Wednesday, November 23, 2016

Why Do Trainers Cheat?


"According to an agreed statement of facts read in court, Chris Haskell, 39, was filmed using a syringe to give horse He’soneinamillion a tracheal and “intramuscular” injection during an OPP horse doping investigation in October 2010.

"A search of his person revealed six “loaded syringes” full of performance-enhancing drugs which police alleged he intended to use to give his horses Enzo Seelster and Ideal Gift a boost."

He was (after a plea deal) convicted of fraud.

His punishment, 6 years after the fact -- "a $2,500 fine for the fraud (injecting a horse) and $1,250 for attempted fraud (being caught with drug-filled syringes)."

That's a purse check for winning a $7,500 horse race.

Why do trainers cheat? Probably because even if you're caught and convicted for fraud via a provincial police investigation, it's worth it.

h/t to @righthind

Tuesday, November 22, 2016

Derivative Betting Instruments Work ..... If You're Growing

I remember back in the 1990's I got a "hot tip" in the markets. Apple was going to be bought by Microsoft. This was not the craziest thing I had ever heard, because Apple was not doing so well, and Gates and crew would certainly be interested in it.

Apple was trading at $17 a share, and I had a choice - buy the underlying equity, or look at derivatives. The $25 calls, a few months out, were trading at a buck or two with plenty of liquidity, so I leveraged using those.

Options and futures markets work for many reasons, but the biggest one, is that the markets don't trade 100 million shares a day like the old days, they trade billions. The markets are all growing, and when they have, derivatives grow, as well.

In Vegas, US Fantasy is a new offering
It’s just like betting the horses. Instead of races, there are props. For instance, Prop No. 1 for Sunday’s NFL action was a group of 12 quarterbacks. You could have bet, say, Tom Brady to win, place or show.
There are daily doubles, pick threes, exactas, trifectas and superfectas available. There’s even a chance to win as much as $1 million on a $1 bet for correctly selecting the winner of seven different props.
The scoring systems are quite simple. Only yards and touchdowns count for football while points, ­assists and rebounds are used in basketball.
As with horse racing’s pari-mutuel system, payouts are determined by the total pool of money that’s bet on that particular prop, minus a 10-12 percent takeout (compared to 18-20 percent, if not more, with horses).
Knee-jerk reaction to this derivative of sports betting is that players will always choose to buy the underlying equity (if you think Tom Brady is going to have a great game, bet the Patriots). But I am not sure I lean this way.

Yes this might be a longshot to catch on, but derivative instruments like this do have a chance, because sports betting is growing, and it's bringing in more and more new users. DFS has surged, despite the levelling off of the last year or two. Fantasy players with strong opinions are in the millions. Fantasy geeks might not want to bet the Pats, but they might like the odds on Julian Edelman this week.

Horse racing (even today) tends to add more derivatives to the win place show pools, and when wagering was growing it made perfect sense. Adding more now does not. However, for the growing sports betting markets, I think we'll see a lot more of it. The obvious blue sky is that while horse racing can be bet in 43 states or so, this type of wagering is only offered in one. That is sure to change.

Have a great Tuesday everyone.

Monday, November 21, 2016

Retail Markets & Betting Markets Have Big Differences

Yesterday on the twitter I posted this (at left) screenshot from a book. It's about LEGO, who was falling on hard times in the early 2000's, and they commissioned "big data" to tell them what was wrong with their product.

The global data said that the digital generation (born post 1980) had "short attention spans", needed "instant gratification", and big, difficult, time-consuming puzzles were not going to fly in the new world.

Luckily for them, due to smaller, anecdotal data, the company took the opposite approach and made their product even tougher, and more time-consuming to use. This strategy worked, because by 2015 LEGO passed Mattel as the world's biggest toy maker.

Ain't that a kick in the pants.

For us in horse racing who believe this is similar to what racing experiences, it's refreshing to read. The LEGO experience is a polytrack race with 14 horses, versus a five horse field where the speed horse sprints and staggers home at 3-5.

