How the money is made.
Angle: The math professor who beat the casino then the market – and the two tools (Kelly sizing, probability thinking) ordinary traders can actually use.
Math professor Ed Thorp proved blackjack could be beaten by card counting and published Beat the Dealer in 1962, then applied the same math to markets.
With a partner he founded Princeton Newport Partners in 1969, widely called the first market-neutral hedge fund, returning about 20% a year after fees for over two decades with no losing quarter until its liquidation in the late 1980s.
He pioneered the Kelly criterion for position sizing and worked out option pricing independently, years before Black-Scholes.
He detected the Madoff fraud early and is regarded as a father of quantitative investing.
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