For Those Who Seek Change, Reality Really Bites

Two of the more strange, weird, wacky and asinine policies in horse racing involve uncashed ticket revenues and breakage.

Uncashed tickets from you, the customer, happen when you forget to cash a 25 cent voucher, tear up a ticket, or take one home from the track and don't get back to cash it in time. Breakage involves taking a tote price down from say $2.57 to $2.40.

It has been proposed time and time again, that uncashed ticket revenue be returned to its rightful owner, in some form. This could be done through a seeded pool, player rewards, or what have you. It's also been proposed that breakage be eliminated. The technology is not only there, it's been there for 40 years to pay to a penny.

Both should be slam dunks.

But when you dig deeper, reality bites. Horse racing is like congress. Everyone has a finger in the revenue pie somewhere, so bad policy can keep right on rolling on.

Take for example, California.

The state used to get a portion of uncashed ticket monies, but in 2009 that was changed. No silly goose, not to right a wrong and give that revenue back to you, but to give that revenue to people who lobbied the law to be changed. Last year, $986,678 of your uncashed ticket cash went to a horsemen fund. $1,681,759 was given to purses, and the track, each. Further, unclaimed refunds went to jockey's, and this amount totalled, $871,311 (source 2013 CHRB Annual Report).

Breakage, the thing that happens because a horse racing Commodore 64 can only round down, yielded a tidy sum of  $5,272,744. This money went into purses and into commissions, like the CHRB.

Let's say me or you - and someone smarter than me or you - put together a business case. Handle would go up by 10% over three years, and revenue would go up by 5% over three years if breakage was eliminated. In addition, if uncashed money was given back through seeded pools, this carryover (takeout reduction) would yield a handle bump of 5% and a revenue bump of 2%.

So, the jock's would get more money than they received from the old policy, so would purses and the CHRB. Yippee, right?

Well, it would not pass. Never. Not even close. You'd have a better chance to hit one of those Frank Stronach triple superquadrefecta's he talked about a few years ago.

Money that is earmarked - even if you can prove there would be more money in the future - is too strong. It's good old-fashioned entitlement.

That's why reality bites. That's why horse racing stagnates. And that's why trying to change it is an exercise in futility.

Those Dreaded Losing Streaks

Much has been talked about regarding the similarities of daily fantasy sports and horse racing betting. I agree more and more each day.

After several months of normally distributed results of my play in DFS, I am currently in the middle of what we've all been in the middle of with horse racing - a losing streak.

It feels remarkably the same. You are looking at a set of players (a horse), who on paper is exactly what you want to see (good trainer off a drop, looks great on the track, good early speed, chalk is a deep closer from a hot overbet barn) so you bet it. And the team stinks (you sent the horse to the scope barn).

This breeds the usual doubts: What am I doing wrong. I can't pick a winner even after the race. Has the track changed? Is the CIA plotting against me? It's like you know you are going to lose before the race is even run.

Usually a streak can be explained with math. When you are betting a 50/50 proposition, it can go against you for a perfectly acceptable streak. There are formulas for it, but anecdotally, this was exemplified by a famous stats discussion in a university long ago:

A professor asked a group of students to write down what they thought 20 coin flips would be, and another group would flip a coin and write down what actually happened. In reality there would be streaks of HHHHHTHT, but for the students who were writing down what they thought would happen, there were never any streaks.

If you are betting 5-1 horses, this streak can be deadly long (they higher the odds of the occurrence, the longer the potential streak), even though you are doing nothing wrong.

If you analyze that you are doing nothing wrong, there are a few prescriptions for this madness.

i) Take a break
ii) Bet Smaller
iii) Concentrate on high hit rate bets i.e. bet WP small for awhile, then move on to exotics when you feel more comfortable

The past couple of days I have concentrated on ii) for my DFS betting. I am sure my line combo will click, rather than watching another line combo on the same team I was going to use click. I am sure the horse team I am concentrating on will not be sent to the scope barn tomorrow, or the next day. I'm pretty sure my coin flip players will flip my way. It'll change.

But for now, just like in horse racing and just like in any other gambling game, the dreaded streak really, really sucks.

I'm With Stupid & It's a Killer

"Customers are stupid" is a familiar refrain, or lament, in some businesses; and those businesses usually have one thing in common: They are failing.

Seth Godin today listed ways to make your customer feel stupid. Because of this, they tend to leave and never come back, or don't purchase in the first place. I'll list a few of his rules and offer some thoughts to them as it pertains to horse racing.

"Collect money as though you're in the long-term relationship business, but in every other way, act like you don't expect the relationship to last."

This is like getting a split fingered fastball that's not split or fast; an easy one to park. We love you very much, and despite us signing a billion dollar slots contract, your concession prices are going up, takeout is being hiked, we're adding new ADW taxes, and please give me $1,200 for Derby seats. I know racing's demographic is not young, but a few people might be around for at least a couple years to remember how they're treated. If you try to build a relationship instead of hijacking it, it might actually last.

Talk about your customers (students/clients/members) behind their back in a way you'd never talk to their face

A 54 MPH knuckler that doesn't knuckle. There are database geniuses, business owners, Phd's, professionals and many others playing this game. Some of  the board of the Horseplayers Association are business turnaround specialists, work in corporate America, developed marketable software or have run successful enterprises. Yet everyone is a dumb bettor who doesn't get it. It's stunning, and no I am not being too harsh. This business doesn't just speak poorly of customers behind their back, they do it right to their face. 

Assume the worst about a customer's intent, intelligence and background.

See above. Customers want the business to search for optimal takeout rates, for example, which will increase purses, handle, and make horse racing healthier. And we're the bad guys?

Charge different prices at different outlets and shrug your shoulders when you get found out.

Want lower takeout in California? Show them you bet $1M a year. And don't tell anyone. If you say "I bet $400,000 last year but would easily bet $2 million with lower juice", see above: You'll be called a dumb bettor who doesn't get it. 

Give your customers a product, idea or service that causes them to be ridiculed or shamed by people they hope to impress.

This one is too easy. The greatest gambling game ever invented - a game that if you can beat you'd likely do well on Wall Street, poker or any other "glamorous" pursuit - has been relegated to "you can beat a race but you can't beat the races". The people in charge did that, and it's sad. 

Horse racing does not have a purse problem. Purses are up the last twenty years. It doesn't have a revenue problem either; those slot machines are humming like never before. What racing does have is a customer problem. That problem won't go away tomorrow or the next day, but it can at least start to get better. If you have a track or run a horsemen group, read Seth's blog. Digest it, think about it and understand it. And start putting it into practice. That's free advice from a dumb bettor.