A Man for All Markets Quotes

“In the abstract, life is a mixture of chance and choice. Chance can be thought of as the cards you are dealt in life. Choice is how you play them. I chose to investigate blackjack. As a result, chance offered me a new set of unexpected opportunities.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“Life is 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 experiences along the way”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“Our corporate executives speculate with their shareholders’ assets because they get big personal rewards when they win—and even if they lose, they are often bailed out with public funds by obedient politicians. We privatize profit and socialize risk. The”
― Edward O. Thorp, A Man for All Markets: Beating the Odds, from Las Vegas to Wall Street

“Too bad. Lesson: It doesn’t pay to push the other party to their absolute limit. A small extra gain is generally not worth the substantial risk the deal will break up.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“I wondered how my research into the mathematical theory of a game might change my life. In the abstract, life is a mixture of chance and choice. Chance can be thought of as the cards you are dealt in life. Choice is how you play them.”
― Edward O. Thorp, A Man for All Markets: Beating the Odds, from Las Vegas to Wall Street

“I also learned the value of withholding judgement until I could make a decision based on evidence.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“simple probability and statistics should be taught in grades kindergarten through twelve and that analyzing games of chance such as coin matching, dice, and roulette is one way we can learn enough to think through such issues.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“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.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“I was disappointed and indignant at this treatment. In my world of books, ability, hard work, and resourcefulness were rewarded. Smitty should have been pleased that I was doing well, and if he wanted to do better, he should practice and study, rather than penalize me.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“The idea of the project was to study how the historical returns of securities were related to various characteristics, or indicators. Among the scores of fundamental and technical measures we considered were the ratio of earnings per share to price per share, known as the earnings yield, the liquidation or “book” value of the company compared with its market price, and the total market value of the company (its “size”).”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“the data was plotted on mathematical diagrams that I invented. These revealed favorable situations and let me quickly specify the appropriate trades. Each day’s closing prices for a convertible and its stock were plotted as a color-coded dot on that particular convertible’s diagram. The diagrams were prepared with curves that were drawn by a computer from my formula and showed the “fair price” of the convertible. The beauty of this was that I could immediately see from the picture whether we had a profitable trading opportunity. If the dot representing the data was above the curve it meant the convertible was overpriced, leading to a possible hedge: Short the convertible, buy the stock. A data point close to or on the curve indicated the price was fair, which meant liquidate an existing position, do not enter a new one. Below the curve meant buy the convertible, short the stock. The distance of the dot from the curve showed me how much profit was available. If we thought it met our target, we tried to put on the trade the next day. The slope of the curve near the data point on my diagram gave me the hedge ratio, which is the number of shares of common stock to use versus each convertible bond, share of preferred, warrant, or option.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“The executives claim that “market forces” determine their salary. However, as Moshe Adler, in his article “Overthrowing the Overpaid,” points out, economists David Ricardo and Adam Smith, writing more than two hundred years ago, “concluded that what a person earns is determined not by what that person has produced but by that person’s bargaining power.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“Derivatives spread the damage throughout the world. In March 2009, when the S&P 500 had fallen 57 percent from its peak, I could not tell whether to buy stocks or to sell what I had. Either decision might have been a disaster. If we continued into a major worldwide depression, buying more would be costly. In the other scenario, the one that occurred, this was the bottom, and stocks rebounded over 70 percent in less than a year. Warren Buffett, who had better information and insight than almost anyone, later told The Wall Street Journal’s Scott Patterson that at one point he was looking into the abyss and considering the possibility that everything could go down, even Berkshire Hathaway. It was only when the US government indicated it would do whatever was necessary to bail out the financial system that he realized we were saved.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“Using Beat the Dealer as a guide, he brought a bankroll of $200 and ran it up to $10,000. It took four months. The grueling days at the green felt tables often lasted sixteen hours. It was a hard way to earn money but the real value, as with so many before and after him, was in what the young man learned. As he later said, “I had no clue that my four months at the tables in Las Vegas were to lay the foundation for a successful career in Wall Street. [It] taught me several important principles that I’ve employed for the past twenty-five years…”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“What if you want the payouts to continue “forever,” as you might for an endowment? Computer simulations showed me that with the best long-term investments, such as stocks and commercial real estate, annual future spending should be limited to the inflation-adjusted level of 2 percent of the original gift. This surprisingly conservative figure assumes that future investment results will be similar in risk and return to US historical experience. In that case, the chance that the endowment is never exhausted turns out to be 96 percent. The 2 percent spending limit is so low because, if the fund is sharply reduced in its early years by a severe market decline, a higher spending requirement might wipe it out.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“As I pointed out in Wilmott magazine, Warren Buffett’s thinking is consistent with the Kelly Criterion. In a question and answer session with business students at Emory University, he was asked, in view of the popularity of Fortune’s Formula and the Kelly Criterion, to describe his process for choosing how much to invest in a situation. He and his associate Charlie Munger, when managing $200 million, put most of it into just five or so positions. Sometimes he was willing to bet 75 percent of his fortune on a single investment. Investing heavily in extremely favorable situations is characteristic of a Kelly bettor.