The approach of any modern professional punter draws from the works of great gambling pioneers. If you do some research on gambling pioneers, one name will consistently come up: Ed Thorp.
These days, Ed Thorp is known worldwide as an influential author and successful hedge fund manager. But above all else, his major legacy is summed up by his nickname: The Grandfather of Card Counting.
Ed Thorp was born in Chicago, Illinois in 1932. His father was a military man and served in both World War I and World War II. As a result, a great deal of Thorp’s youth was spent without his father around.
Thorp was a maths prodigy and upon graduating high school, attended UCLA to pursue a degree in physics. After graduating he then moved onto a PhD in Mathematics from MIT, where he later became a professor.
Thorp’s interest in gambling began when he read an academic paper on the mathematics of roulette. At the time there was a long held belief that games of chance could not be beaten.
In a game like roulette, each spin is independent of one another. However, in other games like blackjack, every time a card is dealt the probability of future hands changes.
Based on this, Thorp was convinced an exploitable edge existed in blackjack. So he headed to Las Vegas in a bid to better understand the game.
Along with mathematician Claude Shannon, Thorp built a pocket sized computer – no small feat at the time – that they could take into casinos to help them track the edge. They then applied the Kelly Criterion to calculate exactly how much they should be wagering on each bet.
At the time casinos didn’t shuffle the deck regularly, making games a lot easier to track for advantage players.
From here, Thorp was able to develop his own system to track the running count of the cards. He studied all areas of the game of blackjack – from the stats behind it, to what the correct strategy was, to the different ways to track the cards that had been dealt.
With mountains of research under his belt, Thorp was certain that card counting would work.
With his new system and help from a range of computer programs he’d developed, Thorp wanted to get playing. He needed to get financial backing and was able to get a $10,000 loan from an acquaintance with alleged mafia links.
After his first weekend of betting he was up $11,000 and didn’t need any more outside funding to finance him.
Thorp continued to be highly successful and eventually moved to Las Vegas. However, the more success he had, the more trouble he had getting bets on.
Casinos quickly started banning him from playing and he was forced to start wearing disguises so he could play at the tables.
As word of Thorp’s exploits spread, he began being approached by other professional gamblers.
Unlike most successful gamblers, Thorp had no issue sharing his knowledge – his background was in academia.
The best way for him to do that, in his opinion, was to release a book.
The first edition of Beat the Dealer was released in 1962. It covered everything from card counting to various aspects of advantage play. The book went on to sell 700,000 copies and hit the New York Times Best Sellers list.
The book served as the basis for many professional gambling careers. The now-common Hi-Lo counting system was developed using Thorp’s book, and added to later editions. It quickly became the most widely-used counting system to beat blackjack, and remains so to this day.
As his fame and success grew, Thorp found it increasingly difficult to play at casinos in the US. Ever the mathematician, he turned his attention to another market all together: the stock market.
Using statistical techniques and computer models, Thorp started his own hedge fund and has produced strong returns over the years. His first fund made annual returns of approximately 15% in nearly 20 years of operation, all while he was still teaching full-time at universities.
In 2003, Ed Thorp was inducted into the Blackjack Hall of Fame.