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From Blackjack to the Market, He Mainly Loves the Challenge

March 11, 1988|JOSEPH N. BELL

Let's say you are looking for a good, solid place to invest your money. Low risk. Sizable return. Say 20% a year.

No problem. Just see Edward O. Thorp, former UC Irvine mathematics professor, Las Vegas bank-breaker, and now one of the owners of an investment firm called Princeton/Newport Partners. In 219 months of operation, Thorp's firm has had only four losing months and has averaged just under a 20% gain annually. You can find him in Newport Center, in close proximity to a bank of computers that makes HAL of "2001" look antediluvian.

There are, however, a couple of hitches. Thorp opens his fund only once a year. Next opening will be in January, 1989. Secondly, he requires a minimum investment of $2 million, which obviously keeps out the paperhangers. ("To invest $2 million," he said, "requires a net worth of $10 million, which means about 4,000 people in this country.") Finally, even the $2 million isn't guaranteed to get you in the club. "If you bang on the door with that money next January," said Thorp matter-of-factly, "I'll be happy to wait-list you." Thorp comes across precisely the same whether he is talking about playing blackjack, running a marathon, investing multimillions in the stock market or winning a Tangletowns contest. Not just sincere, which would do him a disservice, but distressingly, dispassionately rational. Thorp's rather ordinary appearance--wiry, modest stature, offhand mien--makes the quicksilver elasticity of his mind even more startling, and, in an odd sort of way, warming.

He has always been more concerned with challenge than the money. When a friend showed him an article in the Journal of the American Statistical Assn. on a system to beat blackjack, Thorp was curious to see if it would work. It did, but not well enough for Thorp, who devised a much better system. When that bored him, he turned to the biggest game of them all: the stock market, which he calls "far more interesting than any other forms of gambling because of the enormous number of variables and imponderables involved." In between, he took on contests just for the sport of it. All this has made him rich but not jaded.

There were plenty of signs of destiny in his early years. A precocious kid born in Chicago and raised in Los Angeles, he breezed through school and spent much of his childhood in a home laboratory where he conducted experiments that made his neighbors decidedly uneasy. He got a BA in physics and a Ph.D. in mathematics at UCLA, marrying an English major named Vivian Sinetar along the way.

His fascination with blackjack--which his associates had figured out was the commercial gambling game in which the house held the smallest edge over the player--started when he was a graduate student. He found that by using the system described in the statistical journal he could play all day on just a few dollars. That wasn't good enough, so when Thorp began teaching at Massachusetts Institute of Technology, he taught himself to program a computer and poured into it several years of research relating to blackjack possibilities and probabilities. From that came a system that Thorp was convinced couldn't lose.

But since he had no money to stake himself, he explained the system in a National Academy of Science Journal article that unexpectedly brought him some angels willing to back him in Las Vegas. He won consistently, proving his system and satisfying his curiosity. But temptation lingered, and while he changed his base of operations first to New Mexico State University, then to UC Irvine, he continued to win to the extent that he said he was finally barred from the casinos in Las Vegas, an action he viewed as a challenge.

Thorp took to playing in various disguises, and bringing along team members "so I'd have a witness to whatever happened." He is convinced that he was drugged one night at a baccarat table. "I'd been winning steadily, and they had been pretty hostile to me. Then all of a sudden they got friendly and asked me if I wanted some coffee. Within 15 minutes, I couldn't think any more, couldn't count and finally couldn't walk straight. It took six hours for the effects to wear off. The next night, I went back and won again, and they brought me a glass of water. I just touched it to my lips, but that much was enough to do me in. I quit playing after that."

If he was effectively disguised, how could the pit bosses recognize him?

"By the way I played," he explained. "There's a lot of intensive peering at the cards, and I vary the size of my bets considerably. I also tend to make a lot of unusual plays, like standing on 16 if the deck is full of high cards. So it becomes clear to anyone watching--and every table is watched from overhead--that I'm either a very good or a very bad player. It doesn't take long for them to figure out which."

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