[Ted Craven]

In this final extract from The 5th Anniversary Follow Up Issue #25, Dick Schmidt addresses some important issues: higher hit rate and lower average mutuels versus lower hit rate (i.e. 'losing more races') but higher mutuels. Also, and directly related - fear of losing as a paralyzing factor and prime inhibitor to professional level play.

I would say these lessons are as relevant today as 20 years ago! Enjoy.

Do You Need To Lose More?
by Dick Schmidt


"You know, what you need to do is work on your losing percentage. You’re trying to win too many races."
- Dick Schmidt

The above is one of those smart aleck, offhand remarks that get tossed off in conversation at seminars. Even as I said it, I knew it sounded bizarre, but at the same time I knew it was good advice in this particular case. The fellow I was talking to was winning a huge percentage (75 or 80% as I remember) but not making any real money.

Because I liked the phrase for its shock value, the conversation stuck in my mind. During the Master classes in Las Vegas, where Michael and I monitored the betting performance of each of the participants, I noticed, the same pattern repeated by many in each group. It would seem that this was a more universal problem than I thought. Then, just recently, I received the following letter. Apparently my flip remark struck home!



So what could possibly be wrong with winning a lot of races? Am I saying it is really possible to win too many races? In a way, yes I am. By focusing on win percentage rather than actual dollar profits, many of us in the Methodology have lost sight of the real goal we all should share: making significant money through handicapping.

The heart of the problem is an interesting dichotomy that I and others have observed over the years; the higher the win percentage, the lower the average mutuel. The inverse is also true; a lower win percentage tends to be offset by a higher average mutuel. This applies both to handicappers and racetracks. Of course, it isn't by any means an absolute rule; at times things can go gloriously right or horribly wrong, but over time this trend tends to prevail. The intriguing thing is that two handicappers can attend the same races on the same day and experience opposite ends of the spectrum.

I think it is a matter of focus, and of losing sight of goals; together with a heavy overlay of fear. Fear of losing dominates hopes of winning, especially as bets get larger and more important to our financial status. One client who called me recently in some distress told me that he was trying to be fulltime handicapper, but wasn’t making enough money to live on. He reported that he was winning almost exactly 80% of the races he bet into. How in the world can an 80% handicapper have problems?

Further probing revealed that he was driving that 80% win percentage by limiting his play to 5 or 6 bets a week, two horses per race, and that the average rnutuel was $5.70. Let’s take a close up look at what he has to do to earn a living. First off, he must be very patient, but he’s already doing that. Obviously he isn’t an action junkie. He told me that he split his bet 60/40, and that his low price horse won 65% of the time. He also spent a lot of time grinding himself for his losses. He felt that if only he could eliminate mistakes, he could make it. My question is: how many mistakes can an 80% handicapper be making? In this case, at least one, but not one he was even aware of.

What we have is an individual who makes about 275 bets a year (assuming he plays 50 weeks a year and makes 5.5 bets per week) and has an return on investment of about 21%. That is, using a $5 unit, he’ll win 52 out of 100 races with the low odds horse ($3 bet) and 28 races with the high odds horse. In both cases, the average is $5.70. Actually, it is probably even worse than that, as many of the low odds (big bet) horses must pay far less than $5.70, while the "average raisers" will have the smaller wager almost every time; but let’s be generous. What this means is that for every $500 bet, he can expect a return of $604.

If he wants to make the adequate yet still not extravagant living of say $50,000 a year, he must bet about $250,000 dollars a year, or over $900 a race. This means betting $540 on his low odds horse and $360 on the high odds choice. It also means playing from a bank of at least $9,000 and being extremely self disciplined about taking profits and absolutely unshakeable in betting. Somehow, I don’t think this is what most of us had in mind when we started off to become handicappers.

