What I learned from rereading A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market by Ed Thorp.
Ed Thorpes memoir reads like a thriller, mixing wearable computers that would have made James Bond proud, shady characters, great scientists and poisoning attempts.
The book reveals a thorough, rigorous, methodical person in search of life, knowledge, financial security, and, not least of all, fun.
Thorpe is also known to be a generous man, intellectually speaking, eager to share his discoveries with random strangers.
Yet he is humble.
He might qualify as the only humble traitor on planet Earth.
So unless the reader can reinterpret what's between the lines, he or she won't notice that Thorpe's contributions are vastly more momentous than he reveals.
Why?
Because of their simplicity, their sheer simplicity.
For it is the straightforward character of his contributions and insights that made them both invisible in academia and useful for practitioners.
My purpose here is not to explain or summarize the book, Thorpe, not surprisingly, writes in a direct, clear and engaging way.
I am here as a trader and a practitioner of mathematical finance to show its importance and put it in context for my community of real world risk takers.
That context is as 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.
Thorpe's method is as follows.
He cuts to the chase in identifying a clear edge that is something that, in the long run, puts the odds in his favor.
The edge has to be obvious and uncomplicated.
For instance, calculating the momentum of a roulette wheel, which he did with the first wearable computer.
And with no less a co conspirator than the great Claude Shannon, father of information theory, he estimated a typical edge of roughly 40% per bet.
But that part is easy, very easy.
It is capturing the edge, converting it into dollars in the bank, restaurant meals, interesting cruises and Christmas gifts to friends and family.
That is the hard part.