research and contacted other researchers and started with the massive amount calculations they provided. He found it's necessary to simplify the problem since there are millions of possibilities. At this time he finished his PhD, and took a position at MIT, his pregnant wife staying in California with her parents.

As a beginning professor he had quite a workload, but he managed to find time to continue making card gambling calculations. He was happy to have an IBM 704 computer available for his use. He taught himself Fortran and was able to start real calculations with many approximations. He found as he suspected that as the proportion of the cards left changed the odds quite a bit. A useful strategy would be to bet more heavily when the odds moved in his favor and bet small when they moved against him.

This research indicated that he could win at games like blackjack if he could develop a system that he could use while playing. He also spent time with Claude Shannon, who developed much of information theory while at Bell Labs. Both were trying to develop techniques for winning at roulette by applying the laws of physics. They succeeded in developing a cumbersome system that worked, but was difficult to implement since it required two people and lots of equipment that was hard to hide. He never clearly explains why this area interested him so much. Possible profits and showing that something that everyone thought couldn't be done was possible, were factors. His occasional excursions to casinos with experts on cheating indicated that larger casinos did not cheat much, but smaller ones did cheat quite a bit. If he won much he would be asked to leave, but he played enough to be convinced he was right. A mathematician who experiments! He wrote up his result as a mathematics paper that became very popular so he wrote a book.

In this his autobiography he goes though some math in detail to explain his thinking and the system he developed. This may be heavy going for those who don’t enjoy math. He next studies baccarat, that is a bit more complicated, and of course comes up with a system that needs testing. His appointment at MIT ended and he takes a lucrative position at New Mexico State University where they are trying to build up the math department. He convinces the chair of the math department to be part of his team and they go off to the casinos in Nevada. He is recognized and the casino tries drugging him, barring him from playing, and finally their car is tampered with and they are close to having a serious accident. Thorp decides it may be less hazardous to his health to try playing the stock market.

He read many books and papers on investing, economics, finance and concludes there is not much of use. Looking for an edge he finds stocks with warrants, which is the right to buy a share of a stock at a given price for a specified period of time. The value of the warrants fluctuates with the underlying stock price, the amount of time left on the warrant and always the mood of the market. The warrant tends to change value in the same direction as the stock, but is sometimes mispriced according to a model Thorp developed. The idea is to buy the relatively underpriced security and short the relatively overpriced security. He doesn’t explain how you ascertain which is overpriced and if the purchase ratio is one to one. If not how do you set the ratio? The mispricing between the two generally disappears, then the position is closed and the profit is the mispricing.

Both he and his wife desired to live closer to family and friends in southern California so he took a position at University of California Irvine. He soon found a like minded colleague, Sheen Kassouf from computer sciences who was interested in the same hedging techniques. They wrote a book on the method ‘Beat the Market’ in 1967. They also extended the method to convertible bonds and options. Thorp found an easier way to evaluate different hedges, but he doesn't explain his method. He starts a new investment fund to have more capital, meets Warren Buffett as part of being evaluated for investment in his fund by the dean of the University of California Irvine graduate school. Buffett gives him some tough questions and puzzles that Thorp answers successfully. He wants to keep life simple so he incorporates his hedge fund as a limiting partnership that limits the maximum of number of partners to 99. He also discovered property taxes in California can only be raised when the property sold at a higher value. Corporations formed to take advantage of this.

A young stockbroker, jay Regan, called Thorp about starting a convertible hedge partnership. They do start a partnership, with Jay being in Princeton, New Jersey taking care of the trades, and Thorp in California finding individual hedges and researching the market for opportunities. They make good money, but are limited in the number of partners they can have, limiting money they can get to invest. The amazing thing was that the method works pretty well in up and down markets. This makes the compounding effect very powerful. Thorp started using computers in a rented office with some hired help to enter the data. The computers generated so much heat that even in the winter they had all the windows open. Thorp calculated the amount of electricity they were using was more expensive than the rent they were paying.

His research took him to the market research of Bachelier who studied the irregular motion of stock prices in the early 1900’s. The math used was very similar to the mathematics that Einstein used to describe Brownian motion of small particles on the surface of water. Thorp used this math to make a simple practical trading tool for warrants and options. His simplification was to use the US treasury bill rate to replace the unknown growth rates and discount factors of the stock. He did this about five years before Fisher Black and Myron Scholes published their famous options trading equation for which they receive Nobel prize in 1997. Thorp says it was based on his work and not as useful. He published a bit less realizing that cutting into his trading profits would result. His research continued into different areas for investing.

Around 1987 Thorp’s Princeton office was invaded by 50 armed people from the IRS, FBI and postal authorities. Apparently Rudy Giuliani, US attorney for New York, ordered this to further his case against Michael Millikan the innovative king of junk bonds. Giuliani hoped the close relationship between Regan and Millikan would allow him to get information to take Millikan down. Giuliani succeeded in prosecuting Millikan and prosecuted Regan and some associates in the process. Later retrials found Regan and associates not guilty. Neither Thorp nor any people in his office in California were ever charged with anything.

Thorp, after some clear thinking about what was most important to him, decided to step back from business and enjoy life and traveling with his family. He gives the example of a person who always wants to get the best possible deal, for this person time and effort don't matter, and they feel poorly if they don't get the best deal that's possible. Another type of person is satisfied when he finds a result that is close to the best, because he factors in the costs of researching and decision-making and the risk of losing a near optimal opportunity. In other words a near perfect solution is usually much easier to find than an elusive perfect solution. Thorp emphasizes this with examples from real estate where the person buying a house bargained so hard to get the last dollar, actually $10,000, they turned off the sellers enough in the process that the sellers withdrew from the negotiations.

