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The author provides advice and informative overviews related to financial topics such as hedging, compound interest, index funds, and the causes and characteristics of financial crises. In the book’s final chapter, “Thoughts,” Thorp particularly emphasizes the importance of education, which he notes “made all the difference” for him. He particularly advocates for increased study of probability, statistics, and finance in schools, arguing that knowledge of such subjects is essential to making informed choices later in life. He also holds strong views on how to size risk effectively via a Kelly criterion — a core concept for traders, if not necessarily for money managers.
My Book Notes
The book would provide even greater value for finance-oriented readers if it focused more on the “card counting” of finance and the identification of new trading opportunities. I would have enjoyed reading more about Thorp’s development of options pricing and arbitrage in the early days of options trading. Thorp is forthcoming about the more difficult periods of his career, such as the closing of his firm in the late 1980s. He also discusses how, when asked to evaluate Bernie Madoff in the early 1990s, he detected fraud simply by doing his homework and studying the evidence. Edward O. Thorp is the author of the bestseller Beat the Dealer, which transformed the game of blackjack. His subsequent book, Beat the Market, co-authored with Sheen T. Kassouf, influenced securities markets around the globe.
He is regarded as one of the best hedge fund managers in the world. He is also regarded as the co-inventor of the first wearable computer along with Claude Shannon. Thorp received his PhD from the University of California, Los Angeles in 1958 and worked at MIT from 1959 to 1961. He was a professor of mathematics from 1965 to 1977 and a professor of mathematics and finance from 1977 to 1982 at the University of California, Irvine. Thorp’s early focus on the nuances of blackjack card counting may not be of great interest to money managers, but he provides enough details on his research process and trade testing to keep readers engaged.
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He moved on from academia and gambling to make boatloads of money in the stock market, hob-nob with Warren Buffet, and generally live a fascinating life. The writing is clear and engaging, page-turning, and not overly technical nor filled with too many numbers. I’ve spent a lot of time reading books about investing and quantitative finance. This book is a train ride that stops at all of the interesting stops. Yet, Ed has so much primary information to share that he manages to make so much of this his own.
In this regard, Thorp’s autobiography is an illustrative guide to finding meaning in life – not through spirituality, but through curiosity and application of the inquisitive mind to understand the world around it. Thorp received his Ph.D. in mathematics from the University of California, Los Angeles in 1958, and worked at the Massachusetts Institute of Technology 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. This skill, especially to make rapid approximate calculations, remains valuable, particularly for assessing the quantitative statements that one continually encounters.
First of all, I do not know the main character of the book at all. They say it’s a millionaire who earned his money thanks to his mathematical skills. P. Morgan, Ford and John D. Rockefeller are, this is the first time I’ve heard of this man. The story begins as usual, i.e. from the very childhood.
Delivery times may vary, especially during peak periods. At the time, Mr. Thorp was managing about $400,000 and the accounts were grossing about 25 percent a year, with 20 percent of profits payable to the general partner. Mr. Thorp’s $20,000 income from the partnership was equivalent to his salary as a professor and would only accelerate in the coming years as Princeton Newport Partners attracted additional assets and enjoyed steady success. Mr. Thorp retained his professorship for several years before finally dedicating all of his time toward investing in the early 1980s. Fusion Mediawould like to remind you that the data contained in this website is not necessarily real-time nor accurate. Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors.
Then there were the rows of fruit jellies, jams, and preserves in glasses sealed with a layer of paraffin on top. Though we were poor, my parents valued books and managed to buy me one occasionally. As a result, between the ages of five and seven I carried around adult-looking books and strangers wondered if I actually knew what was in them. One man put me to an unexpected and potentially embarrassing test.
I was looking forward to this book even before I knew it would be written — someone would have to write about this man’s life eventually, and I’m glad that Thorp himself did it. Over the next couple of years I read books including Gulliver’s Travels, Treasure Island, and Stanley and Livingstone in Africa. When, after an eight-month arduous and dangerous search, Stanley found his quarry, the only European known to be in Central Africa, I thrilled to his incredible understatement, “Dr. Livingstone, I presume,” and I discussed the splendor of the Victoria Falls on the Zambezi River with my father, who assured me that they far surpassed our own Niagara Falls.
A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer
The incentive structures prevalent in corporate America today are largely unchanged and destined to cause trouble in the future. The fact that Mr. Thorp dedicates this much space in his memoir to personal finance indicates that he believes lack of education in this area is a serious impediment to the well being of the public. He believes that personal finance should be taught in elementary and secondary schools, noting that most people seem to not understand basic probability and statistics. Clearly, if more Americans understood the power of compound growth when leaving high school, there would be far fewer cases of misery caused by mistaken accumulation of debt and lack of savings. Third – and this is the most interesting thing in this book – a description of how the author played with the casino, and how the casino struggled with it with all its might. However, one should also note that when the author was describing his winning method, I had no understanding at all, because I was far from all these gambling.
He could be considered a Warren Buffett of quant traders. Thorp is a model of someone who theorizes how markets and games operate, tests his ideas through evidence a man for all markets and hard work, and then puts his “skin in the game” by playing with real cash. The results are not the ordinary research musings of finance academics.
