July 2nd, 2012 by
Jack Schwager recently stated in an interview that while a lot of Hedge Fund Managers are considered to be extremely smart, they are not geniuses. The interview was given a few days after Michael Geismar, president of Quantitative Investment Management won over $700k playing Blackjack.
Geismar said he had very little experience playing Blackjack and mostly credited Dr. Edward Thorp’s book – “Bringing Down The House” for his success. Thorp also received a lot of publicity for his book “Beat the Dealer” where he taught people how to bet on Blackjack and beat the Casino’s. The book was responsible for changing the way Casino’s operated as they had to counter the strategies that Thorp outlined in his book.
Speaking of Thorp, Schwager said “He took a game like blackjack, which has a built in negative edge, and figured out mathematically that by varying the bets so you bet more when the odds were in your favor, and less when the odds are against you, you can turn what is a negative edge game into a positive edge. That does have a straight analogy with trading. It means that if you can successfully wager more when you have high confidence trades, assuming that you can judge the better probability trades, you can make money even if on balance, your ideas are net negative.”
Thorp’s books are read by a number of Hedge Fund managers who then go and try their hand at Blackjack and other dealer games. Apart from Geismar, there are no reports yet of Hedge Fund Managers walking away with large fortunes, which shows that they do not necessarily have an upper hand when playing Blackjack.
However, considering what Hedge Fund Managers do for a living and coupled with the knowledge they derive from books written by authors like Thorp, these managers might soon come up with a way to win more often at live dealer games.
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