Even in such an accomplished group, Thorp was the star of the evening, and he showed himself to be every bit as gracious as he is brilliant. After delivering a short speech, Thorp received a rousing standing ovation. It was truly an honor for me and everyone in attendance to meet the man that made it all possible.
Every January I attend the Blackjack Ball – an invitation only event in Las Vegas for the professional blackjack community. Many of the best advantage players in the world travel from as far as Asia and Europe for an evening of light revelry. There was a very special guest at this year’s Blackjack Ball. Blackjack luminary, Ed Thorp, attended the Ball for the very first time. In 1962 Thorp published Beat The Dealer after proving his system of card counting gave blackjack players an advantage over the house. Up until that point it was believed that it was impossible to legally beat the casinos at any game.
When Thorp was a professor at MIT, he built upon the work of four army mathematicians – Roger Baldwin, William Cantey, Herbert Maisel, and James McDermott. In 1956, Baldwin, Cantey, Maisel and McDermott derived basic strategy, the set of optimal playing decisions in blackjack. The four army mathematicians came to be known as the “Four Horsemen” in the professional blackjack world. The Four Horsemen laid the foundation that was instrumental to Thorp forumulating a system that captured the dependent event nature of 21 and swung the advantage to players.
Thorp’s card counting days were short lived as he chose to only play long enough to confirm that his card counting system worked. In addition to having a distinguished career in academia, Thorp went on to apply the same principles and analytical skills he used to formulate card counting to the financial markets. Thorp ran one of the most successful hedge funds in the country. His investments yielded a 20% annualized return. In an interview, Thorp was quoted as saying, “The overlap of interest between gambling and the stock market is very high. It’s an amazing phenomenon. But there are so many similarities and so much one can teach you about the other. Actually, gambling can teach you more about the stock market than the other way around. Gambling provides an analytically simpler world, and you can see principles and test theories.”