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“The careful investor, when he hears such tales, should ask a key question: At what price is this company a good buy? What price is too high? Suppose, after doing your analysis of the company’s financial statements, management, business model, and prospects, you conclude that it’s worth buying at $40 a share, at which price you expect not only a satisfactory excess risk-adjusted return but have a margin of safety in case your analysis is flawed. Suppose you also conclude that the expected return at $80 is substandard, so the stock is likely overpriced. Typically you’ll avoid investing in stocks when they are trading above your buy price but, if you follow many companies carefully, from time to time some will be attractive purchases. The range between your “buy” price and the “likely overpriced” level, in this case from $40 to $80, is likely to be narrower for better, more experienced investors, enabling them to participate in more situations and with greater confidence.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“Consider two investors, Sam Scared and Charlie Compounder. Suppose Sam Scared starts with $1; each time it doubles, he puts his $1 profit in a sock instead of reinvesting it. After ten doublings, Sam has a profit in the sock of $1 × 10 plus his original $1 for a total of $11. Charlie also starts with $1 and makes the same investments but lets his profit ride. His $1 becomes $2, $4, $8, et cetera, until after ten doublings he has $1,024. Sam’s wealth grows as $1, $2, $3…$11. This is called simple growth, arithmetic growth, or growth by addition. Charlie’s increases as $1, $2, $4…$1,024. This is known variously as compound, exponential, geometric, or multiplicative growth. Over a sufficiently long time, compound growth at a small rate will vastly exceed any rate of arithmetic growth, no matter how large! For instance, if Sam Scared made 100 percent a year and put it in a sock and Charlie Compounder made only 1 percent a year but reinvested it, Charlie’s wealth would eventually exceed Sam’s by as much as you please. This is true even if Sam started with far more than Charlie, even $1 billion to Charlie’s $1. Realizing this truth, Robert Malthus (1766–1834), believing that population grew geometrically and resources grew arithmetically, forecast increasingly great misery.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“Focused on Princeton Newport, I lost track of Warren after 1969. Then in 1983, I heard about the remarkable growth of a company called Berkshire Hathaway. Not knowing it was to become Warren’s investment vehicle, I had stopped paying attention to it back in 1969. The stock price then was $42 a share, if you could find anyone to trade with. It was now publicly trading at over $900. I knew at once what this meant. The “cigar butt” had become a humidor of Havanas. Despite its having increased by a multiple of more than 23 in fourteen years, I made my first purchase at $982.50 a share and continued to accumulate stock.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“What the hagglers and the traders do reminds me of the behavioral psychology distinction between two extremes on a continuum of types: satisficers and maximizers. When a maximizer goes shopping, looks for a handyman, buys gas, or plans a trip, he searches for the best (maximum) possible deal. Time and effort don’t matter much. Missing the very best deal leads to regret and stress. On the other hand, the satisficer, so-called because he is satisfied with a result that is close to the best, factors in the costs of searching and decision making, as well as the risk of losing a near-optimal opportunity and perhaps never finding anything as good again.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“Facing four hundred million man-years of calculations, with a resulting railroad car full of strategy tables, enough to fill a Rolodex five miles long, I tried to simplify the problem. I”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“The $32 loss was well within the range of possible outcomes predicted by my theory, so it didn’t lead me to doubt my results.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“By this time, Washington’s airports were buried in two feet of snow, so I boarded a train for Boston. During the long ride back I wondered how my research into the mathematical theory of a game might change my life. In the abstract, life is a mixture of chance and choice. Chance can be thought of as the cards you are dealt in life. Choice is how you play them. I chose to investigate blackjack. As a result, chance offered me a new set of unexpected opportunities.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“A young reporter for the Post named Tom Wolfe followed up after my talk with an interview. The Post ran his story, “You Can So Beat the Gambling House at Blackjack, Math Expert Insists.” He was curious rather than skeptical, sympathetic but probing. Wolfe later became one of America’s most famous authors.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“This plan, of betting only at a level at which I was emotionally comfortable and not advancing until I was ready, enabled me to play my system with a calm and disciplined accuracy. This lesson from the blackjack tables would prove invaluable throughout my investment lifetime as the stakes grew ever larger.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“dealing hands at high speed, blowing cigarette smoke at me, and engaging me in complicated conversations. Meanwhile, I was keeping track of the cards, calculating the percent advantage and my bet size, then playing out my hand using strategies that varied depending on the count. The key was to take it one step at a time, adding a new difficulty only after I became comfortable and relaxed with what I was already doing. What had seemed daunting finally became easy.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“Countermeasures included reshuffling the pack of cards by the time half or fewer of them had been played. This not only limits the card counter’s chances to make favorable bets, but is also costly for the casino because it slows the game down, fleecing the ordinary players more slowly and reducing casino profits. If one likens a casino to a slaughterhouse for processing players, then more time spent shuffling means less efficient use of plant capacity.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“There are as many ways to do this as there are to portray characters in the theater. You can be the drunken cowboy from Texas or the wildly animated lady from Taiwan who can’t wait to get her next bet down. You can be Caspar Milquetoast, the nervous accountant from Indianapolis who has already lost too much down the street. Or Miss Spectacular, who draws all the attention to herself, not to how she bets and plays.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“As part of an orchestrated PR follow-up, a Las Vegas Sun editorial of April 3, 1964, assured us that “Anybody who has been around Nevada very long knows that [casinos welcome] players with a system.” “Edward O. Thorp…obviously doesn’t know the facts of gambling life. There has never been a system invented that overcomes…the advantage the house enjoys in every game of chance.” And for the clincher: “ ‘Dr. Thorp may be qualified at mathematics, but he is sophomoric on gambling,’ is the way Edward A. Olsen, Gaming Control Board chairman, put it.” In a nonconfrontational vein, Gene Evans of Harrah’s Club explained that “…the club believes the player may have a better chance when the deck is shuffled every time, because all the Aces and face cards could come up on each deal.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market

“Still, the fact that blackjack could be beaten led to an upsurge in play.”
― Edward O. Thorp, A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market