He also invested in other hedge funds and stocks notably Berkshire Hathaway. He likes Warren Buffett’s ideas. He also presents examples to show his own ideas and how he thinks. For example he does a calculation for someone living in Southern California and trying to decide whether to live closer to work where houses are more expensive and the commute is short, versus finding more economical housing with a longer commute. Taking into account the cost of travel, timed saved worth $25/hr, etc. With his parameters he concludes it is cheaper to buy close to work. He also goes over a calculation on whether it would be worth selling his Berkshire Hathaway stock at $225,000 a share and putting the money in an index fund. He concludes that after taxes he would have $158,000 left. This would require an index fund to do about 43% better than Berkshire shares in the future for him to catch up. Not likely especially since Berkshire generally does better than an index fund. He agrees with Buffet that for the vast majority of people an index fund that you buy and keep is a terrific investment.

He sees high frequency trading as the same as illegal front running where knowledge of a trade before it is made allows a profit to be made by another trader. He sees it as having no useful purpose to society and could be stopped by a small tax. Nobel prize winners like Paul Krugman agree, but some specialists at Vanguard, looking at their actual results, think high frequency trading does provide liquidity, though they don’t explain why.

Thorp gives many other interesting examples of opportunity's that are available when you understand things more clearly than the usual crowds of investors. He and his son are usually looking for situations where even if they are wrong about the direction of a trade they have a hedge so no matter what direction the market goes in they make money. This is a great idea, if you can see and understand the situation. Thus he gives you the opportunity to see how he thinks in many different situations.

In his philanthropic work he and his wife setup a mathematical chair at University of California Irvine based on Berkshire stock and the ideas of Ben Franklin. Franklin’s gifts, in 1790, were to Philadelphia and Boston $1000 each. After 200 years of being invested at 5% and having $100,000 withdrawn Boston had $4.5 million in the fund. Thorp believes his gift, despite being somewhat depleted each year by a professors’ salary, will grow to be huge. So far in 13 years it has doubled. He has suggested this type of gift that continues giving to other philanthropists.

He explores some of the financial crises such as 2008 and suggests that many problems could be solved by giving more power to shareholders making it easier for them to nominate directors and put issues like executive pay to a real vote. Research has shown that the higher the pay of the five top executives as a % of corporate profits the worse the company does. For the really big companies the leverage and risk they use to make their huge profits must be better controlled. It should be similar to futures exchanges where they use standard contracts to control risk. Part of the problem is that you can think you are protecting against risk, but your model may be flawed so you aren’t protected. An unexpected event, a black swan event, can change the odds completely.

Thorp thinks the biggest problem we have is in education. For instance one problem in university education is that funding from the state has decreased. This causes the universities to recruit more foreign students who can be charged three times more for tuition. Then we make it very difficult for these foreign graduate students to stay in the country when they graduate. In fact to some degree there is a reverse brain drain with American scientists leaving to work better equipped labs in foreign countries.

He makes a number of suggestions to solve big problems like this. He notes that he made a conscious choice to give up pursuing greater riches to spend more time with family and

This is an excellent autobiography of a fascinating and truly influential figure. However, Thorp should have the self-awareness to realize he should not be reading his own material for the audiobook. He does not have the skills. The audiobook manages to succeed despite his stilted and robotic monotone that amplifies the occasional piety and self-aggrandizement. Some of the lessons in the book center on realizing you actually do need an expert sometimes, so it's too bad he assumed he was also good at this. Hire an actor next time - they will make you sound better and soften some of the rough edges.

This is the autobiography of Edward Thorp, a mathematician whose name is little known outside of investment circles but who is certainly one of the most significant practical innovators of the last 50 years in the quantitative analysis of games of chance and markets. The first ⅔ of the book reads like a fast paced novel as Thorp, trained as a physicist and professional mathematician, takes on one supposedly impossible analytical challenge after another. His first success was to show that the game of Blackjack could reverse the house edge ("Beat the Dealer") if a player remembered which cards had been played and used this data to strategize his bets. The story goes on to his adventure in partnership with MIT information scientist Claude Shannon to use simple observations about a spinning roulette wheel to narrow down outcomes and improve the player's odds. Demonstrating that these ideas worked in the Las Vegas of the 1960's and 70's brought him into a world of raffish characters and surveillance from the then- Mafia owned casinos.

Thorp could have been an important contributor if like most scientists he had directed his energies to the problems of natural law, but instead his interests lay in the human world of games and financial competition. His most far reaching contributions were to strategies for winning stock market investments. His approach here was to minimize risk by evaluating the proper price for a stock option and use this in combination with buying or shorting the underlying stock itself to yield a consistent edge which was relatively independent of the ups and downs of the market - all this quite innovative at the time. He founded a company to exploit this and related strategies with great success - while retaining his position as a professor of mathematics. The key technical advance to enable this was a formula to estimate the proper price for an option, which he was the first to develop based on the price history of the stock, prevailing interest rates and other market data. Later this led to the more accurate Black-Scholes-Merton model for option pricing, for which Scholes and Merton won the Nobel Prize in Economics. By his analytical skill and focus, Thorp was among the first of the 'quant' revolution on Wall Street. His narrative of all these achievements, while not shy, is a model of clarity in explaining complex concepts for nonspecialists.

Thorp's successful first company Princeton Newport Partners ran into an unfortunate calamity in the late 1980's in the person of US Attorney Rudolph Giuliani, who in his obsessive zeal to prosecute Michael Milken on questionable grounds, attacked the New York office of Thorp's company in an effort to force their cooperation. This destroyed the company, only one example of the dark efforts of Guliani, who in my opinion will go down in history along with Dick Cheney as the most destructive and misguided US Government Darth-Vader figures of the past century.

The last third of the book discusses a variety of topics and anecdotes in which Thorp had some special involvement, such as his discovery (in the course of a consulting project) that Bernard Madoff's fund was a fraud - 20 years before the SEC finally acted. Across his career, Thorp shows a scientist's dismay at the endless array of fraud he comes across in American business, from casinos to major banks.

Beyond his technical achievements, I was impressed that Thorp describes a life lived with a healthy outlook and family commitment, and seems to have had fun with it all.

