Like many gamblers who got their start in the early 1970’s, Blair Hull managed to parlay his gambling efforts into successful investing and trading careers. From literally starting at the bottom Hull has built up a fortune of more than $500 million dollars
Hull was born in 1942 in California in what is now known as Silicon Valley. He wasn’t from a wealthy family and after finishing high school, he took a job in a cannery factory to help support his family. Around that same time the Vietnam War was heating up and he ended up serving six years in the United States Army.
When he returned he took a job teaching high school maths and physics, before ultimately going back to study at University. Like many great gamblers, Hull was a gifted mathematician. He completed an MBA as well as the Harvard OPM (Owner/President Management) Program.
Around that same time Hull began getting interested in Blackjack after he was inspired by the book, “Beat the Dealer”, by Edward Thorp. He got started playing blackjack firstly because he felt there was an edge, but secondly because he simply needed the money.
At age 29, he took his $120 bankroll and headed to Las Vegas to try out his new found blackjack strategy. Hull originally took the bus from California and started out by playing $1-$4 stakes, before increasing it up to $5-$25.
Unlike most gamblers, Hull never thought of Blackjack as gambling. Throughout his studies he came across William Sharpe, a Nobel Prize winner at Stanford, who defined an investment as “a sacrifice of current consumption for expected future gain”.
That resonated with him and he felt that as long as he had an effective strategy that had an edge and he was able to stick to it, he was in fact an investor, not a gambler. In blackjack the goal is to only bet at the times when you in fact have an edge over the house. As a shoe is dealt out, a skilled card counter can track the ratio of high to low cards. High cards, Aces and tens, have more value as they have the ability to make blackjack, which pays out higher odds.
Hull played Blackjack for five years from 1971, however in 1974 and 1975 he made a big step forward in his gambling career by joining a card counting team. The team was highly professional and all members had to pass an exam before they were able to join. When card counters work in teams, the members play different roles.
Often times there is a counter who sits at the table and tracks the ratio of high and low cards and when the ratio is in their favour, they call in the ‘big player’, the one who comes in and places the bets. This way teams are able to bet more money and do so more inconspicuously. They also gain a bigger edge as they can scale up their bets faster.
By the end of the team’s run in 1976, all the members had been identified by Las Vegas Casinos and banned from playing. “The Big Player” was a book that outlined how these teams operated and is famous in gambling circles, although it’s now out of print.
Gambler Turned Investor
Hull was clearly always someone with a strong mathematical mind and his next step was moving into a field that wasn’t going to ban him from placing bets – the stock market.
Using his blackjack winnings, Hull was able to get a seat on the Pacific Stock Exchange and began trading. He used his mathematical prowess to be one of the first to build quantitative models that were able to profit from mispriced options.
In 1985, he founded his own firm called Hull Trading Company. He put together a team of people that at the time weren’t the types that you would associate with being on the trading floor. They included PhDs, mathematicians and computer scientists. The firm developed automated tools and technology to trade options markets.
It has been suggested that his results were so incredible, that his equity curve looked like it was out of an advertisement for a ‘magic trading system’. The difference of course was that his results were real.
In 1999 Hull sold his company to Goldman Sachs for $531 million dollars.
Since then he has gone on to found another trading company and now manages his own ETF (Exchange Traded Fund) which uses multifactor models to predict future stock prices movements.
From very humble beginnings and only a $120 bankroll, Blair Hull became a famed gambler, trader and multi-millionaire who revolutionised an industry.