Edward Thorp: Beating The Odds – The First Quant (A Man For All Markets – Book Summary And Lessons)

Edward Thorp is by many regarded as “the first quant”, at least one of the first who successfully used quantitative models for risk-taking. He became famous when he wrote the book Beat The Dealer, in which he documented a rational way of betting to beat the casinos in blackjack.

He later studied the financial markets, and in 1967 he published Beat The Market – a book about arbitrage. Profiting from arbitrage is very difficult today but it was ingenious when this was written. Edward Thorp’s trading strategies are 100% quantified and mechanical.

This article has my own very brief opinion of the book, plus I give excerpts of my main lessons and takeaways from the book.

Ed Thorp has one of the best investing track records – purely by quantified strategies

However, outside the inner circles of hedge funds and academic researchers, Thorp is not well known, despite a stellar track record for his hedge fund, Princeton Newport Partners (PNP). PNP never had a losing year from 1969 until 1988, when he decided to close because of a rogue employee (for reasons that had nothing to do with Thorp).

PNP compounded 19.1% from 1969 to 1988, almost more than double that of the S&P 500, with significantly less drawdowns. After the unpleasant encounter in 198