Thursday, 27 November 2008

The only VALUE you got was "NO VALUE"

John the Gambler has quietly joined the debate on value (so quietly that I almost missed his contribution) but here is his contribution in full, taken from his blog.

"Elsewhere on the blogosphere, a raging argument is developing on "VALUE". A lot of gamblers/traders base their activity on this vague notion. The argument goes if you think a horse is 6/1, and you can get 8/1 then you are getting VALUE. When the horse trails in last don't worry, at least you got VALUE.

The only VALUE you got was "NO VALUE". The reason you got 8/1 was the horse was not fancied by connections, the jockey could not ride a bike, or the horse woke up with a sore head after one two many barrels of hay the night before.

The price in the market is the price that reflects the chance of the beast winning the race. Why should you or me think we are brighter than the market. It suggests a certain arrogance based on the belief that "I" know better than the trainer, the jockey, the owner, the odds compilers and Uncle Tom Cobley and all. Pride comes before a fall, and bloggers/tipsters that think they are the "bees knees" of the tipping world have a habit of disappearing never to be seen again till they start up a new blog using a different moniker."

Now first of all, in my opinion, John is completely misunderstanding what a value bet is. He is arguing that if someone offers you 3 to 1 on a coin toss, and you lose, you got "No Value". Absolute nonsense. You had great value, but simply because you are getting value, doesn't mean you will always win. Of course you won't. You will still lose the coin toss 50% of the time. The fact that you lose one outcome does not mean the bet wasn't value. (Ask an actuary how he makes his living!)

What do we mean by value? Value is probability, and if you can get better odds than the probability suggests, then you are getting value, and if you are getting value, then in the long-term you will win.

Sports are not as clear-cut as a coin toss, and the probability of an outcome is a matter of opinion until the result is known. Once you have a significant number of outcomes to review, you can be pretty certain whether or not your opinion of value is right or wrong. John's example of a horse available at 8/1 that in your opinion should be 6/1 is perfect. If you are correct in your opinion, you will still lose 85% of the time. That doesn't mean you weren't getting value, since the 15% of the time you win, you will win big enough to come out ahead. In the long-term you will be a winner.

His statement "Why should you or me think we are brighter than the market?" is frankly astonishing. The question should be "Why should you or me think we can make money from gambling if we aren't brighter than the market?".

The only way to make money from gambling IS by being brighter than the market. By spotting value. By having an edge. It requires patience. Bet when you have an edge, stay away when you don't.

One thing is for sure - you will not make money long-term from gambling if you do not have an edge. The market is not always correct. It is driven by fear and greed, hope and ignorance, and when those emotions are at work, bad decisions are made, and bad decisions mean opportunities for cooler heads.

Too many people seem to think winning at gambling is easy or conversely is impossible. It isn't either, but you need to find an edge to be a winner.

6 comments:

Anonymous said...

Good Stuff Robert.

Excellent value.

You should be charging for this stuff.

TG. :-).

saperduper said...

"John's example of a horse available at 8/1 that in your opinion should be 6/1 is perfect. If you are correct in your opinion, you will still lose 85% of the time. That doesn't mean you weren't getting value, since the 15% of the time you win, you will win big enough to come out ahead. In the long-term you will be a winner."

100% true, that's the gist of gambling

"The question should be "Why should you or me think we can make money from gambling if we aren't brighter than the market?".
The only way to make money from gambling IS by being brighter than the market. By spotting value. By having an edge. It requires patience. Bet when you have an edge, stay away when you don't."

Couldn't agree more!

If one cannot realise the concept of "value", then they should probably quit engaging in betting activities and go for trout fishing.

Anonymous said...

Trout "Fishing" sounds much too easy.

Graeme Dand said...

Robert,

Great post again and I agree 100% with every word of it.

I'm not sure what the Gambler was thinking when he wrote that post but it was easy pickings for you!

I really have nothing more to add to your post.

I'm thinking that I should polish off my blog and get writing about value but it wouldn't do me much good since all my readers have left!

Your blog is starting to fill a little void that was left by mines mate. Keep these sort of discussions going on various things as it does stimulate a great amount of debate.

Graeme

Anonymous said...

Cassini, youve pretty much covered most things brought up already. However, to play Devils Advocate for a moment, in a slight defence of "John the Gambler" he may be (wittinglly or unwitingly) touching on a valid point in part.

Depends on the context/tone/intentions of his original post but it appears he may have a slight chip on his shoulder about tipsters (or at least some of them.)

Quite often, you will see these actions by tipsters defend themselves with the "it was value" argument after they lose. Now this could very well be the case (like you mentioned.) However, unscrupulous or misguided tipsters can use this argument to cover themselves as well. In other words, these particular people (not all tipsters) can and do give the value approach a bad name!

With the right intentions/approach of course, the value concept is completely bona-fide. But apart from unscrupulous individuals, bettors can start to kid themselves by using value as an excuse for losing bets. The problem is only they will know if this is a legitimate reason or they are simply kidding themselevs.

In other words, I can see why some people sometimes (wrongly) see why the value concept is flawed.

As always, whether you got value or not can only be known with full confidence in the context of the long term. Anyone can pick winners and losers at random. Short term results arent a measurement of a bettors skill & judgment both in the positive & negative.

By the way, you summed up the post perfectly with "Too many people seem to think winning at gambling is easy or conversely is impossible. It isn't either, but you need to find an edge to be a winner."

JPG

Cassini said...

"...whether you got value or not can only be known with full confidence in the context of the long term". Very true JPG. I very seldom bet on horses, I think in part because if estimating value in a two-selection event is hard enough, then forget it for a multi-runner event such as a horse-race! Because on my sports bias, I am probably seeing 'value' differently from punters such as John and MOM who are coming from a four-legged perspective.