A Blackjack Legend Who Became A Trading Genius
The Blair Hull Story
By George Thurlow '73
By his own admission, Blair Hull ’65, did not get much out of his classes at UC Santa Barbara. He regrets it, but also admits that he became a math major because “it was easy and I could spend less time in class.”
As a Sigma Alpha Epsilon brother he recalled majoring in “TGIF.”
But Hull ’s life , his contributions to UCSB an d his renowne d genius in trading stock options and futures discloses an intellect and a drive that was not all TGIF.
Just a few years out of UCSB Hull joined a team of card players—he was working at a cement company at the time, improving delivery systems—that became famous for their ability to beat Las Vegas odds. Chronicled in the book “The Big Player,” Hull and his team employed a combination of card counting, complex math and game playing theory to consistently beat the house.
Hull took his winnings and set out for Wall Street. The rest is legend.
Using complex algorithms and a systematic approach to investing, Hull built the Hull Trading Company and eventually sold it to Goldman Sachs in 1999 for more than $500 million.
Today his newly launched Hull Tactical US ETF is winning kudos from Forbes and other market followers as one of the most successful trading companies in 2015. The attention led to an invitation to ring the opening bell on Wall Street Nov. 3.
But if you think Blair Hull is all about numbers, computer algorithms and the acquisition of huge sums of money, you would have to read the first couple of chapters of his amazing life.
Driven by his passion for universal health care for America and animosity toward a political system driven by fundraising, Hull ran for U.S. Senate in Illinois in 2004. Political junkies will quickly realize that was the year that a very famous man from Illinois also ran for U.S. Senate. His name was Barack Obama. At the time, he was a state Senator who had lost a bid for a seat in the House of Representatives.
Hull was an early favorite to win the general election race. He funded it out of his own pocket -- to the tune of $29 million—and was campaigning against a weak Republican incumbent. But as he now recalls, Obama was a serious campaigner in the Democratic primary. It was in the Senate race that Obama pulled together some of the same tacticians that would later help elect him to the White House. “The campaign opened my eyes to the political process,” Hull said. To this day he is proud of his campaign and admires much of what Obama has accomplished as president.
His one pointed criticism of not only Obama, but of much of the political leadership in the United States, is that they have no management experience. He feels that has hurt Obama during his presidency.
Even more intriguing is Hull’s interest in women’s issues. It led him to establish the first endowed chair in Women’s Studies at UCSB—a position now held by Eileen Boris, who combines research and activism around issues of women in the workplace.
He points to his mother as the inspiration for the gift. “She worked outside the home,” he recalled. “She was discriminated against in the workplace. It was the 1950s and she was a middle manager at the state employment office.” It inspired him that his mother was one of the few women venturing into the workplace at that time who earned a middle management job. But the discrimination she faced left a mark on him.
More pointed is the story he tells of two of his three daughters who played volleyball. Megan was a good enough volleyball player to be recruited to a Division One team. She committed to Brown. As the first season began, Brown announced it was cutting two men’s and two women’s sports --one program being women’s volleyball. Given there were 6 women’s sports and 18 men’s sports, his daughter protested the decision because it clearly hurt more women than men.
In November 1996, women at Brown University won a ruling in federal court, citing that the University discriminated against women when it demoted its women’s gymnastics and volleyball teams from university-funded to donor-funded varsity status -- and then argued that it was in compliance with Title IX. The court said that Brown violated Title IX and rejected Brown’s challenge to Title IX based on the stereotype that men were more interested in sports participation. The Supreme Court declined Brown’s petition to hear the case, and the women’s teams were restored to university-funded status.
Hull recalled what his daughter saw when she returned to campus after the Supreme Court decision. The campus newspaper ran a headline saying, “Megan Hull: How Can You Sleep At Night?” In 1994, Megan Hull testified in front of a Congressional committee studying the impacts of Title IX. She left to play volleyball at Georgetown and then returned to Brown in her senior year, playing on the team reinstated by the courts.
Ten years later, Hull’s youngest daughter Courtney went to Brown and played on the volleyball team. They won the Ivy League Championship during her freshman year. “That opportunity would not have existed except for her older sister,” he said.
At 73, Hull is not slowing down. Walking through his trading offices next to the Federal Reserve Bank of Chicago across the street -- and downstairs from the Chicago Board of Trade -- he is excited about this new evolution of online trading. In one half of the modest office floor, programmers are creating code that the traders across the room will implement for future trades. This is the new model of trading. No more yelling across a pit to buy pork bellies. Instead, computer programs will crunch huge amounts of data, use algorithms to determine the best spreads for futures and options, and then, in seconds, will execute buying and selling.