He also has to factor in the trauma of losing. Sometime during the first two years, he must expect to lose as many as 6 in a row according to the simulation program Dick Mitchell provides with his 5-in-1 program. This means he’ll be down $5400 in a week, and it may take quite a while to dig out with only a $5.70 average mutuel. Given all this, can he succeed? Sure. All it takes is a clear head under pressure, the willingness to bet $900 a race and a track with a handle large enough to take $900 bets. If our handicapper wants to make more money or take off more than 2 weeks a year, he’ll most likely have to move to where he can play New York or Los Angeles tracks.

The reason this fellow called me was that he was trying to make a go of it with $100 bets. This would limit his income to less than $6,000 a year, not what he had in mind at all. Which brings us to the root of his problem, at least as I see it. He is so afraid of losing a bet that he has become super selective. I recently listened to a series of lectures by motivational speaker Anthony Robins on taking charge of your own life. He describes how although humans will go to great lengths to get pleasure (winning), they will go much further to avoid pain (losing). If you want to stop smoking, give yourself a shock every time you see or think about a cigarette (or hire Mr. Schick to do it to you). You’ll soon forget about any pleasures smoking ever held for you and remember only the pain associated with cigarettes.

Racing in a way enforces a similar regime. No matter how sweet the victories, the pain of the losses are uppermost in our minds, and above all else we try to avoid pain. It happens to all of us, and it can creep back into our minds even if we successfully conquer it for a while. Losing hurts, and hurt is bad. It is better to slowly starve than go through such pain every day.

Go back to our 80% handicapper. He is trying to bet on only "sure things." While a bet on a sure thing is fine with me, they do tend to pay rather poorly. Please remember that any horse that the Methodology presents as a real stickout is not going to be able to hide it. Anyone with a Racing Form will be able to see the horse has a big time shot at winning. All the touts and newspaper guys will be pushing it, and the trainer and owner will be talking up the horse to all their friends. With all this grinding down the price, it is little wonder that low prices are the rule.

On one level, the solution is simple and readily at hand. Play more races and use some type of analysis that is dissimilar to that used by the majority of your competitors. In Methodology terms, run a lot of races with K-Gen, ENERGY! or Synergism II, bet 5 or 6 races a day, and bet into those low priced claimers and murky races. Go for it.

On another level, the answer is much harder. The reason that Dr. Sartin has always emphasized win percentage is that he was well aware when he started that he was a voice crying in the wilderness, and that if he didn’t produce immediate results he would quickly be abandoned by those he was trying to help. Most handicappers have such fragile egos that they simply can’t endure the stress of a losing streak. Yet anyone who has even a passing knowledge of statistics knows that "streaks" are a part of any random distribution. Everyone has bad patches and losing days.

In the past few years, things have changed in the Methodology. We have more and more clients who expect to make a living in racing, not just stop hemorrhaging money. Those of you with enhanced expectations need to realize that though the old mind set of win percentage isn’t "wrong," it is outmoded for you. Actually, it was never right or wrong, it was simply necessary at that stage of development; both of the handicapper and the Methodology. Today, many of you are trying to stretch beyond this world view, expanding your horizons to those of professional level play.

What we must come to accept is that losing is part of racing. I can safely say that there are only two types of handicappers: those who admit to having losing days and liars. To move on to the next level of performance, we need to change our perceptions. The metaphor of baseball can serve well here. No one expects a baseball player to hit the ball even half the time. Hitting "only" a third of the time is worth a couple million a year in today’s market. Since it is an expected part of the game, a ballplayer hasn’t failed when he makes out. He has fulfilled part of our expectations. For every hit, there are several outs. Part of the game.

Racing must be approached in the same way. The other side of saying we win 80% is acknowledging that we lose 1 in 5. Therefore, since we expect to lose 20%, we haven’t failed when it happens. This is simply one of the races that we expected to lose when we walked into the track. No one wins them all, and calling a loss a failure and berating ourselves for our weakness is self destructive. What we must try to do is learn that losing is a natural part of racing, and that it is the expected outcome in a great many races. This is not an easy thing to convince yourself of (ask me how I know that), but it is key to the inner peace so necessary to success at decision making.


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