The spawned a short discussion. One tweet caught my eye about using customer data.
In retail getting the customer to spend more in gross dollars is the goal. Always has been the goal. In fact, it's not only in retail. As noted in this marketing piece last week, the Trump team spent their marketing money in large fraction to get their voters to do more, too.

From my experience, racing thinks the exact same thing - get people to spend more. Of course, this is fine if we're talking churn. But their 'bet more' mantra is all about retail.

It's a jackpot bet, fractional betting, a guarantee, a post drag. It's tweets about an event. It's the Kentucky Derby shoehorning more people into the place. It's hats n' Miss Cougar II, n' stuff. It's all about one disparate entity getting a customer to spend more on their entity, venue or bet.

What many in racing miss, in my view, is that they can crunch numbers until the cows come home, but if their goal is to squeeze the customer for more, without tempering that with considerations of their customers' betting ROI, they're toast.

This is not a challenge for a lot of companies who depend on similar for growth (think Google), but racing has a great deal of trouble with this. Corporate entities compete, and if a jackpot bet breaks a betting base and hurts the sales funnel for all of racing, so be it. You can run down bankroll degradation examples, you know them all by now.

It's funny because, oh, about 15 years ago now I had a track executive tell me about something they found in their data, in an almost giddy-like way -- "It's amazing how much and how often customers bet when they're winning!"

A few years later his track raised takeout. In present day, their marketing team promotes their jackpot bet.

Have a great Monday everyone.

Friday, November 18, 2016

Numbers Are Our Friend

Everything's numbers. Well, not everything.

Churchill Downs today announced a $37 million capital expenditure for luxury suites. People-be -going, wow, $37 million spending for a racetrack, and they'd be right. It is a big amount of money in this business. But, the numbers probably show it's the right thing to do, because Churchill isn't dumb, and they own the Kentucky Derby.

At $1,000 a person (this is likely higher) for the Derby only, we're talking $2M in revenue for one day. If Oaks day is added, at say half that revenue, we have another $1M. With simple payback time as a measure, it's a shade over ten years. This ignores the other days of the year where they will generate some revenue, and discount rates, NPV etc.

It's nothing new. The Dallas Cowboys built an entire stadium for suites -- 300 in all - which bring in a couple of hundred million for 8 games (plus, I am assuming some other events). The new stadium in San Francisco sold $140 million in suites before turning over sod.

It's not going to work at Mountaineer and Penn, but I am sure the numbers show it will work for Churchill.

What's curious to me about the Derby and CDI itself is not its popularity, but when will the lemon be squeezed too much. With increases in general admission prices this week, plus more boxes at high rates, at what point will demand fall? I am sure the numbers will tell them, and they will adjust, but to me it's been an interesting question.

Fanduel and Draftkings ran some numbers of their own and merged this morning. They have protection in states which passed regulation to (ironically) protect consumers. Merging should allow them to raise prices more, and stifling competition will help. That, in my view, is a win for the two companies, a loss for their customers.

On the "let's not use numbers for the most part" front, we have racetrack marketing tactics, as described in HRU this morning. Marketing is about numbers in this day and age because almost everything can be measured. Spending $37 million is an exercise in projecting and discounting cash flows, developing IRR numbers and running formulas.  Today's marketing in racing should be able to answer "if we spend $500,000 marketing X, what type of return will we get?" But it is unable to.

Last up, if you are going to pass a new rule on geo-targeting or shutting off betting for customers, should you not be able to (at least in a rudimentary way) have some numbers to look at before making a decision? O_crunk looked at this phenomenon today at his blog, with regards to yesterday's CHRB meeting.

Have a great Friday everyone.

Monday, November 14, 2016

Horseplayers Don't Delete

It's been pretty wild to watch the last week. Tweets like this are being screen-shotted, rehashed, propagandized, and, yes, deleted.

I know I don't speak for horseplayers, but I am one. And as a horseplayer, I profess:

Don't hit delete. And for everyone promoting this so-called grand "wrongness", don't be a goof.

