YouSaid · the spoken record

Ed Thorp

lines on the record: 92
first: 2021-12-20
most recent: 2021-12-20
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Causes and charities. After she died from cancer in 2011, we celebrated her life with a memorial service. When I think of our lives together, I remember what her brother said then. Nobody can take away the dance you have danced. Life was like reading a novel or running a marathon. It's not so much about reaching a goal, but rather about the journey itself and the experience along the way. As Benjamin Franklin famously said, time is the stuff life is made of, and how you spend it makes all the difference. Best of all is the time I've spent with the people in my life that I care about. My wife, my family, my friends and my associates, whatever you do, enjoy your life and the people who share it with you, and leave something good of yourself for the generations to follow.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“To preserve the quality of my life and to spend more of it in the company of people I value and in the exploration of ideas I enjoy, I chose not to follow up on a number of business ventures, although I believe that they were nearly certain to become extremely profitable. I expected to spend my life teaching, doing research and talking to smart like minded people, but from childhood I was intrigued by the power of abstract thinking to understand and direct the natural world. When I later saw how physics could predict roulette outcomes through the fog of chance, and mathematics could tip the odds in blackjack, I was drawn into a lifetime of adventure. It was my good fortune to share most of this journey with a remarkable companion, my wife Vivian. She mastered Bridge, studied art and history, learned to prepare healthy meals, completed a master's degree in library science, inspired her family to focus on personal fitness and health.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“One legged man in an ass kicking contest, so Munger makes you laugh. This is Ed expressing the same idea. I found that most people don't understand the probability calculations needed to figure out gambling games or to solve problems in everyday life. I believe that simple probability and statistics should be taught in grades kindergarten through 12. And then Ed wraps everything up for us in the epilogue, and this is what he has to say. Once we have the basic necessities of food, clothing, shelter, and health, then what we seek is wealth, power, honor, and the love of men and women. For financial titans who aggressively continue to seek tens of millions, hundreds of millions, and billions, you can ask, is the winner really the one who dies with the most toys? How much is enough? When will you be done? Often the answer is never”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“A market neutral hedge fund. So let's take that idea the Eddor Just explained to us. And again, I don't know why I keep mentioning the same person, but I think that idea that Ed's talking about, the fact is, hey, I had to learn to teach myself because no one's taught me to beat Blackjack, to build computers for letter, or to launch a market neutral hedge fund. Another tweet from Naval Ravicon. This is so fire. This is so good. The best jobs are neither decreed nor degreed. They are creative expressions of continuous learners in free markets. That is a fantastic way to think about the life of Ed Thorpe. Creative expression of a continuous learner in free market. Then he goes into some of the things that you need to teach yourself. He's like, you got to learn probability. One of the greatest quotes that Charlie Munger said, if you don't get the elementary but mildly unnatural mathematics of elementary probability into your repertoire, then you go through life like a”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then he gets into why this is so important. Like, why is lifelong learning so important? Education has made all the difference for me. Education builds software for your brain. When you're born, think of yourself as a computer with a basic operating system and not much else. Learning is like adding programs, big and small to this computer. From drawing a face to riding a bicycle to reading or to mastering calculus, you will use these programs to make your way in the world. Much of what I've learned came from schools and teachers. Even more valuable, I learned at an early age to teach myself. This paid off later on because there weren't any courses in how to beat blackjack, build a computer for roulette, or launch a market neutral hedge fund. I need to repeat that. Super important. Much of what I learned came from schools and teachers. Even more valuable. I learned at an early age to teach myself. This paid off later because there weren't any courses in how to beat blackjack, build a computer for roulette or launch.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And as you can imagine, the whole point of reading about autobiography is so other people can learn from your experiences, they can profit from your experiences, they can avoid your mistakes. And so what he says here is exactly what Charlie Munger says. Charlie Munger says that one way to guarantee failure is if you only learn from your own experience. Like, why would you do that? Charlie Munger has read hundreds of biographies. That's just very simple. One of the smartest and wisest people you ever come across is telling you to read biographies. Why wouldn't you do that? This is not rocket science, right? Those who cannot remember the past are condemned to repeat it. Though the institutions of society have difficulty learning from history, individuals can do so.