Of course this is an autobiography, so it's understood an author puts himself in the best light. For example, reading between the lines, I wonder if it was fair to the University of California Irvine that he was paid as a full time professor for many years while at the same time was full time CEO of a business which obviously had first call on his energies and also disallowed him from publishing his main research interest. He was actually a part time hobby professor, not what the people of California expected. I hope Thorp has made this right with some substantial gifts to Cal.

A uniquely American entrepreneurial story.

Ed Thorp grew up during the depression. Both of his parents worked hard and believed in education. Ed showed signs of unusual ability as he was growing up. His dad would supply him with books that most people would consider beyond his age level. Occasionally tested by unbelieving adults, he could remember pertinent parts of any book in great detail. His book chronicles a series of very interesting intellectual adventures. His pursuits varied from making the very dangerous nitroglycerin to gambling pursuits, also somewhat dangerous, and starting his hedge funds. He doesn't show you how to get rich, but he does give you examples of how he thinks through problems and challenges to invest more successfully and more important to live a more fulfilling life.

Several of his teachers were of great help in supplying him with guidance and advanced books beyond his grade level. He had a great gift that he could read and understand even chemistry and physics books that were very advanced. Thorp also enjoyed experimenting especially with chemicals. In fact he went so far as to synthesize explosives, and came close to real trouble when he made nitroglycerin. Fortunately he managed not to blow himself up. He also sold newspapers and was constantly trying to make selling more efficient and profitable. He saved most of his earnings and put the money in US savings bonds for his college education.

He was in high school during World War II with both parents working different shifts. He also had the challenge of having 10 of his mothers’ Philippine relatives live with them for several years. It became obvious to Thorp that there would be no money for his college education. Since he was doing a great deal of chemistry he decided to compete in a state-wide contest on chemistry for a four year scholarship. His chemistry teacher was very dedicated and supplied old tests to study from. Thorp consistently scored 99 to 100 on the tests. This was a time when slide rules were becoming popular, but he didn't feel he needed one since he thought he could do the problems rapidly in his head. His teacher tried convincing Thorp to take the test the next year in his, senior year, when his knowledge would be greater. He decided to take the test immediately and unfortunately found they had made the test much more difficult. He could not do all the mathematics in his head or by hand in the time allotted. So didn't get the chemistry scholarship. Next year he competed for the physics scholarship, but this time he got himself a very good slide rule and came in first. He wound up going to UC Berkley since the living expenses around his first choice the California Institute of Technology was too expensive.

About this time his parents decided to get a divorce, it turned out that his mother in addition to working her shift was also having an affair with a neighbor. Thorp and his father had no inkling of the affair but apparently her relatives did.

Thorp started off as a chemistry major and found that his first chemistry professor is not interesting or stimulating. So he makes the point of acting bored in class and when called out he responds by insulting the professor. At this time he had a student deferment from the armed services. He faced expulsion from the university and induction into the army. He was terrified enough by the situation he got himself into that he instituted a mental process to evaluate his response before making it. Despite his love of chemistry he decides to switch to physics and later to math because of this incident. Along the way he marries Vivian who is from a well off Jewish family. Throughout he has a great interest in gambling. He researches if it is possible to find a system that increases his chance of winning by math or by studying how a roulette wheel works so he can take advantage of it. His interest does not seem to be just in the profits, but mostly in gaming the game itself.

In particular he analyzes the game of 21 and realizes that counting the cards that have been played and are no longer in the deck, can drastically change the odds in his favor. In any given situation there are 10 values for the dealers next draw, while there were 55 different pairs of cards available to the player. How do you find the changing odds for these 550 total possibilities? He did some research and contacted other researchers and started with the massive amount calculations they provided. He found it's necessary to simplify the problem since there are millions of possibilities. At this time he finished his PhD, and took a position at MIT, his pregnant wife staying in California with her parents.

As a beginning professor he had quite a workload, but he managed to find time to continue making card gambling calculations. He was happy to have an IBM 704 computer available for his use. He taught himself Fortran and was able to start real calculations with many approximations. He found as he suspected that as the proportion of the cards left changed the odds quite a bit. A useful strategy would be to bet more heavily when the odds moved in his favor and bet small when they moved against him.

This research indicated that he could win at games like blackjack if he could develop a system that he could use while playing. He also spent time with Claude Shannon, who developed much of information theory while at Bell Labs. Both were trying to develop techniques for winning at roulette by applying the laws of physics. They succeeded in developing a cumbersome system that worked, but was difficult to implement since it required two people and lots of equipment that was hard to hide. He never clearly explains why this area interested him so much. Possible profits and showing that something that everyone thought couldn't be done was possible, were factors. His occasional excursions to casinos with experts on cheating indicated that larger casinos did not cheat much, but smaller ones did cheat quite a bit. If he won much he would be asked to leave, but he played enough to be convinced he was right. A mathematician who experiments! He wrote up his result as a mathematics paper that became very popular so he wrote a book.

In this his autobiography he goes though some math in detail to explain his thinking and the system he developed. This may be heavy going for those who don’t enjoy math. He next studies baccarat, that is a bit more complicated, and of course comes up with a system that needs testing. His appointment at MIT ended and he takes a lucrative position at New Mexico State University where they are trying to build up the math department. He convinces the chair of the math department to be part of his team and they go off to the casinos in Nevada. He is recognized and the casino tries drugging him, barring him from playing, and finally their car is tampered with and they are close to having a serious accident. Thorp decides it may be less hazardous to his health to try playing the stock market.

He read many books and papers on investing, economics, finance and concludes there is not much of use. Looking for an edge he finds stocks with warrants, which is the right to buy a share of a stock at a given price for a specified period of time. The value of the warrants fluctuates with the underlying stock price, the amount of time left on the warrant and always the mood of the market. The warrant tends to change value in the same direction as the stock, but is sometimes mispriced according to a model Thorp developed. The idea is to buy the relatively underpriced security and short the relatively overpriced security. He doesn’t explain how you ascertain which is overpriced and if the purchase ratio is one to one. If not how do you set the ratio? The mispricing between the two generally disappears, then the position is closed and the profit is the mispricing.

