
A Gambler Who Cracked the Horse-Racing Code (2018) - tosh
https://www.bloomberg.com/news/features/2018-05-03/the-gambler-who-cracked-the-horse-racing-code
======
tgsovlerkhgsel
Is there a service that provides summaries of long-form articles like this? I
get that some people enjoy reading prose, but I'd like to know what the
article is actually about. So far, I'm 5 pages in and still not sure what the
insight is.

I really don't care about the decoration of this guy's office, which drugs he
prefers, how his voice sounds, the atmosphere in a horse racing venue, the
outcome of a specific horse race, not even this guy's entire life story.

What was his key invention?

Edit: Skimmed the rest, and it sounds like he was simply good at statistical
analysis.

Other key parts of the article seem to be (remember, I skimmed): It was a
betting system where effectively people bet against each other, not a
bookmaker with fixed odds, so he basically became a bookmaker.

The rest reads like many other "smart gambling" stories:

\- others invested in his operation

\- he first was treated as a good customer, getting an "API" to place the bets
programmatically, then got that revoked as the organizers realized that other
gamblers might not like that he was winning so much (from them, effectively)

Overall, I learned nothing new, and wasted my time reading ten pages of
drivel. This is why I _hate_ long-form journalism: You don't know whether the
article contains any useful information until you've spent half an hour trying
to find it in the description of people's looks, landscapes, weather, and
similar chaff.

~~~
mruts
I guess you hate novels as well? I enjoy long indepth character centered
articles and I think many other people do as well. The point of reading
doesn’t necessarily have to be about acquiring the most information in the
densest representation.

Also if reading the article was a total waste of your valuable time, why are
you commenting about it?

~~~
maremp
This is a poor comparison. I can understand the OP since a title like this
generates interest as in "how did they do it", and I expect to learn something
by reading the article. I won't be reading a novel with this same expectation;
I read it for its entertainment value.

------
deehouie
After more than a hundred comments, I'm surprised no one mentioned this
wonderful book by Adam Kucharski.

The Perfect Bet, How Science and Math are taking the Luck out of Gambling,
Basic Books, 2016

I learned about his book after watching his talk, which is absolutely
fantastic for anyone interested in the math of gambling.

[https://youtu.be/658xlubwnDc](https://youtu.be/658xlubwnDc)

Bill Benter is featured prominently in the book.

~~~
1ark
I saw the talk last year, which was great, but I didn't know he also wrote a
book. Thanks!

------
PaulRobinson
Last time this was discussed:
[https://news.ycombinator.com/item?id=16985413](https://news.ycombinator.com/item?id=16985413)

I've noticed a little uptick in stories about gambling here, I suspect there
is a strain of us at HN interested in sports analytics for financial gain.
Interesting. :-)

~~~
exogeny
It’s sort of amazing that given the fast-moving legalization of sports
betting, there hasn’t been a lot of VC action in the space, either on the
platform side or on the content/services side.

I can count on one hand the number of funded companies over the past six or
seven years, and I can think of only one that has exited. Might have something
to do with vice provisions dictated by LPs, but it certainly seems like a ripe
growth area.

~~~
hogFeast
There are an absolute ton of companies working in this area (mostly in the
UK). But the reason they don't need VC capital is simple...they make a ton of
money already (VC funds are naturally interested in capital-intensive
businesses that are kind of junky...companies in this sector aren't capital-
intensive and are usually obscenely profitable).

