A Man for All Markets by Edward O Thorp

When you make your money as a hedge fund manager and see so much inefficiency you tend to see markets as irrational as Thorp does. If there is a through-line to his worldview it’s that we put too much trust into markets https://forexarena.net/ and stronger regulators with his brain could fix this. Thorp thinks along the lines of how the SEC could have stopped Bernie Madoff in the early 1990s when the irregularities came to the attention of people like Thorp.

Now Thorp shares his incredible life story for the first time, revealing how he made his money and giving advice to the next generation of investors. An intellectual thrill ride, replete with practical wisdom, A Man for All Markets reveals the power of logic in a seemingly irrational world. Most of the book was autobiographical rambling filled with uninteresting anecdotes about how this math guru put his skill to work finding minuscule edges through money making schemes, whether it was casino gambling or quant-style hedge fund trading. Not surprisingly it was an extremely analytical look at his own career.

Having grown up in the South Bay very near to him, I would have liked a little more color and a little less instruction on how to succeed in gambling and stock trading styles that probably no longer apply. Mr. Thorp’s memoir is likely to be appreciated by more than one type of reader. Perhaps the most important lesson to take away from this book is that intellectual curiosity combined with a refusal to blindly accept conventional wisdom is almost always required to advance human knowledge and, in some cases, achieve great wealth. I was introduced to Thorp as a kid when dad taught me the strategy around blackjack.

This compared favorably to the S&P 500 annual return of 10.2 percent, but more importantly, it was accomplished with a small fraction of the volatility of the overall market. The last quarter of the book focuses on Thorp’s views regarding modern finance and investing. It conveys substantial wisdom from someone who has “played the game.” From market efficiency to compound growth to asset allocation to financial crashes, Thorp offers clearly reasoned opinions that will help the reader think through the nuances of these broad topics.

It’s the kind of thing any would-be investor, to say nothing of casino cowboy, ought to read. I read Thorp’s book about playing blackjack, Beat the Dealer, in the early sixties, and tried card counting in Las Vegas. However, I admired his approach to problem solving and I’m glad he wrote this book, which reviews his career, not only beating gambling games but also the financial markets. There is lots of good information for investors in the book and everyone who is investing for retirement or anything else should read this book or others like it.

About the author

I saw printed words everywhere and realized that if I could figure out how to pronounce them I might recognize them and know what they meant. Phonics came naturally, and I learned to sound out words so I could say them aloud. Next was the reverse process—hear a word and say the letters—spelling. By the time I turned five I was reading at the level of a ten-year-old, gobbling up everything I could find. Warren Buffett reappears toward the end of the book as Mr. Thorp notes his use of Berkshire Hathaway shares to endow a chair in mathematics at U.C.

If I were giving out advice on how to be successful in this world I would say first pick your spouse wisely. Not 3 pages later on p233, Thorp introduces a chapter about his “statistical arbitrage” operation, which to my understanding is the exact same operation as HFTs – profiting off differences in what people are willing to sell at vs. buy at – but perhaps just slower? It made me sit back and wonder, how can he imply that HFT is not really adding anything to society, then talk about making tens or hundreds of millions of dollars in other types of trading ? Overall I found the first half more interesting because of his story of pulling himself up by the bootstraps and overcoming many of life’s essential unfairness. I like that he deliberately calls out how some people you come across in life will not hesitate to put their well being ahead of yours even when they already have what may be considered a comfortable position in life.

What makes people successful is being able to roll with these punches to overcome what life dishes out. Having made enough money to last him and his wife comfortably for the rest of their lives, he retired to spend time with his family, traveling, and enjoying life. And writing this autobiography, which is full of gems of wisdom about managing your money and life in general. I’ve come to believe very strongly that any knowledge that cannot be used in the real world is useless. Application of knowledge to solve real world problems – for individualistic gain or otherwise – satiates our desire to exist. As Munger says, we have a high moral responsibility to understand human systems and act rationally.

I did and then recited, “Alfred the Great, began 871, ended 901, Edward the Elder, began 901, ended 925,” and so on. As I finished the list of fifty or so rulers with “Victoria, began in 1837 and it doesn’t say when she ended,” the man’s smirk had long vanished. Gulliver’s Travels was a special favorite, with its tiny Lilliputians, giant Brobdingnagians, talking horses, and finally the mysterious Laputa, a flying island in the sky supported by magnetic forces. I enjoyed the vivid pictures it created in my mind and the fantastical notions that spurred me to imagine for myself further wonders that might be.

About the Author

Thorp began his career as an academic mathematician, but his story is one man’s search for an edge at playing games modeled through probabilities. The edge he found in games of chance led to valuable discoveries in finance, successful businesses, wealth, and fame. Thorp was a child prodigy who was fascinated by all kinds of science and driven to learn. He proved mathematically, then in the casinos themselves, that blackjack players hold an edge over the dealer and literally wrote the book Beat the Dealer in the 1960s.

