Edward O. Thorp: The Man Who Beat the Dealer

The Father of Card Counting?

Edward Oakley Thorp is considered by many to be the creator of the card counting technique and the man who found a way to beat the game of blackjack. After receiving his masters in Physics and a doctorate in Mathematics at UCLA, Thorp went on to teach mathematics at MIT. Later on in his teaching career he went on to teach Quantitative Finance (a prelude for his later involvement in the stock market).

Thorp had read an article in a statistics journal which provoked him to study blackjack in a systematic method. Thorp labored tirelessly, examining the game cards and in the process, devising a system that "accounted for the variations in those that remained after certain hands were dealt" This is in fact the essence of card counting; the technique strived to shift the advantage from a maximum of about 5% for the house all the way to a 1% advantage for the player. These were indeed some very high aspirations.

 

Thorp, in effect, figured out that if a blackjack player counts the cards that are dealt to him, then an educated guess can be made as regards to the rest of the hidden cards in the deck. By this, a player can play accordingly and devise his subsequent moves and determine whether to hit or stand (see more in the card counting section).

"Math Weekends" at the Casino

Claude Elwood Shannon, was an established American engineer and mathematician who was known for his blackjack and roulette enthusiasm. He developed a liking to many of Thorpe's theories and wanted to cash in and apply these tactics to the tables at the casino. He developed a professional and personal tie with Thorpe and would often join his fellow scientist for weekend retreats to Las Vegas to test his luck. Shannon's wife Betty would also join the two and feed her own interest in the gambling world.

These weekend excursions would serve as a prelude to the weekend fiascos of the notorious MIT Blackjack Team, the popular group of math geniuses who took Thorp's theories as biblical text for their own casino strategies. Like the youngsters of MIT, Thorp and Shannon would often return from Vegas with their pockets full of two days' winnings. One weekend's winnings could accrue to a total of nearly $70,000 by today's standards.

Thorp the Author

Thorp began amassing what is today a handsome fortune with the early success of his writing. "Beat the Dealer", published in 1962 was an instant hit as it was the first definitive card counting "classic" and is still regarded today as a must-read for anyone wishing to understand the intricacies of blackjack.

The book unveiled Thorp's widely known "ten count system", which was close to a step-by-step tutorial that taught the reader how to gain an advantage in a major casino game. It is no secret that all serious card counting systems today use Thorp's methods as a base for any of their proposals.

In 1966, a second edition to "Beat the Dealer" came out and increased the already-great popularity of the original. This was due to a more applicable and practical technique that presented a very valuable asset to readers.

From the Casino to the Stock Market

Like any wise mathematician would, Thorp took his mathematical genius and applied it to the corporate casino- the Stock Market. "Beat the Dealer" was quickly followed up in 1967 by "Beat the Market". Along with co-author J. Regan, Thorp devised a system by which to read the stock market and "play it" in a very similar manner as one would in the casino. While assisting others with their investments through his own firm, "Edward O Thorp & Associated", Thorp has made the greater part of his fortune in the securities market and with his own hedge fund.

Thorp was one of the first seven inductees chosen to the Blackjack Hall of Fame. A much deserved honor to the man who intimidated the casinos with his revolutionary arithmetic ideas and is responsible for the winnings of many avid players.