Book review: “A Man for all Markets” – Edward O. Thorp
“A man for all markets” was a book I was eagerly waiting for. Although not as famous as other financial gurus like George Sorros or Warren Buffett, Ed Thorp in my opinion beats most of them when it comes to actual achievements. Among other things he
- developed the first system to “crack” Black Jack
- developed the first wearable computer in order to get an edge in Roulette
- became the first quant hedge fund after he switched from gambling to investing
- developed and used the option pricing formula years before Black and Scholes published it and latter received the Nobel prize
- met Warren Buffett in the 60ies and later invested into Berkshire at a price below 1000 USD per share (although he complained that he didn’t invest at 50 USD)
- proved for a client that Bernie Madoff was a fraud in the early 90ies, 15 years before the whole thing blew up
- created one of the best hedge fund track records of all times
- gave his “system” to Ken Griffin from Citadel who then created one of the most succesful Hedge Fund firms based on Thorp’s insights
The book starts with some childhood stories which show Ed Thorp as an introverted but clever guy who was most happy tinkering with stuff. He grew up in what we would now call “lower middle class” and had to work hard to get into university. Interestingly, he started studying physics but then switched to math because he could get his phd faster.
I think the really remarkable aspect of Ed Thorp’s career is that he was 100% self tought. He didn’t go to any fancy business school or had some guru to teach him how it is done.
He describes that his way into finance was simply to read a few books during the university summer break including Benjamin Graham and then just applied his mathematical knowledge to the stock market.
One fun fact: I think this is the first time that I read about Warren Buffett’s beach house in California. Ed Thorp had been invited by Buffett at some point in time and describes it as a very nice house in a gated community with a great private beach. So much for humble old Warren only living in his old house in Farnam Street, Omaha, Nebraska.
Another interesting aspect was that he also seems to like “special situation” investing such as undervalued closed end funds, thrift conversions but also situations like 3Com/Palm etc..
Towards the end of the book, Ed Thorp shares his insights on the financial markets and life in general and also recommends index funds to “normal” investors.
As with the whole book, his advice is very down to earth (buy index funds or Berkshire Hathaway…)
I highly recommend this book to anyone interested in investing. Ed Thorp is a great character with so many unlikely achievements. For me the most inspiring aspect of this is that being “self-taught” really seems to be a clear advantage in investing, especially combined with a good grasp of probabilities.