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Like me and want better health, you can invest time and money on medical care, diagnostic and preventative measures, and exercise and fitness. For decades, I have spent six to eight hours a week running, hiking, walking, playing tennis, and working out in a gym. I think of each hour spent on fitness as one day less I'll spend in a hospital.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Part I have to read to you because I've mentioned it earlier, but I think it's just so wise what he did here. I think of each hour spent on fitness as one less day I'll spend in the hospital. So he says, I apply this trade-offs among health. So he talks, really the end of the book is like how he thinks about almost everything. A lot of it has to do with finance. In this case, he's talking about opportunity costs and what's the value of your time. It's really, like I said earlier, how often are you going to get a chance to talk to an 85 year old genius who's just going to be like, hey, I'm going to give you all the game that I learned in my life. All you have to do is pick up the book and read the last couple pages. Obviously read the whole book, but specifically the advice he doles out on finances is like the last few chapters. So he says, I apply this trade-off among health, wealth, and time. You can trade time and health to accumulate more wealth. Why health? So he's like, why are you trading your health? The most important thing for wealth. It doesn't make any sense. You may be stress, lose sleep, have a poi dialect, or poor diet or skip exercise.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mentioned this earlier. This is the part where he talks about hey, I started buying Berkshire at $900 a share and I continued to accumulate. So just imagine what that return on investment is now. Another example of, again, why it's like he's just really good at developing relationships with other really good people. This opens up opportunities in the future. Not long after buying Berkshire, I began putting some of my profits into other hedge funds, networking with some of the smartest and richest people on Wall Street, sharing investment. Remember, the very beginning, Till Lev talks about how he's very intellectually generous. He'll just tell you a bunch of things. Like he'll tell you his learnings. He publishes his papers, write books, that kind of thing, sharing information and investment opportunities. I also gain the benefits of diversifying my personal portfolio. So he's got a ton of investments. He's made these investments. Let's see, what would that be? 30 years before he's writing the book.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“To work every day, but he's only there for a few hours, has lunch with his wife every day, spends time with his kids, working out constantly, like he's doing his thing. And so it says between Ridgeland and XYC, we manage as much as $400 million in statistical arbitrage and another $70 million other strategies. He's running almost 500 million here. While PNP's peak was 272 million. Compared with PNP's maximum of 80 employees, so you had 80 employees and all this headaches in PMP. He only has, there's six total, him being one of them. There's six of us. So it's him, his partner, I think, four employees of us at Ridgeline who faced our formidable competitors. Several of the competitors had hundreds of employees, including scores of PhDs in mathematics, statistics, computer science, physics, finance, and economics. We were a highly automated, lean, and profitable operation. So I think that's the future of work, highly automated, lean and profitable.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you do this, what do you want to happen? And if you do this, what do you think will happen? So he's sitting there thinking, it's like, I can spin up another hedge fund. I can make a ton of money, but I'm already rich. I have more money than I could spend. I have this great investment in Berkshire Hathaway. I'm the first LP in Citadel. He's got investments in all these different hedge funds. He's like, no. And he still works. And so he winds up spinning up another hedge fund, but it's completely different. It's now, I'm going to read this. He's got an entire chapter on this, but I'm just going to read one paragraph, which gives you an idea because I really feel this is the future of work. And what I mean by that is clearly the optimal size for a company is shrinking, right? Because we're in the age of infinite leverage. And so I think the future of work is highly automated, lean, and profitable operations. And so he winds up, let me just read this here. I'm going to run over my point. So it's called RidgeLine and XYZ. It's like an automated hedge fund almost. It's the way to think about this.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Vivian and I would make the most of the one thing we could never have enough of time together. Success on Wall Street was getting the most money. Success for us was having the best life. And I think that is what this book is about. This is why I say he's my personal blueprint blueprint. It's about having the best life, being successful in your work is extremely important, but it's only one part of. It's an extremely important part of having a great life, but it's only one part of. And I think a lot of people, especially people that would listen to something like this, has the same personality that I do. It's like if left my own devices, like I would just work all the time. I know that it's not going at the end of my life. I know I'm not. I have to find systems to avoid going back to like my natural tendencies because I know that'll be a regret for the future, for my future self. And that is one of the things I most admire about Ed. He sat down and thought about, okay, what am I doing here? There's a path. I have a choice here. It goes back to what he was discovering when he was yelling at the college professor. Like, what do I want to happen and what do I think will happen? Let me read it so I get it correct.