Everybody needs a role model
I’m very excited to have pre-ordered Ed Thorp’s new book. I suspect it will go on my top recommendations list.
Principles to live by
It’s important in life to find something you can live by. Some principles, desire, a path to follow. Often you look to others to find that.
A long time ago, while still at school, I visited at a friends house. There I stumbled across a Commodore pet. Learning to do some basic stuff on that, which led me to scrimp, save & beg to get a ZX81 and then a ZX Spectrum.
I spent a lot of time writing games before turning my attention to messing around with football stats. I hadn’t discovered gambling at that point, I was just interested in collecting some data and messing around using my Spectrum to improve my Dad’s entry on the football pools. I wanted to know what created a draw and how to predict which matches were more likely to end in draws. I had no idea where that would lead me.
Inspiration
I figured out that there happened to be a number of scenario’s that lead to higher or lower outcomes. I could put this into a few lines of code, but I felt I was ‘cheating’ by using code to produce the outcome. So I went back to the library and it was there I discovered Ed Thorp. I was reading up on statistics and probability and stumbled across the book ‘Beat the dealer’. I was enthralled by the book and its history.
I became a bit obsessed with learning everything about the author and I even learnt to card count long before setting foot in a Casino. I just thought it was stunning to overturn convention like that and wanted to fully understand it. That fired a thirst for knowledge of statistics and probability with the vain hope that one day maybe I could actually discover something like that and making a living from it.
Progression
From that start, I learnt that Thorp had ended up in financial markets. I managed to get the result I wanted on the football pools, but my exploits with bookmakers hadn’t been so fruitful. So I started to switch my attention to financials and thought that would be what I would eventually do for a living. I started to think of financials like the draw on football. If I knew what price it should be, then it would simply be a case of buying it if it was mispriced and hedging my risk a bit by spreading out those bets. That eventually led me to longer term investing, as that’s essentially what you are doing with that style.
Other things you learn
By enveloping myself in the mind of Thorp it helped me understand a number of things. I’ve no hope at all competing intellectually with somebody like Thorp. But getting an understanding of his work and forcing myself to understand it, even some of the arcane stuff, has no doubt helped me a lot.
But you also pick up on interests, how he lives his life and that leads into other areas and people. You also end up meeting people with similar interests. Often the collective value of these relationships is immense. Everybody has skills in one area or another and if you join up together you can often far exceed what you imagine.
Therefore, I value insight into Thorp’s philosophy as well as his skills as a mathematician. I’m hoping the book will give a deeper insight into what has been a remarkable life. I’m looking forward to it being released in the UK. Till then listen to this insightful interview: –
EP 109: The man who beat the dealer, and later, beat the market – Edward Thorp
Category: Trading strategies
