Also, for financial analysts and gambling enthusiasts:
Shannon and his wife Betty also used to go on weekends to Las Vegas with M.I.T. mathematician Ed Thorp,[25] and made very successful forays in blackjack using game theory type methods co-developed with fellow Bell Labs associate, physicist John L. Kelly Jr. based on principles of information theory.[26] They made a fortune, as detailed in the book Fortune's Formula by William Poundstone and corroborated by the writings of Elwyn Berlekamp,[27] Kelly's research assistant in 1960 and 1962.[3] Shannon and Thorp also applied the same theory, later known as the Kelly criterion, to the stock market with even better results.[28] Over the decades, Kelly's scientific formula has become a part of mainstream investment theory[29] and the most prominent users, well-known and successful billionaire investors Warren Buffett,[30][31] Bill Gross[32] and Jim Simons use Kelly methods. Warren Buffett met Thorp the first time in 1968. It's said that Buffett uses a form of the Kelly criterion in deciding how much money to put into various holdings. Also Elwyn Berlekamp had applied the same logical algorithm for Axcom Trading Advisors, an alternative investment management company, that he had founded. Berlekamp's company was acquired by Jim Simons and his Renaissance Technologies Corp hedge fund in 1992, whereafter its investment instruments were either subsumed into (or essentially renamed as) Renaissance's flagship Medallion Fund. But as Kelly's original paper demonstrates, the criterion is only valid when the investment or "game" is played many times over, with the same probability of winning or losing each time, and the same payout ratio.[33]
The theory was also exploited by the famous MIT Blackjack Team, which was a group of students and ex-students from the Massachusetts Institute of Technology, Harvard Business School, Harvard University, and other leading colleges who used card-counting techniques and other sophisticated strategies to beat casinos at blackjack worldwide. The team and its successors operated successfully from 1979 through the beginning of the 21st century. Many other blackjack teams have been formed around the world with the goal of beating the casinos.
Claude Shannon's card count techniques were explained in Bringing Down the House, the best-selling book published in 2003 about the MIT Blackjack Team by Ben Mezrich. In 2008, the book was adapted into a drama film titled 21.