~~~
pmart123
I won’t say that’s exactly true. I know Founder’s fund have invested in a
couple. I think the need for scale limits VC funded options to companies that
are building things like a gambling exchange, but at that point, the funding
sources might be better from quant traders/hedge funds as its closer to a
capital markets type business. For instance:

[https://www.bloomberg.com/news/articles/2017-10-30/sports-
ga...](https://www.bloomberg.com/news/articles/2017-10-30/sports-gambling-is-
quant-trading-firm-s-way-to-beat-market-odds)

~~~
hogFeast
The US market is not representative at all. It is basically nothing (and
Susequehana's operation isn't large). Exchanges are cumulatively worth tens of
billions and they are a tiny part of the market. Again, most of the people
involved have no interest in VCs (I know a few people starting exchanges).
They know nothing, and they usually have less money than them anyway.

------
piokoch
"[...] casino security, who were constantly on the lookout for card counting".
Why this is something "forbidden", this isn't cheating, am I missing
something? Anyway, how security can detect that someone counts cards? I assume
gamblers are not doing that aloud.

~~~
GuB-42
Casinos are private properties, they can kick you out for any reason without
having to justify themselves. Playing too well is one of these reasons.

Of course, kicking you out is the only thing they can do. They can't take your
earnings, prosecute you, detain you, or use force unless you resist. Usually
the player will be kindly asked to cash-in and leave.

Security can track your play patterns, your gains and losses. Card counting
result in very characteristic patterns, and if your gains are too consistent
to be explained by chance alone, they are going to watch closely. If you are
just lucky, they will offer you free drinks, if you are an advantage player,
you will be asked to leave, if you are a cheater, you are going to have
problems.

Edit: I think there are some places where casinos can't just kick people out
for no reasons. But anyways, there are ways of making card counting
impractical. The use of continuous shuffling machines is one of them.

~~~
hansthehorse
Card counters increase their bets when the see the deck as favorable. The
casino watches for patterns.

~~~
cortesoft
And in fact, the casino also counts cards so they can correlate your bet
changes with the state of the deck.

------
ferros
It’s truly astounding to see the amount of people that Ed Thorp as well as his
book Beat the dealer have influenced.

The amount of successful people in finance and other fields that mention him
as an influence is not insignificant.

~~~
jmportilla
in case you haven't already, his autobiography "Man for all markets" is great.

~~~
PaulRobinson
Seconded: this is a truly great book, as is William Poundstone's "Fortune's
Forumla" which describes Kelly Criterion: perhaps the most influential
equation in trading and gambling in the history of either.

------
yalooze
It says he's still winning to this day. Makes me wonder if his current model
is using Machine Learning (ML) techniques? Which leads me to wonder how
successful ML techniques are with data rich sources of gambling and whether
there are any syndicates I can join to invest in and let them do all the heavy
lifting... I'm sure there's a whole world out there I am yet to discover.

~~~
kratom_sandwich
But where would you even start discovery? I guess no one with a remotely
useful idea wants to share it ...I did a bit of Googling after the article
came out last year and apart from a few research papers and that Wired article
about Joan Ginther, not much comes up.

I'm surprised he is openly talking about everything, but I suppose many others
have caught up and there's not much to lose ...

~~~
yalooze
Yeah, that's the conclusion I am coming to as well. The people with good
models aren't going to talk about them. Even if they need investment they'll
seek it privately. I guess I was thinking of a market where you can 'invest'
your money in someone's model and they take a percentage of your winnings
(that's their incentive for adding your money to the pool). Then it's a
democratised race for whoever has the best model.

~~~
foxhound6
In horse racing where the bets are done via parimutuel[1], the challenge is
that there's an upper bound on how much you can "invest" in a given wager
without changing the odds. This makes it less likely that an expert will seek
outside investment unless their model has them betting "wide" (lots of small
bets vs. a few large ones).

[1]
[https://en.wikipedia.org/wiki/Parimutuel_betting](https://en.wikipedia.org/wiki/Parimutuel_betting)

~~~
PaulRobinson
Not everywhere does Parimutuel - the UK and Ireland for example have basically
rejected it despite massive investment into on-course "Tote" systems.

~~~
phillc73
Is there any hope for Together for the Tote?[1] I like to dream there is
sometimes.

[1] [https://www.togetherforthetote.com](https://www.togetherforthetote.com)

------
joncrane
I want to make it clear I'm not advocating for any action with this post, but
it did make me curious. Given the parenthetical of this article

>After costs, the Jockey Club’s take goes to charity and the state, providing
as much as a tenth of Hong Kong’s tax revenue.

and previously,

>Hong Kong’s population was then only about 5.5 million, but it bet more on
horses than the entire U.S., reaching about $10 billion annually by the 1990s.

Isn't horse racing gambling a ripe area for the Hong Kong protesters to
disrupt?

