Edward Thorp: A Mathematical Odyssey From Las Vegas to Wall Street

Edward Thorp: A Mathematical Odyssey From Las Vegas to Wall Street

Edward Thorp speech A Mathematical Odyssey From Las Vegas to Wall Street

UCI Talk    May 3, 2012

 

 Edward Thorp speech and presentation below:

I would like to thank the UCI mathematics department for inviting me and to Professor Sarah Eichhorn for making all the arrangements.  It’s a pleasure to see so many students and faculty from UCI and from Sage Hill School, including three of my grandchildren.

Today I’ll tell you how I used mathematics in roulette, casino blackjack and the stock market. 

V1        For each, I’ll talk about the idea, the math behind the idea, the implementation, and what happened afterwards.  So that you don’t have to take any notes, I have posted an outline and the images for this talk on my website.

     It all started with roulette, back in 1947 when I was a 15 year old high school junior interested in anything to do with science and math. While studying physics on my own I thought about predicting the motion of an orbiting roulette ball.

 

V2    Here’s a picture of a casino roulette wheel.

 

Describe a play of the game:  Rotor spins, bettors place chips, ball is launched, spins, slows, croupier calls “no more bets,” ball falls into rotor, stops in one of 38 pockets in the U.S. or 37 in Europe.

In the U.S. if you bet a dollar on any number you get $36 if that number comes up and nothing if does not.  If the ball falls at random, meaning all numbers are equally likely, then the casino edge is 2/38 or 5.3%.

In this case mathematicians proved there is no winning system.

My idea was to measure motion of the ball and the rotor to predict which pocket the ball would fall into.  You don’t have to predict exactly – you only need to move win probability from 1/38 to better than 1/36 to get an edge.

 

A few years went by, and then in the summer of 1955, just after I got my MA in Physics, I was sitting in the dining room of the UCLA co-op where I lived drinking tea on a Sunday afternoon.  As usual, a debate started – this one on whether you could beat the casinos.

I argued that physical prediction of roulette would probably succeed.  Most thought not:  If you could do it, someone would have done it by now and they would have changed the game.

Or, there are too many randomizing factors, making prediction impossible.  This reignited my interest.

(a) First, I tried to show proof of principle through experiments on a half-sized wheel.

 Edward Thorp full speech here

 Edward Thorp Presentation

UCI Talk Presentation 201205 by ValueWalk.com

LEAVE A COMMENT


Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

ENDS TONIGHT!

Congrats! Are you a smart person?

We have an exclusive targeted & limited time offer for being a sophisticated and loyal reader.

ValueWalkPremium is a website and newsletter on the latest industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 2/29/2019 or after next 25 subscribers take advantage whichever comes first – please do not share this discount with others

 

0