Why? Because it happens to us all the time.

Someone once said, "Zenyatta is a surface specialist".

Someone once said, "American Pharoah is a lock in the Travers."

Someone says, almost daily, "this horse has no chance to lose."

Those proclamations were wrong. Those horses all lost.

And Horseplayers don't delete.

Horseplaying (and training and owning and being a fan of these animals, too) is humbling. Not only do most of us only hit one of every four of our bets (if you're good and you're looking for a sweet spot in the odds), we oftentimes make some of the worst, boneheaded, stupid, awful, incredibly wrong predictions.

We don't delete, because it's a truth in any gambling game. We will - sooner or later and more than once - have egg on our face.

Our horses come up sore, and sick, and get bad rides, and don't like the weather, and ship poorly and have a fever; have a cough and have allergies. They get bodychecked and stopped right in front of.

They kick themselves in the trailer on the way over to the track.

They see a shadow at the half mile pole, and it messes them right up. A bird flies in the infield, and despite a massive hood with full cups, the horse sees it.

A horse sees a grey pony when loading into the gate and it scares them, throwing them off their game. We bet a horse yesterday who was lone speed, but they get ridden into the ground by another horse, because that grey horse spooked the other horse first.

The Donald had a small chance to win Michigan a month ago. Via the polls, if a couple of people out of 100 changed their minds -  or if a polling methodolgy about turnout was off a smidgen -  he'd win the state.

It's not worth deleting a tweet, or hiding a prediction, because that grey horse can be anywhere - at Mountaineer or Monmouth, Gulfstream or Golden Gate. Or in Michigan.

For us it's old hat, for them, not so much. But they sure could learn something by going to the track more often.

Wednesday, November 9, 2016

Election Betting Recap

Election betting - especially a close election - is an interesting exercise. In this day and age, gamblers and forecasters lean on models and ratings for horse racing, sports betting and otherwise that are tested and retested empirically. An election is sometimes like that, but oftentimes not. Last night was clearly the latter.

Here are some thoughts on the wagering, and data.

In preparing for wagering, the traditional polls, plus exits are informative. In this case, the exits confirmed the polls, which is usually good news. Pre-betting, I had a Clinton plus 3, 308 electoral vote projection. That, at the time, looked sound.

There were two clues I uncovered in the exits though, which I filed away. Trump was doing much better (than comprehensive polls from Wapo-ABC and others which I dug up suggested) with college educated whites, and the working class voter numbers were also quite good for him. The union vote was coming out for him, which most did not have pegged. There's a chance the plus 3 projection was high.

That data, to me, said Iowa looked like a lock. Taking 2-5 odds there seemed wise. Longshot fliers in Wisconsin, Michigan and Minnesota with these numbers seemed unlikely, but value.

At 6PM only parts of Indiana and Kentucky close and these micro-votes (that the networks tell you not to look at) questioned my pre-results bias, further.

Viggo county in Indiana was solid Trump and it should not have been.

Elliott County (well known to my friends in Kentucky) was not only a solid Obama country the last election, it has been a solid blue county for 136 years. After two polls, he was up 69-29.

Trump, a half hour after these early states, was 8-1 to win the election, and in hindsight, there were signs he should be half that, if not less. I, at that point, mentioned to my betting partner that maybe the polls were wrong and he was going to have a good night.

Why election betting can continually give us edges -- and in my view it's one of the only betting mediums left that can allow monster edges -- is because things are confusing. Throwing a wrench into the plans was the early vote. This year's was a record, so when cities came in Hillary was doing very well with that data dump. Was this data a trend, or simply her edge on the early vote and Viggo and Elliot counties were the real story?

The last issue that was needed to be factored, was inner city turnout. If it was much lower, you could feel good being long Trump, if it was in 2012 numbers, you'd go the other way. We had very little of that data at around 7PM.