Both he and his wife desired to live closer to family and friends in southern California so he took a position at University of California Irvine. He soon found a like minded colleague, Sheen Kassouf from computer sciences who was interested in the same hedging techniques. They wrote a book on the method ‘Beat the Market’ in 1967. They also extended the method to convertible bonds and options. Thorp found an easier way to evaluate different hedges, but he doesn't explain his method. He starts a new investment fund to have more capital, meets Warren Buffett as part of being evaluated for investment in his fund by the dean of the University of California Irvine graduate school. Buffett gives him some tough questions and puzzles that Thorp answers successfully. He wants to keep life simple so he incorporates his hedge fund as a limiting partnership that limits the maximum of number of partners to 99. He also discovered property taxes in California can only be raised when the property sold at a higher value. Corporations formed to take advantage of this.

A young stockbroker, jay Regan, called Thorp about starting a convertible hedge partnership. They do start a partnership, with Jay being in Princeton, New Jersey taking care of the trades, and Thorp in California finding individual hedges and researching the market for opportunities. They make good money, but are limited in the number of partners they can have, limiting money they can get to invest. The amazing thing was that the method works pretty well in up and down markets. This makes the compounding effect very powerful. Thorp started using computers in a rented office with some hired help to enter the data. The computers generated so much heat that even in the winter they had all the windows open. Thorp calculated the amount of electricity they were using was more expensive than the rent they were paying.

His research took him to the market research of Bachelier who studied the irregular motion of stock prices in the early 1900’s. The math used was very similar to the mathematics that Einstein used to describe Brownian motion of small particles on the surface of water. Thorp used this math to make a simple practical trading tool for warrants and options. His simplification was to use the US treasury bill rate to replace the unknown growth rates and discount factors of the stock. He did this about five years before Fisher Black and Myron Scholes published their famous options trading equation for which they receive Nobel prize in 1997. Thorp says it was based on his work and not as useful. He published a bit less realizing that cutting into his trading profits would result. His research continued into different areas for investing.

Around 1987 Thorp’s Princeton office was invaded by 50 armed people from the IRS, FBI and postal authorities. Apparently Rudy Giuliani, US attorney for New York, ordered this to further his case against Michael Millikan the innovative king of junk bonds. Giuliani hoped the close relationship between Regan and Millikan would allow him to get information to take Millikan down. Giuliani succeeded in prosecuting Millikan and prosecuted Regan and some associates in the process. Later retrials found Regan and associates not guilty. Neither Thorp nor any people in his office in California were ever charged with anything.

Thorp, after some clear thinking about what was most important to him, decided to step back from business and enjoy life and traveling with his family. He gives the example of a person who always wants to get the best possible deal, for this person time and effort don't matter, and they feel poorly if they don't get the best deal that's possible. Another type of person is satisfied when he finds a result that is close to the best, because he factors in the costs of researching and decision-making and the risk of losing a near optimal opportunity. In other words a near perfect solution is usually much easier to find than an elusive perfect solution. Thorp emphasizes this with examples from real estate where the person buying a house bargained so hard to get the last dollar, actually $10,000, they turned off the sellers enough in the process that the sellers withdrew from the negotiations.

He also invested in other hedge funds and stocks notably Berkshire Hathaway. He likes Warren Buffett’s ideas. He also presents examples to show his own ideas and how he thinks. For example he does a calculation for someone living in Southern California and trying to decide whether to live closer to work where houses are more expensive and the commute is short, versus finding more economical housing with a longer commute. Taking into account the cost of travel, timed saved worth $25/hr, etc. With his parameters he concludes it is cheaper to buy close to work. He also goes over a calculation on whether it would be worth selling his Berkshire Hathaway stock at $225,000 a share and putting the money in an index fund. He concludes that after taxes he would have $158,000 left. This would require an index fund to do about 43% better than Berkshire shares in the future for him to catch up. Not likely especially since Berkshire generally does better than an index fund. He agrees with Buffet that for the vast majority of people an index fund that you buy and keep is a terrific investment.

He sees high frequency trading as the same as illegal front running where knowledge of a trade before it is made allows a profit to be made by another trader. He sees it as having no useful purpose to society and could be stopped by a small tax. Nobel prize winners like Paul Krugman agree, but some specialists at Vanguard, looking at their actual results, think high frequency trading does provide liquidity, though they don’t explain why.

Thorp gives many other interesting examples of opportunity's that are available when you understand things more clearly than the usual crowds of investors. He and his son are usually looking for situations where even if they are wrong about the direction of a trade they have a hedge so no matter what direction the market goes in they make money. This is a great idea, if you can see and understand the situation. Thus he gives you the opportunity to see how he thinks in many different situations.

In his philanthropic work he and his wife setup a mathematical chair at University of California Irvine based on Berkshire stock and the ideas of Ben Franklin. Franklin’s gifts, in 1790, were to Philadelphia and Boston $1000 each. After 200 years of being invested at 5% and having $100,000 withdrawn Boston had $4.5 million in the fund. Thorp believes his gift, despite being somewhat depleted each year by a professors’ salary, will grow to be huge. So far in 13 years it has doubled. He has suggested this type of gift that continues giving to other philanthropists.

He explores some of the financial crises such as 2008 and suggests that many problems could be solved by giving more power to shareholders making it easier for them to nominate directors and put issues like executive pay to a real vote. Research has shown that the higher the pay of the five top executives as a % of corporate profits the worse the company does. For the really big companies the leverage and risk they use to make their huge profits must be better controlled. It should be similar to futures exchanges where they use standard contracts to control risk. Part of the problem is that you can think you are protecting against risk, but your model may be flawed so you aren’t protected. An unexpected event, a black swan event, can change the odds completely.

Thorp thinks the biggest problem we have is in education. For instance one problem in university education is that funding from the state has decreased. This causes the universities to recruit more foreign students who can be charged three times more for tuition. Then we make it very difficult for these foreign graduate students to stay in the country when they graduate. In fact to some degree there is a reverse brain drain with American scientists leaving to work better equipped labs in foreign countries.

