Master Investor Ed Thorp on How to Think for Yourself, Mental Models for the Second Half of Life, How to Be Inner-Directed, How Basic Numeracy Is a Superpower, and The Dangers of Investing Fads (#604)

“An important thing for everyone is to think about the world and society as us instead of me and to try to act that way and to think longer term. Think about how the things one does affects the people around not only right away but down through the years.”

— Edward O. Thorp

Edward O. Thorp (@EdwardOThorp) is the author of the bestseller Beat the Dealer, which transformed the game of blackjack. His subsequent book, Beat the Market, coauthored with Sheen T. Kassouf, influenced securities markets around the globe. He is also the author of A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market.

Edward was one of the world’s best blackjack players and investors, and his hedge funds were profitable every year for 29 years. He lives in Newport Beach, California.

You can find our first conversation here.

Please enjoy!

Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Castbox, Google Podcasts, Stitcher, Amazon Musicor on your favorite podcast platform. You can watch on YouTube here.

Brought to you by Wealthfront automated investing, Vuori comfortable and durable performance apparel, and Eight Sleep’s Pod Pro Cover sleeping solution for dynamic cooling and heating. More on all three below.

The transcript of this episode can be found here. Transcripts of all episodes can be found here.

#604: Master Investor Ed Thorp on How to Think for Yourself, Mental Models for the Second Half of Life, How to Be Inner-Directed, How Basic Numeracy Is a Superpower, and The Dangers of Investing Fads

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Want to hear Ed’s first time on this show? Have a listen to our conversation here, in which we discuss applying math to gambling, beating roulette with the first wearable computer, longevity regimens, impressing Warren Buffett, investment skills that transfer to other areas of life, methods for enacting positive change, lifelong learning, and much more.

#596: Edward O. Thorp, A Man for All Markets — Beating Blackjack and Roulette, Beating the Stock Market, Spotting Bernie Madoff Early, and Knowing When Enough Is Enough

What was your favorite quote or lesson from this episode? Please let me know in the comments.

SCROLL BELOW FOR LINKS AND SHOW NOTES…

SELECTED LINKS FROM THE EPISODE

  • Connect with Edward O. Thorp:

Website | Twitter

SHOW NOTES

  • [06:39] The value of long-term thinking and the price of short-term thinking
  • [07:57] What is a common stock warrant?
  • [09:52] Why are people generally poor at taking longer term (or alternative) perspectives?
  • [11:08] Conversing about numeracy and common misunderstandings
  • [15:00] How to become more numeracy literate
  • [20:18] It’s Raining Man
  • [22:31] The Rule of 72
  • [26:14] Making the best financial decisions with unknown variables
  • [35:57] How to have fun learning about probability and statistics
  • [37:47] How to get an edge in hedge fund investing (with book recommendations)
  • [46:23] Ed’s methods for losing (or maintaining) weight and looking 60 in spite of being almost 90 years old
  • [53:38] Favorite beer
  • [55:03] Music as stress reduction
  • [56:02] Avoiding unnecessary risks
  • [1:04:12] The age-guessing experiment
  • [1:06:17] Other-directed vs. inner-directed and takeaways from The Lonely Crowd by David Riesman
  • [1:14:35] How an 89-year-old maintains hair growth
  • [1:17:20] Using scrap time
  • [1:19:45] A big change in Ed’s later life that increased its quality
  • [1:22:16] New reflections, future hopes, and parting thoughts

MORE GUEST QUOTES FROM THE INTERVIEW

“When I meet somebody, I don’t think about them as being in any particular category. I think that as far as I’m concerned, they’re my equal and they know things I don’t know. I probably know things they don’t know too, but I can learn from them. And I usually try to hear what they have to say instead of telling them what I have to say.”
— Edward O. Thorp

“Measurement is important because you want facts on which to base what you do instead of hopes, beliefs, wishes, so on.”
— Edward O. Thorp

