Turning a Small Edge Into a Big One
Many folks believe that the only way to win wagering on horse racing or other sports is to eschew smaller edges in favor of larger ones — a twist on the Wall St. dictum to “buy low and sell high.” Such advice sounds good and, when coupled with some gibberish about money management, often leaves bettors frothing at the mouth, ready to tackle that pick-6 carryover or play that monster parlay with gusto.
Yet, as I noted in my last column, bettors with an advantage (this is a key word) over the house or crowd will invariably fare better if they simply exploit that advantage rather than try to increase it through “clever” wagering strategies.
Despite what you may have heard, most — if not all — pro bettors make their living selling hamburgers, rather than fries. In other words, they operate on a small profit margin — but one that allows them to grind out profits over the long haul.
Of course, we’ve all heard the claims from various touts boasting of 70 percent winners against the spread (ATS), but a simple peek at the math shows the absurdity of this.
In five separate 1,000-game simulations starting with a $10,000 bankroll and betting just half of the 37 percent Kelly advantage that a 70 percent win rate against a standard -110 line entails, the average winnings topped (cue Dr. Evil)… $15.5 million dollars. And that was with a $50,000 maximum bet limit, which was generally invoked before the 100th wager.
Now ask yourself: Why would anybody with such an enormous edge be selling picks?
Adding another nail to the coffin of such an outrageous claim, the folks at SportsInsights estimate that the probability of any random person maintaining a 70 percent win rate ATS is approximately a trillion to one.
However, this is no reason to despair. In his book, “The Signal and the Noise,” Nate Silver discusses the exploits of Bob Voulgaris, whom Silver later called “maybe the best sports bettor in the world.” According to Silver, Voulgaris, who specializes in the NBA, has a 57 percent hit rate, which makes half his Kelly edge a “mere” 4.85 percent.
Still, Silver’s 57 percent success rate leads to average earnings of $640K after 1,000 bets.
Not exactly the chicken dinner that so many sports bettors seem so enthused about (with $640K in hand, one might consider filet mignon and a nice wine).
Horseplayers would do well to learn from these examples. 57 percent winners against a -110 line equates to an ROI of approximately 8.8 percent — hardly the double-digit windfall that so many racetrack punters seek. Note too that this 8.8 percent return on investment is derived from wagering on what amounts to 4-5 shots — again, not in line with what so many horseplayers seek.
The bottom line is: if you have an edge, take advantage of it. While others are overheating at the the thought of a $30,000 pick-6 carryover, you can cool down by fanning yourself with the accumulated dollar bills earned betting solid 5-2 shots to win.