In 1962, Dr. Thorp published his first book, Beat the Dealer, A Winning Strategy for the Game of Twenty One. The book showcased The Ten Count System, a gambling system based on mathematics. It is a formula that players would plug ratios into in determining betting spreads.
During his tenure at Massachusetts Institute of Technology, (MIT) as a math Professor Dr. Thorp would take weekend trips to Las Vegas with friend and colleague Claude Shannon and wife Betty. Mr. Shannon was an engineer and mathematician who enjoyed playing blackjack and roulette. An advantage-play computer (now illegal in the majority of casinos) was invented by the two men in 1961. Testing and perfecting his card counting system in casinos (funded by an underground organization) Dr. Thorp wrote his book and his system was brought to fruition and all card counting systems since have utilized his concept.
Dr. Thorp had this to say about his book Beat the Dealer, “The publication of this book [method] is a rare event in the world of gambling because it presents one of the few betting systems ever discovered that really works. It is the only system for betting on horse races which has enough scientific analysis to persuade me that it is valid... It took two good scientists, Professor William Ziemba [Dr. Z] and his student Donald Hausch [now a PhD], to back up these ideas with solid analysis... Bill Ziemba is an expert in operations research and portfolio management and in the theory and practical applications of gambling... His main area of expertise, operations research, is concerned with the application of mathematics to the real world.”
In the mathematical community, the thought of a gambling system to beat casinos based on math was inconceivable. Dr. Thorp’s theory gained approval from his peers, however, casino owners felt otherwise. Las Vegas casinos were wary of the effect Dr. Thorp’s book would have so they switched up some basic rules of the game of blackjack to bring hindrance. Players nixed this right away and boycotted until the original rules were brought back; casinos and players compromised with four-deck blackjack instead of single-deck blackjack.
In addition to hundreds of articles and columns he has written, other books authored by Dr. Thorp since Beat the Dealer are, Beat the Market; a scientific stock market system (co-authored with Sheen T. Kassouf), Beat the Dealer revised edition, The Gambling Times Guide to Blackjack (co-authored with Stanley Roberts), Elementary Probability and The Mathematics of Gambling.
He has attained personal financial success in the stock market throughout the years. Combining blackjack theories with finance, he came up with his own concept of attaining risk-adjusted excess returns in the stock market. Through his proficient knowledge of probability and statistics he was able to distinguish pricing irregularities within the securities market. In an article written by Dr. Thorp, A Perspective on Quantitative Finance: Models for Beating the Market, he shares where his ideas come from. “Mine come from sitting and thinking, academic journals, general and financial reading, networking, and discussions with other people. In each of our three examples, the market was inefficient, and the inefficiency or miss pricing tended to diminish somewhat, but gradually over many years. Competition tends to drive down returns, so continuous research and development is advisable.”
Today, Dr. Thorp owns a successful company in Newport Beach, California, Edward O. Thorp and Associates.