I work for a Scandinavian based betting syndicate. Betting syndicates like ours are investment companies. The investments we make are in the form of bets made on sporting events, rather than trades on financial/equities markets, but the principles that underpin our success are based on the same fundamentals.
The common philosophy among successful betting syndicates, poker players, investors and traders can probably be best summarized by the term ‘value investing’. Making a long-term profit from gambling or investing (which are essentially the same things) requires getting the odds in your favour consistently. It’s about being on the right side of statistical probability. Or getting ‘value’.
This isn’t an easy concept for most to grasp. The vast majority of people who bet on sport chase winners by making predictions. They pay more attention to the thing they are betting on than the price they are getting. They don’t get the logic that a losing bet can be a good bet. They can’t separate the idea of short-term success from long-term profits.
It takes a particular mindset to be able to adhere to the principles of value investing. You need to be confident that what you’re doing is right, and you need to be able to rationalise losers as nothing more than an inconvenient blip.
A bad run of losers is a great test of faith. You need to be able to stick to your principles and be confident of your long term success. And you need the self assurance and contrariness to be willing to go against the crowd.
Here are three people we reckon would be good recruits to our betting syndicate…
The ‘Sage of Omaha’ is arguably the greatest gambler who has ever lived. He bets on the share prices of companies rather than the outcomes of sporting events, but his guiding philosophy is essentially identical to ours.
Buffett is a fully committed disciple of the principles of ‘value investing’. He buys things for less than they are worth. And he sells them for more than they are worth. That’s all he does. And he has been doing it successfully for several decades, mostly through his investment vehicle Berkshire Hathaway. At current reckoning it has amassed him a personal net wealth of $72.3billion.
He always ignores short term trends, and is never attracted to companies because they are fashionable and cool, or have had a spectacular looking recent performance. He looks at fundamentals. And he takes into account the context in which past results have been achieved, and the likely conditions that will affect the business in the future.
Buffett isn’t scared of being wrong. He’s made loads of losing investments. Recently he lost around $1billion on an investment in UK supermarket company Tesco. He lost a similar amount on Wall St investment bank Salomon Brothers. Not even the greatest investor in history wins all the time. In fact he loses on lots of investments. But this doesn’t matter in the big picture. So long as he keeps seeking value, and he’s right more often than he’s wrong then he’ll end up ahead. That is just how we think and operate too.
With $72billion in the bank I doubt he’d be interested in the salary we would pay him, but if he wanted a job at our syndicate then I think we could find a space for him.
By the reckoning of many, Ivey is currently the greatest poker player in the world. He has ten World Series of Poker bracelets and over $23million in live tournament winnings. He has said that if he wasn’t a poker player he would probably do some kind of investing in the financial markets. But if he fancied turning his hand to sports betting we think he would do pretty well.
What makes a good poker player? There are lots of factors that go into the mix, but at its heart is the same fundamental principle – probability based value investing. When Ivey bets on the turn of the River, needing a Spade to make a flush he isn’t predicting that the last card will be a spade. He doesn’t know what the card will be any more than anybody else in the room. But what he does know is that on the balance of probability, if this same game scenario was played out an infinite number of times, then on average he would win more than he would lose. So to bet is ‘value’. He would like the card to be a Spade for sure, but taking the long-term view it really doesn’t matter what suit it is. What matters is that the bet was value.
The principle is simple enough, but the calculation of what betting decisions represent value in poker is part science and part art. Anyone with a decent head for numbers can work out the probability of the River card being a Spade, based on the cards he can see. But to model the value requires some educated guesswork based on the behavior of the other players at the table. Phil Ivey is better at doing that internal modeling than anybody else, which is what makes him the best.
Modelling poker hands and modelling football matches require different inputs and processes, but the basic premise is the same – work out probabilities in order to determine if a bet represents value. We’d be happy to take him on if Phil fancies a summer internship to come and work on some football models with us.
When US President Barack Obama announced live on national television ‘Once again, Nate Silver completely nailed it. The guy is amazing’ it sealed the ascent to super-stardom for this politics and sports blogger/statistician/geek. Silver has ridden the Presidential name-check, and now edits his own ‘data journalism’ website fivethirtyeight.com (which is terrific). He also appeared in a recent BBC Panorama episode on the UK general election polling numbers (which was woeful).
The Obama mention was actually in relation to the Presidential pardoning of Thanksgiving turkeys (don’t ask!). But Silver had come to prominence for his work on predicting the outcome of US general elections, and in particular nailing predictions for all 50 states in 2012.
The methods Silver uses to model elections are broadly similar to the methods we use to model football matches. The inputs are different obviously, but the calculations and output of probabilities are the same. In order to get famous, Silver had to make predictions with his models, but we’re sure he’s smart enough to realise that in professional sports betting predictions are worthless, and it’s just the probabilities we are interested in.
As a New York sports fan Nate is probably currently a lot more interested in the Yankees, Knicks and Jets, than in Barca, Bayern and Man Utd. But as a sports fan, a clever modeler and a former pro poker player we think he’d find his feet with us quickly enough.
And here are three guys we wouldn’t want to hire…..
Shearer was a fantastic footballer, a prolific goal-scoring centre-forward for Blackburn, Newcastle and England. He is the English Premier League’s all-time record scorer with 260 goals, and he got 30 goals in 62 games for England. A true legend as a player.
But he is an awful TV pundit. He was hopeless as a manager, and he doesn’t have the right sort of mentality at all to work for a betting syndicate.
An essential element to being successful as a bettor is the ability to go against the crowd. Almost everybody who bets on sports loses. If you follow that crowd, you will lose too. You have to be able to look past the obvious, and not be scared to bet on things which are unfashionable or seem unlikely to happen. Having a naturally contrary nature certainly helps. You need to see the world in shades of grey, not black and white.
