3/16/2022

Mit Professor Blackjack

Bloch was an MIT student, earned a law degree, and then turned to poker to earn a living. He says his largest individual win at blackjack was $100,000. The Reptiles were led by Mike Aponte, Manlio Lopez and Wes Atamian. Aponte convinced Jeff Ma (who inspired the lead character Ben Campbell in “21”) to play on his team of card counters. Breaking Vegas S1E03 - Professor Blackjack This episode explores one of gambling history's most unusual, legendary relationships-and how it changed the casino industry. In 1961, lifelong gambler Manny Kimmel, a 'connected' New York businessman, read an article by MIT math professor Ed Thorp claiming that anyone could make a fortune at.

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The Professor of Blackjack Dr. Edward O. Thorp

Dr. Edward O. Thorp is an American hedge fund manager who began his career as a professor of mathematics at MIT. In between those two endeavors he visited Las Vegas, played some blackjack, became enamored of the game’s continually changing house edge and wrote the most famous book on gambling ever which he titled Beat the Dealer.

The Professor of Blackjack was born in Chicago, Illinois August 14, 1932. His childhood did not reflect a future of gambling (at casino games or the stock market), but he was continually intrigued by the precision and definitive nature of mathematics and physics. His interests led to a BA in Physics from UCLA in 1953, an MA in Physics from UCLA in 1955 and finally a PhD in Mathematics from UCLA in 1958.

He was hired as a professor at MIT, but missed the West Coast and was fascinated by casino games and game theory, and took several vacations with friend Claude Shannon and Claude’s wife Betty. Not surprisingly, the numbers attached to a spinning roulette wheel were quite a draw, and he and Claude invented a small computer for advantage play at the game. Betty would wear the device and use his mathematical formula to try and take advantage of anomalies in the spin pattern of different dealers and wheels.

Along the way, Thorp’s overall forays into the casinos of Las Vegas were successful. However, the mathematics of blackjack was also alluring to Thorp and he learned Fortran so he could program equations into a huge IBM 704 computer to define a specific strategy based on game theory related to the changing nature of the odds due to cards put into play. He was influenced by a paper presented by fellow mathematician Roger Baldwin on the same subject in 1956, but wanted to take his ideas to a new level. His new overall theory was related to the Kelly criterion, a wagering system he later applied to the stock market that matched bet-size to player advantage.

With his initial research finished, Thorp wrote a paper he titled A Favorable Strategy for Twenty-One in November of 1960. His fellow MIT professor, Dr. Shannon, suggested a name change to Fortune’s Formula: A Winning Strategy for Blackjack. The name stuck. The paper suggested that there was a specific way to play each hand of blackjack, based on the dealer’s up card – a basic strategy for winning. He also theorized a system to determine when the house odds changed and became player odds (or an actual player advantage).

Hitting the Casinos

His theories were so masterful that Thorp convinced Manny Kimmel, a local professional gambler, to provide him with a $10,000 bankroll to prove his system could be both practical and successful in real casino action. Instead of playing in Las Vegas, Thorp started in the casinos of Reno and Lake Tahoe where he initially won enough to convince Kimmel this might be a goldmine.

Repeated trips to both Reno and Las Vegas were filled with the good and bad of gambling. Unfortunately, even with a 1% edge there are huge swings at blackjack and Thorp had many ups and downs, but an $11,000 win over a single weekend was enough to keep him playing. And, it kept Pit Bosses watching him very carefully.

Before Thorp and the advent of basic strategy, most players were at a much larger disadvantage to the house, probably closer to 5%. To have a player who seemed to be so much better at the game was unnerving for the casinos, and they had no problem just telling him he couldn’t play anymore. He pondered his future while moving to New Mexico where he was a professor of mathematics from 1961 to 1965.

Thorp refined his strategy and detailed his Las Vegas casino exploits and explained the use of a mathematical card counting system in his book, Beat the Dealer. It was only marginally successful until a series of magazine and newspaper articles detailed the story of the college professor with a winning formula for playing blackjack and beating the casinos.

Las Vegas, in typical knee-jerk reaction to the thought of losing any money, changed the rules of the game to make it harder for the coming wave of skilled players they were sure was coming. Those rules included: no splitting of aces, shuffling the deck early, and restricting double down hands.

The public hated the rule changes, and even though Thorp’s book became a National Best Seller, it turned-out that very few players had the ability, patience, or bankroll to implement Thorp’s card counting system. In fact, after the casinos relented and eased-up on the rule changes, tens of thousands of new blackjack players did indeed come to Las Vegas, Reno and Lake Tahoe to try their luck. Most lost.

System Revised and the Real Boom in Blackjack Play

Thorp, however, continued to win, but found he was often shuffled-up or asked to leave, so he took to playing in disguise. With the help of Julian Braun, an easier count system was developed and included in the 1966 updated and revised edition of Beat the Dealer. Every subsequent blackjack book and system is based on the initial work of Thorp and Braun

Thorp continued to play casino blackjack after moving to the University of California at Irvine where he also taught mathematics from 1965 to 1982. He also contributed articles and ideas to a growing group of professional blackjack players and blackjack teams. However, his main focus outside the university was a growing interest in the stock market.

