#604: Master Investor Ed Thorp on How to Think for Yourself, Mental Models for the Second Half of Life, How to Be Inner-Directed, How Basic Numeracy Is a Superpower, and The Dangers of Investing Fads
Brought to you by Wealthfront automated investing, Vuori comfortable and durable performance apparel, and Eight Sleep’s Pod Pro Cover sleeping solution for dynamic cooling and heating. Edward O. Thorp (@edwardothorp) is the author of the bestseller Beat the Dealer, which transformed the game of blackjack. His subsequent book, Beat the Market, coauthored with Sheen T. Kassouf, influenced securities markets around the globe. He is also the author of A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market. Edward was one of the world’s best blackjack players and investors, and his hedge funds were profitable every year for 29 years. He lives in Newport Beach, California. You can find our first conversation here. Please enjoy! This episode is brought to you by Wealthfront! Wealthfront pioneered the automated investing movement, sometimes referred to as ‘robo-advising,’ and they currently oversee $28 billion of assets for their clients. It takes about three minutes to sign up, and then Wealthfront will build you a globally diversified portfolio of ETFs based on your risk appetite and manage it for you at an incredibly low cost. Smart investing should not feel like a rollercoaster ride. Let the professionals do the work for you. Go to Wealthfront.com/Tim and open a Wealthfront account today, and you’ll get your first $5,000 managed for free, for life. Wealthfront will automate your investments for the long term. Get started today at Wealthfront.com/Tim. * This episode is also brought to you by Eight Sleep! Eight Sleep’s Pod Pro Cover is the easiest and fastest way to sleep at the perfect temperature. It pairs dynamic cooling and heating with biometric tracking to offer the most advanced (and user-friendly) solution on the market. Simply add the Pod Pro Cover to your current mattress and start sleeping as cool as 55°F or as hot as 110°F. It also splits your bed in half, so your partner can choose a totally different temperature. And now, my dear listeners—that’s you—can get $250 off the Pod Pro Cover. Simply go to EightSleep.com/Tim or use code TIM at checkout. * This episode is also brought to you by Vuori clothing! Vuori is a new and fresh perspective on performance apparel, perfect if you are sick and tired of traditional, old workout gear. Everything is designed for maximum comfort and versatility so that you look and feel as good in everyday life as you do working out. Get yourself some of the most comfortable and versatile clothing on the planet at VuoriClothing.com/Tim. Not only will you receive 20% off your first purchase, but you’ll also enjoy free shipping on any US orders over $75 and free returns. * [06:39] The value of long-term thinking and the price of short-term thinking [07:57] What is a common stock warrant? [09:52] Why are people generally poor at taking longer term (or alternative) perspectives? [11:08] Conversing about numeracy and common misunderstandings [15:00] How to become more numeracy literate [20:18] It’s Raining Man [22:31] The Rule of 72 [26:14] Making the best financial decisions with unknown variables [35:57] How to have fun learning about probability and statistics [37:47] How to get an edge in hedge fund investing (with book recommendations) [46:23] Ed’s methods for losing (or maintaining) weight and looking 60 in spite of being almost 90 years old [53:38] Favorite beer [55:03] Music as stress reduction [56:02] Avoiding unnecessary risks [1:04:12] The age-guessing experiment [1:06:17] Other-directed vs. inner-directed and takeaways from The Lonely Crowd by David Riesman [1:14:35] How an 89-year-old maintains hair growth [1:17:20] Using scrap time [1:19:45] A big change in Ed’s later life that increased its quality [1:22:16] New reflections, future hopes, and parting thoughts * For show notes and past guests on The Tim Ferriss Show, please visit tim.blog/podcast. 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