He makes a number of suggestions to solve big problems like this. He notes that he made a conscious choice to give up pursuing greater riches to spend more time with family and

This is the autobiography of Edward Thorp, a mathematician whose name is little known outside of investment circles but who is certainly one of the most significant practical innovators of the last 50 years in the quantitative analysis of games of chance and markets. The first ⅔ of the book reads like a fast paced novel as Thorp, trained as a physicist and professional mathematician, takes on one supposedly impossible analytical challenge after another. His first success was to show that the game of Blackjack could reverse the house edge ("Beat the Dealer") if a player remembered which cards had been played and used this data to strategize his bets. The story goes on to his adventure in partnership with MIT information scientist Claude Shannon to use simple observations about a spinning roulette wheel to narrow down outcomes and improve the player's odds. Demonstrating that these ideas worked in the Las Vegas of the 1960's and 70's brought him into a world of raffish characters and surveillance from the then- Mafia owned casinos.

Thorp could have been an important contributor if like most scientists he had directed his energies to the problems of natural law, but instead his interests lay in the human world of games and financial competition. His most far reaching contributions were to strategies for winning stock market investments. His approach here was to minimize risk by evaluating the proper price for a stock option and use this in combination with buying or shorting the underlying stock itself to yield a consistent edge which was relatively independent of the ups and downs of the market - all this quite innovative at the time. He founded a company to exploit this and related strategies with great success - while retaining his position as a professor of mathematics. The key technical advance to enable this was a formula to estimate the proper price for an option, which he was the first to develop based on the price history of the stock, prevailing interest rates and other market data. Later this led to the more accurate Black-Scholes-Merton model for option pricing, for which Scholes and Merton won the Nobel Prize in Economics. By his analytical skill and focus, Thorp was among the first of the 'quant' revolution on Wall Street. His narrative of all these achievements, while not shy, is a model of clarity in explaining complex concepts for nonspecialists.

Thorp's successful first company Princeton Newport Partners ran into an unfortunate calamity in the late 1980's in the person of US Attorney Rudolph Giuliani, who in his obsessive zeal to prosecute Michael Milken on questionable grounds, attacked the New York office of Thorp's company in an effort to force their cooperation. This destroyed the company, only one example of the dark efforts of Guliani, who in my opinion will go down in history along with Dick Cheney as the most destructive and misguided US Government Darth-Vader figures of the past century.

The last third of the book discusses a variety of topics and anecdotes in which Thorp had some special involvement, such as his discovery (in the course of a consulting project) that Bernard Madoff's fund was a fraud - 20 years before the SEC finally acted. Across his career, Thorp shows a scientist's dismay at the endless array of fraud he comes across in American business, from casinos to major banks.

Beyond his technical achievements, I was impressed that Thorp describes a life lived with a healthy outlook and family commitment, and seems to have had fun with it all.

Of course this is an autobiography, so it's understood an author puts himself in the best light. For example, reading between the lines, I wonder if it was fair to the University of California Irvine that he was paid as a full time professor for many years while at the same time was full time CEO of a business which obviously had first call on his energies and also disallowed him from publishing his main research interest. He was actually a part time hobby professor, not what the people of California expected. I hope Thorp has made this right with some substantial gifts to Cal.

A uniquely American entrepreneurial story.

This is an outstanding book, whether your interest is gambling or markets or simply hearing the perspective of a very intelligent, very thoughtful man. Thorp made his name by telling up how to "beat the dealer" at blackjack, but in reading his memoir it is clear that his casino exploits, as remarkable as they were, might be the least interesting thing about his career. That says a lot, since Thorp popularized, if not invented, the discipline of card counting at blackjack, leading to tremendous changes in the gaming industry. After the publication of Thorp;'s book in 1962, blackjack's popularity soared. Since then, casino managers have struggled to come to grips with advantage players--all of whom, whether they know it or not, or following a path laid by Thorp.

Thorp had two equally interesting casino adventures that are less well known that his blackjack beating. He pioneered the use of a wearable computer to beat the game of roulette and developed a system for beating baccarat.

Having explored all the possibilities that interested him in the casino, Thorp next moved to the markets. Over the following 40+ years he was able to develop ways to "beat Wall Street" by exploiting the market's inefficiencies--something that the economics orthodoxy said was impossible. Being more familiar with his gambling work, I found these chapters particularly enthralling. More sobering are his accounts of the hubris, miscalculations, and outright fraud, that have triggered financial crises in the past and will continue to do so despite easily-enacted safeguards.

All in all, this was a fantastic book by an intensely interesting subject. Highly recommended.

Ed Thorp is to quantitative investors what Ben Graham is to value investors – the founding father. Thorp, a mathematics professor and overall science genius, has an incredible investment track record. From 1969 to 1988 the two Princeton Newport Partnership funds showed an annual return of 19.1% and 15.1% vs. a return of 10.2% for S&P 500. Further, between 1992 and 2002 Thorp's statistical arbitrage portfolio returned 18.2% per year with 6.7% annualized volatility compared with 7.8% and 15.1% respectively for S&P 500. Still, this isn’t as much a book on investing as it is an autobiography plus – unfortunately – a strangely added on mix of chapters with personal finance advice and contemplations on financial markets.

There are 4 sections in the book. First we learn about Thorp’s modest upbringing with a reclusive father and a mother who ran off with another man and Thorp’s college money. The young Thorp uses knowledge and reasoning as his way forward in life. Since he is largely self-taught he is motivated to think differently and empirically test theories. When Thorp as a young academic asks world famous physicist Richard Feynman if it is possible to beat the game of roulette and receives a negative answer, he is encouraged – if Feynman thinks it is impossible then there will be no competition. The first part of the book is a bit flat and the text makes it obvious how important it was for the underdog Thorp to be smart. The book comes to life in the next two sections.