~~~
Mikeb85
Disrupting HK's economy hurts HK, not China. China will gladly let HK devolve
back into a fishing village.

~~~
seanmcdirmid
A lot of international companies are in China and the rest of Asia via HK.
Sure, they can move to Singapore, but China will invariably lose something.

~~~
Mikeb85
Yes, some will move to Singapore, others to Shanghai. They won't stop doing
business with China. They'll just move out of HK.

~~~
seanmcdirmid
Those companies that could tolerate the conditions of operating directly in
the mainland already have moved there, and they won’t be eager to move now
given all of Xi’s backsliding. China is actually approaching a point in world
relations that hasn’t been lower since 1989.

------
deehouie
Since there's a lot of machine learning folks reading this, let me mention not
too long ago, there was a kaggle competition on horse racing. The dataset is
from Hong Kong Jockey Club, which is still available here

[https://www.kaggle.com/hrosebaby/horse-racing-dataset-for-
ex...](https://www.kaggle.com/hrosebaby/horse-racing-dataset-for-experts-hong-
kong)

------
tahorse
Yes these systems work. How they describe it is basically correct, although a
lot more sophisticated. They are big operations, I've been employed by one.
I've met names in that article. And that's all I'm saying. :-)

~~~
deehouie
What is considered to have "worked". What kind of variance and drawdowns. How
do you know it's not just luck -- just want to be provocative here.

~~~
tahorse
Large org, existed for 10-20 years, 100-1000 employees, worldwide offices.
Either worked, or had someone chucking some serious money at it for years down
the drain.

~~~
deehouie
I like this perspective : "chucking serious money down the drain" :)

------
gandalfian
Money laundering? Boastful lies? The truth? Probably never know for sure. Fun
read anyway, wouldn't get carried away mind.

~~~
PaulRobinson
HK racing authorities have been all over him for decades - no money
laundering, and no lies, his story all checks out.

~~~
phillc73
He wasn't the only one either.

Other big names from around that time include Alan Woods[1](mentioned in the
article), Australian Paul Makin[2], Rod Dufficy (also Australian)[3], the
Manuel brothers from Adelaide[4] and the Eddington brothers from the UK.

[1]
[https://en.wikipedia.org/wiki/Alan_Woods_(gambler)](https://en.wikipedia.org/wiki/Alan_Woods_\(gambler\))

[2] [http://www.thoroughbreddailynews.com/paul-makin-
dies/](http://www.thoroughbreddailynews.com/paul-makin-dies/)

[3]
[https://www.wired.com/2002/03/betting/](https://www.wired.com/2002/03/betting/)

[4] [https://www.theage.com.au/sport/racing/big-names-take-a-
punt...](https://www.theage.com.au/sport/racing/big-names-take-a-punt-on-
global-gambling-20030426-gdvlqy.html)

------
deehouie
More on Bill Benter. From what I heard, his model had worked well for a while,
then faltered. It suffered large drawdowns, which is typical of machine
learning models on behavioral data with feedbacks. The betting patterns
could/have changed in response to the model predictions.

------
shocks
If you find this interesting, live in London (or are willing to move), and
want a job - email me.

------
Terretta
> _A breakthrough came when Benter hit on the idea of incorporating a data set
> hiding in plain sight: the Jockey Club’s publicly available betting odds.
> Building his own set of odds from scratch had been profitable, but he found
> that using the public odds as a starting point and refining them with his
> proprietary algorithm was dramatically more profitable. He considered the
> move his single most important innovation, and in the 1990-91 season, he
> said, he won about $3 million._

The article suggests he came up with arbitrage vs. other bettors in 1990, a
kind hedge fund for horse racing “without precedent”.