We all have biases in betting, and mine was to be cautious, because it was confusing. I also had an internal bias  -- I apologize to my Trump friends reading this; I was not a fan, so picturing him winning was difficult.

Later on, this bias slipped away. Counties in Virginia were coming more like 2012, not like the 2016 polls suggested. She looked like she'd win Virginia (and I took a couple of positions) but she was running very soft.

At that point, Trump was still a strong underdog to win, and he should not have been. There was the value, at over +300.

North Carolina represented a true swing market, and again, it was confusing. Around Raleigh she was overperforming him - widely and above President Obama in 2012 - but there's that early vote phenomenon again. Regardless, we took some positions at about 4-1 on Trump (mainly because of the Virginia data and trends), which was a good trade.

Finally in Florida -- which I lost severely in 2012 because of Broward County numbers that came in late, and well above what anyone projected they'd be --  we had our answer about the inner city vote. It was not there. I still think - just like 2012 - taking HRC positions near the end (when she was over 10-1) was smart. It was close, and there was a shot (just like the late numbers came in, in MI)

Election betting - despite the craziness of the race, which at times for me was impossible to follow -  once again proved a challenging mental exercise. And if we dug far enough, and stuck with convictions of what we were seeing, (not what others told us we should be seeing) there was some money to be made. 

Monday, November 7, 2016

The Post Breeders' Cup Pop Quiz

We saw, we came, Arrogate conquered.

Test your memory of the happenings on the weekend with the 9th Annual Post-Breeders' Cup Pop Quiz!

The attendance numbers at the Breeders Cup were tabulated by:

a) Paid attendance numbers
b) Paid attendance numbers + an error variable for fence jumpers
c) Hot dogs sold extrapolation formulas
d) Finding the estimate of how many showed up to the Cubs World Series parade, and doubling it

English jockey Ryan Moore walked the Santa Anita turf course on Thursday and had trouble finding:

a) The best path
b) A good angle to take for the apex for the first turn
c) A single blade of grass

The Beholder-Songbird photo was taken by:

a) The Santa Anita photo computer, accurate to one one trillionth of a millimetre
b) A high speed canon, with frame speed used to photograph Usain Bolt.
c) A barn cat

Arrogate's top-shelf Classic run is being compared to:

a) Sunday Silence's takedown of Easy Goer
b) Alysheba-Ferdinand
c) Zenyatta's thrilling 2009 Classic win
d) Allison Janney's Academy Award winning performance in Seabiscuit

This is a photo of the press:

a) Watching the Olympics
b) In the New York Times lunchroom, cheering the new Hillary polls
c) Seeing the free donut man come up the stairs
d) None of the above. If you are writing about horse racing, you like horse racing
The new turf maintenance man at Santa Anita came over from:

a) Belmont
b) Laurel
c) Kentucky Downs
d) Sam's Billiards

The saddest news to come out of the Classic was:

a) Chrome lost
b) The handle was down from last year
c) Keen Ice ruined many people's trifectas
d) Arrogate has been retired to stud because "he's done enough"

The Turf course was so hard that:

a) Other hard objects orbited around it
b) Donald Trump called it soft, but actually issued a press release saying he was wrong
c) Andy Asaro protested because there's apparently another synthetic surface in California
d) Highland Reel went 2:23

Frank Stronach called the Classic:

a) One of the best races he's ever seen
b) Better than the Kentucky Derby
c) A world class event Santa Anita should be proud of
d) Not bad, considering it has half the purse of the Pegasus World Cup

Steve Coburn's prediction that California Chrome was a lock were made :

a) in haste
b) in homage to the great horse he once owned
c) by his imposter that Charlie Davis found

Enjoy your Monday everyone!

Wednesday, November 2, 2016

When Does Existing Pain Become Too Much? That's the Purchase Decision

There's been a lot of crazy stuff happen this election cycle in the US, and frankly, I have never seen similar in my lifetime. Because there's been so much craziness, nonsense, and sometimes horror, the race has become on the surface, very muddy.