“You can work out and be fit and have high aerobics and so on, but if you’re not going in for routine colonoscopies and skin cancer checks and so on, you’re leaving a big risk factor open for yourself. So you’ve got to try to get rid of the risks that you can cover.”
— Edward O. Thorp

“Thinking long-term is one thing that running a marathon teaches us.”
— Edward O. Thorp

“The value of being around good people and not being around a few bad people is much higher than it ever was before.”
— Edward O. Thorp

“An important thing for everyone is to think about the world and society as us instead of me and to try to act that way and to think longer term. Think about how the things one does affects the people around not only right away but down through the years.”
— Edward O. Thorp

“A lot of these things that you make better now, for the future, will actually benefit us a lot sooner than you might think”
— Edward O. Thorp

PEOPLE MENTIONED

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10 Replies to “Master Investor Ed Thorp on How to Think for Yourself, Mental Models for the Second Half of Life, How to Be Inner-Directed, How Basic Numeracy Is a Superpower, and The Dangers of Investing Fads (#604)”

  1. Your 5-Bullett Friday said leave comments here. Attached is the link to the Steve Gleason’s, ALS hero, introducing his favorite Pearl Jam song Inside Job, and the song live from
    Wrigley field. A suggestion for what I’m listening to. [Moderator: link to YouTube video “Steve Gleason intro – Inside Job – Pearl Jam 2016.08.20 Chicago Wrigley 1” removed per YouTube embed policy.] For books associated with investing I suggest both Howard Marks books. [Moderator: Thank you, Scott. Folks can also find Tim’s interview with Howard Marks at https://tim.blog/2018/09/25/howard-marks/ and https://tim.blog/2020/05/11/howard-marks-2/ .]

  2. I took to wearing wigs and acting stupid so as to divert attention to my using the Thorpe chart when “Beat the Dealer” first came out, but they found me fast by how I bet. Then they would bring in a shoe or the dealer would hide cards when he’d bust. I once asked a pit boss why they were harassing me, since I wasn’t a big better, and he said, “You’re taking the seat away from a potential loser.”

    I found this when I came looking for you, Tim, after reading today’s Bulletin. You give your audience so much value but how about using us to give the world value? We need system-change and we hardly deal with that. At end-stage capitalism, to end-run around the government get ideas for what we the people could do. Ask me and I’ll give you mine — please. It’s my serious pursuit, where I ask my stellar podcast guests what they would do if they ran the world: [Moderator: links removed.] Tim — have me as a podcast guest and we can talk about this!!!

  3. Ack! I can’t find the blog for today’s Friday news…
    You cited a DFW quote used by a friend. That quote is from a DFW commencement speech that was published as a bokk titled This Is Water: Some Thoughts, Delivered on a Significant Occasion, about Living a Compassionate Life – worth reading aloud until it’s in your bone marrow.

  4. As time passes, you keep going as distant as possible from the truth. It’s been awesome, but that’s it for now. Relativism keep you away from what matters in the end. Hope someday you understand this concept.

  5. Looking forward to listening to this. Thorp is friends with Taleb. Maybe you can request Thorp to put in a good word with Taleb to get him on your podcast!

  6. Great conversation & notes as usual. I discovered that Darwin, Einstein & I have the same personality types and love walking!!

  7. A good numeracy book is
    Innumeracy:Mathematical Illiteracy and Its Consequences by
    John Allen Paulos (who has written other great books)
    Another great book in this area: Science Fictions by Stuart J. Ritchie.
    I had the pleasure of meeting Dr. Thorp in 1981 at UC–Irvine when I was a rookie in the academic market. He treated me–a lowly ABD–with respect and attention.

  8. It would be great if there could be a note with the adds – valid for US citizens only. I’ve checked many of pages, Wealthfront being the last, where the access or purchase is only possible from US. Europe, Australia, Asia and Africa subscribers are in such cases exempt from all the goodies and it’s always a bit depressing when I find this out afterward.