Edward Thorp’s achievements in blackjack are legendary. He pioneered card counting and became an expert. His book Beat the Dealer on this subject shot him to fame. He was also the co-developer of the wearable computer, which is now illegal. Today Thorp is the President of Edward O. Thorp and Associates and uses his mathematical expertise to exploit the stock market.
Edward Oakley Thorp was born in 1932 in Chicago. He received his Ph.D. in 1958 from the University of California. He was a Professor of Mathematics in the University of California from 1965 to 1977 and a Professor of Mathematics and Finance from 1977 to 1982. After getting his Ph.D. he worked at M.I.T. from 1959 to 1961. It was there that he did his research in blackjack.
Working on the IBM 704 computer, Thorp used the Kelly criterion to blackjack and developed his model to maximise the chances of winning in the long run. He included in his model the concept of card counting, which neutralised the house edge and increased the player’s chances of winning. The card counting was especially useful towards the end of a card deck that was not reshuffled after every deal. Confident of his theory, Thorp set about testing it in Las Vegas. He took venture capital of $10,000 from Manny Kimmel, a known associate of the mob. His theory was vindicated as he won $11,000 during the first weekend. However his ability to win came to the notice of casino management and he was barred from playing at several casinos. Otherwise he would have won much more. It was Thorp’s foray in Las Vegas that led to the practice of shuffling before the deck is completed in order to neutralise card counting. As a result of his success in Las Vegas, Thorp became an instant celebrity in the blackjack circuit. There was a great demand for his methods, not only from blackjack fans but from the larger gambling fraternity as well. Hence in 1962 Thorp came out with his book titled Beat the Dealer, which became the original card counting manual. It sold over 700,000 copies and made it to the prestigious New York Times bestseller list. Thorp’s achievement had several interesting aspects. His research reached the public first through his book, totally bypassing the peer review process through publication in academic journals. His work marked the first time that a computer was used as a gambling aid. And Thorp risked physical harm at the casinos in trying to test his research at the ground level.
Thorp is also known for his role in the development of the wearable computer, in which Claude Shannon was his partner. Thorp had met Shannon while at MIT and both shared an interest in gambling theory. The two also went to Las Vegas together to play blackjack and roulette. During 1960 and 1961 Thorp and Shannon developed the wearable computer to facilitate card counting. An operating version was produced and tested in Shannon’s home laboratory. Unfortunately, the casinos went to court and got the device declared as illegal.
Because of his immense contribution to blackjack, Thorp was made an inaugural member of the Blackjack Hall of Fame in 2002.