Thorp uses his unusual combination of mathematical knowledge and practical bent to first figure out ways to tilt the odds in the favor of the gambler in Black Jack and then does the same with roulette. In both cases he validates his systems by heading to the casinos and making some serious big bucks. In beating the game of roulette he uses the first handheld computer, constructed together with Claude Shannon, the father of information theory. After being banned, cheated on and threatened by the casinos, Thorp survives a murder attempt and re-focuses on Wall Street.

What Thorp brings is the notion of the necessity of a combination of an edge and risk management to stay in the game. For Thorp the edge is found in the budding derivatives markets. He first comes up with a groundbreaking method of better valuing options and designs a strategy of buying undervalued options and selling overvalued ones. After a lunch and a game of bridge with Warren Buffett Thorp launches the Princeton Newton Partnership, using the same model as Buffett’s partnership. Sometime later Fisher Black and Myron Scholes launch their Black-Sholes Model of valuing options, the same model that Thorp has been using for a while. What follows is a period when Thorp plays cat and mouse with the academic establishment, coming up with ways to price derivatives and then trading on this knowledge until similar academic findings are published. In 1988 he, after a regulatory scandal unrelated to Thorp, closes the partnership. After two decades the academics pretty much have caught up. Instead a Thorp switch to statistical arbitrage and for another decade continues his investment success. In 2002 he finally closes down to spend more time with his family as the influx of hedge funds is starting to eat away his edge.

The final part of the book is a strange jumble of 10 chapters with fairly ordinary texts, ranging from compound interest to the 2009 financial crisis, that in my view only clouds the structure of the book. I think they should have been edited away. Surely there would be nothing wrong with publishing a book of “only” 250 pages?

As the author explains, when he thinks about problems he does it in words, numbers, images and in models – combine this versatile thinking with curiosity and drive, and great things are achieved. Thorp is a remarkable man with an astonishing career but this is not a remarkable book.

This is a review by investingbythebooks.com

Having admired Edward O. Thorpe's contributions to the quantitative analysis of blackjack and financial markets, I was pleased to read his story in his own words. "A Man For All Markets" is a long-awaited autobiography of a pioneer in gambling and trading. Thorpe introduces his narrative: "This is the story of my personal journey through the worlds of science, gambling, and the securities markets. It's about how I managed risks and reaped rewards in Las Vegas, Wall Street, and life." Thorpe focuses on his professional accomplishments and the background behind them, but events in his personal life are sprinkled throughout. The book is written for laypeople, not for quants. In fact, the last 100 pages, or nearly a third of the book, is financial advice meant for a readership that has little experience in investing.

Thorpe begins with his working-class childhood in Depression-era Chicago and then California, shaped partly by his proficiency with numbers and an ambition to make money wherever he could. From his ham radio license at age 12, through his many teenaged science experiments, to his scholarship to the University of California at Berkeley, Thorpe was always mathematical and ambitious with a strong sense of fair play that sometimes led to frustration. He ended up with a degree in physics and a PhD in mathematics. Thorpe takes us through his work on blackjack in the late 1950s, building on the Baldwin strategy, his move to MIT in 1959, where he met Claude Shannon, with whom he would develop a system to beat roulette, and his experience playing blackjack in casinos. One chapter discusses how his card-counting system played out in casinos for blackjack pros and amateurs. Thorpe quit the casinos after they resorted to drugging him to combat his baccarat system.

After page 145, Thorpe turns to investing other people's money and becomes a founding member of the mathematics department at the University of California at Irvine. He says he loved teaching and research, but maintaining a competitive edge often prevented him from publishing. He takes us through his theory of warrant valuation and hedging, then the founding of Convertible Hedge Associates (later Princeton Newport Partners or PNP) with Jay Regan in 1969, which originally specialized in hedging of convertible securities. PNP would close in 1988. Thorpe shares his key experiences on Wall Street: PNP's trading strategies, his experience on Black Friday in October 1987, PNP's Princeton offices raided in 1987, his discovery in 1991 that Bernie Madoff was a fraud, his founding of an institutional fund and Ridgeline Partners with Steve Mizusawa in 1992.

The last hundred pages of "A Man For All Markets" consists mostly of advice about investing and savings, targeted to the general reader. There isn't really a transition; the book might benefit from being organized into parts. Thorpe includes his opinion of the financial products involved in the 2008 crisis and some of his later experiences on Wall Street. Throughout his story, Thorpe doesn’t hesitate to give others credit where it is due or to express disdain for efficient market hypothesis. He's an engaging writer, good at expressing complex strategies as simple concepts that anyone can understand. "A Man For All Markets" is an enjoyable read about a remarkable life, in the man's own words. I hope it reaches an audience beyond those already familiar with Edward Thorpe's work.

The first half of the book is really interesting. It gives an overview of Ed Thorp's first-person account of his early life and then his gambling and trading exploits. The second half of the book swerves into silly advice with chapters explaining the virtue of compounding returns and complaints about the lack of government funding for higher education.

At first I really liked the first half. But then a friend of mine recommended to me "Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street". That has a more detailed and more interesting account of the same story in combination with some other innovators in investing and gambling.

So I guess what you should get from this review is to sell this book short and go long "Fortune's Formula". I'm not sure the exact hedge ratio though...

This is an interesting but uneven autobiography. I found the chapters on his early life a bit dull, and some of the anecdotes didn't really ring true (like the one where he claims to have broken into his school office to search through some records). Also maybe it was just me, but some of the stories were quite similar and often along the lines of I was top of the class, top of the state, did some awesome experiment etc due to my own intelligence, but sometimes when I didn't do well it was all someone else's fault. (I have no doubt he is very intelligent, but it is kind of annoying to take all the credit for your successes, but when something doesn't go well, someone else is to blame. Maybe we are all like this to some degree though).

The book picks up after the first few chapters and his exploits in the Casinos and early days of investing are the highlights. Later in the book he digresses into a discussion of principles of good investing etc which has all been done many times before and in more depth by other authors. So in conclusion, I will say that this is a good book that is worth reading, but some parts are a little dull and also repeat material commonly discussed in many investing books. The highlights are in the middle when he discusses topics like his research into gambling and counting cards.

