Thorp became a voracious reader (as did Buffett) and
developed a keen interest in and aptitude for mathematics
andscience.Hewonaprestigiousphysicscompetition,
beating out kids from privileged backgrounds and
earning himself a scholarship to university. But that
wasfollowedbyacrushingblow.
“Shortly before leaving for college, I learned that my
motherhadcashedinthewarbondsIhadpaidforwith
my paper route and spent the money. Her unexpected
betrayal was an emotional blow that estranged us for
years,andwhetherIcouldsupportmyselfattheuni-
versitywasnowindoubt.”
Thorpsurvivedongritandhisintellectflourished.
First he succeeded in academia. Then he pioneered
cardcounting,makingsignificantamountsofmoney
at blackjack and baccarat. In 1962 he literally wrote the
book on card counting (Beat the Dealer).
In 1961 he developed the world’s first wearable com-
puter with “the father of information theory”, Claude
Shannon. This device gave Thorp and Shannon an
astounding 44% edge over the casino when betting
on roulette.
From here he moved into the world of investing,
achievingimpressivereturnswithtinyamountsofrisk.
ThetypeofinstrumentsinwhichheinvestedareonesI
usuallyavoid:options,futures,warrantsandmanyother
complex financial derivatives. But his methodology was
so sound that even Buffett apparently endorsed Thorp.I
movedtoSydneyatthestartof1996andthat
December I was shopping for a book to read
onthesix-hourtraintripbacktothecountry
forChristmas.IwasintheDymocksstore
in George Street and clearly remember the
momentIpickedupBuffett:TheMakingofanAmerican
Capitalistby Roger Lowenstein.
Thatbooksetoffachainofeventsthatledtome
achieving many of my financial goals ahead of schedule.
Crucially, it inspired my original three-step game plan
for accumulating wealth in the sharemarket: 1. Learn
accounting, the language of business; 2. Learn how to
value companies; 3. Buy shares in companies for less
than your valuation.
Ilovethatsuchpowerfulinsightsand,eventually,
favourable outcomes can be reaped from an object costing
just$24.95andrequiringonly10or12hourstoread.
Since then I’ve read more than 100 investing books,
many of them mediocre. But this year, 21 years after first
reading about Buffett, another book gave me the same
frisson of excitement. It was an autobiography called
A Man for All Markets: From Las Vegas to Wall Street,
HowIBeattheDealerandtheMarket.AndIcouldn’t
help but compare the protagonist to my long-time hero.THORPVBUFFETT
EdwardThorpwasborninAugust1932,twoyears
afterBuffett.Hewasraisedinadirt-poorfamily,while
Buffett grew up middle class, the son of a stockbroker
and, later, congressman.
While Buffett began delivering newspapers out of
self-motivationandloveofthemoneyhehadbegun
accumulatingatayoungage,Thorpendedupinthe
sameoccupationbecause“therewasnosparemoney”
and his parents encouraged him to earn something so
he might one day go to college.SHARES STRATEGY
How $25
changed
my life
When the
right book
connects
with you
at the
right time,
the results
can be
spectacular
STORY GREG HOFFMAN