OT: Edward O Thorp

Jeff’s “Boring World” post reminded me of an active thread over on the BRK board that started last week and has gotten really weird. It started off comparing BRK to the S&P and then morphed into a detailed discussion of coin flip probabilities and the odds of winning at roulette . Yeah, you’re bored when you talk about coin flipping for five days. But this actually becomes relevant to investing and might be of interest to some people here.

Someone mentioned Edward O. Thorp who created what is widely believed to be the first wearable computer, and used it with a partner to win at roulette. But prior to that, he is the first known person to create a method for card counting at Blackjack and made quite a bit of money. He viewed it as an academic exercise and wrote a book about it, and so the casinos changed the rules in response.

Later he got interested in investing, started a hedge fund and made a huge bundle of money. Got bored, and moved onto other projects. He was also an early investor in BRK, buying in at $982. Current price is $434,694. A nice 43,000% gain.

He was on the Tim Ferris podcast twice recently and they had some very lucid discussions about investing in general, why long term thinking is important for investors, and how the market can be beaten but why most people won’t.

His investing advice for most people is 90/10 stock/bond index funds. His investing horizon is long, so he’s in 100% stocks. Note: He’s 90 and he is still thinking long term. Also, he’s pretty sharp for 90. You’d think he was much younger.

Worth a listen if you’ve got the time: