A Man for All Markets From Las Vegas to Wall Street, How I Beat the Dealer and the Market



In Founders Podcast #93, the host delves into the remarkable life of Ed Thorpe, a figure revered by Warren Buffett, Charlie Munger, and Nassim Taleb as a genius. Thorpe's autobiography, "A Man for All Markets," serves as a blueprint for living a balanced life, highlighting his approach to success that extends beyond financial gains. Thorpe optimized for life experiences, maintaining a healthy balance between work, personal life, and happiness, a contrast to common entrepreneurial regrets. This episode underscores the importance of learning from both the triumphs and mistakes of great minds, with Thorpe's story exemplifying the pursuit of a life with minimal regrets and a focus on what truly matters. The podcast encourages listeners to join the Misfit feed for full access to such insightful biographical studies and the wisdom they impart.

Summary Notes

Benefits of Founders Subscription

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  • Focus on learning from both successes and mistakes of these individuals.

"One of the benefits of investing in a subscription to Founders is not just the new episode that I put out every week based on the biography I happen to read that week. But it's also to get full access to the back catalog."

This quote emphasizes the value of subscribing to Founders, highlighting the comprehensive content available to subscribers.

Ed Thorpe's Life and Influence

  • Ed Thorpe is highly respected by Warren Buffett, Charlie Munger, and Nassim Taleb.
  • Thorpe's autobiography, "A Man for All Markets," is recommended for understanding his balanced approach to life.
  • He is admired for living with few regrets and prioritizing balance between work, health, and personal life.

"Ed Thorpe lived an unbelievable life, and he's still alive to this day. He's a person that Warren Buffett, Charlie Munger, Naseem Taleb all called a genius."

This quote introduces Ed Thorpe as an influential figure whose life story is worth studying.

Blueprint for Life

  • Ed Thorpe is considered a blueprint for life due to his balanced lifestyle.
  • He optimized his life based on the principle that "time is the stuff life is made of."
  • Thorpe chose to focus on health, family, and interesting work over financial gain alone.

"If I had to choose one, he's my blueprint for life."

The speaker identifies Ed Thorpe as their personal model for living a fulfilling life.

Holistic Success

  • Ed Thorpe's success is not limited to financial wealth; he maintained his health and personal relationships.
  • He pursued interests beyond financial gain and excelled in various aspects of life.
  • Thorpe's approach is rare and admirable among the individuals studied on the podcast.

"He identified the things that were important to him and decided to be great at them, all of them."

This quote highlights Thorpe's commitment to excellence in all areas of life that he deemed important.

Founders Podcast Subscription Details

  • Founders is an independent, ad-free podcast.
  • Subscribers can save money with an annual subscription and gain full access to all episodes.
  • A monthly subscription option is also available, with a free trial included.

"The best way to use founders is to invest in an annual subscription. Not only do you save 18%, but it works out to less than a dollar a week to learn from some of the greatest minds in history."

The speaker is promoting the annual subscription as the most cost-effective way to access the podcast's content.

Ed Thorpe's Contributions to Mathematics and Finance

  • Ed Thorpe's memoir combines elements of adventure with scientific and financial insights.
  • He is the first modern mathematician to use quantitative methods successfully for financial risk-taking.
  • Thorpe's approach emphasizes simplicity and the importance of having a clear edge.

"Ed Thorpe 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."

This quote places Ed Thorpe as a pioneer in applying mathematical methods to finance, emphasizing his success in this field.

Simplicity and Practical Application

  • Thorpe's work is characterized by its straightforward nature, making it invisible in academia but valuable for practitioners.
  • The true challenge lies in translating an edge into tangible benefits.
  • Academia often values complexity over simplicity, whereas Thorpe's success demonstrates the power of the latter.

"For it is the straightforward character of his contributions and insights that made them both invisible in academia and useful for practitioners."

The speaker explains that Thorpe's simple yet effective methods are not always recognized in academic circles but are highly valuable in practical applications.

Academic Complexity vs. Practical Simplicity

  • Academics often engage in creating complex theories and models, which may not have practical applications.
  • Great mathematicians and physicists are exceptions who can bypass this trend.
  • Ed Thorpe is an example of someone who preferred practical learning and application over academic complexity.

"The only academics who escape the burden of complication for complication's sake are the great mathematicians and physicists."

This quote emphasizes the rarity of academics who manage to avoid unnecessary complexity in their work, highlighting the exceptional nature of great mathematicians and physicists.

"Ed was initially an academic, but he favored learning by doing with his skin in the game."

This quote explains that Ed Thorpe valued practical experience and real-world application over theoretical academic work.

Simplicity in Blackjack Strategy

  • Ed Thorpe simplified complex card counting strategies into easily understandable rules.
  • His method involved a simple tally system that anyone could apply.
  • Thorpe's strategy made blackjack accessible to the average person.

