Edward Oakley Thorp is the maverick mathematician who beat the house and transformed the world of finance. Born in August 1932, the 91-year-old American was a maths professor-turned-author and blackjack researcher, before turning his hand to the financial markets using something called probability theory.
Thorp is a guy who managed to turn the odds of everything he touched in his favour, leaving an indelible mark on the gambling and financial industries.
Where it all began
Growing up in Chicago, Thorp exhibited an early affinity for numbers. His knack for math led him to the University of California, where he earned his PhD in maths at the tender age of 24. Little did the academic world know that they were about to witness the emergence of razor-sharp mind who would redefine people’s perspectives on games of chance.
In the early 1960s, Thorp threw himself into the world of blackjack; a game that seemed impossible to strategically manipulate. Think again: armed with his mathematical prowess and a steely determination to crack the game, Thorp honed a strategy that would soon be known as card counting.
Thorp rattled the world of Las Vegas
Imagine this: a bespectacled, unassuming professor sitting at a blackjack table on the casino floor of a Las Vegas resort, casually observing the cards they’re dealt. Thorp wasn’t relying on luck though; he was meticulously keeping track of the cards being dealt using his very own system. His groundbreaking book, “Beat the Dealer”, published in 1962, spilled the beans on this very system, forever changing the landscape of blackjack.
Although it changed the way blackjack was played by many, it didn’t affect its popularity, both in terms of players and the online and offline casinos. In fact, the best online casinos today still put blackjack at the front and centre of their gaming services. Blackjack is still considered the quintessential casino table game, alongside the likes of roulette, so it’s no surprise that iGaming brands invest heavily in providing authentic virtual and live dealer blackjack experiences.
Thorp: A man for all markets
After Thorp’s foray into the gaming industry, he then ventured into the world of finance, leveraging his analytical mind to develop investment strategies suitable for hedge funds. His own fund, Princeton Newport Partners, didn’t just survive; it thrived. In the 1970s and 80s, his fund greatly outperformed the S&P 500. His innovative approach to risk management and statistical arbitrage set a precedent for what’s known as quantitative finance.
Thorp’s journey from the blackjack tables to Wall Street is the stuff of legends. Thorp was always one step ahead of the competition, in whichever field he was competing. His contributions to information theory, Kelly Criterion – the formula used to define the optimal size of a bet – and option pricing have proven invaluable to their very existence.
He may not be as popular as the top television stars of the 60s, but his impact us undeniable. Beyond the accolades and the after-dinner speeches, Thorp’s legacy is rooted in his audaciousness; his deep-seated desire to challenge the status quo. Thorp embodied the spirit of a true iconoclast. His impact resonates not only in the casinos and trading floors of the modern era but in the minds of countless individuals who dare to defy convention.