But, as I scan things this morning, the polls are where they were three months ago; pretty close.

For all the retweets and tweets, stories about how bad someone is, or was, or will be, I have believed from the start, the race is a perfect example of behavioral economics and a simple buying or not buying decision.

"How bad off am I where I will choose to cast a vote for someone who I know is a flawed candidate?"

This is the same decision most people make when they purchase.
  • Pointing out what a buyer stands to potentially gain from buying your product requires a leap of imagination on their part – they have to picture themselves in a new and better place by having bought from you. This type of imaginative and creative leap isn’t always easy to take, and can be tenuous.
    However, claiming that they will no longer suffer the existing pains that they currently do is much more grounded in reality, based on the very human notion of fleeing losses. They already have this very real pain point, something they live with on a day-to-day basis. Once they have the conviction that you relate to and understand this pain point, and that you have the power to remove it, they will be much more convinced.
I'm certainly no expert on what people outside of my immediate sphere think, but with 70% in polls saying the system is not working for them (or despise the status quo), you probably have a good idea why things are close. This pain point shifts in a maybe 8% range, and Bob's your uncle.

Yesterday we looked at exactly the same thing with horse racing. Pain points.

Another item cropped up that illustrated this point yesterday -- The marketing deal which blocks TVG from showing any races on the Breeders' Cup undercard.

The comments are pretty scary. Both fans and horseplayers are slowly having enough of this.

This is why, in my view, horse racing is very tough to sell, to both new people and existing customers, and it explains why existing customers, like Lenny Moon recently, simply get up and leave.

If you leave you "will no longer suffer the existing pains that you currently do" - no more high juice, marketing deals, having five accounts to bet all tracks, post drags and all the rest.

That's been trumping (no pun intended) the positive aspects of the sport.  It's enhanced because (for regular customers) it's a 300 day a year vocation. It's not a twice a month restaurant, or a vote in an election.

During this election cycle, most people are tweeting and retweeting and facebooking their choice on in a sometimes agonizing, cathartic exercise. Horse racing customers go through similar feelings each day, but they don't do that; they just quietly leave.

Tuesday, November 1, 2016

Post Drags Eventually Wear You Out, But the Racing Can't Fix Itself

The NFL is going through some pretty amazing machinations this year. Viewership is down, as is betting.

Sally Jenkins reported today on the phenomenon, and one area she looked at was the time it takes to enjoy a game on television.
I have surmised here before about this -- it gets incredibly frustrating to watch a score, a commercial, a kickoff, another commercial, a quick turnover and another commercial. Games which used to start at 1PM and end at 3:49 so you could get ready for the 4PM game haven't been around for awhile.

I've likened this to takeout increases in horse racing. It's not one increase and you leave, it's a drip, drip drip then leave. It took years to turn off viewers, it took years for bettors to say "I have no chance to beat this game".

Racing has the same issue with post drags, though. They are excruciating. Cards get longer, and feel longer, because half the time it's tantamount to watching commercials after seemingly every play during an NFL game. It wears on you.

NFL games have gotten longer because there is revenue attached to adding more commercial time. The more commercials sold equals more money for TV rights; until the house of cards comes crashing down, that is, which might be happening.

I suspect the NFL will probably address this issue. It's fixable, even if it means slightly less revenue.

Disparate tracks notice the same correlation with post drags and revenue (handle). If Pompano Park post drags, they, like the NFL make more money. So does Gulfstream and Santa Anita. But if everyone post drags, the sport suffers, because more and more people get frustrated and leave. This, like a takeout increase, often doesn't show up this week, month, year or couple of years.

Racing, unlike the NFL, can't address this because it can't fix itself.

This tragedy of the commons issue is a plague on the sport in many ways, and this is another example. Tracks are incentivized to post drag because post dragging helps them, but the industry as a whole, like the NFL is seeing, gets hurt.  The fractured nature of racing works for its good in some ways (more points of sale, more consumer choice, etc), but overall it's a real drag on long-term revenues, no pun intended.

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