The Man Who Robbed Las Vegas.... Legally

From the time Edward Thorp was three, his parents knew they had a special child. He didn't speak until his third year and his alarmed parents took him to a doctor to find out what was wrong. The physician examined him by asking him to point to a ball on his desk. He did so. The doctor told him to pick up his pencil and Thorp complied.

After a few more questions, the doctor smiled.

"Don't worry. He's normal. He'll talk when he's ready," the physician said.

He began talking in complete sentences a short time later and his father introduced him to numbers. Young Edward starting counting and set a goal of counting to one million. He got to 32,000 before he finally quit.

He also had to experience everything before he believed it. When his mother warned him not to touch the stove because it would burn him, he touched it -- only once. She also warned him not to squeeze eggs because they would crack with pressure. He squeezed them, cracked a couple, and learned just how much pressure to use before an egg would crack.

He began reading and learned to read and comprehend books that were far beyond his age. Life was an exciting challenge for Thorp who would gain a PhD in math and who would come up with a formula for winning at blackjack and roulette.

He would turn his knowledge into a best selling book, "Beat The Dealer," and would create a system for making money on Wall Street that would turn him into a multi-millionaire. That would turn into another book, "A Man For All Markets,' that would stay on the New York Times bestseller list for a long time.

Thorp grew up in Chicago. His father was a low-paid security guard who shared his son's quest for knowledge. He fell in love with books and read 'Gulliver's Travels,' 'Treasure Island' and other books that challenged his imagination.

Early in life, he developed an uncanny ability to retain information, especially numbers. All he had to do was glance at a column of numbers and he could quickly add them up, astounding adults with his ability.

In school, he became so bored with his classes that his teachers moved him ahead a couple of grades. Because he was the smallest kid in his class, he befriended the biggest one similar to the plot in 'My Bodyguard' and the kid became his protector.

Thorp began a lifelong love affair with the public library and learned to make gunpowder and nitroglycerine from everyday products he could buy at a supermarket or drug store. He was the neighborhood kid responsible for mysterious blasts that shattered concrete or sent contrails into the sky.

He even tried to build a plane big enough to carry him, using war surplus weather balloons that were powered by natural gas. Using his acquired knowledge of numbers, he calculated how much he weighed and the capabilities of the gas to lift him into the sky. That experiment failed but at least he tried.

The Thorp family moved to Southern California where he made friends of mathematicians and university professors who liked his inquiring mind. In his late teens, he became interested in gambling, especially blackjack and roulette, and wondered if the games could be beaten.

Thorp read all the books and research papers he could find on the subject. People told him Las Vegas was invincible -- that there was no way anyone could overcome the odds. He didn't believe them. The more he read, the more he was convinced they were wrong.

When he was a senior in high school, his parents divorced. Thorp hated it but he learned to live with their decision.

He began taking exams to see if he could win a college scholarship and his efforts paid off. He scored so high in a national physics exam that he won a scholarship at the University of California at Berkeley, thrilling himself and his teachers.

He met his future wife at the university. Vivian Sinetar was slim, blond and attractive. She was also intelligent, majoring in English literature. They got to know one another and over a period of time fell in love. Vivian was Jewish, Thorp wasn't, and despite her parents' initial rejection of him they finally accepted Thorp as their future son in law.

Thorp and his wife began vacationing in Las Vegas. He had developed a card counting system to overcome the odds in blackjack and was thrilled to discover the system worked. He wrote an academic paper on his findings and a newspaper reporter wrote an article about him that was picked up by the wire services.

Almost overnight Thorp became a celebrity as the man who thinks he can beat Las Vegas.

Casino owners scoffed at him. Several even offered to provide him with free cab service so he could test his system. Instead, Thorp was contacted by two millionaires who were big-time gamblers. They were fascinated by his theories and offered to finance a trip to Nevada to test his system. They said they would put up $100,000 and Thorp accepted their offer.

Vivian warned her husband to be careful. She loved his enthusiasm and believed in him, but she said he was dealing with gamblers and casino owners who could cheat him and even use violence if he was successful. Thorp told her he understood that but he said he believed he could overcome the odds.

He met his financial backers, whom he initially referred to as Mr. X and Mr. Y. They were Emmanuel 'Manny' Kimmel, a wealthy business owner from Maplewood, N.J., and Eddie Hand, who lived in upstate New York. The three of them flew to Reno, NV., left their suitcases at a hotel and headed for Harold's Club owned by Pappy and Harold Smith Jr.

Thorp was nervous and wanted to play conservatively to test his system. His backers were convinced it would work and wanted to plunge. It took all his powers of persuasion to convince them he was right and they let Thorp be the boss.

The power of Thorp's system was in aces, fives and 10s. The more aces and 10s in the deck, Thorp discovered through his intense computer research, the better the odds were for the player to win. This was also true when there were fewer fives remaining in the deck since the dealer had to hit any hand with a total of 16 or under.

They played and they won, more than doubling the $10,000 they had started out with.

The casino owners, including the Smiths, reacted to their winning strategy by ordering their dealers to shuffle up after just a couple of hands instead of dealing with the end of the deck. When that failed to stop Thorp from winning -- and it took time -- they switched from single deck blackjack to using a shoe containing anywhere from six to eight decks.

After his book 'Beat The Dealer' was published, Thorp ran into problems with casino owners. Some banned him and Thorp said he even had drinks 'spiked' to affect his judgment. Once he claimed his car was tampered with in an effort to cause him to have an accident.

Thorp had proven his point. He made fewer trips to gambling casinos and turned his interest to the stock market where he developed a trading system that made him wealthy by using asset allocation and wealth management.

He had heard the same claims about Wall Street that he had heard about casinos, that the average investor could not win. Thorp set about to prove they were wrong and succeeded.

He advocates teaching simple probability and statistics in kindergarten through grade 12 and says analyzing games of chance like coin matching, dice and roulette will help young people think.

"Understanding why casinos usually win might help us avoid gambling and teach us to limit our losses to their entertainment value," he adds. "Gambling now is largely a socially corrosive tax on ignorance, draining money from those who cannot afford the losses.

"Most of what I have learned from gambling is also true for investing. People mostly don't understand risk, reward and uncertainty. Their investment results could be much better if they did."