|
|
| Line 1: |
Line 1: |
| '''Edward Oakley Thorp''' (born August 14, 1932) is an American mathematics professor, author, [[hedge fund]] manager, and [[blackjack]] player. He pioneered the modern applications of [[probability theory]], including the harnessing of very small [[correlation]]s for reliable financial gain.{{Citation needed|date=April 2014}}
| | #redirect [[Edward O. Thorp]] |
| | |
| Thorp is the author of ''Beat the Dealer'', which mathematically proved that the [[house advantage]] in blackjack could be overcome by [[card counting]].<ref>[[Peter A. Griffin]] (1979) ''The Theory of Blackjack'', Huntington Press, {{ISBN|978-0929712130}}</ref> He also developed and applied effective [[hedge fund]] techniques in the [[financial market]]s, and collaborated with [[Claude Shannon]] in creating the first [[wearable computer]].<ref name="wearcomp1">{{cite web |title=The Invention of the First Wearable Computer |url=http://www1.cs.columbia.edu/graphics/courses/mobwear/resources/thorp-iswc98.pdf |publisher=Edward O. Thorp & Associates |accessdate=April 26, 2010 |author=Edward O. Thorp |format=PDF}}</ref>
| |
| | |
| 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{{Citation needed|date=January 2016}} and a professor of mathematics and finance from 1977 to 1982.
| |
| | |
| ==Computer-aided research in blackjack==
| |
| 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.<ref name="Understanding the formula">[http://www.edwardothorp.com/sitebuildercontent/sitebuilderfiles/understandingfortunesformula.doc.doc 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."</ref><ref name="Conf Paper">[http://wayback.archive-it.org/all/20090320125959/http://www.edwardothorp.com/sitebuildercontent/sitebuilderfiles/KellyCriterion2007.pdf THE 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]</ref><ref name="Discovery channel">Discovery channel documentary series: ''[[Breaking Vegas]],'' Episode: "Professor Blackjack" with interviews by Ed and Vivian Thorp</ref><ref name="MIT the Tech">[http://tech.mit.edu/archives/VOL_081/TECH_V081_S0000_P001.pdf The Tech (MIT)] "Thorpe, 704 Beat Blackjack" Vol. 81 No. I Cambridge, Mass., Friday, February 10, 1961</ref> 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,<ref name="Elwyn article">{{cite web |url=http://www.americanscientist.org/template/BookReviewTypeDetail/assetid/47321%3Bjsessionid%3Daaa9har2OmrE7K |title=American Scientist online: Bettor Math, article and book review by Elwyn Berlekamp |accessdate=2006-03-18 |deadurl=bot: unknown |archiveurl=https://web.archive.org/web/20070423023948/http://www.americanscientist.org/template/BookReviewTypeDetail/assetid/47321%3Bjsessionid%3Daaa9har2OmrE7K#47646 |archivedate=April 23, 2007 |df=mdy-all }}</ref> especially near the end of a [[Playing card|card deck]] that is not being reshuffled after every deal.
| |
| | |
| ===Applied research in Reno, Lake Tahoe and Las Vegas===
| |
| Thorp decided to test his theory in practice in [[Reno]], [[Lake Tahoe]], and [[Las Vegas, Nevada|Las Vegas]].<ref name="Discovery channel" /><ref name="Elwyn article" /><ref name="SI Vault">[http://vault.sportsillustrated.cnn.com/vault/article/magazine/MAG1075542/3/index.htm It'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)"</ref>
| |
| Thorp started his applied research using $10,000, with [[Manny Kimmel]], a wealthy professional gambler and former bookmaker.<ref name="Biography channel">[http://www.biography.com/listings/episode_details.do?episodeid=279192&airingid=333532 Breaking Vegas “Professor Blackjack.”] 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. "</ref> providing the venture capital. First they visited Reno and Lake Tahoe establishments where they tested Thorp's theory at the local blackjack tables.<ref name="SI Vault" /> The experimental results proved successful and his theory was verified since he won $11,000 in a single weekend.<ref name="Discovery channel" /> 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.<ref name="SI Vault" /> In addition to the blackjack activities, Thorp had assembled a [[Baccarat (card game)|baccarat]] team which was also winning.<ref name="SI Vault" />
| |
| | |
| 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 [[User guide|manual]],<ref name="Hero">{{cite web |url=http://www.blackjackhero.com/blackjack/players/edward-thorp/ |title=Blackjack Hero profile |publisher=Blackjackhero.com |date= |accessdate=2010-04-26}}</ref>
| |
| 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.<ref name="Discovery channel" />
| |
| | |
| Thorp's blackjack research<ref name="NAS">A favorable strategy for twenty-one. Proceedings of the National Academy of Sciences 47 (1961), 110-112</ref> 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.<ref name="Discovery channel" />
| |
| | |