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Especially if you have billions of dollars, right? I initially thought that it might continue with my own on my own with a PNP style partnership. But if I did that, then in addition to the fun parts, remember he's already rich when he's making this decision. This is what Taleb was talking about, how you can tell he's in control of his own life. And he realized being independent was a lot more stressful, right? And if you involve yourself in these series of this giant business, you have all these clients, you have all this other stress, you're making more money, but your quality of life goes down. That's not a smart trade. So it says, but if I did that, then in addition to the fun parts, I would be responsible for things I didn't enjoy. I changed my mind and gradually wound down our PNP office in Newhart Beach, finding good jobs in the securities industry for some of our key players at places like the Giant Hedge Fund DE Shaw, and I wanted to bring that to your attention because DE Shaw is the place that Jeff Bezos was working at. I love how this all kinds of.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“He hasn't seen his wife and children. My reason for living, he says, for several days, which is obviously bullshit, right? The last time we talked, my wife told me she missed the old days. When I was at TRW and we lived in a condo. She told me she wants to go back to that life, but they can't go back because he can't let go. They later divorced And before I finish the story, if you Google that guy they're talking about in the year 2000, about 15, 20 years later, he winds up getting caught in a Las Vegas hotel room with a hooker, if I'm not mistaken, and they catch him with heroin, met him meth, I can't pronounce it, cocaine, all this other stuff. And I think the person was almost dead or whatever the case was. There was like an overdose of some sort, but clearly not the kind of situation you want to be in.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“With one employee, which is Griffin, to a collection of businesses managing $20 billion in capital and having more than 1,000 employees 25 years later. Ken's net worth in 2015 was estimated at $5.6 billion, I think today at the time I'm recording this net worth is over $20 billion, if I'm not mistaken. And so this is the life lesson, right? As Princeton News port partners close, I reflected on the proposition that what matters in life is how you spend your time. When J. Paul Getty was the richest man in the world and manifestly not fulfilled, he said the happiest time of his life was when he was sixteen, riding waves off the beach in Malibu. In two thousand, Los Angeles Times magazine, speaking to a new multibillionaire Henry T. Nichols III of Broadcam Corporation said It's one hundred thirty AM He just turned forty. At his desk in a dimly lit office.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so now Ed provides a life lesson on the very next page. What would have Princeton Newport partners been worth 25 years later? How could I possibly have any idea? Amazingly enough, a market neutral hedge fund operation was built on the Princeton Newport model, the Citadel Investment Group. It was started in nineteen ninety in Chicago by a former hedge fund manager named Frank Meyer when he discovered a young quantitative investment prodigy Ken Griffin, who was then trading options from his Harvard dorm room. I met with Frank and Ken, outlining the workings and profit centers of PNP, as well as turning over cartons of documents outlining in detail the terms and conditions of older outstanding warrants and convertible bonds. That's insane, by the way, with a few million dollars and one employee, Griffin”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so this kind of echoes Ed's experience with Bernie Madoff in the SEC when he discovered. There's a ton of people, Edges being one of them, that knew Madoff was running upon this game, had told people about it. So he's asked the question, did you ever think you should go to the authorities with this? And then this is Ed's response. Bernie Madoff had been a chairman of NASDAQ. He was the third biggest mercer trader in the US. He was on all types of committees. He was the establishment. The SEC checked him every year and gave him a rubber stamp of authenticity. And really the way I think about this is Ed schooling us not on how we think the world works or how we think it should work. He's telling us how it does work.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Finance. So that's Ed talking about everything's corrupt, right? So this contrasts with the case of Drexel, which is Michael Milken. Where the searchlight of government was focused to reveal as many violations as possible, and so this is where Ed's going to give us his thinking on this with a story, a metaphor. It's like the case of a man who's been cited three times in a single year for driving while intoxicated. His neighbor would also drink and drive, but was never pulled over. Who's the greater criminal? Now suppose I tell you that the man who did it only three times and was happy every time, whereas his neighbor did it a hundred times and was never caught. How could this happen? What if I tell you that the two men are bitter business rivals and that the traffic cop's boss, the police chief, gets large campaign contributions from the man who gets no traffic citations? Now who is the greatest criminal?”