Wednesday, 2 January 2019

Your Logical Fallacy Is Anecdotal

As I mentioned previously, I found myself dragged into a debate on the topic of whether it is possible to win long-term on UK horse-racing given that insiders are ever present.


It was @lordlard who included me in a response to @SmarterSig tweeting:
@SmarterSig then changed the topic, writing:
I do not agree with his assertion that you cannot beat the market in horseracing using publicly available data
I suggested that:
It’s fine to disagree with me but you should be able to support your assertion with a logical argument. Why would insider trading be unlawful if the public were not at a disadvantage? By its very nature, horse racing has its insiders. Good luck beating their edge long term.
My basic premise is this - Horse racing has always had its insiders as I have written about before. If you are not privileged to such information, then you are at a disadvantage, and have a negative EV. If others know more about a race than you do, the odds are against you. Sure you might win over the short-term, but you are highly unlikely to overcome this disadvantage over the long-term.

SmarterSig claims that he and others are making money long-term from UK horse racing, but anecdotal evidence is limited in value. SmarterSig conceded that horse-racing markets are rigged but wrote that:
My numbers suggest that I am not being lucky
Hardly an unbiased opinion, and the suggestion that there may be skill at work rather than luck remains unproven.

I'm not the only one who is sceptical about the likelihood of overcoming a negative EV long term with no non-public information. Fellow sceptic Joseph Buchdahl joined the fray, adding:
I’m already on record as believing that long term profitability in racing requires some form of insider knowledge. Of course it’s not my field so I may be wrong. 
It's not my field either, because as an outsider, I see the challenge of beating horse racing as similar to trying to forecast a company's financial results. Others with inside (or privileged information) will always know more than I do. There's a reason why insider trading in financial markets is illegal - it is unfair to take advantage of those without access to this information.

If a horse can be backed at a certain price, it's because others more knowledgeable than you aren't interested in it at that price. Is it because they don't know what they are doing, and are missing out on the value? Unlikely, or they would soon be out of business. The only other reason is that it is poor value.

An optimistic attitude is all well and good, but a healthy dose of reality needs to be maintained.

If someone really does have an edge in UK horse-racing, they should soon be very wealthy indeed, if they can keep accounts open of course, and as @lordlard wrote:
Folk quietly making a living aren’t going to be shouting on Twitter about it. It’s at odds with the skillset required.
Quite. Returning full circle to the initial topic of complete frauds, you might expect the lifestyles of supposedly successful traders to be a little more reflective of their reported success than appears to be the case. I suspect that there is a direct (inverse) correlation between how much people talk about their success, and how successful they actually are. 

As unlikely as it is given the completely different structures of the betting markets in Hong Kong and the UK, if someone is 'doing a Bill Benter' in the UK, you won't know them by name. And no, it isn't, and wasn't, Adam Heathcote. 

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