Remarkable sums it up.
Buying this on audible.com I could not believe all these skills were embedded in one man.
Dr. Thorp, 10 years my senior, writes and speaks with grace and humility. The only difference between him and me is about 90iq points but you would never know anymore than you could duplicate the talents of this prototypical Renaissance man his honesty is that transparent.
My only regret is that I never had the opportunity to meet him personally and that I am not capable of replicating him in his style and class ithat shines every word and sentence. One can only dream that a person of his caliber would run for public office but he didn't and now we have the antithesis running our already great America.
Sir Edward I only wish I could thank you enough for your magnum opus.

An all-around book from an all-around investing guy. The author's achievements are numerous, struggling as many at his level do with the ability to advance math or monetize that math, and somehow Mr. Thorp manages both, along the way changing the gambling industry. The Nassim Nicholas Taleb introduction doesn't seem as important as the fact that it is there, the stamp and seal of approval from another unique mind. Four stars from me because I don't particularly care about the author's childhood recollections, which are way too detailed but give a good sense of that difference in mind. Card counting, Ponzi schemes, hedging, CDO squares, it's all in there, this is the original guy.

Interesting, but sort of outdated considering what you can learn about card counting, odds making and the markets simply by watching a few YouTube videos. Basically, Thorp was a early pioneer on how understated and work with the odds in your favor.

I think the audio version shouldn't have been narrated by the author. Too dry.

This is an excellent autobiography of a fascinating and truly influential figure. However, Thorp should have the self-awareness to realize he should not be reading his own material for the audiobook. He does not have the skills. The audiobook manages to succeed despite his stilted and robotic monotone that amplifies the occasional piety and self-aggrandizement. Some of the lessons in the book center on realizing you actually do need an expert sometimes, so it's too bad he assumed he was also good at this. Hire an actor next time - they will make you sound better and soften some of the rough edges.

It is surprising, and disappointing, that a man with this much intellect and analytical ability never felt the need or social responsibility to go public with his recognition that Madoff was running a fraud. Thorp takes great pride in regaling the reader with his recognition that Madoff was running a scam, but expresses no remorse over his failure to publicize his discovery or at least report his findings to regulatory authorities. While reading his ode to self I could not help but contemplate how many lives he could have spared financial misery.

Smart guy? Yes Citizen of the year? Way down the list!

The very interesting life of a mathematician trained in Pure Mathematics, who applied his skills to beat gambling and financial markets. Most famed for developing the first successful system for beating blackjack at the casino's. He also developed the concept of Financial Derivatives and helped to establish quantitative financial analysis. Largely an engaging life story, he recounts among the interesting personalities he encountered Claude Shannon (father of Information Theory) and Warren Buffet. He also developed the first wearable computer as a tool for beating biased roulette wheels.

This interesting story is not documented with the the mathematical details of Thorpe's analysis, but clear explanation of many underlying principles are described in layman's language. A fascinating book.

Excellent. Subjects that can sometimes seem quite complex are clear and easy to understand. Thorp is an amazing individual who proved that even if everyone says it can't be done, many times it can. He proved that you can beat the casinos. He proved that you can beat the market. It was not by cheating or chicanery but by applied science, math and logic. This is a great book for anyone interested in gambling, investing, mathematics or just interested in a great story of honesty, perseverance and success.

This is an amazing autobiography of a genius. Not only did Thorp beat casinos, he had probably the best risk adjusted returns for the last 20 years. He is the real deal as an trader who understands risk. I plan on re-reading this book every couple years.

The book has 30 chapters. The first ~20 chapters read largely like a professional autobiography that dives deep into details of what made Ed's approach to problem-solving original and fun... and made him very successful. They are superb and deserve a 5-star rating. However, the last ~10 chapters did not have to be a part of this book. Some of them are less focused and meander around smaller topics, while others read more like self-contained essays on a specific subject, largely substantiated by Ed's experience and opinion. For example, while I appreciated Ed's insights on financial crises and management pay (and it is hard not to agree with him), those chapters detracted from the autobiographic focus of the book... and the overall punch. Last 10 chapters could have had a separate treatment, perhaps in a future book or in magazine articles. Hence, I give the book 3/5 stars.

Ed Thorpe is a fascinating character, a scientist who likes to practice in the real world -- from beating the casinos at Blackjack and roulette to setting up a quant fund that had outperformed the market for decades. I have a great deal of admiration for this pioneer. Ed was willing to test his theories and improve upon knowledge through practice. A few things I found most insightful in this autobiography:

1) Better be approximately right than precisely wrong. It's evident that Ed was ok with not having an exact answer. He had a sound theory and much observational data to be close enough -- to be sure he was in the ballpark of whatever he was trying to calculate.
2) Size your bets to ensure you survive. You have to address two things, not only your own appetite for volatility and risk, but that of your partners. Interestingly, it may be that your partners may have a much smaller (or larger) appetite for risk than they claim. A telling example is Ed's experience with a couple of NYC financiers who bankrolled his Blackjack adventures. I thought his approach to dealing with the pot size uncertainty was revealing of his understanding of human psychology.
3) Treat work as an intelligent play. Ed turned his professional and personal experience into a really fun adventure. It's great to find a right fit between skills, disposition, and pay in the world with so much noise. Ed has done excellently to pick up on the signal and pursue his passions in a way that has enabled him to excel professionally and financially.

I read about Thorp in other books so some materials presented in this book are not completely new to me. However, I am still impressed by Thorp's life experience especially after knowing the details behind it. The mentioning of Fischer Black, David Shaw and Ken Griffin is truly surprising for me, as if Thorp is the man behind them... just joking.

The part on his statistical arbitrage strategy is still enlightening today. I might actually backtest this strategy myself using PCA.

The reason I give this book four stars rather than five stars is because the last parts of this book get less interesting and engaging, and also may be because I already knew most stories about Thorp therefore I spoiled the interest.