He is regarded as one of the best hedge fund managers in the world. He is also regarded as the co-inventor of the first wearable computer along with Claude Shannon. Thorp received his PhD from the University of California, Los Angeles in 1958 and worked at MIT from 1959 to 1961. He was a professor of mathematics from 1965 to 1977 and a professor of mathematics and finance from 1977 to 1982 at the University of California, Irvine. Thorp’s early focus on the nuances of blackjack card counting may not be of great interest to money managers, but he provides enough details on his research process and trade testing to keep readers engaged.

Thorp elaborates on the value of thrift in building wealth elsewhere in the book especially on page 269. The smoking gun is in the acknowledgements section, Thorp thanks a magazine editor for past opportunities to write, and saying “some chapters draw upon articles…” Yes, these out-of-place chapters are quite easy to recognize. Pretty nice analysis of modern investment and economic landscape towards the end of the book, leaving the reader with practical takeaways.

How to Beat Wall Street: Everything You Need to Make Money in the Markets Plus!

I didn’t understand all the math, but I understood the strategy enough to memorize basic play and I remembered enough to play decently when I turned 18 a decade later. I had always figured that Thorp continued in the gambling world like math experts David Sklansky and Chris Ferguson. It turns out that Thorp took a different path to Wall Street where his ability to find mathematical inefficiencies led to the creation of successful hedge funds. Edward Oakley “Ed” Thorp is an American mathematics professor, author, hedge fund manager, and blackjack player best known as the “father of the wearable computer” after inventing the world’s first wearable computer in 1961. He was a pioneer in modern applications of probability theory, including the harnessing of very small correlations for reliable financial gain.

The first half of the book was an utterly fascinating autobiography recalling the early years of the author’s childhood life and how he got interested in mathematics. His curiosity led him to key discoveries in how to beat the dealer in blackjack and other games of chance, and eventually led him down the path to make key discoveries to arbitrage the markets in finance. However, that material only provided enough for half of a book so the latter half is stuffed with his observations and views on markets, hedge funds, wealth, personal finance, etc. While somewhat interesting, none of this material is original and can be discovered in greater detail in any number of finance/business books.

• I was surprised the author dedicated the last 1/3 or 1/4th of the book to personal finance, budgeting, and life view/work life balance.
• Never mind that a lot of his money was made in collaborations with literal criminals.
• Thorp, who worked in PNP’s Newport Beach office, was not implicated in the suspected criminal activity but does not avoid discussing the investigation, his opinions on its true motivations, and his decision to close the firm.
• His descriptions of his methods sometimes get a bit technical, but serious investors will be able to follow them easily.
• I was just turning six, tall and thin with a mop of curly brown hair, lightly tanned, pants too short, the bare ankles ending in a pair of tennis shoes with frayed laces.

I was looking forward to this book even before I knew it would be written — someone would have to write about this man’s life eventually, and I’m glad that Thorp himself did it. Over the next couple of years I read books including Gulliver’s Travels, Treasure Island, and Stanley and Livingstone in Africa. When, after an eight-month a man for all markets arduous and dangerous search, Stanley found his quarry, the only European known to be in Central Africa, I thrilled to his incredible understatement, “Dr. Livingstone, I presume,” and I discussed the splendor of the Victoria Falls on the Zambezi River with my father, who assured me that they far surpassed our own Niagara Falls.

The probability of the reported move of “at least” nine points, or less than a seventh of this, was about 90 percent, so the market action was, contrary to the report, very quiet and hardly indicative of any fearful response to the news. My father taught me to compute the square root of a number. I learned to do it with pencil and paper as well as to work out the answer in my head. Between the ages of three and five I learned to add, subtract, multiply, and divide numbers of any size.

from Las Vegas to Wall Street, how I beat the dealer and the market

First of all, I do not know the main character of the book at all. They say it’s a millionaire who earned his money thanks to his mathematical skills. P. Morgan, Ford and John D. Rockefeller are, this is the first time I’ve heard of this man. The story begins as usual, i.e. from the very childhood.

This left me much more on my own and I responded by exploring endless worlds, both real and imagined, to be found in the books my father gave me. Sensing this and hoping it would bring us closer, I welcomed his efforts to teach me. Born in Iowa in 1898, my father, Oakley Glenn Thorp, was the second of three children, with his brother two years older and sister two years younger. His father took him and his brother to settle in the state of Washington. In 1915 my grandfather died from the flu, three years before the Great Flu Pandemic of 1918–19, which killed between twenty and forty million people worldwide.

The End of the Free Market

The irrationality of people is exactly what gives politicians power. Thorp’s favorite entertainment was solving mathematical puzzles. He decided early on not to accept anyone’s opinion that something was impossible . After blackjack, he calculated a way to beat roulette, in collaboration with Claude Shannon, the father of information theory.