- By Charles Carroll

Since this is the beginning of a new column it might be good to start at the beginning and talk about why we are mixed up in this handicapping business, and why horse race betting works so well in the much wider world of gambling. The answer is found in The Second Law Of Gambling.

There are not many laws
in horse race handicapping, and
handicappers who have been around a while are fond of saying, The only
rule is there __are__ no rules. This is
certainly true when
you get down to the handicapping process and start trying to decide
things like how to treat a 30-day layoff, or whether or not to take the
first pace/speed line, fastest pace/speed line, or any of the other
variables we face in each and every race. These types of
decisions are based on knowledge gained by hard-won
experience.
They are situational in the context of each race, and there is no
rulebook.

One of the first things
to get past is that handicapping is
the goal. Making money is the goal and the two are not the
same. I'm not all __that__ old, but in my
middling lifetime,
I have seen the sport change from an era when handicapping could in
fact be the goal because odds were shaped in favor of my style, and
short odds on some wins were offset by easy, decent odds on
others. So, for a very long time (*like the early
seventies
through the early nineties*), I didn't have to look much
beyond
simple horse selection. It wasn't until the Beyers were first
published and every nincompoop who could open a **Form**
had decent
figures that drastically cut into my speed handicapping edge, that I
saw a big enough slump in my bottom line to ask what every
selection-oriented handicapper does sooner or later: *Damn!*
I'm a good handicapper. Where's* my profit?*
The answer was
that I was almost totally focused on __handicapping__
and even
though, by then, I really did know better I was not moving quickly
enough in realizing that the game is __horse race betting__,
not
picking winners. (This is group-therapy, so Ill be brutally
honest: I was __worse__ than that one of my
biggest giggles
was to select all three money horses in order __and__ *predict
the lengths apart at the finish blissfully* ignoring the fact
that
in many situations, trifectas can be the worst underlays on the
board. I'm pleased to report I got well.)

Horse race betting is the
game, and making money is the
goal and this would be a fools errand, __if it wasn't for one
fact__: *if you play the game right, you can
develop a positive edge*.

I promise not to do many
formulas (my fingers are only a
little crossed), but the absolute beauty of The Second Law Of Gambling
is that it is a pure mathematical certainty. Not that you
will
win but depending upon how you play you__ can achieve a positive
edge__.
Remember, were talking about *gambling* here, and
that fact
should be front-page news. If a casino suddenly announced a
rule
change that turned the natural edge of the crapshooter from negative to
even a *minuscule* positive one, there would be
bedlam at their
tables. If the horse racing industry ever figures out how to
market this fact well, racing might take off, but don't hold your
breath. The third- or fourth-law of pari-mutuel betting is
that __the
crowd is fundamentally lazy which__* is great for your
edge but*
bad for marketing something that implies that you might have to __work__
for a living, even at gambling. So here is the Second Law,
which
makes horse race betting the most attractive form of gambling there is
(excuse the absence of really cute math symbols, which aren't available
in Web fonts):

E = Dr x Pw R x Pl

In plain English, this
says that your edge is equal to the
amount of money you can potentially win, times the probability of
winning, __minus__ the amount of money you place at
risk, times the
probability of losing.

I wont test your
patience by plugging in numbers you can if
you want but take my word on two things: 1) it __can__
be
positive for horse race betting, and 2) __the actual edge for
even
strong players is probably a hell of a lot less than you think__.

We've all seen people
toss around hot numbers like 25% ROI,
(now, *theres* a useless concept) but, at any rate,
we have
cultivated the myth that strong players have __big__
edges of some
sort or another. The fact is that even __very__
strong
players are playing in the +/-__3% edge__
range! (__Edge__,
remember, not ROI.)

So why should this be front-page news? Because, with mathematical precision, you can plug in the facts about other forms of gambling and prove the obvious: virtually all other forms of gambling have a negative edge for any player regardless of skill, knowledge, or bankroll.

- Craps
proposition bets range from
*minus*9% to*minus*17%! - Roulette
=
*minus*2.63 - Craps
pass line =
*minus*1.41 - Blackjack
basic strategy =
*minus*0.4 - Blackjack
Card Counting =
1.5__positive__ - Horse
race betting =
3+/-__positive__ - Poker =
% depending on skill__positive__

Of all common forms of
gambling, only Blackjack card
counting, poker, and horse race betting can show an edge *in
favor of*
the gambler. But guess what? If you become a
Blackjack
genius and actually show that tiny positive edge in Las Vegas, two
former linebackers from BYU will arrive at your table and escort you
politely to the street. In horse race betting, the
pari-mutuel
clerk could care less! Not only that, you can actually *monkey
with the equation* to improve your edge! Try __that__
at a
table game in Las Vegas. [Note that horse race betting and
table
poker are situational and exact edges cannot be calculated, as they can
with the strict rules and known possibilities of the other games.]

Please take a look again
at the equation. To make your__
edge bigger__, *all you have to do is make the things
on the left
of the minus sign bigger and*__/or make__*
the stuff on the
right of the minus sign smaller*.

Whats on the left of the
minus sign? The amount of
money possible to win your__ odds__. And, your
probability of
winning your__ handicapping__. Whats on the
right? The
amount of money at risk your__ bet__. And,
your probability of
losing(simply the remainder after your probability of winning).

Probably the most
overlooked elements of the equation are on
the right of the minus sign avoiding__ and minimizing losses__
(or
at least making losses work for you by gaining some insight that
increases the left side for future bets).

*Everything we do in horse race betting is wrapped in that little equation*. If it were not possible to make E become positive, a more lucrative horse-hobby might be trading horse action figures on eBay. Since it

__can__be made to come out positive, in future columns

*we just have to worry about four little things*: improving handicapping, improving odds, improving betting strategies, and decreasing losses. This shouldn't take very long.