Founders: #92 Ed Thorp and Claude Shannon

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What I learned from reading Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone. ---- Claude Shannon was as close to a sure thing as existed [2:53] The beginning of information theory [7:11] Project X [9:09] introduction to Ed Thorpe [15:05] using math and physics to beat Las Vegas [18:03] Ed Thorp and Claude Shannon meet [20:45] testing Thorpe’s Blackjack theory [26:00] The core of John Kelly’s philosophy of risk can be stated without math. It is that even unlikely events must come to pass eventually. Therefore, anyone who accepts small risks of losing everything will lose everything, sooner or later. The ultimate compound return rate is acutely sensitive to fat tails. [28:23] I’d be a bum in the street with a tin cup if the markets were efficient. —Warren Buffett [44:30] how Claude Shannon begins studying the stock market [46:45] Claude Shannon and Henry Singleton [48:16] why and how Ed Thorp started investing in stocks [49:49] Thorp starts a hedge fund and starts working remotely [52:49] Ed Thorp meets Warren Buffett [54:20] An acid test of Princeton/Newport’s market neutrality came in the Black Monday

[00:00:00] Much useful thought and data collection has supported the idea that neither securities markets nor betting systems prevent some venturers from gaining highly satisfactory, way above average results through unusual skill. William Poundstone's book, Fortune's Formula, collects much of the modern evidence on this point in a highly entertaining way. Moreover, the book contains an account of the Lollapalooza investment record of Claude Shannon, pioneer scientist in information theory, that makes Shannon's methods look much like those of Charlie Munger. Okay, so a few weeks ago when I…

Founders: #92 Ed Thorp and Claude Shannon

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