Although he doesn’t fit the theme of a sports bettor, it would be rude not to include betting pioneer, Edward Thorp, in our article series.
As mentioned in our article on Bill Benter, Edward Thorp was made famous through his book Beat the Dealer.
Thorp brought the phenomenon of card counting to light when his book was released in 1962, selling over 700,000 copies and making it onto the New York Times Bestsellers list.
With his father involved in World War II and his mother working to make ends meet, Thorp found himself on his lonesome through a large proportion of his childhood.
Unlike other children, this didn’t lead to Thorp rebelling and getting into trouble, it led to the opposite, spending time playing chess and reading books.
He also dabbled in a few childhood experiments, attempting to fly using large balloons and setting off home-made explosives.
His love of science brought him to university, where he decided to study mathematics and physics, earning a doctorate in both fields.
Throughout his spare time at university, Ed began reading statistical journals on Blackjack strategy and observing various games.
After a trip to Vegas, Thorp left convinced that he had a strategy that could beat the system.
His two main tools were an old-school IBM computer and the Kelly criterion, a formula that determines the ideal size of wagers.
He created a card-counting system that centred on one deck of cards, but nowadays, his system is largely ineffective as casinos use multiple decks of cards.
Nonetheless, to summarise his system simply, he reduced the houses edge by placing larger wagers when he had a greater chance of achieving a valuable hand.
As he had counted the cards since the fresh deck had been dealt, he was able to know when a hand would be more likely to be valuable.
This might sound confusing and hard to implement for some, but for a genius mathematician it wasn’t.
After receiving financial backing, Thorp headed to Reno, Nevada with his system, leading to a weekend where he turned $10k into $21k.
His next stop was Vegas, and after plenty of early success he was starting to attract unwanted attention, especially after the release of his book.
He stated the following in his latest book, A Man for All Markets;
“I was sitting at a baccarat table and they offered me coffee with cream and sugar. I drank the coffee and before long my pupils dilated and I could no longer count the cards. On the fourth night, they offered me coffee again. I put just one drop on my tongue and it tasted like baking soda. "What could one drop do?" I thought. It was enough to take me out again. They kicked out my two team members, who were told not to come back. On our final night, we went to a different casino, The Sands, where I set the win rate at $1,000 an hour. After two and a half hours, they came in with a gigantic security guard and told us to leave.
“As I drove home the next day, my accelerator pedal locked to the floor and the brake wouldn't control the car. We got up to about 80 miles per hour. I downshifted to first gear, turned off the key, pushed hard on the brake, and set the emergency brake, all of which slowed the car down. We pulled over and popped the hood when somebody came by who knew a lot about cars. He looked at the accelerator linkage and said that it had been changed in a way he'd never seen.”
Yep, he didn’t just start the concept card counting, he’s a technological inventor too!
During the 1960’s, Thorp created a device that would change the game of roulette forever.
He believed through the use of Newtonian Physics, that he could calculate the speed of a roulette ball to predict where it would land.
The device went inside the shoe of a player and would radio transmit particular sounds to a device that could be worn in the players ear, telling the player where the ball was most likely to land. Genius stuff!
After the success of Beat the Dealer, Thorp tried wearing disguises to casinos, but even that didn’t prove effective for too long, prompting a shift to the Wall Street world.
Funny enough they could, making a 15.1% return on his hedge fund over nineteen years and his personal investments yielded a 20% average return over 28.5 years.
He believed betting and investing shared some key traits, most importantly being that if you measure the probabilities of outcomes and then vary the size of your bets accordingly, you can be very successful.
Thorp even mixed with the likes of Warren Buffett, where he gained a lot of information surrounding long-term compounding.
Overall, his personal net worth sits at $800 million from both card counting and the stock market!
Nowadays, the multi-millionaire spends his time in semi-retirement after being inducted into the Blackjack Hall of Fame in 2002.
Check out our other articles in the 10 People Who Got Rich On Sports Betting series:
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