Just like the Madoff claims , many other claims around the originality of Black-Scholes like pricing etc are throwaway, theoretically inadequate, practically unhelpful to almost all around and unprovable. The author’s habit to damn the damned only adds to the impression of a person unlikely to stand up for anyone in need of help or support. Thorp lives in a rational world where foolishness is tested and dies. And as a decent man he would have fought irrational governance had that been his career. A Man for All Markets is a great book and a reminder that the Achilles Heel of the rational man is the irrationality of everyone else. You can rich get off that knowledge but you can’t fix it.
It’s impossible not to have great admiration for his lifes work, but found the book a bit flat, which surprised me. A little too much of the early days for my taste but obviously a very intelligent man and I found what he had to say about Las Vegas most illuminating. Not so much the house always wins but more the house will make sure it always wins – a different concept entirely. With razor-sharp insight, bestselling author Roger Lowenstein tells the full story of the end of Wall Street as we knew it.
If I were giving out advice on how to be successful in this world I would say first pick your spouse wisely. Not 3 pages later on p233, Thorp introduces a chapter about his “statistical arbitrage” operation, which to my understanding is the exact same operation as HFTs – profiting off differences in what people are willing to sell at vs. buy at – but perhaps just slower? It made me sit back and wonder, how can he imply that HFT is not really adding anything to society, https://forexarena.net/ then talk about making tens or hundreds of millions of dollars in other types of trading ? Overall I found the first half more interesting because of his story of pulling himself up by the bootstraps and overcoming many of life’s essential unfairness. I like that he deliberately calls out how some people you come across in life will not hesitate to put their well being ahead of yours even when they already have what may be considered a comfortable position in life.
from Las Vegas to Wall Street, how I beat the dealer and the market
Mr. Gerard was planning to take cash and wanted Mr. Buffett’s opinion regarding Mr. Thorp. Both men had employed warrant hedging and merger arbitrage strategies and spoke about it during a lunch arranged by Mr. Gerard. Although Mr. Buffett’s style of investing extended far beyond Mr. Thorp’s activities, he apparently had a positive overall assessment since Mr. Gerard ended up investing additional funds with Mr. Thorp.
- Conventional wisdom in the 1950s held that it is impossible for players to gain a consistent edge in games such as blackjack, baccarat and roulette.
- His multidisciplinary approach to learning is a lesson for anybody who wants to make it big in life.
- The establishment at the time would not have believed that Bernie Madoff could be a fraud.
- But that’s not the point of the book, which is more about the big picture.
- In such circumstances, he advocates holding Berkshire Hathaway and index funds.
Similarly, in our time with the ubiquity of computers and hand calculators, the ability to carry out mental calculations has largely disappeared. Yet a person who knows just grammar school arithmetic can learn to do mental calculations comfortably and habitually. From Malory’s story of King Arthur and the Knights of the Round Table, I learned about heroes and villains, romance, justice, and retribution.
But it falls apart when Thorp starts talking about how special he is. I’m still not sure that he has done much other than make a lot of money, but to Thorp his money apparently is proof of his worth. Never mind that a lot of his money was made in collaborations with literal criminals. Thorp of course declaims any knowledge of their crimes, as if this makes absolves him of any responsibility. (Thorp also discovered Madoff’s Ponzi scheme 18 years before it collapsed—of course he did nothing about it.) The book collapses in the second half, when Thorp shares his utterly pedestrian “insights” on financial markets. If you haven’t yet heard of inflation or compound interest, I won’t spoil it for you.
My first memory is of standing with my parents on an outdoor landing at the top of some worn and dirty wooden steps. It was a gloomy Chicago day in December 1934, when I was two years and four months old. Even wearing my only set of winter pants and a jacket with a hood, it was cold.
One of those unique minds who combined amazing innate math abilities with a flair for practical implications, Thorpe would enjoy decades of results that even earned the respect of Warren Buffet. Thorpe dives into any number of related topics including his own tale of spotting the Madoff fraud 20 years before it came to light….noone listened to him either. Photo by Adam Śmigielski on UnsplashA Man for All Markets is an auto-biography about Edward Thorp. He lived a fascinating life and I think his brilliance comes across in accomplishments throughout the book. The order of the book is mostly chronological, but he jumps around a little when there are similar topics from different time periods.
Thorp is one of the world’s best blackjack players and investors, and his hedge funds were profitable every year for twenty-nine years. Princeton Newport employed a true “hedge fund” strategy, meaning that it was designed to be market neutral and profitable regardless of the movement in the overall stock market. Today, what we call “hedge funds” are usually not market neutral funds of the type Mr. Thorp ran but are instead usually net long or net short, meaning that managers are taking a directional view of their holdings or the market as a whole. Mr. Thorp focused on identifying opportunities that could be hedged in a way that did not depend on the movements of the overall market. This resulted in a nearly twenty year track record in which the fund never posted a loss over a single calendar quarter. From November 1, 1969 through the end of 1988, Princeton Newport Partners posted an annual compound return of 19.1 percent before fees, and 15.1 percent after fees.