Are You a Sucker or a Sharp?
There was a twitter thread the other day where one protagonist insisted that "a winning bet can never be a bad bet". When casinos or bookmakers hear this kind of thinking, they put out the red carpet.
What this bettor does not understand is that there are 2 parts to a bet: expected value and variance. Horse racing is decision making under uncertainty. Every horse in the race has some positive probability of winning, some larger, some smaller. If you consistently bet on horses whose odds are below their win probabilities (which, of course, we can only estimate and are never actually "known"), you are betting at negative expected value (-EV) and you will be a loser over a statistically significant sample size. That is the math. It will NEVER change. Casinos are built on this math, and bookmakers drive Cadillacs because of it.
The carrot that casinos, bookmakers, and racetracks dangle out there to attract business on gambles that are -EV for the bettor is variance. -EV bets win all the time. People go on hot streaks at the craps table. You might have read about the guy who bet Tiger Woods at 14-1 with his last $85,000 to win over $1 million recently. These are all WINNING BETS, but they are all BAD BETS. Unless you can control the dice, craps is ALWAYS -EV. The overround on the Tiger Woods bet was close to 150% (the vig was close to 50%. A fair bet has an overround of 100%.)
Bottom line, don't confuse a WINNING BET with a GOOD (+EV) bet. If you do, you are a sucker and you will be a loser over a statistically significant number of bets. Sharps bet +EV. Period.
Now the bad news: unfortunately, we can only estimate our probabilities of winning a bet (where there is no built in -EV like craps or roulette). That is where the challenge or skill comes in. If we, or our computer programs, are better than others in the betting pool, we will find +EV bets. No one said it was easy. (Well, system sellers say it is easy, but they are selling their system because its bet suggestions are -EV). If it was easy, everyone would do it and the +EV bets would cease to exist.
Richard
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