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Variance - The Zen Of Horse Race Betting
- By Charles Carroll

One of the hardest concepts to get across in any kind of gamblingbut especially horserace betting is variance.  Mathematically, it is a little more complex than the gamblers edge I talked about last week.  But, dont worry, I am not even going to try to explain itthis is one of those times its better to look at the phenomenon, rather than the math.

Variance is behind the fact that you can walk up to a craps table and watch a shooter make twelve straight sevens and not see one again for twenty minuteseven though you know, mathematically, there are 36 ways the dice can tumble, and six ways that sevens can be made, so they should appear one out of every six times.  You can be sure that over millions of rolls, that is the ratiobut, in the short term, you can see twelve straight passes.  Variance is the reason amateurs can beat professionals in three-day pokerand horse race handicappingtournaments.

Still, the idea of variance can be really tough to swallow in horserace betting.  One major reason is that we like to think that there is a right answer when we handicap a race.  How many times have you looked back over a set of past performances, and thought, Geez, if Id taken that third speed-line back on the 4-horse.

Well, maybe if you had, you would have won that beton the other hand, maybe you did exactly the right thinggiven everything you knew about that race.

You were right to lose?  Sort of.  You didnt loseyou made the right bet and it lost.  Theres a difference.  Another reason variance is so tough to swallow is that theres a big ego element in handicapping.  If I win a race, I was right.  If you lose the same race, you were wrong.

Did you catch the little shift in there?  Neither of us put on our Nikes and sprinted down the track.  We didnt win or lose a racewe won or lost a bet.  Egos, and the faith that there is a right pick in every race, tend to blind us to one of the keys to profit in horseracing.  The goal of horse race betting is to make money, and the sub-goal isnot to win racesbut to make good bets.

You will know when you have arrived in horse race betting, when you can look at a lost bet and automatically know if there was something you missed in the handicappingthe selection of horses who figured to be in the moneyor, if there was something in the way that you structured your betboth are possibilities that you can learn from and handicap or bet more soundly in the futureOR, if there was absolutely nothing wrong with your decisionand nothing that needs to be changed.

Whatever your approach to betting, whether it is flat-rate Win bets, or some wacky approach to exotics, using an inverse-tetrahedral-Kelly-Criterion, you know one thing with absolute certainty:  you are going to lose bets.  The higher odds you play at, the lower your probability of winning, although the amount you can win gets larger.  (Remember the little edge equation last time? Thats how that side works).  Horse race betting has vastly more variables than Blackjack, so it is far more difficult to convince people that even with perfect play, you can losefrequently, and with absolute certainty.  The trick is to make the scores outweigh the losses.

Once you have mastered your game, you need to develop the Zen of a Blackjack player (boy, theres a twisted metaphornot the dorks at most tablesthe serious players).  Perfect play in Blackjack can be achieved.  A master player knows the percentage on every turn of the card and what the correct response is.  He tries to program himself, like a computer, to make the right move in response to input.  If he makes an actual mistake, he knows it and tries not to do it again next time, buthere comes the Zen:  he also knows that in pure terms, given the percentages of the game and his edge he could make every correct move and theoretically lose for months!  Since horse racing has vastly more variables than Blackjack, you would have to be a major bliss-ninny to take that big a series of losses with a Buddha smile, believing you are making right betswithout questioning something about your play.

So how could I prove that this can happen:  perfect horse racing betsresulting in a string of predictable losses?

I cannotit is impossible to prove directlythere are too many variables.  It is a very rare race indeed where you cannot look back with the wisdom of retrospect, and say in your best Chris Lincoln voice, Well, clearly if I had taken the third speed line before the layoff.  But, my point is that, given what you knew before the race, your betting decision might have been exactly right.  We have to learn to distinguish between legitimate learning experiences, and the red herrings of retrospect.  These red herrings often turn up as rules and spot plays.

Tom Ainslie said it years ago (in his masterpiece. Complete Guide):  A longshot wins a race.  A disappointed bettor consults his Form and discovers that the longshot had been timed in 36 seconds in a breezing three-furlong workout a couple of days ago.  No other horse in the race had worked so rapidly so recently.  Powie!  A new system is born!

How can I prove that a lost bet is not necessarily either a mistake or the basis for a new system?  Many years ago, I had a great science teacher named Nello Allegrezza, who told me if I could not solve the problem, try solving the opposite problem, and see what you can learn.

So, whats the flip side of variance?  How about if somebody did everything wrong and won?  That would be indisputableno need to go back and search through the fish pile of reasonsthey just plain WON.

I suggest you seat your handicapping ego in a lotus position while I rest my case with the following (from Thoroughbred Quotes, Thoroughbred Times, February 26, 2000):

I dont know anything about horse racing.  I dont know anything about the odds.  I dont know anything about this.  I picked up the sheets with the horses names on it and I bet the names I liked.  There was also one jockey I bet with my name, Sellers.

This was Audrey Louie-Sellers telling Daily Racing Form how she defeated more than 270 other participants to claim first prize and $56,855 in the Flamingo Reno Winter ChallengeHer brother entered her in the tournament in return for babysitting his son during the contest.

(Footnote:  If you understand variance, this is an absolute hoot and confirmation of its powerbut, unfortunately, the owners, trainers, and breeders who read Thoroughbred Times have never heard of it, so their long-standing image of us handicappers as pathetic dweebs rocks on.)