Business Tricks We've Learned From Gamblers, Pickup Artists, & Feynman
28 Jun 2024 (3 months ago)
Ed Thorp and the mathematics of gambling
- Ed Thorp, a math prodigy from a poor background, earned a Ph.D. in mathematics from Berkeley and UCLA and developed a card-counting strategy that gave him a higher chance of winning at Blackjack.
- After testing his strategy at home and proving its effectiveness, Thorp received funding from mobster Manny to test it in Las Vegas, where he made a $1,000 profit.
- Thorp's book about his Blackjack strategy became a massive hit, marking one of the first instances of academic research being successfully applied in real life.
- Thorp also developed a wearable computer to predict where the ball would land in roulette and later made a profit by studying options and stock prices in options trading, treating the stock market as a math game.
World's first hedge fund
- Ed Thorp, a professor, learned about investing from a colleague and invested in a small fund run by Warren Buffett.
- After Buffett closed his fund, Thorp and the professor became friends, and Thorp eventually started managing money for the professor and others, creating one of the first hedge funds.
- Thorp used quantitative analysis to make investment decisions and achieved significant returns over 30 years.
- Thorp also developed card counting techniques for blackjack, invented a roulette game, and created the world's first wearable computer, all of which eventually became restricted or banned in casinos.
- Thorp retired from investing in 2005 after accumulating substantial wealth and is known for his fitness and healthy lifestyle at the age of 92.
Sam and Shaan revisit “The Game”
- "The Game" by Neil Strauss introduces techniques like the "cube test" and "cat string theory" to attract women.
- Pursuing hobbies and being passionate about them, like Ed Thorp's study of roulette, makes one more interesting and attractive.
- Distractions like social media and high expectations hinder personal growth and reduce one's appeal.
- Valuable business tricks can be learned from diverse sources, including gamblers, pickup artists, and physicist Richard Feynman.
- Starting with basic knowledge and gradually building upon it is essential for personal development.
The Feynman technique for learning
- Richard Feynman's problem-solving approach involves starting with basic principles and testing theories through simple experiments.
- Jack Smith, founder of Vungle, challenged industry norms by introducing CPA (cost per action) instead of CPM (cost per mille) in mobile gaming advertising.
- Smith's success came from thinking from first principles and creating an ad unit that allowed users to try a mini version of the game, proving more effective than traditional video ads.
- After selling Vungle, Smith pursued personal interests, researching and applying scientific findings to his daily life, particularly focusing on finding the best way to sit.
- YouTuber Jack exemplifies the importance of pursuing personal interests without societal expectations, testing and experimenting with various products to find the best solutions for his needs.
- Jack's dedication led him to build a custom ergonomic chair and dedicate a room to testing products he ordered online.
- Jack's story highlights the value of curiosity-driven exploration and experimentation, without the need for a specific outcome or societal validation.
Shaan's one criteria for action
- The speaker emphasizes the importance of engaging in intrinsically rewarding activities rather than solely focusing on future rewards.
- Retirement should be viewed as an opportunity to pursue enjoyable and fulfilling activities, rather than a time of complete inactivity.
- Individuals should prioritize activities that bring immediate satisfaction and enjoyment, rather than relying solely on potential future benefits.
- The speaker encourages adopting an approach of filtering activities based on whether the act of doing them is enjoyable and rewarding, rather than solely focusing on long-term payoffs.
- The speaker provides examples of how they applied this approach to various aspects of their life, such as workouts, hobbies, and reading, prioritizing activities that they genuinely enjoyed rather than those done solely for future benefits.
- This shift in approach has resulted in increased focus and productivity for the speaker.
Why you don't need privilege to start
- The speaker views living a privileged life as a compliment and a goal, not something to be ashamed of.
- The speaker's most successful project is this podcast, which they started without expectations of financial gain or a large audience, but found enjoyment in the process.
- The speaker believes that pursuing personally interesting and enjoyable projects, rather than enduring unpleasant work for future rewards, leads to more rewarding outcomes and greater success.
- While this approach may be more challenging for individuals with responsibilities and time constraints, the speaker emphasizes its ultimate value.
- College students should embrace their current freedom and take advantage of it, as society often suppresses this mindset and encourages conformity as people age.
Playing "the game" of business
- Successful individuals achieve success by pursuing their own interests and curiosity, rather than following conventional paths.
- Many wealthy individuals endure a difficult journey to achieve financial success, but only a few later pursue their true interests.
- The "playing startup" mentality, where entrepreneurs manufacture ideas that might work, is discouraged.
- The most successful startups originate from solving personal problems or addressing unique pain points.
- Successful people in business share traits with gamblers, pickup artists, and Richard Feynman.
- They are interested in the game itself, rather than the industry they are in.
- They are willing to take risks, try new things, and are not afraid to fail.
- They are always learning and growing.
Switching to better games
- OpenAI drama and speculation about AGI breakthrough.
- Leak of information about "qar" technique.
- Recent research papers show amazing performance using the "qar" technique.
- Claude Shannon's brother gave him a hint to solve a jigsaw puzzle.
- The hint increased Shannon's probability of success.
- Shannon was involved in the Thorp Shannon principal, which is related to roulette.
How the Roger Bannister Effect crushes limiting beliefs
- The Roger Bannister Effect states that when someone achieves a breakthrough, it inspires others to achieve similar breakthroughs.
- Just knowing that someone else has found a solution increases the probability of finding a solution yourself.
- Hearing about other people's success can motivate you to achieve your own goals.
- Kaggle is an online competitive platform for solving problems.
- When the leaderboard in a Kaggle competition becomes stagnant, a sudden jump by one team often leads to multiple independent teams quickly reproducing the same breakthrough.
- This phenomenon is similar to the Roger Bannister Effect, where Roger Bannister's breaking of the four-minute mile inspired several other runners to achieve the same feat within a short period.
- In business, hearing that someone else is succeeding in a particular marketing channel can motivate you to find a breakthrough and achieve success in that channel.
- Just the knowledge that a solution exists, even without knowing the details, can increase your chances of finding your own solution.
- This principle can be applied to personal development and goal achievement by learning from the successes of others.
Step 0: Believe it can be done
- Believing in the possibility of success is crucial for achieving it.
- Creating a new category in business can lead to leadership and a unique selling proposition, as demonstrated by companies like Hot Ones and Wander.
- A virtuous cycle of high conviction, increased action, and bigger results reinforces belief and drives further action.
- Raising one's level of belief in a desired goal can help break through plateaus and achieve it.
- The author and his friends learned card counting and signaling techniques from gamblers to win at blackjack but lost their money due to a misunderstanding in their signals.
- Real-world conditions can differ from controlled environments, and unexpected factors can affect outcomes.
- Leverage can be more important than an edge in certain situations, as the author learned from their failed attempt to create an underground Blackjack club at school.
- Casinos now use six decks and auto shufflers, making it harder to gain an edge through card counting.