Las Vegas is a city built by losers. The lottery is a tax for people who are bad at math. Gambling is a sure way of getting nothing for something.

Luckily for me, I never understood the attraction of gambling. But I did understand one thing: no one is a “genius” at anything.

Earl Woods handed Tiger a golf club when he was only 3 years old. Contrary to the narrative at the time, Tiger had been a seasoned veteran by the time he won his first Masters.

Magnus Carlsen, now 35, was a chess grandmaster by the time he was 13. He studied school subjects for 3 or 4 hours a day… and then spent the rest of his time on chess!

Wolfgang Amadeus Mozart was a child prodigy. By the time he was 5, he was already a good keyboard and violin player and had begun composing and performing for European royalty.

The point is that you have to do something for a long time to be excellent at it. It’s so rare to be naturally a master at anything that it’s not worth mentioning.

Chess is just a board game. Golf isn’t really a sport in my book. And I’ve never had a penchant for music. So I never decided to spend the time required to learn these things.

But the stock market? Now that’s something worth learning about.

Sports gambling? Playing slot machines? Betting on predictions over which you have zero control?

Stupid. Plain stupid. Not only do you lose time, but eventually, you lose your shirt.

Don’t take my word for it. Today, I’ll tell you about a man who literally Beat The Dealer, and then walked into a much bigger casino… one where you have a chance of winning big.

The House Always Wins.

America has a new national pastime.

It's handing $150 billion a year to FanDuel and DraftKings and pretending that's different from feeding quarters into a slot machine while wearing a Jaguars jersey.

In 2024, Americans legally wagered nearly $150 billion on sports. The sportsbooks kept $13.7 billion of it — a 24% jump from the prior year. That's a wealth transfer dressed up in parlay odds and stadium sponsorships. And it's growing at a double-digit annual rate, projected to reach nearly $24 billion in operator revenue by 2029. As always, the House is doing just fine.

But here's what nobody putting $50 on a four-team parlay wants to think about: the smartest gambler who ever lived looked at the casino business, figured out how to beat it, and then walked away… because he found something better.

The Man Who Beat the Dealer — and Then Quit

Edward O. Thorp is the most consequential gambler you've probably never heard of. A mathematics professor by training, Thorp cracked the code of blackjack in the early 1960s, developed the first scientifically proven card counting system, and turned $10,000 in seed money into $21,000 in a single weekend in Reno and Las Vegas.

He was so good that casinos changed the rules of the game specifically to stop him. They shuffled decks more frequently, banned him from tables, and — if you believe his account in A Man for All Markets — may have tried to have him killed. That's how you know you've found a real edge.

He also wore the world's first wearable computer, built with MIT's Claude Shannon, to beat roulette. Just to round out the resume.

And then, with a genuine, mathematically unassailable gambling system in hand, Thorp looked at the casino business and said, “You know what, there's a much bigger casino.”

He turned to Wall Street.

His hedge fund, Princeton/Newport Partners, ran from 1969 to 1989 — 20 years of profitability, with essentially no down years. His personal investments averaged a 20% annualized return over two decades.

The man who actually invented card counting decided that the stock market was the better bet. He called Wall Street "the biggest casino in the world" — but he meant it as a compliment. Unlike Vegas, the market has a long-run positive drift. Equities compound. Blackjack winnings do not.

The lesson Thorp drew wasn't that gambling was fun. It was that gambling was a solvable problem — and once he solved it, the rewards on offer simply weren't worth the effort compared to what the capital markets could produce over time. As he put it, "gambling is investing simplified." The difference is that in investing, the house doesn't always win, but if you stay long enough, you will.

Back to Your Parlay

Meanwhile, in 2024, 35% of all sports wagers were parlays — combination bets whose expected value is genuinely terrible, engineered specifically to feel exciting while quietly annihilating bankrolls. The parlay percentage keeps climbing. So does sportsbook revenue. Funny how that works.

The mathematics here is not ambiguous. Sportsbooks hold roughly 9-10% of every dollar wagered. That's the vig, the juice, the vigorish — call it what you want. For every $1,000 you put through the system over time, you'll get about $900 back. You can get lucky in a session, the same way you can get lucky at roulette. But over time, the 10% rake is as certain as gravity.

Compare that to the long-run historical return of U.S. equities: roughly 7% annually after inflation, year after year, for over a century. The stock market has a negative hold rate for the house. The "edge" accrues to you, the patient investor, not to some operation in Joisey.

Thorp understood this intuitively. He wrote about it, modeled it, and lived it. His framework — the Kelly Criterion, which tells you how much to bet when you have a genuine edge — is entirely premised on the idea that you only deploy capital aggressively when math is on your side. Sports parlays are the mathematical opposite of Kelly. They are anti-Kelly. They are the financial equivalent of driving in reverse at highway speed and calling it a shortcut.

The Regulatory Veneer

The genius of the modern sports betting complex is that it laundered itself through the language of freedom and tax revenue. After the Supreme Court struck down PASPA in 2018, states stampeded to legalize, lured by the promise of tax dollars. And the tax revenue is real: $2.8 billion to states in 2024.

What's also real: that $2.8 billion came entirely from bettors who lost. Every dollar of tax revenue is a dollar extracted from someone who thought they had Patrick Mahomes figured out. The state gets a cut. The sportsbook gets a cut. The bettor gets the residual, which, on average, is $900 back for every $1,000 in.

This is not a criticism of legalization per se, though it’s not good for society. But the marketing surrounding sports gambling — the wall-to-wall TV spots, the celebrity endorsements, the integration into live broadcasts — is specifically designed to normalize a transfer of wealth from the many to a handful of well-capitalized operators.

FanDuel alone took in $5.78 billion in revenue in 2024 from bettors who thought they were just having fun. That's a scoreboard with a toll booth attached.

What Ed Would Do.

Thorp's advice for the average investor, given in interviews over the years, is almost comically simple: buy a low-cost index fund. The SPY. The VTSAX. Let it compound. Don't try to be clever.

The man who cracked blackjack and roulette and ran a hedge fund for 20 years is telling you: the best bet available to a human who doesn’t want to spend time learning is the one that requires no skill, no research, and no app on your phone that sends you push notifications about live in-game prop bets.

The sports gambling industry's value proposition is that it makes watching sports more interesting. Maybe. But it also turns every game into a personal financial event, which is a fantastic way to ruin both the sport and your balance sheet simultaneously. And unlike the stock market, there is no long-run case for being long on parlays. None. The math is settled.

Wrap Up

Ed Thorp beat Las Vegas and walked away because he found a better casino. The best casino — the one with positive expected value and centuries of upward drift — is the one that trades five days a week in New York.

By investing in the stock market, you have a chance to win over the long term. With a sports betting app, you don’t.