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“So eventually his hedge fund, the East Coast Office, gets raided by the IRS Rudy Giuliani, who is, this is before he was the mayor of New York City, he's the lead, what is it, that the prosecutor of the Southern District of New York. And this had nothing to do with Ed. Every single thing would wind up being dropped against them. He actually has, this is a summary of that, Rudy Giuliani wanted my partner to give him dirt on Goldman Sachs and Michael Milken. My partner wouldn't cooperate. That's Jay Regan, who's in the East Coast, right? So Giuliani Rated Our Office, the trial dragged on for years at a great expense. The government ended up dropping prosecution for most people on most counts. So that's what Teleb was referencing in the forward, that his hedge fund ended at no fault to his own. And so what was happening here? And so really there's, I'm going to skip over all the rating and all this stuff because what I realized is especially on the second read through this.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Over the years, I hired former staff from UC Irvine, but only one faculty member, one without tenure, was willing to leave and take a chance and join my operation. The others found it very scary notion. Of course, a few had regarded. And so he's picking up on the exact same thing that George Lucas picked up. Ed had the ability to take this next step, to take the risk. So did George. And George says, it was the importance of self and being able to step out of whatever you're in and move forward rather than being stuck in your little rut. People would give this is so important what George was about to tell us. People would give anything to quit their jobs. All they have to do is do it. They're people in cages with open doors.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“So he's going to wind up leaving academia. I was wrong. It's 13 years after founding his hedge fund. And he just points out how petty they can be when the stakes are so small. And really, this is an excuse to bring up one of my favorite quotes and comes from the biography of George Lucas, and I'll get there in a minute. I transferred to the Graduate School of Management where I enjoy teaching courses in mathematical finance, but I found fractionism and backstamming as bad there as it had been in the math department. Both had endless committee meetings, petty squabbles, people who couldn't pull who wouldn't pull their weight and couldn't be dislodged, and the dictum of publish or parish. I decided it was time to leave academia. It was not an entirely easy decision. Remember, he thought he was going to do this for Russia's life. Over the years, this is the important part.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Their ways from previous jobs. It is better to teach a young athlete who comes from his sport fresh than to retrain one who has learned bad form, especially in a small organization. It was important that everyone work well together. I was unable to tell from an interview how a new hire would mesh with our corporate culture. I told everyone that they were temporary for the first six months as we were for them. Sometime during that period, if we mutually agreed, they would become regular employees. In order to attract and keep superior staff, I paid wages and bonuses well above the market rate. Actually, save money because my employees were far more productive than average. The higher compensation limited turnover, which in turn saved time and money otherwise used to teach my one of a kind investment methodology.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then he's new to managing, to starting a company, new to managing people. So he's got to come up with a way to do things. And so he's got four different ideas. One, management by walking around. Two, hire for intelligence and enthusiasm over experience. Three, hire on a trial basis. And four, talent is expensive and worth every penny. Now I had to learn how to choose and manage employees, figuring this out for myself. I evolved into the style later dubbed management by walking around. I talked directly to each employee and asked them to do the same with their colleagues. I explained our general plan and direction and indicated what I wanted done by each person, revising roles and tasks based on their feedback. For this to work, I needed people who could follow up without being led by the hand. As management time was in short supply. Since much of what we were doing was being invented as we went along and our investment approach was new, I had to teach a unique set of skills. I chose young, smart people just out of university because they were not set in the”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“At the beginning, the seam said Ed might be the only humble traitor on planet Earth. This is Ed's polite way of saying, I put up numbers. We modified our performance fee of 20% of the profits billed annually by including a new high water provision. This meant that if we had a losing year, we carried forward the losses and used them to offset future profits before we were paid more fees. So he's saying I was trying to be as fair as possible to my investors. This helped align our economic interests with those of our limited partners. As it happened, we never had a losing year. even a losing quarter, and this calculation was never invoked. It's more than that. They only lost the hedge fund's going to run for 230 months. They only lost money in three months. And three negative months.