Betting Luck, Variance (And Those Cowboys!)

We speak a lot about variance here on the blog because it's a topic that each of us - no matter what game we play - have to deal with almost every day. This variance can mean the difference between winning and losing on that given day, but it's more than that - it spawns so many other biases we have to work through as we try and become better and better bettors.

I opened the interweb today to see some serious consternation in Dallas Cowboys land. As most know, the Texas team had a less-than-stellar performance to the Bills yesterday and the headlines are murder. It's all but a done deal that Head Coach Jason Garrett is done after the season - a season that everyone seems to feel is toast, despite leading the division, with a tiebreaker.

Let's go back five days and play the variance game.

On Sunday, Dallas does not get called on that phantom (super variance) tripping call, and have the ball 1st and ten at the New England 40. Prescott drops back to pass and more football luck kicks in. A New England safety slips, Cooper is wide open, Dallas wins 16-14.

They - including Jason Garrett - slayed New England, right in Foxboro.

Then the entire narrative changes. Jason Garrett just "beat Belichick" at home. He's not on any hot seat, he's probably getting talked about glowingly. All because of one slip.

In betting this is something I think we need to come to grips with.

Many of us will hit scores that are high in variance. We grabbed that freaky pick 5 and made $11,000. We hit an odd superfecta that paid $4,000. Those are wonderful, but if we can't show profit consistently, they are kind of meaningless in the long term.

It's why when we analyze our betting we should probably take out one or two high variance scores (and maybe drop one or two very bad days where we let our emotions take over as the losses mounted during that losing streak). If, after doing that, and looking what we do at the mean, not at the fringes, we find out we're near break even, well we're onto something. If our ROI is barely beating the takeout, we have a lot of work to do.

It's one of the only ways we can be honest with ourselves and our ability. It's not what we do at our best and worst, it's what we consistently do that will guide us.

Whether Jason Garrett's team beat Belichick's team or not last Sunday shouldn't make a ton of difference, because win or lose he's still the same Jason Garrett. And it works the same way with us. Variance can be a blessing or a curse, but it tells us little about ourselves.

Have a nice Friday everyone.

Familiarity

Have you heard the news, the big, big news!?

Tampa Bay Downs is creating a brand new wager. It's a low denomination pick 6 and if one lucky bettor holds the only ticket, they scoop the pool. It's called a "Pick 6 Jackpot".

Why do these things exist?

I was reading a book recently called Hit Makers. In one section the concept of familiarity and human nature (and in tandem, business demand) was discussed.

For instance, there's a pop song writing school in Sweden, where invariably pop hits are rolled onto vinyl digital files like an assembly line. These songs have a perfect pattern - a pattern that works because they're all so familiar. You and I have heard many of them. They have billions of hits on YouTube.

We see the same thing in movie sequels, your Hallmark Christmas Movie fix - girl heads back to small town, meets boy, coincidences and love ensues, they have a snowball fight, and fall in love  - and just about everywhere else.

We, as humans, like something familiar, expect more of it, and cling to it.

In horse racing - with our relatively closed group of customers - it, in my view, is the exact same thing.

NYRA's graphics are familiar, and so is the pre-game show and betting menu. Do you want to double handle at Finger Lakes? Hire NYRA's brand and I bet you will. No change in product is needed.

We saw just about that same thing with CDI-owned Calder, when it moved to the familiar confines and looked exactly like the Gulfstream Park feed. In fact, they even used the Gulfstream Park name. Handle skyrocketed.

To our existing customer base, a pick 6 is a brand. It's a bet everyone loves, but even fewer (at $2 denominations) could play. Enter a pick 6 jackpot. For a price of a $1 pick 4 you can get coverage, play a bet you've always wanted to, and spread to your heart's desire. The fact that it's a terrible, awful, horrible gamble? Pretty irrelevant to that cohort.

Racing exists to shuffle the deck chairs, it succeeds in this micro, insular way when it stays completely familiar.

That's great for intra-track business, and we should keep expecting it. But on the flip side it's bad for growth. Outside the industry, gamblers find a game with jackpot bets unfamiliar. That might fit the industry's maddening harvesting business strategy, but therein lies the rub.

Have a nice evening folks.

Horse Racing's Mainstream Column Inches

Horse racing has always seemed to crave mainstream press, because, as the thought goes, mainstream press means relevance with the general public. I don't see a need to debate that point (which I believe is a little dubious in 2019), but it's been a hard industry ask since Seabiscuit-War Admiral match race radio feeds.

Today (thanks for the tweet) there was an editorial in the Los Angeles Times titled, Saudi Money in U.S. Horse Racing is the Next Moral Jam. The opinion focuses on how Saudi Arabia's charm offensive (usually with cold hard cash) is used to quell criticisms of their regime, and how horse racing dutifully comes to the rescue to help them out.

I read the article half-expecting it to be written by a racing hater, or someone vested in the breakdown issue, or some other insider piling on. It wasn't; it was written by the Executive Director for International Studies at M.I.T.

Breakdowns at Santa Anita have opened a box; one of the Pandora variety. Every day people hear about racing's practices, are a little startled, and then start to dig thinking there must be more. And when they do dig, they tend to hit some paydirt.

When Brett wrote long ago, "Do you ever find racing craves mainstream press, but not mainstream opinion?" this is probably what he had in mind. Until some of these long-standing racing issues are addressed, I think we should probably expect more of it.

Have a nice Monday everyone.

Sports Betting & The Elusive Crossover

There's a good twitter thread today between Keith and Crunk right here.

Summarizing, despite upwards of $500M bet in Jersey on football this past month (a smashing number), overall pari-mutuel handle at Jersey tracks has not seen any real bump that can be attributed to the spark in willingness to skill-game gamble. Neither - so far it appears - has on-track handle.

If these trends continue, in this day and age it should not overly surprise us, in my opinion.

"Foot traffic" and promotion sure meant something when people had rotary phones. But with mobile betting, it's just not there. And make no mistake, the jurisdictions that have embraced mobile are growing rapidly in sports betting. It's tough for racing to plant its flagpole.

Similarly, without offering new products - perhaps side by side - with sports betting, there's little chance of crossover. This point, in my view, is not nearly as strong as the first point, however. The internet, and consumers, are harder to attract because marketing is so pinpoint. It's why banner ads are losing so much relevance -  I want a pair of blue socks so I find them with ease on my mobile phone. Thanks for the shirt ad, and it looks interesting, but I don't need a shirt right now. It's one of the reasons google owns the world.

In addition, it's very difficult to promote crossover because of the pure volume of consumer choice. If I am watching the football game and see a race going off, I may bet it if something catches my eye; others might too, for action bets. But when I can bet in-running, or each quarter, who needs action?

Combating the above is tough, but it's not impossible, of course.

There are oil companies harvesting what they have, while investing and working on other fuel sources as demand for energy rises and will rise, rapidly. Companies are nimble, capital mobile, and there are opportunities around each corner. In as little as 25 years China might be paying Exxon billions for popup nuclear power plants; Gulf for charging stations or fuel cells. In 25 more it could be their core business.

Racing, thus far, appears to want a slice of sports betting as a subsidy, and there's nothing wrong with that. Protecting legacy industries with regulation and forced commerce is as old as the day is long, and taking advantage of it is not heresy. However, the added revenue from such ventures - like slots provided before it - presents the sport with a choice:  Use the capital to invest and experiment, or use it solely to harvest.