preface
Recommendation
Review

Chapter 01 | Love to Learn - A Poor Childhood, the Great Depression, and War
Chapter 02 | Science is My Playground - Studying Science Through Endless Pranks and Experiments
Chapter 03 | Physics and Mathematics - Choosing a School and Major That Changed My Life Path
Chapter 04 | Las Vegas - Questioning the Claim That You Can't Beat the Casinos
Chapter 05 | Conquering Blackjack - Realizing That Winning Is Possible and Getting Rejected by the Thesis Committee
Chapter 06 | Lambs' Day - Adventures in Nevada, Lambs' Casino Experiment
Chapter 07 | Card Counting for Everyone - How the Wizard of Oz Beat the Casinos
Chapter 08 | Player vs. Casino - "Beat the Dealer" Still Relevant
Chapter 09 | A Computer That Predicts Roulette - Testing the First Matchbox-Sized Wearable Computer
Chapter 10 | Gaining an Edge in Other Gambling Games - A New Take, Opening Your Eyes to Bigger Casinos
Chapter 11 | Wall Street, the World's Biggest Casino - Self-Education on Economics, Finance, and Markets
Chapter 12 | Playing Bridge with Buffett - Meeting Warren, a Man Who Influenced My Life
Chapter 13 | Starting an Investment Partnership - Becoming the First Quantitative Analyst on Wall Street
Chapter 14 | Leading the Quant Revolution - Thorp's Formula, a Core Strategy for Countless Hedge Funds
Chapter 15 | Emergency... The Successful Operation of the PNP
Chapter 16 | ...and the Fall - The Dissolution of the Investment Association
Chapter 17 | A Time for Adjustment - The Ambivalent Feelings of Enjoying Life and the World of Investing
Chapter 18 | Fraud and Harm - High Stakes and Bold Thieves
Chapter 19 | Buy Low, Sell High - Statistical Arbitrage and the Founding of Ridgeline Partners
Chapter 20 | Moving Back to the Bank - Open a Savings and Loan Association Account and Earn Profits
Chapter 21 | One Last Cigar - Attending Berkshire Hathaway's Annual Shareholder Meeting
Chapter 22 | Hedging Your Bet - What You Need to Know When Investing
Chapter 23 | How Much Does It Take to Be Rich? - The Key to Achieving Massive Wealth
Chapter 24 | Cumulative Growth: The Eighth Wonder of the World - Enjoy More Marshmallows Later
Chapter 25 | Index Tracking Beats Most Investors - How to Invest in Index Tracking
Chapter 26 | Can You Beat the Market? Should You Try? - Knowing the Market's Nature Means Knowing How to Beat It
Chapter 27 | Asset Allocation and Wealth Management - How to Manage Your Assets
Chapter 28 | Giving Back - Thank You to UC Irvine
Chapter 29 | The Financial Crisis: Lessons We Didn't Learn - Few Safeguards Can Prevent Another Crisis
Chapter 30 | Questions to Consider - What I Learned from Science, Math, Gambling, Hedge Funds, Finance, and Investing

Conclusion
Appendix A | The Impact of Inflation on the Dollar
Appendix B | Return Statistics
Appendix C | Rule 72 and Additional Rules
Appendix D | PNP LP Investment Returns
Appendix E | PNP's Statistical Arbitrage Performance on the Fortune 100
About the Author
Acknowledgements
annotation
References

He was arguably the first modern mathematician to successfully apply quantitative analysis to risk-taking, and the first to apply that analysis to financial success.

-Nassim Nicholas Taleb, author of The Black Swan

Edward Thorp, the mathematician who conquered Wall Street and the father of quantitative investing
Working as a hedge fund manager for approximately 30 years, he achieved an unprecedented average annual return of 20%, a 'sure' return.

This book is written by Edward O. Thorp, a genius mathematician who served as a mathematics professor at MIT and the father of quantitative investment.
[A man for all market; From Las Vegas to Wall Street, How I Beat the Dealer and the Market 2018.
4] This is a translated version of the first edition.
Soph is the living father and legend of quantitative investing.
Thorpe's life is the history of quants and Wall Street.
He became the first person in human history to win a casino game that even mathematicians had argued was theoretically impossible, and he went on to Wall Street and achieved a record of never losing a bet on the stock market for 30 years.
He invented a wearable computer that predicted the position of a roulette wheel, and on Wall Street, he founded a hedge fund called Princeton Newport Partners (PNP) in 1969, which operated funds using mathematical formulas, economic models, and computers.
This was the first and only quant fund to rely solely on quantitative techniques, and it marked the beginning of a new type of investor in the global financial markets, later called the quantitative analyst.
He first devised the Black-Scholes equation, which won him the Nobel Prize in Economics in 1997, and he used this formula to manage PNP, increasing profits by 409% over the 10 years since establishing the hedge fund.
The initial investment of $1.4 million grew to $28.6 million, generating an average annual return of 17.7%.
From 1979 to 1988, the investment positions held totaled $1 billion, and the average annual return on capital was 22.8%.
This was a huge excess return compared to the S&P 500 index, which rose by an average of 11.5% per year during this period.
One of the more remarkable facts is that he has never recorded a loss for a single quarter or year, which is why he is called the most "sure" investor in history.
The average annual return over the past 30 years of investment life is approximately 20%, and as of 2012, his personal assets were reported to be over 900 billion won.
Since the beginning of human trading, Thorpe was the first person to use quants to clearly beat the market.
The books he published include “Beat the Dealer”, which became the subject of the movie [21], “Beat the Market”, which introduced warrant investment techniques and opened the door to many hedge fund markets, “Beginner’s Probability”, “The Mathematics of Gambling”, and this book “How I Beat the Market”, which may be his last book.


