The Pull of Risk Aversion Is Super-Strong

We've written about Prospect Theory here before. In general terms, it's a human element that involves putting a greater emphasis on not wanting to lose something, even when the decision making is not mathematically sound. It's the classic birds in the hand idiom, even though you can have more birds in your hand with a little bit of risk taking.

It's a powerful cognitive bias, and we see it in all walks of life - coaching decisions, betting decisions and elsewhere. In one of my favorite examples, professional golfers are more effective on putts of ten feet when saving par rather than making a birdie. Bogeying a hole is more painful, so apparently their subconscious grinds more.

I was reading about Jeopardy champ James Holzhauer today, and Prospect Theory rears its head in his run as well. Washington Post columnist Charles Lane is one of a number who believes Holzhauer is a "menace" because of the way he plays the game.

"I have nothing personal against James Holzhauer. What I am a little concerned by is the application of, kind of, database-probabilistic optimization to an innocent game show like Jeopardy."

Think about that for a second.

Charles Lane, a former Jeopardy contestant, is mad at James for playing the game right.

Holzhauer is not some sort of alchemist. He's betting optimally, choosing categories at a sequence that maximizes his chance to win, but he isn't doing it the way we would ...... he isn't doing it to minimize risk! That's the way everyone plays the game. They ease into categories, wager daily doubles with the thought of the pain of what happens when the question is missed, not gotten correct.

Even these smart Jeopardy folks use Prospect Theory, and it's so powerful that when someone doesn't use it, it sticks out like a sore thumb.

The warm and cuddly Inside the Pylons - when analyzing ticket structure on twitter - often displays anti-prospect theory: Why use the favorite if you don't like them, because it's mathematically unsound; and other assorted principles. His view is James' - the pain of missing a 4-5 chalk and losing a bet is too much for a lot of people, and if he wants to win, and bet right, that's irrelevant.

It's a lesson we all have trouble with in wagering. But if we want to increase our bankrolls, it's something we have to get a hold of, no matter how hard it is.

Have a nice Tuesday everyone.

That's Why They've Been Loathe to Pitch a Derby Horse

The Preakness viewership numbers are in, and a surprise to probably no one, they were down by a lot

"Saturday’s race segment of the Preakness Stakes earned a 3.4 rating and 5.41 million viewers on NBC, down 29% in ratings and 31% in viewership from last year (4.8, 7.90M) and down 26% and 28% respectively from 2017 (4.6, 7.54M)."

We've heard quite a bit the last few weeks about, "letting the horses decide" versus "a foul is a foul is a foul" when it comes to big races like the Kentucky Derby.

Let's see what the latter choice involved --

• $1.86 million in purse money changed hands
• Syndication, stud value was changed because a "kind of Derby winner" isn't a Derby winner
• Tens of millions were flipped around in the betting pools
• The Preakness Stakes viewership was killed, and it's not small potatoes because that number could be used as leverage for future television rights negotiations, potentially costing the business a lot of money

This was decided by three people in the judges stand. 

This is probably why we see the Ferdinand's or Better Talk Now's or Goldikova's of the world get left up after murdering other horses - as maddening as that may be - while a "foul is a foul" at other tracks, for lesser races. 

The butterfly effect of a Derby pitch is not the same as your average Wednesday at Delta Downs.

Have a nice Tuesday everyone. 

We Can Only Wager On What They Offer (& Sometimes It Kicks Your Style of Play in the Butt)

I was pinged today by Mike on the twitter website about a couple of bomb golfers he liked for this weekend's PGA. I replied offering two bombs I bet at huge odds - Scott Piercy and Pat Perez.

And that got me thinking.

Pat and Scott have, I think, sneaky good form, buttressed by a recent ability to go really low. But, when you think about it, are Scott and Pat likely major winners, qualitatively come Sunday? Absolutely not.

The mindset I have with this angle was borne from the tools I've always used to wager to scrape out some profit.

Playing Betfair from 2003 on, with their deep exchange where I could trade in real time, I didn't need a winner to make money. I needed overlooked bombs who can simply carry their play to the weekend. At that point, if I wished, I could start trading out and going green. It's not about winners, it's about betting a stable of players who are playing well that the public feels aren't potential winners.

That opens up a completely different gambling mindset. Without a tool like Betfair, I probably should not be playing Perez or Piercy outright. But it's a hard habit to break.

The lesson, however, for the growth of betting is not lost on me.

Match-ups, head to heads, group betting - a staple of the modern betting landscape - encourages more play as we see offshore each Derby season.

I might not love a horse in the Derby, but I sure like War of Will to beat Maximum Security (go cash!).

I love a certain pace scenario, and sure I'll bet supers because of it, but why not bet a closer over a front runner H2H to take advantage of it?

I certainly don't like Patch, but he's 100-1 in the markets, should make the Derby, so I'll play and I'll likely lay that off at 30-1 with an exchange right?

These are the exact same questions people have who bet other sports.

Garett Skiba, yesterday on Shapiro's Bet America podcast, noted a couple of head to heads he liked for the PGA this weekend. He didn't go through 10,000 data points or fancy math, he spoke of one factor he uses for head to heads, and it was very simple.

Answering these questions in horse racing does not take a massive learning curve, or a download of 1,000 different betting products, or microscoping a 20 horse field with 10,000 data points either. It just takes some gambling acumen, which, as we see with massive sports betting handles in Jersey and elsewhere of late, is not rocket science.

Churchill Downs - and others - have not embraced offering us this type of play and, in my view, they should be. You can't make a tent bigger if you don't pitch one.

In the end we all have our styles of play, but they key is, it's our style of play. It's troubling in this day and age that we may have to pivot from our styles because the powers that be won't offer us a chance to use them. That's on them.

Have a nice Wednesday everyone. I'm off to cancel my Piercy and Perez bets.