"Instead of engaging in complicated and challenging card counting, something that requires one to be a savant, he crystallizes all of his sophisticated research into simple rules."

This quote highlights Thorpe's ability to distill complex research into a set of simple, actionable rules for blackjack, making it accessible to the average person.

Importance of Money Management

  • Money management is crucial for those exposed to profits and losses.
  • Having an edge in gambling or investing is not enough; one must also be able to survive financially.
  • Academic finance often overlooks the importance of avoiding ruin, which is critical in practical finance and gambling.

"Having an edge and surviving are two different things. The first requires the second."

This quote underscores the concept that to maintain a competitive edge, one must first ensure financial survival by avoiding ruin.

Rejection of Thorpe and Kelly by Economists

  • Ed Thorpe and John Kelly's ideas were practical but rejected by mainstream economists.
  • Paul Samuelson, a leading economist, was particularly opposed to Thorpe's ideas.
  • Practical strategies that ensure survival are often undervalued in academic circles.

"Thorpe and Kelly's ideas were rejected by economists in spite of their practical appeal."

This quote points out the disconnect between practical strategies that work in real life and the theories favored by academic economists.

Two Distinct Methods in Finance

  • Economists often use methods that lead to financial blow-ups or profit from management fees rather than direct speculation.
  • Information theorists, like Ed Thorpe, use methods based on survival and practical application, which are favored by traders, entrepreneurs, and scientists.
  • The latter group's methods are essential for long-term success in speculation.

"The world today is divided into two groups using two distinct methods."

This quote identifies the fundamental divide in financial strategies between those who prioritize academic theories and those who focus on practical, survival-based methods.

Thorpe's Independence and Life Control

  • Ed Thorpe chose not to manage large funds or structures after leaving his firm.
  • He valued independence and control over his life, avoiding the stress of large corporate structures and powerful clients.
  • Thorpe's approach to life and business reflects a focus on peace of mind and rational decision-making.

"True success is exiting some rat race to modulate one's activities for peace of mind."

This quote captures Thorpe's philosophy that real success lies in gaining control over one's life and activities, prioritizing mental well-being over wealth accumulation.

Ed Thorpe's Early Life and Four Rules

  • Thorpe grew up during the Great Depression, which shaped his self-reliance and independent thinking.
  • He developed four rules for learning: questioning accepted views, testing theories with experiments, setting realistic goals, and being rational based on evidence.
  • These rules guided Thorpe's approach to life and his success in finance and gambling.

"I began a life in the great depressions of the 1930s... I learned how to think because of circumstances."

This quote provides context for Thorpe's upbringing and the development of his independent and rational mindset, which later contributed to his success.

"First, rather than subscribing to widely accepted views... I checked for myself."

This quote illustrates Thorpe's first rule for learning, emphasizing the importance of independent verification over accepting conventional wisdom.

"Since I tested theories by inventing new experiments... I formed the habit of taking the result of pure thought... and using it profitably."

This quote reflects Thorpe's second rule, highlighting his practice of applying theoretical knowledge in profitable ways through experimentation.

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

This quote exemplifies Thorpe's third rule, focusing on the value of determination and planning in achieving goals.

"I strove to be consistently rational, not just in a specialized area of science, but in dealing with all aspects of the world."

This quote conveys Thorpe's fourth rule, underscoring his commitment to rationality and evidence-based decision-making in all areas of life.

Early Life and Influence of Reading

  • Ed's parents were often absent due to work, leaving him and his brother unsupervised.
  • He developed a love for reading, which provided him with knowledge of heroes, villains, romance, justice, and retribution.
  • Ed admired heroes who achieved great things through extraordinary abilities and resourcefulness, which inspired him to use his mind to overcome obstacles.
  • Despite being poor, his parents valued books and occasionally managed to buy him one.

"I responded by exploring endless worlds, both real and imagined, that I found in the books that my father gave me."

This quote highlights the significance of reading in Ed's early life, serving as an escape and a source of inspiration for him.

Influence of the Great Depression

  • The Great Depression had a lasting impact on Ed's life, instilling values of frugality and economic efficiency.
  • His family lived on a meager salary, never wasting food and wearing clothes until they fell apart.
  • Ed observed a common trait among Depression-era survivors: a tendency towards frugality and hoarding.

"For the rest of my life, I would meet depression error survivors who retained a compulsive, often irrational frugality and an economically efficient tendency to hoard."

This quote reflects the long-term psychological effects of the Great Depression on individuals, including Ed and others he encountered.

Early Lessons in Entrepreneurship

  • Ed's first entrepreneurial venture was shoveling snow for neighbors, earning him a significant amount at a young age.
  • He learned an early lesson in competition and the importance of finding a competitive edge when other kids started offering the same service.

"This was an early lesson in how competition can drive down profits and why you need to find your edge."

The quote encapsulates the business lesson Ed learned from his childhood experience with competition and profit-making.

