Information theory goes to Hollywood.

My colleague Aiden Bruen sent me an e-mail comment on a recent news article (“Burning down the house” Globe and Mail, March 8, 08) concerning the newly released movie 21.
He says:

[the article] is somewhat misleading, as is the plot of the movie.
Counting cards in blackjack goes way back to a paper entitled “Fortune’s Formula: a winning strategy for blackjack” presented by mathematician Ed Thorp in January 1961. The paper explained how card-counting improves the odds and how much should be bet. Many backers offered to finance Thorp who went to Reno to try out the system during Spring Break at MIT in 1961. The system worked perfectly. Eventually however, Thorp and his associates would be asked to leave. Most casinos then also adopted the “professor stopper” which allowed dealers to shuffle multiple decks together, thereby sharply reducing the edge afforded by “card counting”. Details are nicely described in the book by W. Poundstone.
The mathematics is based on the work of the great Claude Shannon on information theory [see our book]. The ideas, fundamental in communications, are still used prominently in finance and gambling using the so-called Kelly formula.

A quick search on the internet turn out this other article (“Getting a hand”) and many references to the Four Horseman who were pioneers in devising an optimal strategy for beating Blackjack. Their insights were later formalized and corrected by Edward Thorp in his book “Beat the Dealer”. John Kelly made an important contribution to the information theoretical aspects of the optimal betting strategy problem.

One Response to Information theory goes to Hollywood.

  1. Nice writing style. I will come back to read more posts from you.

    Susan Kishner

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