Hull is quick to point out that this is not the high-speed trading that was exposed in the recent book, “Flash Boys.” That trading relies on seconds, milliseconds and even nanoseconds to execute trades that make money based on huge volume -- and done very quickly to exploit momentary price differentials that may be very small. Hull said his trading is for the long haul because “flash” trading is an “end game.” At some point you can’t move data any faster than the speed of light, so that ends any advantage anybody might have.
Instead, Hull’s trading is about using computer knowledge and disciplined execution. As he told Fast Company magazine, “All you need is a mathematical advantage and the controls to ensure you stay in the game. Everything else takes care of itself.”
It goes back to his days at the card tables. “You get an advantage and then you stay in the game.” Just like in cards, trading on Wall Street is about discipline not emotion.
To this day, Hull leans on the academic world for inspiration and techniques. He cites a long line of researchers of human behavior and market psychology in explaining how he built his systems. He recently published an academic article along with Xiao Qiao titled “A Practitioner’s Defense of Return Probability” and launched an active ETF on the New York Stock Exchange under the symbol HTUS. Once a math major, always a math major.
In the Big Player, a breakthrough 1977 book about card counters who beat the biggest casinos in the world, one of the important players was an insurance salesman named Steve Lottier.
Lottier was described as a sharp looking, well-dressed math whiz who helped develop the mathematical odds for when a bet had a better than even chance of beating the house. According to the book, Lottier perfected the math formulas on his computer at work.
In a recent interview in his Chicago trading offices, financial whiz Blair Hull admitted that he was Steve Lottier and the “Big Player” was about a team he played with from 1971 to 1975.
Over that period of time, Hull recalled he spent 50 days a year at the blackjack tables of Nevada playing 800 hands a day. In all, he would play 40,000 hands a year or 200,000 hands over that four year period.
Using theories first developed by an academic Ed Thorp, Hull and his team combined card counting with complex mathematical formulas to predict the best odds, and then would bring to their table “the big player” who made the winning bets. The team by their own estimates won more than $1 million until the Sands casino uncovered their whole system and banned them. That signaled the end of “the team.”
The Big Player was written by Ken Uston, the man who started the team. Midway through their playing days he describes “Steve’s” ambition in the mid-1970s: “Entering the stock option field by using computer programs to detect exploitable market anomalies, as well as the notion of a computerized racehorse handicapping system.”
The racehorse idea went nowhere. As for the “market anomalies,” that was where Hull really beat the house.
--George Thurlow '73
Managing Microsoft’s Environmental Impact
Tamara DiCaprio, '81, explains how Microsoft's carbon tax helps
build a better world
By Renee Lowe '15
Using too much paper can be a hazard to the environment – but sending out millions of emails a day as a multinational company can be just as damaging to the Earth. Microsoft’s senior director of sustainability Tamara DiCaprio, `81, has made it a priority for the technology company to reduce its carbon footprint. “Some people don’t see Microsoft as a heavy polluter, but we’re turning into a smokestack industry as we go to the cloud,” said DiCaprio. “In order to get emails, everything goes through the servers. Those server farms are energy intensive.”
DiCaprio, who graduated with a degree in environmental studies at UC Santa Barbara and has won the 2013 U.S. EPA Individual Leadership Award for her work in creating sustainable business practices, believes Microsoft needs to own its environmental impact. “As everything becomes electronic, energy consumption is still happening,” she said. “As we were building more data centers, we needed to do something at least equal to that to help the planet.”
Early on, she realized she needed to speak to business people about their environmental impact using business terms. Instead of using greenhouse gas metrics, she measured environmental impact in dollars. This became the premise of Microsoft’s internal carbon tax that charges different departments money for environmental innovation projects.
In four years, the carbon tax has funded wind farms and solar panel installations at Microsoft buildings around the world. Microsoft has also brought schools and hospitals to developing regions, created forest preservation jobs for those who used to work for poachers, and empowered women to plant trees and create businesses manufacturing organic clothing.
Microsoft departments now want to pay more into the carbon tax. “People are excited about the money they’re paying and the impact that they’re able to make,” DiCaprio said.
Renee Lowe graduated with a degree in communications studies in 2015.