Variance - The Zen
Of Horse Race Betting
One of the hardest
concepts to get across in any kind of gambling but especially horserace betting
is variance. Mathematically, it is a little more complex than the
gamblers edge I talked about last week. But, don’t worry, I am not even
going to try to explain it this is one of those times it’s 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 minutes even 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 ratio but, in the short term, you
can see twelve straight passes. Variance is the reason amateurs can beat
professionals in three-day poker and horse race handicapping tournaments.
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
Well, maybe if you had,
you would have won that bet, on the other hand, maybe you did exactly
the right thing given everything you knew about that race.
You were right to
lose? Sort of. You didn’t lose, you made the right bet
and it lost. There’s a difference. Another reason variance
is so tough to swallow is that there’s 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 didn’t win or lose a race we 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 is not to win races but to make
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 handicapping the
selection of horses who figured to be in the money or, if there was something
in the way that you structured your bet both are possibilities that you can
learn from and handicap or bet more soundly in the future OR, if
there was absolutely nothing wrong with your decision and nothing that
needs to be changed.
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? That’s 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 lose frequently, 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, there’s
a twisted metaphor not the dorks at most tables the 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, but here 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 bets without questioning something about your play.
So how could I
prove that this can happen: perfect horse racing bets resulting in a
string of predictable losses?
I cannot it is
impossible to prove directly there 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
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, what’s the flip
side of variance? How about if somebody did everything wrong
and won? That would be indisputable no need
to go back and search through the fish pile of reasons they 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
I don’t know
anything about horse racing. I don’t know anything about the odds.
I don’t know anything about this. I picked up the sheets with the horse’s
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 Challenge. Her brother entered her in the
tournament in return for babysitting his son during the contest.
you understand variance, this is an absolute hoot and confirmation of its power
but, 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.)