#596: Edward O. Thorp, A Man For All Markets — Beating Blackjack and Roulette, Beating the Stock Market, Spotting Bernie Madoff Early, and Knowing When Enough is Enough

Brought to you by Wealthfront automated investing, Athletic Greens all-in-one nutritional supplement, and Eight Sleep’s Pod Pro Cover sleeping solution for dynamic cooling and heating. Edward O. Thorp is the author of the bestseller Beat the Dealer, which transformed the game of blackjack. His subsequent book, Beat the Market, coauthored with Sheen T. Kassouf, influenced securities markets around the globe. He is also the author of A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market. Edward was one of the world’s best blackjack players and investors, and his hedge funds were profitable every year for 29 years. He lives in Newport Beach, California. Please enjoy! This episode is brought to you by Wealthfront! Wealthfront pioneered the automated investing movement, sometimes referred to as ‘robo-advising,’ and they currently oversee $28 billion of assets for their clients. It takes about three minutes to sign up, and then Wealthfront will build you a globally diversified portfolio of ETFs based on your risk appetite and manage it for you at an incredibly low cost.  Smart investing should not feel like a rollercoaster ride. Let the professionals do the work for you. Go to Wealthfront.com/Tim and open a Wealthfront account today, and you’ll get your first $5,000 managed for free, for life. Wealthfront will automate your investments for the long term. Get started today at Wealthfront.com/Tim. * This episode is also brought to you by Eight Sleep! Eight Sleep’s Pod Pro Cover is the easiest and fastest way to sleep at the perfect temperature. It pairs dynamic cooling and heating with biometric tracking to offer the most advanced (and user-friendly) solution on the market. Simply add the Pod Pro Cover to your current mattress and start sleeping as cool as 55°F or as hot as 110°F. It also splits your bed in half, so your partner can choose a totally different temperature. And now, my dear listeners—that’s you—can get $250 off the Pod Pro Cover. Simply go to EightSleep.com/Tim or use code TIM at checkout.  * This episode is also brought to you by Athletic Greens. I get asked all the time, “If you could use only one supplement, what would it be?” My answer is usually AG1 by Athletic Greens, my all-in-one nutritional insurance. I recommended it in The 4-Hour Body in 2010 and did not get paid to do so. I do my best with nutrient-dense meals, of course, but AG further covers my bases with vitamins, minerals, and whole-food-sourced micronutrients that support gut health and the immune system.  Right now, Athletic Greens is offering you their Vitamin D Liquid Formula free with your first subscription purchase—a vital nutrient for a strong immune system and strong bones. Visit AthleticGreens.com/Tim to claim this special offer today and receive the free Vitamin D Liquid Formula (and five free travel packs) with your first subscription purchase! That’s up to a one-year supply of Vitamin D as added value when you try their delicious and comprehensive all-in-one daily greens product. * Edward fills us in on where he grew up, how he was educated, what made the application of mathematics to gambling such a compelling challenge, and why he rushed to publish his successful system after testing it in the real world. [04:51] What reference material did Edward use in his first trip to the blackjack table in Vegas, and why was Claude Shannon at MIT — a person known to be difficult to reach — willing to spare five minutes to meet with him around this time? [12:01] What method did Edward and Claude devise to beat roulette with the assistance of what MIT considers to be the first wearable computer? [15:11] Edward looks great for a man in his 60s — which is especially incredible when you consider he’s 89! Is it just a case of lucky genetics, or does he follow some kind of mortality-cheating health regimen? Has his approach to remaining in shape changed over the years? [17:13] How did finance and investing enter the picture for Edward? Where did this lead, and who did he meet along the way? [25:19] What was it about Warren Buffett that made Edward come away from their first meeting convinced he’d someday be the richest man in the world? [34:22] If Edward were teaching a seminar in investing to a modern student body (some of whom might not possess an aptitude for math), what frameworks would he impart to get them started? [38:55] What lessons learned from investing are transferable to other areas of life? [43:50] Even at 89, Edward considers himself a long-term thinker. How might those of us who struggle to think beyond the short-term be more like Edward? [45:59] How did Edward suss out that something was fishy about the way the Madoff brothers were doing business 17 years before everybody else finally caught on? [50:58] Exploring the mental models of externalities, the tragedy of the commons, and fundamental attribution errors. [59:15] What you should be reading and listening to if you want to enact positive change in the world right now — politically or evolutionarily. [1:08:29] What investors, aside from Warren Buffett, impress Edward — and why? [1:13:48] How has Edward known where to draw the line between growing a business and withdrawing before it consumed all else in his life? What catalyzed his decision to wind things down? [1:17:48] What does independence mean to Edward and how did he spend his time after winding down the investment side of things? [1:22:52] Is there anything Edward’s particularly curious about learning right now? [1:24:27] Pondering a conversation between Joseph Heller and Kurt Vonnegut and other parting thoughts. [1:26:37] * For show notes and past guests on The Tim Ferriss Show, please visit tim.blog/podcast. For deals from sponsors of The Tim Ferriss Show, please visit tim.blog/podcast-sponsors. Sign up for Tim’s email newsletter (5-Bullet Friday) at tim.blog/friday. For transcripts of episodes, go to tim.blog/transcripts. Discover Tim’s books: tim.blog/books. 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