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“A revolutionary idea when we set it up in 1969 hedging risk. This is what I mean about that. Hedging risk was not new, but we took it to an extreme never-before tried. We managed this with mathematical formulas, economic models, and computers. This nearly total reliance on quantitative methods was unique, making us the earliest of a new breed of investors which would later to be called quants and would radically transform Wall Street. I could see from the very beginning how our wealth could grow, but when I told friends and colleagues what I was up to, and you got to also, the reason I'm reading this to you is because you have to be prepared to be misunderstood. He's got a fantastic idea, an idea that he's going to continue to use for the rest of his life that's going to generate generational wealth and people don't understand it. But when I told friends and colleagues what I was up to, Vivian was almost the only one who got it.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so he's going to tie his decision making because he's saying that's essentially what, although different tactic was what Buffett was doing with the Buff for Partnership. And so he says the time I spent with Buffett had two major effects on my life. It helped me move me along the path to my own hedge fund. He copies the partnership agreement from that Buffett used. Ralph gave it to him. And so he's like, oh, this makes perfect sense that I'm going to use this similar document. So it says, help me move along the paths of my own hedge fund. And later it led me to a very profitable investment in the company he transformed, Berkshire Hathaway. So he's going to talk a little bit about this hedge fund. This is going to remind me, and I'm going to use an example that, I mean, you could say a number of people we studied, but Steve Jobs comes to mind, and that is whatever you were interested in, carry it to an irrational extreme. That's what they described in one of the biographies I ran to Steve Jobs. Whatever he was interested in, he carried it to an irrational extreme. So it says Princeton Newport Partnership.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“So Ed's going to live on the West Coast, Reagan's on the East Coast, they're going to run the company together. They're going to have two separate offices and they're both doing completely different things. We shook hands that day and agreed to create and manage together a new investment partnership based on the ideas and beat the market. Newport Beach was to be the think tank and trade generator in New York, the business office and the trading desk. Our operation was an example of what had come to be known as a hedge fund. Although hedge funds were few in number at that time, they were not a new concept. So this is where we at. I think around 1969, right? So it says they're not a new concept. Buffett's mentor, Benjamin Graham, had run a hedge fund in 1936.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is going to wind up reading Beat the Market. And this is going to open up another opportunity for Ed. This winds up being his partner, Jay Regan, who they're going to operate the first hedge fund with. When I was deciding on my next steps, I got a phone call from a young stockbroker in New York named Jay Regan who had read beat the market and told me he wanted to get into the investing business using a limited partnership to implement my convertible hedging approach, thinking he might be able to handle the business aspects of running a hedge fund while I focused on choosing the investments and on doing further research into the markets I arranged to meet him.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Largely on the performance relative to the market. In contrast, I didn't judge the worth of various businesses. Instead, I compared different securities of the same company with the object of finding relative mispricing, from which I would construct a hedged position, long the relatively undervalued, short the relatively overvalued, from which I could extract a positive return despite stock market ups and downs. So his entire life, he operated a market neutral hedge fund. And I'll get to more of his numbers and stuff later on. His goal was to accumulate the most money. Warren began to invest while still a child and spent his life doing it remarkably well. My discoveries fit in with my life path as a mathematician and seem much easier, leaving me largely free to enjoy my family and pursue my career in the academic world. And what's crazy is he's going to start the world's first quantitative hedge fund is called Princeton Newport Partners. He's still working as a professor. For like the first like ten, even though he's rich.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Thus it happened that the Gerards invited Vivian and me to their home for dinner with Susie and Warren Buffett. So now he's going to describe what Warren was like a 38. Warren was a high-speed talker with a Nebraska twang and a stream of jokes, anecdotes, and clever sayings. He loved to play bridge and had a natural liking for the logical, the quantitative and the mathematical. I learned that he focused on finding and buying into undervalued companies. Warren also invested in warrant and convertible hedging and merger arbitrage, which is some of the stuff that Ed was doing at this time. It was in this area that his and my interest overlapped and where Buffett unknown to me was vetting me as a possible successor to a management investment for the Girards. As Warren and I talked, the similarities and differences in our approach to investing became clearer to me. He evaluated businesses with the aim of buying shares them or even the entire company, so cheaply that he had an ample margin of safety to allow for the unknown and the unanticipated. His objective was to outperform the market in the long run, and so he judged himself”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I gotta fast forward in the story. There's still a ton to get to here. But I want to get to the point where he winds up meeting Warren Buffett. He's going to learn a little bit. He comes up with some ideas about Warren