Repetition Compulsion

A thread appeared on my Twitter timeline on the topic of whether someone can be so bad at betting that money can be made by fading (opposing) their selections.

It's an idea I remember reading about years ago. The argument was that in betting, even negative information is useful.

Just a couple of months ago, I wrote that:

Given that my grandmother would be expected to pick winners at a rate of around 50%, and she's been dead for over 30 years, this didn't seem to be a hugely impossible task.

The fact is that when you are betting on coin-toss events, picking your selections at random means you should break even over the long term, excluding commission of course, which is what ultimately beats most bettors.

Losing intentionally is as hard as winning, as anyone who has tried arbitrage betting with the intent to lose on Betfair and win elsewhere to avoid Premium Charges, will be able to confirm. Well, anyone except Tony Hargraves, for whom the laws of probability apparently conveniently suspend themselves in this regard.

While many people, some successfully, put in a great deal of effort to find value, enough to beat the odds and commission, and become profitable over the long term, it's not clear why anyone would make such an effort to intentionally lose.

As the always interesting @RufusPeabody wrote:

The idea that there are people so bad at betting that fading them — betting the opposite of what they’re on — provides value is preposterous. Yes, the average bettor is worse than a coin flipper (I’d guess like 49.7%) because of biases that they fall victim to, but not by much.

Think about it logically — what talent could someone (ostensibly trying to win) have for picking losers? Where is that skill coming from? And what does that say about the efficiency of the market if that’s possible?

@JFCPicks contributed to the debate that:

Overreacting to recent results is the only thing I can think of that's liable to result in long-term losing. Theoretically, it should be just as hard (if not harder) to lose consistently betting -110 than it is to win consistently betting -110.

Indeed. While this bias should be self-correcting, in my experience there are several markets where it is not. The success of the T-Bone System is based on this bias. 

Profitable, so-called 'revenge', systems aren't successful because the team tries that little bit harder next time out. Their success is because the market is inefficient, the inefficiency due to the aforementioned overreaction by the betting public, and thus the market, to recent results.  

Speaking of which, hopefully some of you are following the T-Bone System again this season, and enjoying one of the longer winning streaks currently (see left). 

The 'official' ROI for straight up bets is 19.4% this season, and for Run Line bets it is 23.9% while to a level stake, the ROI is 20.9%.

There may be one more winner to add to that list, as the Athletics just qualified yesterday at -140 and beat the Tigers by 14 runs, but sometimes these borderline qualifiers drift and don't get counted officially. 14 runs would be the largest margin of victory for this system in over a year - when the Athletics were on the receiving end of a beating in Houston. 

Of course, this inefficiency should disappear, but these biases are persistent little devils, which is good news for those of us who enjoy making hay.

Hot favourites in baseball have performed well in recent seasons as readers will know, and after a losing March / April have resumed their winning ways this month.

Again, this isn't because favourites have a life of their own, and are pulling their socks up and trying harder this month. The success of this strategy is down to the public's resistance to betting on hot favourites in baseball, and the resulting inefficiency that is there to be taken advantage of.

The probability of these returns being by chance? Using a calculator I downloaded some time ago, I believe from Joseph Buchdahl's web site, I get the following.

Run Line:

Straight up:

Interesting how much difference there is between the straight up bets at short odds and higher stakes compared to the run line and its more even odds and stakes.

The numbers actually look too good to be true, and I should probably remove this post and all references to baseball betting, but even if they are correct, not everyone will be convinced by them, and that's a good thing. 

A one-in-a-million probability wouldn't sway some people. 

Matthew Trenhaile woke up after a long nap, more accurately after a long  hibernation, and has resumed activity on Twitter, which is good news. He is well worth following and recommended the BettingMarket web site.

Somewhat relevant to this post are these opening lines from an article there titled: On the psychology of the betting market:

Most punters lose. They are ill-informed, intrinsically lazy, psychologically flawed, impulsive, ill-disciplined, incapable of appreciating the importance of affect to the decision making process and prone to imitative and repetitive behaviour. When punters lose they typically come back for more (repetition compulsion); when they win, they become overconfident and prone to risk-seeking.

Long may this continue.