Family Hardships During World War II

  • Ed's family in the Philippines suffered during World War II, with relatives being prisoners of war and experiencing great loss.
  • These stories of hardship and survival motivated Ed to strive for a better future for himself and his future children.

"Seeing what World War II had done to my relatives and how World War I plus the Great Depression had limited my father's future, I determined to do better for myself and the children that I had hoped to have."

Ed's resolve to improve his and his family's circumstances is expressed in this quote, showing how past generational struggles influenced his ambitions.

Financing College Education

  • Ed planned ahead for college by investing in war bonds, which were supposed to mature by the time he started college.
  • Despite his family's dysfunction and financial betrayal by his mother, who cashed out his bonds, Ed managed to support himself through scholarships, part-time jobs, and minimal support from his father.
  • He lived frugally, even relying on free meals from church open houses on Sundays.

"I survived with scholarships, part-time jobs, and $40 a month for the first year from my father."

This quote demonstrates Ed's resourcefulness and determination to pursue higher education despite financial obstacles.

Health and Fitness in College

  • While in college, Ed adopted a focus on health and fitness, a habit that benefited him throughout his life.
  • The book about Ed's life emphasizes entrepreneurship, risk-taking, hard work, self-education, and living well, with health and fitness being a key component.

"And that's a focus on health and fitness."

The emphasis on health and fitness in the quote reflects a lifelong habit that Ed developed during college, contributing to his overall philosophy on living well.

Life Prioritization and Regret

  • Many entrepreneurs express regret in their autobiographies for not spending enough time with family.
  • Sam Walton (Walmart) and Phil Knight (Nike) both wished they had allocated more time to family rather than just their businesses.
  • Ed Thorpe is highlighted as an individual who, despite his success, did not neglect family time or his health.

"The entrepreneur waits close to the end of his life, starts writing his autobiography, and there's a lot of regret so the two to come to mind right." "They talk about spending so much time on their business that if they could do it over again, they would have spent more time with their family." "Ed doesn't make that mistake. So he makes a lot of money, but he also spends a lot of time with his family and loved ones."

These quotes emphasize the common theme of regret among successful entrepreneurs regarding their work-life balance, and contrast Ed Thorpe's approach, who managed to maintain a balance between his professional success and personal life.

Health and Fitness as a Foundation

  • Ed Thorpe understood the importance of health for overall life quality.
  • He developed a lifelong interest in fitness after accepting a challenge to work out and subsequently doubling his strength.
  • Thorpe's approach to maintaining a healthy lifestyle was systematic, similar to how he approached other aspects of life.

"He also takes care of his health. And in addition to reading this book, I also took notes because I think there's two or three different talks I found of his." "This was the beginning of a lifelong interest in fitness and health."

These quotes highlight Ed Thorpe's commitment to health and fitness, which he pursued with the same systematic approach he applied to other areas of his life, leading to a long and healthy life.

Intellectual Curiosity and Challenging Conventions

  • Ed Thorpe was not content with accepting the consensus view and sought to investigate for himself.
  • He believed that it was possible to beat roulette using principles of physics and set out to prove it.
  • Thorpe's challenge to conventional wisdom led him to develop one of the first wearable computers, which turned a negative edge in gambling into a positive one.

"It was also the view of the world in general, backed up by the painful experience of generations of gamblers." "I argued with others at the table that you could beat roulette using what I learned from physics." "I didn't think so, and I decided to find out."

These quotes demonstrate Thorpe's willingness to question commonly held beliefs and his determination to apply his knowledge of physics to solve practical problems, such as beating the game of roulette.

Encounters with Prominent Figures

  • Ed Thorpe's interaction with Richard Feynman reinforced his belief in his own ideas.
  • Despite Feynman's skepticism about beating roulette, Thorpe felt encouraged that his approach had not yet been explored.
  • This encounter with Feynman was a motivator for Thorpe to begin his experiments in earnest.

"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?" "This suggested that no one had yet worked out what I believed was possible. With this incentive, I began a series of experiments."

These quotes illustrate how Thorpe's conversation with Feynman, a renowned physicist, provided additional motivation for Thorpe to pursue his ideas, as it indicated that there was still uncharted territory in the application of physics to gambling.

The Value of Biographies in Learning

  • Biographies provide insights into the lives and experiences of successful individuals.
  • Toby Lutke (Shopify) and Marc Andreessen highlight the efficiency of learning from others' experiences through books.
  • Charlie Munger and Warren Buffett are avid readers of biographies, which they use to learn about life and business successes and failures.

"Books are the closest you will ever come to finding cheat codes for real life." "You can access the entire learnings of someone else's career in a few hours." "Reading personal biographies allows one to experience multiple lives and successes and failures."

These quotes underscore the importance of reading biographies as a means of gaining valuable life lessons and shortcuts to success by learning from the experiences of others, as advocated by several successful entrepreneurs and investors.

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