Episode Details

What I learned from reading A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market by Edward Thorp. 

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[0:01] Ed Thorp’s memoir reads like a thriller—mixing wearable computers that would have made James Bond proud, shady characters, great scientists, and poisoning attempts. The book reveals a thorough, rigorous, methodical person in search of life, knowledge, financial security, and, not least of all, fun. Thorp is also known to be a generous man, intellectually speaking, eager to share his discoveries with random strangers.  

[1:23] Ed Thorp is the first modern mathematician who successfully used quantitative methods for risk taking—and most certainly the first mathematician who met financial success doing it.  

[3:19] Ed was initially an academic, but he favored learning by doing, with his skin in the game. When you reincarnate as practitioner, you want the mountain to give birth to the simplest possible strategy, and one that has the smallest number of side effects, the minimum possible hidden complications. 

[4:33] As Warren Buffet said: “In order to succeed you must first survive.” You need to avoid ruin. At all costs. 

[6:48]  It is vastly less stressful to be independent—and one is never independent when involved in a large structure with powerful clients. It is hard enough to deal with the intricacies of probabilities, you need to avoid the vagaries of exposure to human moods. True success is exiting some rat race to modulate one’s activities for peace of mind. 

[7:51] Read the forward by Nassim Taleb 

[9:14] Ed’s 4 rules for learning 

First, rather than subscribing to widely accepted views—such as you can’t beat the casinos—I checked for myself. 

Second, since I tested theories by inventing new experiments, I formed the habit of taking the result of pure thought—such as a formula for valuing warrants—and using it profitably. 

Third, when I set a worthwhile goal for myself, I made a realistic plan and persisted until I succeeded. 

Fourth, I strove to be consistently rational, not just in a specialized area of science, but in dealing with all aspects of the world. I also learned the value of withholding judgement until I could make a decision based on evidence.  

[11:15] I admired the heroes who, through extraordinary abilities and resourcefulness, achieved great things. I may have been inspired to mirror this in the future by using my mind to overcome obstacles. 

[14:29] They told us that my aunt Nona and her husband had been beheaded in front of their children. 

[16:45] At its core, this is a book about how to live well. 

[17:55] Ed develops simple systems for everything in his life. 

[20:37] If anyone knew whether physical prediction at roulette was possible, it should be Richard Feynman. I asked him, “Is there any way to beat the game of roulette?” When he said there wasn’t, I was relieved and encouraged. This suggested that no one had yet worked out what I believed was possible. With this incentive, I began a series of experiments. 

[21:15] “Try to figure out what your skill set is and apply that to the markets.” Thorp likes to stay within his circle of competence. This is a hallmark of people who are rational. In that sense, Thorp reminds me of Warren Buffett. A Dozen Things I learned from Ed Thorp  

[21:50] I also believed then, as I do now after more than fifty years as a money manager, that the surest way to get rich is to play only those gambling games or make those investments where I have an edge.  

[23:50] He wrote a book that sold over a million copies: Beat the Dealer: A Winning Strategy