Why Do Trainers Cheat?

Well, 

"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

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.

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.

@EJXD2 @turfpunter @Pullthepocket Used to work for Blockbuster, was almost creepy how much we knew & how to get folks to spend more.

— Steve Crayne (@StartingGateMkt) November 21, 2016

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.