A Conversation With Edward O. Thorp at the Beckman Center
I watched a Conservation with Edward O. Thorp at the Beckman Center of the National Academies of Science and Engineering in Irvine, California, on April 20, 2017.
He was also signing his book “A Man for All Markets”.
This is subtitled “From Las Vegas to Wall Street, How I Beat the Dealer and the Market.”
Edward O. Thorp was a founding math professor at UC Irvine in 1965.
His interviewer was Rick Reiff of the Orange County PBS station.
Hopefully, the interview will appear on the Beckman Center lecture series on YouTube.
The interview seemed to be in three parts, first his math and practice on winning at roulette, baccarat, and poker (card counting).
The second part was his study of the math of the future projections of puts and calls, which became famous as the Black-Scholes equation, and of his development of the hedge company.
The third part was question and answer. Let me work backward. The really interesting question was last, and it concerned with market regulations. He answered that regulations were important to keep the market honest, and to protect people’s investments, including those of his investors.
In the market, he was asked by an investing company to investigate Bernie Madoff and find out how Madoff managed to get a consistent about one and a half percent profit every month, regardless of whether the market was going up or down. He concluded that Madoff was not on the level, but could not report it to the SEC since his client invoked client confidentially. They withdrew their Madoff investments. This was in 1988. In 1999, another investigator went to the SEC, and they turned him down.
He discovered the Black-Scholes equation and several variants, but did not publish them, before Black and Scholes became famous for them.
He had many gambling stories and study of the game theory of gambling. He started with predicting the endpoint areas of the roulette wheel, based on where the ball started. He, in collaboration with Claude Shannon at MIT, developed the first wearable computer, so that he could report the starting point, and receive the projected endpoint in a set of five connected numbers. It was amazing that he could beat the odds at 44% with Newtonian physics.
Throughout his life, he has very creatively investigated aspects of how math can be used to predict and game outcomes of things considered purely random.
