In the current blog vein of chatting about the recent article discussed below, where racing is asking government to shut down off shore wagering, I came across a story at a probability site. The whole article is good, as it details betting exchange economics, but one slice of it I found really interesting. It seems (seemed, as they did not do this. This article was written several years ago) that the government in the UK was thinking of taxing the betting exchanges at a higher rate, at the behest of the bookmakers. Of course this was not a good policy; and the writer wrote a nice parallel to show what happens to people when they stifle innovation. Have a read:
Horseless carriages (cars) were a neat invention. However despite the revolution that was going on they did not meet with universal approval. Horseless carriages were cumbersome contraptions and had been powered by steam engines as far back as the late 18th Century. They met great resistance based upon two key issues.
• Stagecoach owners were afraid that horseless carriages would mean the end of their business.
• The general public found that their horses were scared of the machines.
Rather than try to compete, stagecoach owners decided to cling to the existing state of affairs rather than identify that an irrevocable shift had occurred in transportation and their businesses.
Eventually, opponents to the horseless carriage succeeded in harassing experimenters and lobbying authorities and laws were passed forbidding the use of steam engines on roads. In England, stupidity triumphed when Parliament passed the Locomotive on Highways Act in 1865. Popularly referred to as the "Red Flag Law," it stipulated that all self-propelled vehicles on public highways be limited to a maximum speed of four miles per hour and be preceded by a man on foot carrying a red flag to warn oncoming horse-drawn vehicles. Although the law was amended in 1878, it still retained the speed limit and required two people to operate the vehicle and a third to go ahead at danger spots, like intersections, and give a warning. After eventually seeing sense the law was repealed in 1896 but not before other, more enterprising, countries had taken the advantage. Such laws were unknown in the United States and the rest as they say, is history.
I guess belief and understanding of the free market are two diametrically opposed forces certainly where vested interests are at play. Suffice to say that the UK and its attitude put paid, or at best, delayed the adoption one of the most important innovations of the recent times. This in turn delayed increased productivity and commerce. The government also lost out on the basis of the fact that failure to spot his shift meant new commerce did not generate new profits which did not generate tax income.
Market forces could not be resisted and eventually the UK lost initiative, suppressed economic development but eventually embraced the horseless carriage when it was obvious that it was actually a good idea.
In betting exchanges the UK has become a global leader in this new and exciting industry. Exchanges are a new paradigm and demonstrate destructive capitalism at its best. Without these break points in economic development we would not be using computers for fear of decimation of the pen and paper would we? Inevitably these break points cause short term distruption to business and tax revenues as the market adjusts to the new state of affairs. By over-regulating or attempting to punish the success of exchanges it could be possible to de-rail this progress. Progress that could lead global dominance by the UK in a new industry and one that could generate significant opportunities for UK PLC.
Despite my best efforts I don't see many members of parliament currently using horses in London. But they do appear to use horseless carriages a lot. If they want to see the country prosper and develop they should learn to embrace and encourage new ventures rather than penalise them. Failure to do so should see all members of parliament adopt a drive to abandon the horseless carriage and move back to horses, to drop computers and adopt the pen and paper. If you fail to allow those things to progress and shape the world as they have done in the past you will fail to let the innovations of today shape tomorrow.
We could of course parallel that with racing here in North America. In the late 1990’s Betfair came to racing and said “this is what we do and we think you might want to partner up”. Racing did what they do, and continue to do to this day: They demonized them. They called them names, and said they were a threat to us.
What if instead, they said this: “This is interesting. Ebay is going crazy with people trading goods…… this is like an Ebay for gambling. We have to be a part of this.”
What if they said that.
What if they chose to embrace a new technology, convince government what it can do for them and racing, and what it can do for the North American gambling economy.
This is what our industry faces today. We have executives - from horseman groups and tracks - who are clinging to the obsolete realities of yesterday. They have not kept up with the times. Offshore wagering, online poker and betting exchanges are not going away, they are here to stay. As the writer above stated “market forces could not be resisted.”
Racing is the stagecoach operator who could have partnered and made cars, instead of trying to shut them down. They could have been a part of, and grown with the most significant invention of the century.
The Internet, and online gaming is this industry’s automobile. It is simply the most important invention that gambling has ever seen. We can choose to be a part of it, or we can choose to cling to the past.
If we choose the latter, we are clearly in serious trouble.
I hope someone, somewhere is listening. But I, like you, unfortunately believe that the lights are on, but no one is home.
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