Leveraging Changing Probability

My recent post on Scientia Trading garnered some attention and debate, which is always a good thing.

I mentioned in the last post my issue with stopping after four bets in any one day and thanks to Matthew, who pinpointed for me where I might find Mel's thoughts on this, I was able to hear them without having to sit through almost 8 and a half hours of fluff.

I did start to watch Episode One, but gave up after ten minutes. It wasn't the most motivating of talks. 

Apparently the thinking behind the four bets limit is to avoid burnout, with six spells in a day of watching twenty minutes of a football match too much for him. 

Mel speaks of this 20 minutes as being in a 'high stress situation'. Our ideas on what life events can be considered 'high stress' appear to differ. If I'm stressing over a bet, it's because my stake is too high. Reduce the stake size! Save stressing for the things in life that are actually important. 

Mel's struggles in this area certainly boost my argument that outright punts are the way to go. If two hours of 'work' a day is too much, I hope Mel never gets a job with some real responsibility. Not that he'll ever need a job with a huge edge like this. 

In an attempt to justify this nonsensical four matches a day limit, Mel says:

"When I'm trading, I can't just go out there on a daily basis trying to trade as many times as I can thinking that probability will help me through. Rather, I need to leverage probability as a window of opportunity in which to extract the profits that I want because I know that probability can change and what used to happen in the past was that I would get myself into a situation where I was up, had some profit for the day, and I would just trade and trade and trade because I'm thinking to myself well if I can trade 20 to 30 times a day, look at the profit potential and then what would happen? I would be up £300 or £400, I would be back down to zero and then £300, £400 down in the red and then I would continue to trade because now I'm trying to get myself back to break even and before you know it I'm mentally fatigued and I end up with a loss for the day or break even or just a small profit, and I remember thinking to myself "I can't consistently trade this way on a day by day basis" 'cos of the fact that if I was living on my own, then maybe but I need a much more precise way to trade."

Where do I begin?  First of all, it doesn't appear that Mel is actually trading - rather, he is watching a match "trying to develop a justification" (his words) to place a bet (not a trade, since I haven't seen or heard any mention of exiting the open position). 

"Trying to develop a justification" sounds about as un-scientifica as you can get. Guessworkentia Betting would be a more appropriate name for this endeavour. 

Of course probability changes. The probability of a goal after 83 minutes is one thing. The probability of a goal after say 86 minutes is another. 

What "leveraging probability as a window of opportunity in which to extract profits" means is anyone's guess. Sounds like meaningless mumbo-jumbo nonsense to me.

What Mel seems to be missing is that if he seriously thinks he can hit winners at 2.8 50%-60% of the time, he is sitting on an absolute goldmine, although yesterday he did admit that this is now closer to 50%. It would not be a huge surprise if this ultimately drops to approximately 35.714285%. 

With an edge that huge, (a win rate of 50% to 60% at 2.8) full Kelly suggests staking 36.6% of the bank, and anyone who has been betting for any length of time will tell you that it is palpable nonsense.

Denzillion @bettingMayhem tweeted that:

I haven't seen any reference to 'investors' myself, but presumably these are people contributing to his starting bank rather than subscribers to any service he might be offering.

I'm not sure how an in-play service could work for this situation in any case. This would also beg the question, why would Mel need investors with such a huge edge? Why would you not start with a £100 bank and build it up for yourself, beholden to no one and perhaps reducing the stress he feels. 

Another error Mel made in the few minutes I listened to the webinar was when he was talking about having a "Premium Hand" which is a poker term and totally irrelevant for a discussion about betting on football.  

Mel plays some audio from a trader who basically talks about the importance of maximising your profits when you are trading well, "letting winners run", but this is in the context of trading in one specific market. 

Mel tries to justify quitting after three losses in terms of "it's not my day", or "the market Gods are against me", completely missing the point that each match is an individual event, and that his huge edge applies to each match, regardless of previous and unrelated results. 

If you've found a casino that pays 50-1 on any individual number, would you arbitrarily limit the number of spins you play based on whether the first three spins are winners or not? Of course not. If you have a positive expectancy, you maximize the number of events in which you are active.

How results are distributed should have no bearing on your betting. In fact, in Mel's intro, he writes:

You can only learn if you embrace the good the bad and the ugly of how trading results are distributed because for years I tried to fight probability and this hindered my progress. It was only by accepting uncertainty that I found peace with my trading.

Mel has much to learn, including from himself. You can't "fight" probability. Markets aren't conspiring against you. 

Phil @workingawayphil, who seems a pretty sharp chap, had a few comments on the likelihood of someone consistently being able to find such huge edges in football markets. Denzillion wrote:

From what I can gather he is assessing multiple pre match stats and in play indicators so has taken a view that from minute X, the win rate is X% hence any price X and over is value.

and Phil replied that:

He also clarified with:

Phil added:

I collected data from thousands of games, goal times, odds, shot locations penalty/ free kick etc. Seen so many people on twitter talk about edges but every time I’ve looked into them in real detail I’ve either found them to be wrong or a tiny sample size.

