American mathematics professor, blackjack pioneer and hedge fund manager Edward Thorp says he recognized Warren Buffett's potential to become the richest man in the world when he first met the Oracle of Omaha in the late 1960s.
Thorp, who pioneered card counting and blackjack strategies using math and computer programming, said on "The Tim Ferriss Show" podcast that he first met Buffett when he was closing his Buffett Partnership due to a lack of opportunities after posting outstanding returns for several years.
Don't Miss:
- The AI Marketing Platform Backed by Insiders from Google, Meta, and Amazon — Invest at $0.85/Share
- Deloitte's #1 Fastest-Growing Software Company Lets Users Earn Money Just by Scrolling — Accredited Investors Can Still Get In at $0.50/Share.
Thorp at the time was seeing "steady" returns of 25% a year using a hedging strategy involving warrants, which allowed him to make money with reduced risk, he said. The dean of the graduate division at the University of California, Irvine, wanted to invest with Thorp but asked Buffett to evaluate him first.
"He introduced me to Warren Buffett to check me out, to see if that might be a good place to put it," Thorp said. "Warren and I got along fine and apparently, I passed the test because the dean gave me his money to invest. I got to know Warren Buffett and I was sorry to see that he was going out of business because I thought, as I told my wife then, ‘This is going to be the richest man in the world.'"
Buffett established his partnership in 1956 and posted a compounded annual return of 29.5% over 13 years, according to the New York Times.
Trending: Americans With a Financial Plan Can 4X Their Wealth — Get Your Personalized Plan from a CFP Pro
‘A Good Evaluator of Companies'
When asked by the podcast host what made him think Buffett would become the richest man in the world, Thorp said it was Buffett's consistent returns over several years and his exceptional skill at evaluating businesses.
"He was very smart and that he really knew a tremendous amount about companies," Thorp said. "He was a good evaluator of companies.He demonstrated a very edge already, he'd been running his partnerships from 1956 to 1968 and had about a 30% before fee annualized return rate."
See Also: An EA Co-Founder Shapes This VC Backed Marketplace—Now You Can Invest in Gaming's Next Big Platform
‘I Know What He's Doing to Do'
Thorp said he "lost track" of Buffett after he began taking control of Berkshire Hathaway and turning it into an investment company. Years later, Buffett came back on Thorp's radar when he read an article about Berkshire Hathaway, which had by then grown enormously. Thorp decided to invest in the company because he was aware of Buffett's potential.
"I happened to see an article about Berkshire Hathaway and I saw that he was running it and then I decided to take a look and I said, ‘Oh, it's gone from $12 to $982. So is the opportunity gone?'" Thorp said. "And I said, ‘I know what he's doing. I know this man, I know what he's going to do. I'm buying at $982, even though I missed out the move from $12 to $982.' And of course, buying at $982 turned out to be a good move."
Read Next: Have $100k+ to invest? Charlie Munger says that's the toughest milestone — don't stall now. Get matched with a fiduciary advisor and keep building
Image: Shutterstock