On the contrary, my college roommate and I had _Dr. Z’s Beat the Racetrack_
from 1987:

[https://smile.amazon.com/Dr-Beat-Racetrack-William-
Ziemba/dp...](https://smile.amazon.com/Dr-Beat-Racetrack-William-
Ziemba/dp/0688072216/)

> _Benter had achieved something without known precedent: a kind of horse-
> racing hedge fund, and a quantitative one at that, using probabilistic
> modeling to beat the market and deliver returns to investors._

In fact the 1987 edition was even preceded by _Beat the Racetrack_ by William
Ziemba from 1983, a decade earlier than the innovation described in detail
here:

[http://www.betfairprotrader.co.uk/2012/05/beat-
racetrack.htm...](http://www.betfairprotrader.co.uk/2012/05/beat-
racetrack.html)

From the book blurb:

 _William Ziemba and Donald Hausch explain the fundamentals of track racing
and show how patterns of public inefficiency in betting pools can lead to you
reaping big payoffs. Rather than focusing on the complicated details of
thoroughbred handicapping, the groundbreaking “Dr. Z” system offers
mathematical models based on stock-market analysis._

 _William T. Ziemba is professor of management science at the University of
British Columbia, Vancouver, Canada. He is an expert in operations research
and portfolio management and has served as consultant to the Canadian
government on lotteries and pari-mutuel betting systems. Donald B. Hausch has
a doctorate in managerial economics and decision sciences from Northwestern
University, and is currently teaching in the School of Business at the
University of Wisconsin, Madison._

------
incompatible
I believe David Walsh did something similar in Australia. He eventually spent
his winnings on building a gigantic art museum (MONA) in Hobart.

------
ttul
[https://outline.com/sfXdYZ](https://outline.com/sfXdYZ)

------
skizm
"Calculated Bets" by Steven Skiena is a pretty good read if you're interested
in this stuff.

~~~
kgwgk
I was just thinking of adding a comment about that book and the next comment I
saw was yours! What are the odds? :-)

(Actually I didn't remember the name of the book, but I remembered the author
and the jai-alai player in the cover.)

------
paulpauper
i'm sure this is being done now for every possible sport and location.

~~~
Scirra_Tom
Met a professional football (soccer) better in a gambling convention here in
the UK a few years back. He had a small team of AI computer scientists.

Told me his average bet size was £100,000, and his edge was in the region of
~1% (EV of £1,000 per bet). Interesting guy but you have to have a huge amount
of cash and real belief in your model to ride out the variance!

Pretty sure he wanted to bet bigger but there was an issue with available
volume.

~~~
PaulRobinson
The only place he's going to be able to get that size of bet on is on the
exchanges, and even then it's going to be a struggle for many games. I'm
guessing he's sticking to EPL games or Champions League, which means he has to
be super, super sharp.

He'd actually make more money by betting less and looking to the smaller
markets, I expect because the edge is likely multiples of 1% there. Strange
that he hasn't.

~~~
hogFeast
No. You can bet multiples of £100k on the Asian books. There are people
putting down millions on CL games with no issue (you can put down £100k+ on
the Championship ffs). Exchanges represent a tiny fraction of the market (and
only mugs bet on the main ones, you need to go through a white-label to get
decent commission rates..again these are usually run by Asian bet brokers).

