The Physics of Wall Street: a brief History of Predicting the Unpredictable

The Prediction Company 
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news to report: you could make a killing in poker, if you just played 
by the book. Packard’s experience was less auspicious. But in place of 
blackjack winnings, he brought something even better: a new idea for 
a gambling system. Prompted in part by some cryptic remarks that 
thorp had made at the end of his book, Packard convinced himself 
that another game could be beaten more effectively than blackjack 
(and with less likelihood for casino shenanigans). Packard, like thorp 
before him, had an idea about roulette.
farmer was skeptical, but Packard was persistent and finally con-
vinced farmer to think about it. Soon enough, farmer was on board. 
He, Packard, and Biles spent three days thinking about the problem, 
working out some initial calculations and getting excited about their 
newest project. By the time farmer had to go back to Santa cruz, the 
three men had decided to pursue the project. they would build a com-
puter to beat roulette.
In the fall of 1975, farmer was starting his third year of graduate 
school. He was supposed to be settling on a dissertation topic and 
beginning research in astrophysics. Instead, he and Browne began 
running experiments on a roulette wheel they had bought in reno, 
at Paul’s Gaming devices, the manufacturer rumored to provide the 
regulation wheels used in reno and Las vegas. (farmer’s thesis ad-
visor, a man named George Blumenthal, had enjoyed his own run 
as a would-be card counter in Las vegas. He was tickled enough by 
farmer’s project to look the other way as farmer’s academic research 
stalled — in fact, after reviewing farmer’s calculations, he even sug-
gested that there might be a physics dissertation lurking in the roulette 
project.) Packard and Biles, meanwhile, were back in Portland, work-
ing on an electronic clock that could take precise measurements of the 
ball traveling around the wheel. Along with his work on the roulette 
project, Packard was finishing college and applying to graduate school. 
Santa cruz was at the top of his list. At this stage, even though Packard 
knew thorp had thought about beating roulette, no one in the group 
knew anything about thorp’s calculations, or about the computer that 
thorp and Shannon had tested in Las vegas. they were reinventing 
the wheel.
At the end of that academic year, in the spring of 1976, the four 

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gambling men met up in Santa cruz to put their work together and 
make a plan for the summer. one of their first pieces of business was to 
settle on a name for the group. farmer had recently stumbled on a new 
word, eudaemonia, while flipping through the dictionary. central to 
the ethics of the ancient Greek philosopher Aristotle, eudaemonia was 
a state of ideal human flourishing. the roulette group took the name 
eudaemonic enterprises, and the members referred to themselves as 
eudaemons (Greek for “good spirits”). they rented a professor’s house 
for the summer and built a tinkerer’s lab, assembling electronics and 
running experiments on roulette wheels. the eudaemons indepen-
dently arrived at the same basic strategy that thorp and Shannon had 
used, with two people working the game, one timing the wheel and 
the other making bets. Ingerson’s legacy was manifest in farmer and 
Packard’s conviction that they could build anything. the eudaemons 
were an only slightly more grown-up version of the explorer Post 114 
(indeed, Ingerson later helped the group in vegas when they tried to 
put the scheme into action).
the original four were soon joined by another physicist named 
John Boyd and a friend of farmer’s from his undergraduate days, Steve 
Lawton. Lawton was a humanist, a specialist in utopian literature. 
His role was to organize a reading group on political fiction. from 
the start, the group was devoted to a revolutionary mindset. over the 
years, as they continued to work on roulette, more and more people 
joined — gamblers, physicists, computer programmers, utopians. the 
group thought of themselves as Yippies, members of the countercul-
tural movement founded by Abbie Hoffman and others in 1967 and 
devoted to undermining the status quo through anarchic pranks they 
called “Groucho Marxism.” for the eudaemons, the roulette project 
was a way to beat the Man and take his money — money they planned 
to use to build a commune on the Washington coast.
thorp and Shannon never had much luck with their roulette adven-
ture, on account of frayed wires and nerves. the eudaemons did bet-
ter, plugging away at the problem for the better part of five years. not 
that they didn’t have their own share of hardware problems. Instead 
of an earpiece like thorp wore, the eudaemons’ first generation of 
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t h e p h y s i c s o f wa l l s t r e e t

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