hedging, all this other stuff. It's all in the book if you want to go into more detail, but he wants to managing other people's money. And one of the people that he manages money for just happens to be was one of the investors in Warren Buffett's partnership. This is what he was doing right before he does Berkshire Hathaway. So it says, that's my reputation as an investor quietly spread around UC Irvine friends and members of the university community. Ask me to manage money for them using the techniques and beat the market, the book I mentioned earlier. I took on several accounts of the minimum investment of $25,000. Among my new clients was Ralph Waldo Girard, who was the Dean of the Graduate School at UCI. Gerard had met Warren Buffett and was an early investor in Buffett Partnerships, so at this point in the story, Warren is thirty eight years old, Anthorpe is thirty six.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so he starts out trying to learn something new the way he does every time learning something new. He just reads an insane amount of information. And I like his metaphor, this whale metaphor where he talks about like a lot of the stuff you're going to read is not useful, but it's all the little bits that you pick up that lay the foundation that are actually useful in the future, relishing the intellectual challenge and the fun exploring the markets. I spent the summer of 1964 educating myself about them. I read stock market classics like Graham and Dodd Security analysis and scores of other books and periodicals ranging from fundamental to technical, theoretical to practical, and simple to obtruse. Remember, he knows nothing about them at this point. Much of what I read was Dross, but like a whale filtering the tiny nutritious krill from huge volumes of sea water. What a great metaphor for this. I came away with a foundation of knowledge. Once again, just as with casino games, I was surprised and encouraged by how little was known by so many.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, this is where he's thinking about his path in life. He's like, Well, I can't be a professional gambler. If I'm not alive, right? So he says, I invested money from book royalties and gambling in my gambling winnings and stocks. But I was ignorant of the market. The results were poor. I wanted to do better. Investments presented a new type of uncertainty, but the theory of probability might help me make good choices. Things came together when I realized that there was a far greater casino than all of Nevada. Could my methods for beating games of chance give me an edge in the greatest gambling arena on Earth Wall Street? This is what's going to make him wealthy. Ever curious I decided to find out. I began to teach myself about the financial markets, lighting my way with an unusual lamp, the knowledge I had gained from gambling games.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“We were going 65 miles an hour when the accelerator pedal suddenly jammed with little time to think and my foot pressing as hard as I could on the brakes. I also set the emergency brake. Downshifted so the engine would help slow the car so that essentially the accelerator stuck, it's only going forward and cut off the power by turning off the ignition. I finally managed to stop the car in a turnout.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was deep into my first game happily winning and drinking my coffee when suddenly I couldn't think. I could no longer keep count. I was shocked because I had managed well through noise, smoke, conversation, and the pressure of high-speed play. Something unexpected had taken place. My pupils were hugely dilated. He's with some friends, one of them's a nurse who was a nurse said that she had seen this often when people who had used drugs were admitted to her hospital. I wanted to collapse into sleep, but they plied me with black coffee and walked me for several hours until the effects began to wear off. He's talking about his friends. And so that's not enough. After this, they're going to still, even when he's leaving, they try to kill him. During our nights of play, we had proven the system at the tables. We validated the theoretical mathematical calculations and demonstrated yet another application of the Kelly system, the Kelly criterion I mentioned earlier, for betting and investing. But our trip would have an unnerving postscript. The six of us left Las Vegas the next morning to drive back. I was at the wheel and we went down a mountain road.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would take was determined by my character, namely what makes me tick. As the Greek philosopher Heracetus said, character is destiny. I unfreeze time and watch his head for the roulette tables. Moving on to the casinos drugging him and trying to kill him. I just want to give you the results of their experiment together. The roulette had a 5.3% disadvantage. However, using our computer, it would give us a 44% edge. So he's going to do quite well, Blackjack. As you can imagine, they're not going to like that. And so they're going to find ways to send him a message that if you keep taking money from us, we're going to kill you. When I sat down to play, the atmosphere...”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was transmitted by radio. The other person, the better, would wear a radio receiver which played musical tones telling him on which group of numbers to bet. We two Confederates would act like strangers, and so they're about to go down and test it. It says as I stood ready to leave for the casino, Claude cocks his head, and with an elfish smile asked, What makes you tick? Claude was jokingly referring to the strange sounds he would be sending from the computer he was wearing to my ear canal. As I look back now from the future, seeing myself wired up with our equipment, I stopped that moment in time and I think about a deeper meaning to the question of what makes me tick. I was at a point then in my life where I could choose between two very different futures. I could roam the world as a professional gambler winning millions of dollars per year, switching between blackjack and roulette. My other choice was to continue my academic life.