| 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 Strip|Las Vegas]] to play [[roulette]] and blackjack, at which Thorp was very successful.<ref name="Poundstone">{{cite web |url=https://www.amazon.com/gp/reader/0809046377 |title=Poundstone, William: ''Fortune's Formula : The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street'' |publisher=Amazon.com |date= |accessdate=2010-04-26}}</ref>
| |
| 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.<ref name="wearcomp1" /><ref name="Poundstone" /> The wearable computer was co-developed with Claude Shannon between 1960–61. The
| |
| final operating version of the device was tested in Shannon’s home lab at his basement in June 1961.<ref name="wearcomp1" /> His achievements have led him to become an inaugural member of the [[Blackjack Hall of Fame]].<ref name="Las Vegas Advisor">{{cite web |author=Anthony Curtis |url=http://www.lasvegasadvisor.com/QODcontributordetail.cfm?authorID=161 |title=Las Vegas Advisor on Ed Thorp |publisher=Lasvegasadvisor.com |date= |accessdate=2010-04-26}}</ref>
| |
| | |
| He also devised the "Thorp count", a method for calculating the likelihood of winning in certain endgame positions in [[backgammon]].<ref>{{cite web |title=Cube Handling in Races: Thorpe count |url=http://www.bkgm.com/rgb/rgb.cgi?view+158 |work=bkgm.com |publisher=Backgammon Galore |accessdate=May 8, 2013 |author=Chuck Bower |date=January 23, 1997}}</ref>
| |
| | |
| ==Stock market==
| |
| 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 [[market anomaly|anomalies]] in the [[securities market]]s, and he has made a significant fortune.<ref name="Conf Paper" /> Thorp's first hedge fund was [[Princeton Newport Partners|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.<ref name="Market">{{cite web |url=http://webhome.idirect.com/~blakjack/edthorp.htm |title=Thorp's market activities |publisher=Webhome.idirect.com |date= |accessdate=2010-04-26}}</ref>
| |
| | |
| ==In literature==
| |
| A biographical novel of Thorp was written by gambling writer and professional blackjack player [[Les Golden]] of Oak Park, Illinois, in 2017, published by Springer Nature.
| |
| | |
| ==Bibliography==
| |
| * (Autobiography) Edward O. Thorp, ''A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market'', 2017. [http://edwardothorp.com/id32.html]
| |
| * Edward O. Thorp, ''Elementary Probability'', 1977, {{ISBN|0-88275-389-4}}
| |
| * Edward Thorp, Beat the Dealer: A Winning Strategy for the Game of Twenty-One, {{ISBN|0-394-70310-3}}
| |
| * Edward O. Thorp, [[Sheen T. Kassouf]], ''Beat the Market: A Scientific Stock Market System'', 1967, {{ISBN|0-394-42439-5}} ([http://accountingpdf.com/beat-the-market-by-edward-o-thorp/ online pdf], retrieved 22 Nov 2017)
| |
| * Edward O. Thorp, ''The Mathematics of Gambling'', 1984, {{ISBN|0-89746-019-7}} (online version [http://edwardothorp.com/sitebuildercontent/sitebuilderfiles/tog1.pdf part 1], [http://edwardothorp.com/sitebuildercontent/sitebuilderfiles/tog2.pdf part 2], [http://edwardothorp.com/sitebuildercontent/sitebuilderfiles/tog3.pdf part 3], [http://edwardothorp.com/sitebuildercontent/sitebuilderfiles/tog4.pdf 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), {{ISBN|978-9814293495}}, February 10, 2011 by Leonard C. MacLean (Editor), Edward O. Thorp (Editor), William T. Ziemba (Editor)
| |
| | |
| ==See also==
| |
| * [[Black–Scholes]]
| |
| * [[Gaming mathematics]]
| |
| * [[Richard Arnold Epstein|Richard A. Epstein]]
| |
| | |
| ==References==
| |
| {{reflist|30em}}
| |
| | |
| ==Sources==
| |
| * [[Scott Patterson (author)|Patterson, Scott D.]], ''[[The Quants]]: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It'', Crown Business, 352 pages, 2010. {{ISBN|0-307-45337-5}} via [http://www.npr.org/templates/story/story.php?storyId=123209339 Patterson and Thorp interview] on [[Fresh Air]], February 1, 2010, including excerpt "Chapter 2: The Godfather: Ed Thorp"
| |
| | |
| ==External links==
| |
| * {{MathGenealogy|id=9739}}
| |
| * [http://www.edwardothorp.com/ Edward O. Thorp official site]
| |
| * [http://www.wilmottwiki.com/wiki/index.php?title=Thorp%2C_Edward Thorp, Edward entry, Wilmott Wiki]
| |
| * [http://www.fortunesformula.com/ Edward O. Thorp & Fortune's Formula]
| |
| | |
| | |
| {{DEFAULTSORT:Thorp, Edward Oakley}}
| |
| [[Category:1932 births]]
| |
| [[Category:American blackjack players]]
| |
| [[Category:American gambling writers]]
| |
| [[Category:American male writers]]
| |
| [[Category:20th-century American mathematicians]]
| |
| [[Category:21st-century American mathematicians]]
| |
| [[Category:American hedge fund managers]]
| |
| [[Category:American investors]]
| |
| [[Category:American money managers]]
| |
| [[Category:American stock traders]]
| |
| [[Category:Living people]]
| |
| [[Category:University of California, Irvine faculty]]
| |
| [[Category:New Mexico State University faculty]]
| |