Lessons From a Man Who Beat The Market

Last Updated April 30th 2019
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'A Man for All Markets' by Edward Thorp is a memoir that will inspire Trading Education readers interested in investing.

Ed Thorp may not be as famous as financial gurus, such as George Sorros and Warren Buffett, but in terms of actual achievements he should share the spotlight. Although he is well known by money managers, his success makes him one of the most famous mathematicians and card counters of our time.

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For anyone interested in gaining an insight into one of the most successful financial gurus in the world, this book is ideal. Investing.com describes Thorp as a legend within both the gaming and quant world, moving from maths professor to blackjack expert and then on to a renowned hedge fund manager. Unlike many memoirs from academic mathematicians, this book is an interesting and engaging history of Thorp's ability to use maths and determination to succeed.

You might also like:  Stanley Druckenmiller – The Iconic Forex Trader

 

The successes of Edward Thorp

Edward Thorp has celebrated many achievements throughout his career, with the developments in the gambling world some of the most remarkable. Thorp developed the first system to crack the game Blackjack and then developed the first wearable computer, which allowed him to gain an edge in Roulette.

Thorp then switched his talents to investing, where he famously held the first quant hedge fund, before continuing on to create one of the best hedge fund track records of all time. Thorp's talents in spotting new opportunities continued with him developing the option pricing formula to break the market, which later received a Nobel prize. Thorp also famously used his remarkable talents to prove that Bernie Madoff was a fraud, 15 years before his crimes were uncovered.

 

Image: alchetron.com

The early life of Edward Thorp

The book opens with some snippets of Thorp's childhood, which provides the reader with an insight into his introverted and intelligent personality. Some of the stories are described in detail such as when Thorp at the age of 12 set out to learn Morse Code, which required the purchase of a tape machine and a radio operator license.

Thorp worked extremely hard to gain a place at university from his lower-middle-class background, where he studied physics before switching to mathematics to gain his PhD. The start of the book explains how Thorp would read financial books throughout his time at university to learn about investing, which then enabled him to use his mathematics knowledge within the stock market.

See also: The Number 1 Financial Regret You Want to Avoid At All Costs

 

Thorp and his gambling success

Although the blackjack card counting may not initially seem of interest to money managers, there are enough details about his research processes and trade testing to keep everyone engaged.

This section of the book explains Thorp's success within the blackjack game. Thorp explains the use of his Ten-Count System, which would show moderately heavy losses mixed with occasional winning streaks to beat the house. The book continues by explaining that this characteristic of random favourable bets is seen repeatedly in both the investment and gambling worlds.

 

An inspiring memoir

The final chapter with a description of Thorp's closing thoughts on the benefit of his education on his brilliant success, in both gambling and the world of finance. It is clear that Thorp believes his success can be largely attributed to his ability to teach himself, a skill which he learnt from an early age.

Professional investors can learn a lot from Thorp's application of gambling methods to the world of stock and options trading. If you would like to continue your investor education and learn more about the many successful people within investing, please take a look at our insightful blogs or contact us today.

Don't miss: Charlie Munger: The Pragmatic Investor Who Knows How to Create Wealth

 

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Sources:

[1] investing.com

[2] valueandopportunity.com

[3] blogs.cfainstitute.org

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