Shearer is a great example of a person who sees only that which is right in front of his face. Such single mindedness was undoubtedly useful as a penalty box striker, but it’s no use in a job where you need to use your imagination to see beyond the obvious.
When Shearer summarises a game he never deviates from being ‘impressed’ with the team that won, and ‘disappointed’ with the team that lost. To him and people like him, the result is all that matters. So goals are all that count. Stats are for geeks who don’t know the game.
We take a different view. If we want to be different from the crowd we need to look at things differently, and look beyond the scoreline. The big problem with analysing football by just concentrating on goals is that football is a low scoring sport. On average fewer than 3 goals are scored a match. So in any single game, the result can turn on a small number of key moments. It often happens that a team can get battered for 90 minutes, but get lucky. Their keeper has a great game, or the opposition striker has ‘one of those days’ in front of goal. And then they go and nick one on the break late on.
In Shearer’s worldview we should be impressed with the team that got battered, because they got the result. A betting syndicate doesn’t see it that way. We think they got lucky. And more often than not, if the game was replayed multiple times they’d lose. Just because they avoided defeat this time doesn’t ‘mean’ anything. It’s just one of the occasional blips you get in the distribution of results in a low scoring sport. Over the course of a season the best teams will always end up winning more than the weaker ones.
Some of our performance models ignore goals that are scored in games, and instead measure teams only by their stats like ‘big chances’ and ‘shots on goal’. This gives us a more rounded view of their actual performance level than simply looking at their goals for and against. It gives us the confidence to go against the crowd in opposing teams whose recent results look impressive, but have actually just been lucky.
Kevin is the Racing Post’s resident stats guru and tipster. He writes stats based football articles and suggests bets based on his statistical models. You might think he would be exactly the sort of person who would fit in well in a betting syndicate, but there are a few reasons why we don’t think he’s the sort of guy we’re looking for.
At a betting syndicate we play with live ammo. As with many things, there’s a big difference between being good at something ‘for real’, and being good ‘in theory’. Being a tipster is not the same as being a gambler. It is an altogether different test of character to place real money on a bet, as opposed to suggesting a bet for other people. It takes bottle, courage of convictions and decisiveness to be a pro gambler. You can’t be scared to make mistakes.
While Kevin writes up plausible justifications for his bets, he also tortures himself (and his readers) with pointless conjecture on what might go wrong for the bet in the match. This is a toxic habit for a bettor to get into. If a trader is so consumed with worries about what might go wrong, his ability to do the job properly is impaired. There is only ever one justification for a bet; the price represents value. When a trader sees value he needs to pull the trigger without hesitation. Pullein is a ditherer.
Kevin is guilty of over estimating odds compilers. He is forever eulogising about how clever bookmaker’s odds-setters are. Having been one of those odds setters myself once, I can tell you that this is a misguided belief. Bookmakers make a profit because of the over-round they add to their prices, and because almost all of their customers are amateurs who bet on predictions not probabilities.
A football odds compiler working for a bookmaker would have to be seriously incompetent to set prices so bad that his firm actually lost money long term. You only need to be fairly decent to do a sound job. For certain there are a few genuinely talented compilers. But most would be unable to turn a profit if you took away their over-round and exposed them to open markets where the accounts of pro punters weren’t restricted or closed by their firms.
Pullein also seems to be believe there is virtue in inertia. He takes peculiar pride in recommending ‘No Bet’, as though this makes him clever and shrewd. It is true that syndicates are patient, only betting when a value opportunity arises. But with many hundreds of football matches going on, each with dozens (if not hundreds) of different pre-game markets offered by bookmakers, there are plenty of value bets out there.
Bookmakers aren’t stupid, but they do make plenty of small mistakes that can be exploited. To write a tipping column in a betting paper and literally be able to find no value bets is limp. There’s a difference between being patient in looking for good opportunities, and approaching a set of fixtures with the pessimistic viewpoint ‘there probably won’t be any value here, but I’ll have a quick look anyway’.
Syndicates need to be selective and strategic, but they also need to be aggressive in seeking value opportunities. Sitting on your hands isn’t an option.
Damian Lyons Lowe
Damian isn’t really famous, but he did recently earn a measure of notoriety for himself. He is the founder and CEO of a polling company called Survation. They conducted a poll of the British electorate just before the recent UK general election, but Damian chickened out of publishing it.
Their poll put the Tories at 37% and Labour at 31%. This was at odds to all the polls that had been published recently by the other 7 major polling companies in the UK. So Damian decided not to publish it. He was worried he would look silly for standing out so far from the crowd. This is known as ‘herding’. Polling companies act like sheep by sticking together, not wanting to expose themselves as different or separate from the rest.
That is lily-livered nonsense that we wouldn’t tolerate for a second at our syndicate. In the event, Damian’s poll turned out to be almost exactly spot on. The real share of votes was 36.9% and 30.4%. But that doesn’t matter. The principle that is vital is that you must have faith in your models and your ability, and then the courage of your convictions to act. Even if it means going the opposite direction to the crowd.
When betting we always remind ourselves that most bettors lose. So we don’t ever want to be following them blindly. But in everything we do we are never scared to be different. We don’t shy from a bet just because the crowd would never back against Chelsea at home, or bet ‘Under’ the goals in a Barca match. We would never ignore our model numbers just because they were different to everybody else’s.
At times the crowd will be right, and we’ll be alone and wrong. But we have faith in ourselves, and the resilience to take some hits and still stick to the principles that underpin our success. We’re comfortable being outliers. We have no place for sheep who follow the herd.
A version of this article originally appeared on Odds-Invest.com. I write betting related articles for them in addition to my day job there.