His first hedge fund, the market neutral Princeton/Newport Partners was started in 1969 with partner Jay Regan. Thirty years later Thorp reported that his own personal investments using his system of exploiting pricing anomalies in the securities markets as well as quantitate finance with stocks had yielded a 20% annual rate of return.

Dr. Thorp has written several books on his theories for beating the stock market using what were then new ideas, with names like Option Arbitrage, Convertible Arbitrage, Index Arbitrage and Statistical Arbitrage.

Without the book Beat the Dealer and Thorp’s Simple Point-Count System and Complete Point-Count System, upcoming blackjack players like Lawrence Revere and Kenny Uston would never have achieved the success and notoriety they did – by beating the casinos, and publishing their own books.

(Redirected from Edward Thorp)

Born	August 14, 1932 (age 88) Chicago, Illinois, U.S.
Citizenship	American
Alma mater	UCLA
Scientific career
Fields	Probability theory, Linear operators
Institutions	UC Irvine, New Mexico State University, MIT
Thesis	Compact Linear Operators in Normed Spaces(1958)
Doctoral advisor	Angus E. Taylor
Influences	Claude Shannon

Edward Oakley Thorp (born August 14, 1932) is an American mathematics professor, author, hedge fund manager, and blackjack researcher. He pioneered the modern applications of probability theory, including the harnessing of very small correlations for reliable financial gain.

Thorp is the author of Beat the Dealer, which mathematically proved that the house advantage in blackjack could be overcome by card counting.^[1] He also developed and applied effective hedge fund techniques in the financial markets, and collaborated with Claude Shannon in creating the first wearable computer.^[2]

Thorp received his Ph.D. in mathematics from the University of California, Los Angeles in 1958, and worked at the Massachusetts Institute of Technology (MIT) from 1959 to 1961. He was a professor of mathematics from 1961 to 1965 at New Mexico State University, and then joined the University of California, Irvine where he was a professor of mathematics from 1965 to 1977 and a professor of mathematics and finance from 1977 to 1982.^[3]

Computer-aided research in blackjack[edit]

Thorp used the IBM 704 as a research tool in order to investigate the probabilities of winning while developing his blackjack game theory, which was based on the Kelly criterion, which he learned about from the 1956 paper by Kelly.^[4]^[5]^[6]^[7] He learned Fortran in order to program the equations needed for his theoretical research model on the probabilities of winning at blackjack. Thorp analyzed the game of blackjack to a great extent this way, while devising card-counting schemes with the aid of the IBM 704 in order to improve his odds,^[8] especially near the end of a card deck that is not being reshuffled after every deal.

Applied research in Reno, Lake Tahoe and Las Vegas[edit]

Thorp decided to test his theory in practice in Reno, Lake Tahoe, and Las Vegas.^[6]^[8]^[9]Thorp started his applied research using $10,000, with Manny Kimmel, a wealthy professional gambler and former bookmaker,^[10] providing the venture capital. First they visited Reno and Lake Tahoe establishments where they tested Thorp's theory at the local blackjack tables.^[9] The experimental results proved successful and his theory was verified since he won $11,000 in a single weekend.^[6] Casinos now shuffle well before the end of the deck as a countermeasure to his methods. During his Las Vegas casino visits Thorp frequently used disguises such as wraparound glasses and false beards.^[9] In addition to the blackjack activities, Thorp had assembled a baccarat team which was also winning.^[9]

News quickly spread throughout the gambling community, which was eager for new methods of winning, while Thorp became an instant celebrity among blackjack aficionados. Due to the great demand generated about disseminating his research results to a wider gambling audience, he wrote the book Beat the Dealer in 1966, widely considered the original card counting manual,^[11]which sold over 700,000 copies, a huge number for a specialty title which earned it a place in the New York Times bestseller list, much to the chagrin of Kimmel whose identity was thinly disguised in the book as Mr. X.^[6]

Thorp's blackjack research^[12] is one of the very few examples where results from such research reached the public directly, completely bypassing the usual academic peer review process cycle. He has also stated that he considered the whole experiment an academic exercise.^[6]

In addition, Thorp, while a professor of mathematics at MIT, met Claude Shannon, and took him and his wife Betty Shannon as partners on weekend forays to Las Vegas to play roulette and blackjack, at which Thorp was very successful.^[13]His team's roulette play was the first instance of using a wearable computer in a casino — something which is now illegal, as of May 30, 1985, when the Nevada devices law came into effect as an emergency measure targeting blackjack and roulette devices.^[2]^[13] The wearable computer was co-developed with Claude Shannon between 1960–61. Thefinal operating version of the device was tested in Shannon's home lab at his basement in June 1961.^[2] His achievements have led him to become an inaugural member of the Blackjack Hall of Fame.^[14]

He also devised the 'Thorp count', a method for calculating the likelihood of winning in certain endgame positions in backgammon.^[15]

Stock market[edit]

Since the late 1960s, Thorp has used his knowledge of probability and statistics in the stock market by discovering and exploiting a number of pricing anomalies in the securities markets, and he has made a significant fortune.^[5] Thorp's first hedge fund was Princeton/Newport Partners. He is currently the President of Edward O. Thorp & Associates, based in Newport Beach, California. In May 1998, Thorp reported that his personal investments yielded an annualized 20 percent rate of return averaged over 28.5 years.^[16]