Saturday, 7 March 2020

In Data We Trust

Continuing with the theme of myth busting from the last post, and neatly touching on the topic of whether (betting) skills learned in one sport are transferable to a completely different sport which some of you may have caught on Twitter, MLB has this interesting article on Michael Jordan's one season in baseball after leaving the Chicago Bulls at the height of his fame and success.

Reaching the top in any sport is hard, and the number of hours required to spend on getting there means that there is little time left to build on any ability you might have in other sports. Athletes might be above average in several sports in their younger days, but to reach the top they need to choose one and specialise.

The (betting) example of Bill Benter is an interesting one with a Bloomberg Article referenced here in May 2018. The article discusses Benter and his partner Alan Woods in some detail, but not so much Robert Moore who had a few psychological issues and committed suicide in 1997.

Moore often wagered up to $2 million per day on horse races and received an annual return of 38%.
That is quite an ROI! 

Hong Kong horse racing is quite different to that in most other countries, with just two tracks and a small number of jockeys, trainers and horses in training. This "closed" racing population, as Benter describes it, offers advantages to modeling over the more usual horse racing environment.  

Betting is also huge here, with the largest horse racing gambling turnover in the world generating an average of US$12.7 million in gambling turnover per race which is six times larger than its closest rival France at US$2 million, while a race in the United States only generates $250,000 on average.

Betting on horse racing in Hong Kong is "ingrained in local culture and is seen as an investment", which it certainly was for Benter and Woods who turned their initial US$150,000 into close to a billion dollars "through the development of one of the most successful analysis computer software programs in the horse racing market". I think the "one of" might be something of an understatement!

Unfortunately when Benter returned to the US and tried his methods at baseball for three years, he could only break even. In my opinion, the Hong Kong horse racing markets in the 1980s likely offered a lot more opportunity than baseball markets in the 2010s. For one thing, computing had come a long way in those 25 years.

The article is well worth a read though as I said at the time. There are a number of lessons to be learned if you are serious about being profitable in betting.

One of the first that jumps out is that it sometimes pays to persevere. Of that initial $150,000 some $120,000 was lost and Benter returned to Blackjack to build up his bank again.

There's a story in the article about the effect of weather on a horse's performance, which although ultimately wasn't helpful, it's the process and lengths he followed to reach this conclusion that offer important lessons.

Determining which of the many variables were useful indicators was of course the key, and as readers of this blog will know, often the most valuable are in plain sight. 

That some data is also key for no apparent reason is also something that Benter has written about:
The author knows of no 'common sense' reason why this factor should be important. The only reason it can be confidently included in the model is because the large data sample allows its significance lo be established beyond a reasonable doubt.
This is the Sumo 15th Round problem, for which ultimately there was an explanation, even if it was elusive. Trust the data.

Benter knew that Kelly is optimal and he also faced the challenge of having his accounts closed when he started to win too much. The $50 million won in 1997 proved too much for the Hong Kong Jockey Club:
The club had come to see the syndicates’ success as a headache. There was no law against what they were doing, but in a parimutuel gambling system, every dollar they won was a dollar lost by someone else. If the everyday punters at Happy Valley and Sha Tin ever found out that foreign computer nerds were siphoning millions from the pools, they might stop playing entirely.
If only Betfair's Premium Charge kicked in at such a level!  

Alan Woods died of cancer in 2008 aged 62, while Benter is alive and well, with other interests but describes himself as a one-trick pony:
Benter also runs a medical transcription company, but it’s only modestly profitable. “I find the real business world to be a lot more difficult than horse racing,” he told me. “I’m kind of a one-trick pony.”
Markets all have their own personalities, and expecting one to behave like another appears to be unrealistic. The influence of some inputs certainly persists, but in general being a successful bettor in one sport doesn't mean you can be in another. At least not without a lot of work. 

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