@o_crunk tweeted out a good piece today. For those of you who gamble it's second-nature. For those who bet it might be worthwhile to have a look at.
Here are a couple of snapshots, with some comments.
"The model I like—to sort of simplify the notion of what goes on in a
market for common stocks—is the pari-mutuel system at the racetrack. Any damn fool can see that a horse carrying a light weight with a
wonderful win rate and a good post position etc., etc. is way more
likely to win than a horse with a terrible record and extra weight and
so on and so on. But if you look at the odds, the bad horse pays 100 to
1, whereas the good horse pays 3 to 2. Then it’s not clear which is
statistically the best bet using the mathematics of Fermat and Pascal."
- This is the "don't pick winners, pick winners that are going to win at a higher rate than the odds board probability says they will" line. e.g. bet a horse at 5-2 that will win greater than 28% of the time. It's also why you'll rarely hear professional people bet a driver or rider change that others will bet, or why a flavor of the week trainer who's lighting it up that everyone knows about becomes a negative expectation play.
"Unfortunately, what a shrewd horseplayer’s edge does in most cases is to
reduce his average loss over a season of betting from the 17% that he
would lose if he got the average result to maybe 10%...... if it weren’t for that big 17% handle, lots of people would regularly be beating lots of other people at the horse races. .."
- Beating 17% is brutal. That's why low rake rebate shops or exchanges flourish. It's easier to beat 5 or 6%.
"Here again, look at the pari-mutuel system. I had dinner last night
by absolute accident with the president of Santa Anita. He says that
there are two or three betters who have a credit arrangement with them,
now that they have off-track betting, who are actually beating the
house...... And the one thing that all those winning betters in the whole history
of people who’ve beaten the pari-mutuel system have is quite simple.
They bet very seldom."
- This in a nutshell, is what I believe is wrong with the system. To win with 22% rakes you have to bet "very seldom". Think about it. Would McDonald's be what they are if you "ate very seldom" there? Would Wal Mart be making money if you shopped there "seldom"?
When a trade cost $300 in 1975 brokers were telling you to "buy stocks seldom". When E*Trade offered $7 trades, they were telling people to trade 100 times a day. Volume and revenue followed.
Memo to track execs and horsemen groups: Stop promulgating a system where you are telling your customers to "bet seldom"
A few weeks ago I chatted with Derek Simon on twitter. Derek plays in Twinspires and tries to grind out 10% a year betting 'seldomly'. "Picking his spots" he does fairly well. Conversely there are others on twitter who bet each race every race and play for a living.
The big difference of course, is the price paid. If you are betting into betfair at 5%, almost every race is playable. If you are playing into the tote, maybe one in ten races are.
The way the game is gambled is based solely on the playing field you are gambling in, or on.
It's similar in poker. If you are playing a pick up game with a bunch of newbies you should wait until you have a good hand before going all in. This is because newbies want action, they want to bluff and have some fun. You might as well play tight. That's your edge; your playing field.
In racing you play tight if you are betting into 22% takeout. You play loose if you are playing into 5% takeout.
That's why when takeout drops handle rises. There's more opportunity to open your wallet. People getting low rake play loose. We need more people playing loose.
Enjoy your Sunday everyone.