Edward O. Thorp facts for kids

Edward Oakley Thorp, born on August 14, 1932, is an American mathematics professor and author. He is famous for his work on probability theory. This involves using math to figure out the chances of things happening.

Thorp used his math skills to study games like blackjack. He wrote a book called Beat the Dealer. This book showed how players could use a method called card counting to improve their chances of winning. He also helped create the very first wearable computer with Claude Shannon.

Edward Thorp earned his Ph.D. in mathematics from the University of California, Los Angeles in 1958. He taught math at places like the Massachusetts Institute of Technology (MIT) and the University of California, Irvine.

Early Life and Education

Edward Thorp was born in Chicago. He moved to southern California when he was a child. From a young age, he loved science and building things. He became one of the youngest amateur radio operators at just 12 years old.

Thorp won scholarships for his skills in chemistry and physics. He first went to UC Berkeley for college. Later, he transferred to UCLA and studied physics. He then earned his PhD in Mathematics from UCLA.

Using Computers to Study Blackjack

Edward Thorp used an early computer called the IBM 704 for his research. He wanted to understand the chances of winning at blackjack. His ideas were based on something called the Kelly criterion.

He learned a computer language called Fortran. This helped him program the math equations for his research. Thorp studied blackjack very deeply. He used the computer to create card counting methods. These methods helped players improve their odds, especially when fewer cards were left in the deck.

Testing Theories in Casinos

Thorp decided to test his math theories in real casinos. He visited places like Reno, Lake Tahoe, and Las Vegas in Nevada. He started with $10,000, which was provided by a professional gambler named Manny Kimmel.

Their tests at blackjack tables were very successful. Thorp won $11,000 in just one weekend. Because of his methods, casinos now shuffle cards more often. This makes it harder for players to use card counting. When Thorp visited Las Vegas, he sometimes wore disguises.

News of Thorp's success spread quickly. He became well-known among blackjack players. Because so many people wanted to learn his methods, he wrote Beat the Dealer in 1962. This book became a New York Times bestseller. It sold over 700,000 copies.

Thorp's blackjack research was unique because it reached the public directly. It did not go through the usual academic review process first. He saw the whole experiment as a fun academic challenge.

Working with Claude Shannon

While teaching at MIT, Thorp met Claude Shannon. Shannon was a famous scientist. Thorp, Shannon, and Shannon's wife Betty sometimes went to Las Vegas together. They played roulette and blackjack.

Thorp's team used a special device for roulette. This was the first time a wearable computer was used in a casino. This kind of device is now against the law in casinos. Thorp and Shannon developed this computer between 1960 and 1961.

The device worked with two people. One person watched the roulette wheel. They used their toe to input how fast the wheel was spinning. The other person received musical tones through a hidden earpiece. These tones told them which numbers were most likely to win. By betting on groups of these numbers, they could gain an advantage.

Thorp's achievements led him to become a first member of the Blackjack Hall of Fame. He also created a method called the "Thorp count" for the game of backgammon.

Success in the Stock Market

Since the late 1960s, Edward Thorp has used his knowledge of probability and statistics in the stock market. He found ways to spot unusual patterns in the market. He used these patterns to make a lot of money.

Thorp managed investment funds called hedge funds. His first fund, Princeton/Newport Partners, ran from 1969 to 1989. His second fund, Ridgeline Partners, focused on statistical arbitrage. This means finding small price differences in related investments. He closed this fund in 2002.

Today, Thorp is the President of Edward O. Thorp & Associates. This company is based in Newport Beach, California. In 1998, Thorp shared that his own investments had grown by about 20 percent each year for nearly 30 years.

Thorp has written many articles about how to price options, the Kelly criterion, and how markets can sometimes be inefficient. In 1991, Thorp was one of the first people to doubt the amazing investment returns claimed by Bernie Madoff. Madoff's investments were later found to be fraudulent.

See also

In Spanish: Edward O. Thorp para niños

• Black–Scholes
• Four Horsemen of the Apocalypse - who created the Basic strategy for blackjack
• Gaming mathematics
• Kelly criterion
• Proebsting's paradox
• Richard A. Epstein