A world-renowned gambling and investment guru has sold up his magnificent mansion on the Newport Coast, with the estate – including a stunning observatory – sold in one fell swoop. Unfortunately for him, he was forced to take an unexpected hit on the asking price, having to drop from $8.795m and settle for $8.3m instead. That guru is 87-year-old Edward Thorp, a man who changed the face of strategy in the classic casino game of blackjack.
Thorp’s four-bedroom, eight-bathroom Mediterranean-inspired home overlooks Newport Harbor and is a symbol of his success as a gambler through the decades. The estate’s observation tower, which affords spectacular scenery of the Pacific Ocean, is the centerpiece here. However, there are plenty more hidden gem features lurking around every corner, with a swimming pool, spa, loggia, and gym all providing a lifestyle fit for the “king of mathematics”.
Who is Edward Thorp and what is his story?
Edward O. Thorp was born in Chicago in August 1932. A man with a thirst for scientific and mathematical knowledge, Thorp would go on to study for a Ph.D. in maths in LA at the University of California. Although numbers and physics were Thorp’s main hobbies, it was around this time that he was motivated by the world of gambling. He was told by many colleagues and friends that the house edge of a casino was impregnable and that players could never devise winning strategies or systems to “beat the house” at classic card games like blackjack.
Ultimately, the house edge in blackjack depends on how many decks of cards are played in a dealer’s “shoe”. Land-based casinos used to use only one deck of cards at a time, which it was soon discovered made it possible to accurately predict and calculate the odds based on the remaining cards in the deck – an early form of card counting.
Today, some online casinos will use eight decks as a rule, but there are exceptions. 888casino, which offers some of the most exciting games for classic blackjack and table variants online, provides blackjack with just four decks in-play. Even four decks can make it harder for players to develop an accurate “count” and, of course, online eliminates a card counter’s abilities. Live was where it’s at for card counting.
In the late 50s, Thorp utilized an IBM 704 to try and calculate the probabilities of winning at the blackjack table. Thorp taught himself the Fortran programming language to help him hone the mathematical equations required to refine his research model on blackjack probabilities. Thorp soon discovered that it was possible to alter the patterns of his betting to improve his odds, particularly when a dealer was nearing the bottom of a card deck and only certain cards remained in the shoe.
Having spent enough time honing his theory, it was time to put it into practice at the blackjack tables. He would visit casinos in Lake Tahoe, Reno and latterly Las Vegas. Working with professional gambler Manny Kimmel, who stumped up most of Thorp’s initial research costs, the theory came up trumps during the opening weekend, with the pair winning $11,000. It was a similar story in Las Vegas, although given his increasing notoriety, Thorp opted to devise a string of clever disguises to avoid detection from the pit bosses of the casino floors.
It wasn’t just blackjack that Thorp was able to develop winning probability-based systems for either. He soon realized that baccarat was another card game that could be manipulated. He built another crack team of gamblers to try and take down the baccarat tables in Vegas.
In one of Thorp’s recent books, which detailed his rise to notoriety in the gambling world, Thorp recounted the casinos’ attempts to combat his systematic gameplay by plying him with alcoholic beverages that would prevent him from being able to keep up with the card count. He even detailed issues with his car when driving home from Las Vegas through Arizona, discovering that the accelerator linkage had been tampered with. Although Thorp never intimated that the casinos had anything to do with this, he did state that readers could “draw whatever conclusions” they wanted.
Thorp’s books on blackjack probability made him a best-selling author too. His “Beat the Dealer” book was purchased more than 700,000 times, which was an enormous figure for such a niche title. It was enough to rank the book in the bestseller list of the New York Times. However, as Thorp’s love-hate relationship with Las Vegas casinos became increasingly frayed, he took the – probably sensible – decision to divert his attentions from gambling to financial investments.
From Vegas to Wall Street: Thorp’s new strategies to beat the stock markets
In 1967, Thorp published another book titled “Beat the Market”, which detailed his quantitative strategy for dealing with the stock markets. He soon realized that gambling and investing share similar attributes – with probability intrinsically linked to the size of bets and investments. Thorp’s formula was to invest heavily in stocks that were deemed undervalued.
Thorp would go on to launch his very own hedge fund – Princeton Newport Partners. For some 20 years, that hedge fund managed to reap a 19.1% return on investment each year, acting as the first success story for quantitative financial trading. Thorp would also go on to strike up a friendship with a man that’s gone on to become one of the world’s most successful investors, Warren Buffett. Thorp and Buffett, who was recently overtaken by Elon Musk as the richest man on the planet, conversed regularly about the stock markets in the early days and Thorp would even go on to invest in Buffett’s Berkshire Hathaway company for a mere $982.50 per share. Today, those shares are worth over $327,000 apiece.
Thorp may have masterminded the worlds of gambling and financials, but it’s somewhat ironic that he was unable to eke out the maximum value from the sale of his Newport Coast estate.