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“So after this he winds up. He spends a lot of time with Claude Shannon. They're going to wind up developing the first wearable computer. So this is, I want to go into a little bit detail about testing the computer in Vegas with Claude Shannon because this is also when I love these intersections in life. These alternate futures that are in front of you. Like what path am I going to take? And so at this point, he's 20, this is around 1961, 1962. He is 29 years old. Claude is 45. And so they set up the computer, the wearable computer, which is a way to, it's very complicated, and I don't really understand it honestly about all these formulas on how to measure the distance to where they think the roulette ball is going to end up. And it winds up working out. So it says one of us wore the computer which had 12 transistors and was the size of a pack of cigarettes. Data was input with switches hidden in the wearer's shoes and operated by his big toe. The computer forecast”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then he's just wrapping up this section. And the note of myself is just, this is just cool. From a mathematical idea in my head, I forged a system for beating the game. Then I was ridiculed by the casino, which said that it sank cabs for fools like me. Thinking they played fair and that I was taking my secret weapon, a brain to a sporting event, I found myself barred, cheated, betrayed by a representative of the gaming control board, and generally persona non grat at the tables. This is the cool part. I felt satisfaction and vindication when the great beast panicked. It felt good to know that just by sitting in a room and using pure math, I could change the world around me.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Realizing he was there to finger me for the casinos, I used the restroom excuse, I used the restroom excuse to lose him, and went to play at another casino. And so then he tells us what's happening at this point. When I played in the early 1960s, tens of millions of dollars in cash were being taken from the counting rooms without being tallied. The hidden profit avoided taxes and funded mob operations throughout the nation. So there's a great book that I also read that he, and it's also a movie. I love the movie and the book. He recommends the casino by Nicholas Pelleggi or whatever, Robert De Niro is in the movie, Joe Peschette's fantastic movie. It's like three hours long though, but that was around the same time that he's there. He says, beat the dealer, the book he's writing at this point came out in November 1962. It sold briskly.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Came up and they're like, hey, which one do you want? So obviously very cheating. I'm skipping over this part to get you to the punchline. As my protector followed me outside, I said, did you see, did you ever see a second card like that before? He replied, second, what second? This agent had been sitting just three feet from the dealer. He saw everything and pretended to see nothing.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so he's going in with people that know the system. And they're the ones, he essentially hired these people, say, hey, teach me how everybody's cheating. And these people also have relationships with the regulatory body. And so they go, they wind up taking notes and identifying all these ways that regular people are getting cheated by the system. So they go to the gaming control board like, oh, these guys are going to want to know and not realizing that no, they don't want to know. They're in on it. So it says they assign one of the gaming control board's agents to watch over me. Mickey thought this was a good idea and had told me earlier, and this is an important point, and had told me earlier that the dealers knew all the people the board used. So whenever they showed up, the cheating stopped until they left. That is where this guy made a mistake. He's like, okay, if you don't want to get cheated, let's bring all these agents because the agents of the gaming board,”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“In Southern California. Later, he retired to the south of France. And so, this is when he gets into the idea that you need a great defense because everything is corrupt. He's going to talk about this in the terms of the casinos. So he says an expert cheat does this so well that even when you are told in advance and are watching close up, you can't see. And so dealers are actually cheating. They would actually peak so fast at what the card is. And if they would deal the card underneath it. So that's just one cheat. There's a bunch in the book, but this is what he's talking about. Happens to be talking about this particular time. So it says they do this so fast that even when you are told in advance and you're watching up close, you can't see. It's also nearly impossible.