All in all, I still highly recommend this book to everyone!

Written in simple language, very easy to read.

Mr Thorp is a very sensible mathematician (I don't wanna be rude but some mathematicians can be quite unreasonable). He knows the limitations of quantitative theories and he understands the essence of luck in everything he does. Yet, he has been exploiting the inefficiencies so well throughout his life by just calculating odds, and he explains it very well in his book.

Interesting to experience the motivations and methods of a pioneer. From childhood onward, the book explores love of learning, constant struggle with opposing forces, ascension to the acme, dissolution, and reflection of the ride.

I think most will learn something new.

I read this book on a suggestion by Charlie MUnger at one of his shareholder meetings. Interesting book. I had not heard of THorp before although I knew about the MIT kids. Thorp is a math prodigy who did some remarkable things using math. He is also a bit OCD about his projects which you have to be for breakthroughs.

It was not entertaining so I did not give it 5 stars but I did find it interesting. He is arrogant in the way of someone who did accomplish things. His defense of Milken and analysis of the S&L fraud is just plain wrong, which was irritating. He suffers as do most of us in not analyzing matters thoroughly outside his expertise. But that is just a quibble as the book is interesting and I would recommend it.

This was a very well written book which dealt with a topic that I only had some interest in when obtaining the book. I thought the subject would only be marginally able to keep my attention. However, the author was able to turn a real life person and experience into something so interesting that I could not put it down. It just amazing. For a book which I had little in when I started reading it, I ended up finding it to be a wonderful experience. This was because the author was able to weave facts into an informative and entertaining narrative.

After listening to Mr. Thorp's interview on Chat with Traders, I immediately purchased the book. The stories, insights, history was worth twice as much as it cost, and Mr. Thorp reads the book on tape version which is even better. Thank you Mr. Thorp for all that you and your wife have done for us. I really appreciated the work you have done, your mind, your actions and you.

"A Man for All Markets" follows the author's biography as he grows up during World War II, goes to college in California, has a spell at MIT in Cambridge, Mass., and, while also teaching, harnesses his mathematic talents for gambling and then for investing. Tips about investing are also included, as well as cameos by Warren Buffett. The author used his math skills to build "models" that he then correctly utilized for predicting, assuring that success was a premeditated effort. Overall, an interesting read.

Very boring book for a fascinating man. Way too many mundane details about day to day minutiae, like what type of paper he used in the office and what type of copy equipment. I read alot of biographies and finance books, but I couldn't make it through this one. It just got bogged down into way to many minor facts about an otherwise interesting life.

This book is just ok. It has some interesting stories. I listened to the audio version on a long road trip recently. It is more about markets than casino gambling which I prefer being a trader for the past 15 years.

The biggest complaint I have is toward the end of the book he starts spewing socialist rhetoric which I would have not financially supported had I known prior to purchasing. This was a real turn off.

A reasonably good book about a very smart guy. It's too bad so many super smart people like Mr. Thorp spend so much of their time moving money around rather than putting capital to use and helping those with IQs inside the tails of the distribution.

Thorp has done many things in his life; card counting, beating the roulette wheel, creating the first hedge fund, working out the Black Scholes formula before Black Scholes thought of it, busting Bernie Madoff 20 years before he got busted, predicting JFK would be assassinated, telling NASA how to get to the moon and teaching Einstein the theory of relativity - just ask him! Everything he has touched in life has turned to gold. Anything he didn't, like when his own company got busted, he knew absolutely nothing about what was going on. A brilliant mind that has never made a mistake in his life.

More seriously, if you can get over the arrogance and hubris (I generally laughed every time he wrote about how he was onto something 20 years before anyone else) it's a 4 star read.

As an aside, Thorp appears to be half Filipino based on the first few chapters (mum born in the Philippines and her family held by Japanese in WWII), but he never really confirms this and he certainly doesn't look half Filipino.

In this book Ed Thorp describes his strategies for winning in mathematics, at the casino and in the market. Unlike many other investors he is open about what works. That is perhaps because he is a mathematician and a member of an open culture. This book would be interesting reading for anyone interested in statistics, casino math and the market.

I selected this book for two reasons. First, I have read "Breat the Dealer" Thorp's masterpiece on blackjack. Second I am a kind of fan of Taleb. Both are the reasons why I will not recommend this book. First off, this is Thorp's first person retelling of his story from childhood to now. As such is its an accounting rather than a engaging set of chapters about his life. Everything is black and white. "I was way smarter than other people. ../ I met my future wife then i married here. .... We moved here. ... I crunched numbers on MIT's computer to come up with the blackjack strategy..."

There is no story here, just expose and descriptions. This makes for rather laboring reading that has caused me to put this book down more than once as its just not very interesting.

Taleb is no where to be found in the book. I guess he is writing the forward, which was not in this advanced copy. A forward from the Black Swan author is not enough to warrant purchasing the book. I had hoped for more than a procedural about his life, but that is what is in this book.

This is just a smart guy bragging about how smart and wonderful he is. Couldn't get through it but I tried reading it in several places and every time it was just about how great he is. No end to his ego. You would think being a genius would be enough for him. His ego bucket has a large hole in it and will never be filled.

Fortunately I read our public library's copy of this disappointing book. In this autobiography of a brilliant man, the author tells us repeatedly how smart he is and how lacking everyone else is. If you find the ramblings of an aging genius narcissist fascinating, you should read this book.

What a shame that such a brilliant mind applied himself to beating casinos and grinding money out of Wall Street. He sounds like someone that could have changed the world through math and science by inventing new ways or solving real human needs rather than wasting his life figuring out where a roulette ball will stop. That or he could have inspired real science and real growth of human capital as a teacher but no just another very possibly smarter than most hedgefund manager sucking money out of the system and wasting his great potential. Interesting first few chapters sort of if you really think beating a casino is something to be all that proud of or famous for but then the book trails off into a lot of well known Wall Street so what talk you can get anywhere. I can't recommend this book unfortunately.