Blackjack is believed to have been around since the 1700s and up until Ed Thorp; no one was smart enough to come up with a system to beat it. As the author of the bestseller Beat the Dealer, Thorp proved not only to the gaming world but the rest of the world that the house advantage in blackjack can be overcome through mathematics – card counting. His latest book, A Man for All Markets, tells his story revolutionizing investing through the application of his knowledge of gambling.

Very recently Jacob Goldstein of Planet Money podcast, personally interviews Edward Thorp. Goldstein broke the ice by saying that figuring out how to get an edge in casino games has never been answered until 1959. This was the year that Ed Thorp realized that blackjack is not like any other casino game.

Thorp said that in all casino games (except blackjack), one play of the game does not affect the next move. For example in roulette, hitting red in a spin will not change the odds of coming up with red in the subsequent spin. It is less likely for a blackjack player to get an ace in the second hand if he got an ace in the first hand. Based on this observation, Thorp said that the odds in a game of blackjack shifts back and forth between the casino and player.

Even with Thorp’s mathematical mind, it still took him more than a year to do the calculations on how to win in blackjack. He said that he was more interested in publishing his system in a scientific journal than in raking in millions of U.S. dollars. He said he was more interested in teaching in a university than in making a great deal of money.

The article was indeed published in a scientific journal. Thorp’s system was read by many and then one day, an elderly man dressed in cashmere got off his Cadillac in front of Thorp’s house. The man propositioned to bankroll Thorp on a trip to Reno, Nevada. Using his own system, Thorp more than doubled their money. The first gambling trip was followed by several other trips, each time bringing in more money to Thorp. Then it hit him – that if he can beat casinos, he could probably beat the stock market too.

The initial investments by Thorp proved to be disasters, until he discovered call options which basically reserves the right of an investor to purchase a specific stock at a set price. Using his math background, Ed Thorp eventually figured out the correct price of an option for him to thrive in the stock market.

The formula “worked” as for the next years, Thorp’s gains in the stock market was phenomenal. After a few years of making consistent profits, Thorp established his own investment firm. For the next 20 years, the firm was recognized as one of the top across the United States. Thorp said that his investments were definitely patterned after his blackjack approach. He believed that if one brings in more information, it is possible to beat the unbeatable.

The firm that Ed Thorp established closed down in the 1980s due to the legal problems brought on by people working for the company. Though Thorp was not charged, he gracefully exited the investing business. However, the investing business is alive and well, filled with Ed Thorp wannabes.

Ed Thorp also started the use of quantitative investment techniques in the investment market. Today, he lives quietly in Newport Beach, CA.