Edward O. Thorp

Edward O. Thorp, an American mathematics professor, was the creator of the card-counting technique in blackjack. His groundbreaking 1962 book, Beat the Dealer, was the first to prove mathematically that card counting could be successfully employed to beat the house in blackjack.

The book also had the side effect of bringing blackjack to the attention of the gambling public. Thousands of readers flocked to the tables as blackjack, which had theretofore been considered a side game, became one of the most popular games in the casinos.

The Academic Study of Blackjack

Edward O. Thorp was born in 1933. He received a Master's degree in physics and a doctorate in mathematics from UCLA, and went on to become a mathematics professor at MIT, UCLA, NMSU, and UC Irvine.

While working at MIT, Thorp began exploring the possibility of developing a mathematical model of the probabilities of winning at blackjack. Thorp's ideas were based on one simple observation. In other casino games, what happened in the past has no effect on what will happen in the future: the last spin of the roulette wheel has no effect on the next spin; the last roll of the craps dice has no effect on the next roll. Hence, the odds remain the same throughout the game. Blackjack, however is different. In blackjack, the events of the past do affect the probabilities of the future. The reason is that after each hand, the cards that were used are set aside and are no longer available for the next hand. Therefore, the probabilities to be applied to the next hand are not based on a complete 52-card deck, but only on the reservoir of cards that remain to be dealt.

Although the basic premise is simple, drawing practical applications from it was anything but. Thorp taught himself Fortran and, using an IBM mainframe computer, spent many hours developing his blackjack system. The system that evolved was based on counting the cards that had already been dealt, analyzing the dealer's up card and the player's own cards, and making fast and accurate mental calculations of the odds before deciding whether to stand, hit, double down, or split. The goal is not to win every hand, but to bet more when the odds are in your favor and to bet less when the odds are in the dealer's favor, and thus to come out ahead in the long run.

Blackjack in Real Casinos

Thorp published his ideas, which he called the Ten-Count System, in his book Beat the Dealer in 1962. The book sold over 700,000 copies and made the New York Times bestseller list. The problem with the Ten-Count System, however, was that although it was mathematically accurate, it was difficult to learn and difficult to apply in real-life casino situations, and therefore impractical for most blackjack players. This defect was rectified in the second edition of Beat the Dealer, published in 1966, in which Thorp, with the assistance of Julian Braun, presented a more practical version of the Ten-Count System as well as Braun's own High-Low System.

Success on Wall Street

From the Las Vegas blackjack tables, Thorp moved on the world's greatest casino: Wall Street. Using his expertise in probabilities and statistics, Thorp was able to discover and exploit a number of pricing anomalies in the securities market. With co-author J. Regan, he published Beat the Market in 1967. He created a hedge fund called Princeton/Newport Partners, and is now president of Edward O. Thorp & Associates. As with his blackjack system, his stock-market system has been a resounding success: as of May 1998, Thorp reported that his personal investments had yielded an annualized 20 percent rate of return averaged over 28.5 years.