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Areas of life. The experiment winds up working. They wind up making a good bit of money. And this is before, like, he'll go back a bunch of times before he went to getting poisoned, and then they take the breaks out of his car. But what's fascinating to me is that the two people that were bankrolling him, they wanted being mobsters. They wanted laundering money into legitimate businesses and then selling some of those businesses. It was interesting because, you know, usually here there's only two ways to end up in that kind of life. You're going to end up dead or in jail. Well, not Manny and Eddie. They got away with everything. So it says Manny Kimmel died in Florida in 1982 at the age of 86, leaving a young widow named Ivy, who was the older of the two nieces, quote unquote, who had visited us, who had visited us so long ago on that dreary winter afternoon in Boston. So you wind up never getting caught and dying rich, Eddie Hand was prospering in the wealthy enclave of Monastery.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bring brainwash with bad information. This idea that the market was efficient, efficient market theory, efficient market hypothesis. And Ed talks about it a lot, actually, in this book. I'm not going to talk about it today. But what I found interesting is you have all these super smart people arriving at the realization that the theory that you're teaching them is not accurate. In the grand scheme of things, if I have lineup on one side, Ed Thorpe, Henry Singleton, Warren Buffett, Charlie Munger, Claude Shannon, and then the other side, some people that were never successful in the real world and just spent all their time in academia, I'm going with the Singleton, the Buffets, the Mongers, and the rest of these guys. But the point I'm making is I thought it was very interesting how they took theories from academia and found a way to make them valuable. Some of these theories valuable in entrepreneurship, investing, blackjack, whatever it was. I don't know if John Kelly actually, I think he died. In the books, I think he had like a heart attack.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“Something that Shannon also helped him was he remember to talk about dosing, like the size of the bet, whether it's investing or gambling is really important. When they're doing the roulette experiment, and he's talking about, and Shannon's helping him publish the paper on blackjack, he's like, hey, when you're doing this, you should check out a paper. I think it was published in 1956 by this guy named John Kelly. And that paper is famous for something people still use to this day called the Kelly Criterion, which is a way to figure out the dosing in your bets so you never go broke because that's a huge thing that Claude Shannon. What's interesting is when I was doing that multiple part series with Claude Shannon, Ed Thorpe, I was reading all of Warren Buffett's shareholder letters. I was reading Charlie Munger. I was studying Henry Singleton. This is all in like the 80s and 90s in the episode numbers in the archive. This idea all kind of relates to each other is because in the talks and in the books they talked about the fact that there was entire generations of business school students that were”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“So then we get into some funny sentences in the book. In preparation, I flew from Boston to New York every Wednesday. I would arrive in Manny's Manhattan Penthouse while he would deal, he dealt while I played the 10 count. The 10 count is one of the systems for counting cards and developing an Edge and Blackjack. This is the funny part after a few hours. Manny's Butler served lunch and we continued playing. At the end of each session, Kimmel would give me 100 or $150 to cover expenses, and curiously, a salami. These salamis added an unmistakable aroma to the cabin during my return flight.”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“But this is one of my favorite sentences in the book. I was certain I was right, even though he's talking about the difference between Las Vegas casinos with all the resources in the world and little Ed Thorpe just lacking himself in the library and using his mind to try to get rich, right? This is one of my favorite sentences of the book. Even though the Goliath I was challenging had always won. I knew something no one else did. He was nearsighted, clumsy, slow, and stupid, and we were going to fight on my terms, not his”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“So this older guy pulls up at his house in a Cadillac with two young, he says two good-looking young blondes. He's got a long cashmere overcoat on, and he says he introduced himself as Manny Kimmel, then about 65. And he said he was a wealthy businessman who knew his way around the gambling world. He explained that the two mink-coated beauties were his nieces. That's obviously not true. And then we're going to get, so he's going to accept Manny's offer. Manny and another guy I'm going to get to in a minute wind up back in Ed. And they're going to wind up going to Vegas. They first, this is some funny lines in the book here. First, they're going to do a lot of practice to make sure, hey, I'm not just going to let you got to come to my penthouse in York, and we're going to play these games and make sure, like, simulate the environment that we're going to be in, okay?”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, because of this talk, he's got a bunch of people saying, Hey, I'm willing to put up a lot of money to back this. Let's see if we can actually win some money in Vegas together. This winds up here, he winds up getting involved with some gangsters. These are like the nice gangsters. These are not the gangsters I want to try to kill them later on, these mobsters. So this guy winds up saying, hey, I'll put 100 grand behind you. He wasn't sure if he wanted to do this, but then one of the reasons he's just like, I finally decided to go to Nevada, partly to silence that irritating jeer often leveled at academics. Well, if you're so smart, why aren't you rich?”
2021-12-20 · Founders · #222 Ed Thorp (My personal blueprint) · IDENTIFIED FROM THE TRANSCRIPT · source