Book Review: A Man for All Markets

Edward Thorp is an impressively talented person, endowed with so much even though he was born with little. The son of a GI sergeant and an emigré housewife from the Philippines, Thorp was born into a poor family in the depths of the Great Recession. He had two things going well for him: he had loving parents who raised him well and a brilliant, mathematical mind. So intelligent was he that Thorp was allowed to skip two grades, topped regional chemistry and physics exams, and scored the highest IQ test in the entire California. His brilliance is only underscored by an intensely humble approach to life, a grit tempered by the tribulations of the Great Depression, and a healthy respect for money. He always had sympathy for the underdog, and through his life felt that a fair game was always better than “cheaters and liars” or people who otherwise won by means other than on merit. From sharing his house with 10 other family members who had come over from the Philippines after the war to making billions in the stock market, Thorp was level headed and mindful student of human nature, skillful tactician and natural mathematician. Most importantly, he is factual, never deviating or straying into irrational or illogical theory.

Thorp first applied his mind to studying, winning a string of scholarships, awards and prizes along the way. He topped the state physics test and came in fourth in chemistry (having the misfortune of being unable to afford a proper slide rule and missing the entire calculation portions). This led to his enrollment at UC Berkeley, tuition-free, where he majored in chemistry. A poor lab grade, caused in part by a lousy teaching assistant, prompted Thorp to move to UCLA, where he majored in physics and eventually got a PhD in mathematics. He also met his wife, Vivien, there.

From Los Angeles he progressively climbed the academic ladder, eventually landing at MIT where he met Claude Shannon. Shannon, an inveterate prankster and practical engineer who secured his place in history as the father of information theory, eventually collaborated with Thorp on a series of increasingly complicated gadgets that allowed them to compute the physics of baccarat. Before that, Thorp had figured out how to do card counting and worked with two high rolling gamblers to swindle the house. Using a combination of mathematics and level headed play, Thorp and his associates found themselves increasingly banned from major establishments after they initiated winning streaks against the house.

From the gambling table, he graduated into the financial world. He likened it to a similar world, with equally slimy liars and cheaters, but at least it was a level playing field. Using statistical arbitrage and a medley of other advanced mathematical techniques (including finding for the Black-Scholes’ predecessor formula), Thorp formed a highly profitable partnership which gained 20% on average every year. The Princeton Newport Partnership, or PNP, was only brought down by proxy due to the Securities and Exchange Commission’s persecution of junk bond trader Miliken. From the standpoint of an old, octogenarian, Thorp then reflects (surprisingly sharp for his age) on the numerous mathematical issues that arise out of personal finance. The last part of the book discusses a host of charitable contributions and other musings on life.

His life has been well lived. Edward Thorp is probably a rare gem - an almost perfect combination of genes and nurture that have led to a very successful and highly adept individual who excelled in almost everything he did (including living healthily). His intelligence is almost unimaginable, and even though he occupies such a high perch, he does not have any form of a superiority complex. He is humble, does not take credit for things, and in general just gets the job done. A Man for All Markets is an insightful and inspiring read of a young genius whose worldly experiences have taught him to give back to society - and the world.