Former faculty member gives UCI $1 million

Marisa O’Neil

A former faculty member who wrote the book about beating the house at

blackjack has made a $1-million donation to the math department --

one designed to grow to become the largest research grant in the

nation.

Newport Coast resident Edward O. Thorp, a former mathematics and

finance professor, has used his math skills to devise ways to win at

blackjack and roulette and in the stock market. Thorp also came up

with a unique structure for the donation to UC Irvine’s math

department that will use some money to attract a renowned

mathematician and reinvest the rest.

“His strategy is that in 100 years, this will be the wealthiest

chair in the country,” said Ronald Stern, dean of the School of

Physical Sciences. “That’s his way of garnering some immortality.

It’s a very forward-looking gift.”

Thorp and his wife, Vivian, have created the Edward and Vivian

Thorp Endowment with an initial gift of a little more than $1 million

-- the largest in the department’s history. Each year, a portion will

be used to support a research grant for the new faculty member.

“Ed is a brilliant person who came up with an elegant and simple

strategy to handle the chair,” Stern said.

Most research endowments come from the federal government, Stern

said, and are restricted in their focus -- something that will not be

the case for Thorp’s donation. Having such a large amount of money

associated with the faculty position has already attracted interest

from people at elite universities who would normally pass over UCI as

an option.

If the country’s economic future follows the same as its past,

Thorp said, according to his formula, the donation could total $32

million in 90 years. In 180 years, it could be worth $1 billion.

“Some might say it seems fanciful,” Thorp said. “But Benjamin

Franklin had an idea like this. The power of compound interest is

very great over the passage of time.”

Thorp cited two donations by Franklin in 1790 for 1,000 pounds

each for the cities of Boston and Philadelphia. Over the course of

200 years, they had grown to $2 million and $4.5 million, Thorp said.

A founding faculty member for UCI, Thorp has also worked as a

mathematician at MIT and UCLA. In 1958, while on vacation in Las

Vegas, he played a game of blackjack and hatched the idea of counting

cards. In 1962, he published the book “Beat the Dealer: A Winning

Strategy for the Game of Twenty-One.”

He later created a wearable, concealable computer that calculated

the position and velocity of a roulette ball to figure out where it

would land. Eventually, the Nevada state legislature banned such

devices in casinos, but counting cards remains an effective method,

he said.

“[Casinos] made a lot of money on people who try to do these

things and don’t do them very well,” Thorp said. “But they also lost

a lot of money on people who do these things well.”

Later, he applied his mathematical formulas to the stock market

and co-wrote “Beat the Market: A Scientific Stock Market System” with

UCI professor emeritus Sheen Kassouf. Thorp went on to run one of the

most successful hedge funds in the country and retired from UCI in

1982 to pursue the stock market full time.

Over the past 38 years, he has averaged annual gains of 15% to 20%

with no down years.

* MARISA O’NEIL covers education and may be reached at (949)

574-4268 or by e-mail at [email protected].