1% is also a fairly decent ROI. What you are missing is that you compound at
1% weekly. And if you are putting down bets on other leagues with a higher
ROI, you are likely making well over 50%/year.

~~~
PaulRobinson
On that level of throughput, even on the main exchanges, they'll be paying 2%
max, and perhaps less. Betfair's Premium Charge might be an issue, but a
discussion could be had I'm sure, for that level of liquidity.

Going through the Asian books has problems. You're basically dealing with
money launderers. Would you be happy to trust that process and team on £100k+
sized bets?

And I did not "miss" the 1% compounding. I get it. I do it myself. At 1% per
game, if they're doing EPL, Championship, 2-3 other European leagues and CL,
they should be getting 300% or more per year return, which means the £4m-£5m
capital they have today to work be able to make those bets (minimum), will
make them £10m profit in the next year.

If they are actually hitting those numbers, the Asian books will shut them
down. If they are not hitting those numbers, well, they're not getting 1% per
game.

I would strongly advise you don't take the stories people tell you in this
area as direct, god's honest truth.

~~~
hogFeast
You don't seem to understand how or why Asian books exist (which does explain
your odd views). You aren't dealing with money launderers (the only reason
they have that reputation is because the Chinese govt calls people who buy
foreign currency "money launderers" because buying foreign currency is,
mostly, illegal), you are dealing with the biggest bookies in the world (they
are far bigger than any in the UK).

And they are happy to do business with winning players because they aren't
like UK books. UK books make markets on ML, that means they don't have a
balanced book, and therefore need to take risk. Your only edge as a UK bookie
is, therefore, marketing and finding enough mugs.

Asian books mainly make AH markets, this means a balanced book, and their only
aim is to make the overlay as a commission. This means that they need sharp
bettors to come in and move the line. They lose money on bets with sharps but
their lines are now efficient so they make it all back and then some. All the
biggest books (Pinny, SBOBet, etc.) do this. And some of them actually open
lines privately for sharps to bet on before they go public (this is how
StarLizard gets so much down, Tony Bloom used to work at an Asian book).

Btw, most of the large UK books trade in Asia too. It is the epicentre of
betting in the world. They don't shut down accounts. It isn't money
laundering.

Also, you appear to know nothing about Betfair too. Betfair white-labels
through bet brokers to offer lower commissions to big bettors (I don't use
Betfair but I know these deals START at 2%, no premium charge). No
professional goes through Betfair directly.

Your maths for the ROI is also wildly inaccurate. Basic. I'll leave it to you
to work out why.

Less conspiracy theories pls.

------
ec109685
It never really explained why they couldn’t collect the Triple Trio. Why was
it unsporting to cash that in, but not other bets that they placed?

~~~
ohyea
They kind of did explain it. If they cashed it in then there would be coverage
about who won it and the fact that they were American and were placing bets
with a system would have surfaced. So basically they could make more money by
continuing to slowly siphon money off then they could with a big win like
that.

------
rmena123
Anyone dumb enough that would like to take on a project like this? Email me :
rmena123 at gmail

------
apta
Gambling is another destructive practice that should be outlawed completely.

------
JeanMarcS
> Hong Kong racing uses a parimutuel system.

I was surprised to see this word.

It’s from French pari mutuel that can be translated « mutual bet »

The official horse racing agency in France is called PMU (for Pari Mutuel
Urbain, or urban mutual bet)

It’s fun how words move from a language to another.

~~~
JJMcJ
The term is used in the United States and elsewhere.

------
mruts
Another untapped market is political betting. I go with a low-risk low-profit
strategy that involves a rolling strategy of buying 98 and 99 cent markets
(the status quo) on PredictIt. Not very hard to make a 50% annualized return
with this kind of stuff. You gotta use multiple accounts though, since you can
only put $500 on a single market.

~~~
hogFeast
Not untapped at all. There are guys who run their own polls to get an edge on
political bets. One guy actually runs his own polling company now (Survation).

There is a big edge...if you have info about what polls will say before they
come out, etc.

~~~
patrickk
More info about Survation, some of Nigel Farage's pals made quite a tidy
profit off the fall in the pound after the Brexit referendum:

[https://www.bloomberg.com/news/features/2018-12-21/for-
farag...](https://www.bloomberg.com/news/features/2018-12-21/for-farage-and-
brexit-pollster-a-world-of-gamblers-and-gambling)