Investing in Berkshire Hathaway while playing bridge with Warren Buffett

Edward Thorp is known as the 'founder of quantitative investing' or the 'founder of hedge funds.'
So, when we examine the investment methods of Benjamin Graham, famous for his value investing, and his greatest disciple, Warren Buffett, what overlaps are there between quantitative and value investing?
Of course, there are many differences in specific investment methodologies, but there are very commonalities.
Neither investment method supports the efficient market hypothesis, which states that it is impossible to achieve excess returns over the market, no matter what investment information is available.
Value investing shares the idea that excess returns can be achieved by purchasing quality companies at undervalued prices, while quantitative investing shares the idea that excess returns can also be achieved by combining quantitative indicators effectively.
It is noteworthy that quantitative investors have recently adopted and utilized value indicators that value investors value as quantitative indicators for investment, thereby establishing strategic alliances between the two camps.
It is well known that Buffett also applies the Kelly formula to his investments and utilizes portfolio and rebalancing based on it.


Edward Thorpe has a close relationship with Warren Buffett.
As Thorpe's reputation grew for making a fortune using the warrant investing technique introduced in "Beat the Market," a relative of Benjamin Graham, author of "Security Analysis," entrusted him with his investments.
This connection led to the first meeting between Thorpe and Buffett, and gave rise to the famous story of the bridge game between Thorpe and Buffett.
Soph considered the game of bridge to be a game of imperfect information, and he also considered the stock market to be a game of imperfect information.
Like Bridge, if you can get more information from the stock market faster and use it well, you can achieve good results.
In this respect, it is said that this gives us an idea of ​​why Buffett, who is called the greatest investor in history, is a bridge game fanatic.
As Thorpe developed a close relationship with Buffett, he not only benefited from his personal relationship but also from the high success rate of Buffett's value investing method, and invested a significant amount of money in Berkshire Hathaway, reaping enormous profits.
Thorpe actively encouraged those around him to invest in Berkshire and maintained a steady relationship by attending shareholder meetings.
In Soph's case, in addition to quantitative investment using value investing indicators, he has made investments that have never failed, utilizing spread trading, arbitrage trading, and various indicators that influence prices.
There are many books about Edward Thorpe, but none resonate quite like Thorpe's own book, How I Beat the Market.
Readers will slowly follow in Soph's footsteps, learning how to invest, and gaining insight into investment through his experiences, the countless stories he tells about his interactions with the people featured in the book, and his statements about his intense efforts and enlightenment.


Edward Thorpe's "How to Beat the Market"

Nassim Nicholas Taleb, author of The Black Swan and the book's foreword, is considered one of the greatest modern thinkers.
Although he is known for his sharp criticism and remarks, as he is called 'the arrogant villain', he was also a quant and worked as a capable trader.
He praised Soph as a person with strong self-control and self-awareness, and praised him as the first quant.
Professor Moon Byeong-ro, the godfather of quants in Korea and CEO of Optus Asset Management and professor of computer science at Seoul National University, wrote a heartfelt letter of recommendation, expressing his academic and personal respect for him.
Shin Jin-oh, the chairman of Value Leaders and the editor of this book, expressed his respect and gratitude for Soph in his afterword, saying that today's existence is possible thanks to his fierce efforts.
And that's not all.
The author of "Start Stock Investment with ETFs," systrader79, who is famous both online and offline for introducing quantitative techniques to the public, and Hong Yong-chan, who developed and operates a lab product using his own quant design and wrote "Practical Quant Investment," strongly recommend reading the books of the great quant Edward Thorp.
Kang Hwan-guk, author of "You Can Do It! Quant Investment," who has recently been actively communicating with the public through YouTube, and Kwon Yong-jin, author of "AI Investment: Quant," who worked as a quant trader in New York, say this book is more valuable than any other investment book.
For those readers who are curious about what they can get from this book, here's a brief overview of his strategy:
His investment method, simple and even plain, can be summarized as follows: "To beat the market, you must focus on investment opportunities within your knowledge and evaluation skills—that is, within your capabilities."


1.
Get good information early
-Some information is only immediately available to some people who have access to it.
A lot of information is made known to a limited number of people and then spread to a larger group.
The first person to use this information benefits, while others gain nothing or suffer losses.
So you need to get good information early, and you need to be confident in yourself to judge it, and if you're not confident, it's likely not good information.

2.
Be a disciplined investor
While some people are completely irrational when it comes to financial matters, others struggle to be rational in almost every action.
So the rationality of actual market participants is limited.
Therefore, logic and analysis should be followed rather than propaganda, whims, and emotions.
Consider yourself superior when you can demonstrate a reasonable and convincing justification beyond any doubt.
Never gamble unless you are absolutely certain you have the upper hand.


3.
Find a good analysis method
-Market participants usually have only some of the information necessary to determine the fair price of a stock.
We need to find analytical methods such as undervaluation and overvaluation, statistical arbitrage, convertible hedges, the Black-Scholes model, and card counting in blackjack.
Another winning strategy is to leverage the analysis of a small number of talented individuals and the techniques of excellent hedge funds.


4.
If you see an opportunity, invest before others do.
-Buy and sell orders in response to specific information can flood in within seconds, creating or widening price gaps.
However, research shows that reactions to news often unfold over minutes, hours, days, or months.
Therefore, it is important to invest before the public does, before it becomes known that the stock is not trading at its fair price and the discrepancy is resolved.