The problem with a fundamentally flawed approach of using pre-match stats, 'goal times' etc. is that not only are all matches independent events, but that as previously mentioned, far better resourced enterprises have already crunched this data and more, and extracted any value out of the market. One example:

Star Lizard Consulting, which was set up by Mr. Bloom’s associates to provide support for his betting syndicate, operates like a quantitative hedge fund. About 200 employees — traders, software engineers and analysts — focus on helping Mr. Bloom’s syndicate make data-driven bets on soccer and other sports.

The gambler in his one bedroom flat has little to no chance of beating this kind of opposition long-term.  

Denzillion suggested that maybe:

I dunno, does Tony [Bloom] care what Mel does in his bedroom in Iceland Division 2 with 30 spectators. Are you being too cynical here? Time will tell if his win rate stands up.   

Possibly not, but the problem here would be that liquidity is correspondingly low and when you back at 2.8 in an illiquid market, the true odds are probably 3.0 or greater. If the market is liquid, then no doubt Mr. Bloom would be very interested. 

If Mel has truly found a system that generates winners at even 40% of the time at his 2.8 target, then he has an impressive edge and really shouldn't be telling everyone about it. If anyone knows more about the 'investors' angle or where it is mentioned, please let me know. 

Nonsense Scientia

Via Full Time Betting Blog on my blogroll, I was led to Scientia Trading and Mel, who also posts on Twitter as @scientiatrader. 

The post is titled "Food for thought", which had me salivating, but not for long. Readers are warned that Mel has produced four webinars to date, although cautions us that:

What I will say is the videos are loooooong! And I mean long.(2 hours anyone?) Mel does go on a little bit sometimes (sorry!) but I assure you its well worth staying with them as there are some utterly fascinating pieces of information in there.

At the time of writing I have yet to get more than three minutes into them. Something for the weekend perhaps. The About Scientia Trading page contains lots of mumbo-jumbo phrases, for example:

When I made a decision to fully understand and internalize the trading fundamentals of some of the worlds most successful traders it was one of the most difficult and challenging journeys I have ever faced.

Given that Mel appears to be closer to starting out in adult life than some of us, that might not be quite as dramatic a statement as it initially sounds.

He writes that he is now having consistent results with a strategy:

...with a 50-60% win rate and one in which the average risk to reward ratio is 1:1.8 (1.8R).

The strategy appears to be betting on a goal late in a game, but there's a small problem with that sentence.

This risk to reward ratio implies an average price of 2.8, i.e. a win probability of 35.7% for his bets, so anyone achieving a 50-60% win rate at that price would clearly, and rapidly, be on the way to a fortune and keeping very quiet about it.

The trouble is, it's not that easy. You can't have a 50-60% win rate at around 2.8. 

Ignoring over-rounds and commission, bets at 2.8 will win 35.7% of the time, winning 1.8 units each time, and losing 1 unit 64.3% of the time. Net gain zero units. It's how probability works.

If Mel wants a 50-60% win rate, he'll need to be betting at prices between 1.667 to 2.0, well short of the 2.8 he talks about in the second half of his throwaway sentence. 

This ignores commission of course, which is not an insignificant cost when trading on Betfair. 

So the strategy of betting on a late goal in a game can only be profitable long-term if you are able to judge the probability better than the market, i.e. other individuals. I very much doubt that any one individual can do this consistently. If they can, they should probably offer their services to the football industry. 

Prices at any particular time in a game generally reflect the true probabilities. If the market does have a weakness at 80 minutes plus for some strange reason, it will soon correct, especially if people are shouting about it! 

Recording winners twice in your records might help the spreadsheet, but the bank won't benefit:

The other thing that jumped out at me from a cursory read is the idea of having a maximum of four selections per day. As readers of this blog will know, I'm of the opinion that value is hard to find, and that it doesn't come along x number of bets per time period. You may have no bets, you may have many bets. It makes absolutely no sense to ignore a value bet simply because you've already found a certain number that hour, day, week, month, whatever. If Mel has this huge edge, it would be folly to shutdown for the day at four selections. 

When I posed this question on Twitter, I was referred to Webinar 2, which, as my old friend Matthew Trenhaile put it:

I'll enlighten you all later if I get there.  

Completely unrelated, but the Betfair Forum isn't known for its sharp minds. In a thread titled "Does a football betting system that works exist?", we have this genius posting:

On what planet would a system generating ROI of 20% be 'not worth the time and effort'? 

A later post reveals that this return is from the grand total of 106 bets, so not yet anything to get excited about, and the fact that the 'inventor extraordinaire' is happy to give his system away means he knows it's rubbish.  Either that, or he is even more crazy than I first thought. 

MLB - May, Lines and Bones

Only a small profit last month for hotties, but the streak of profitably for the opening two months of the season continued stretching back to 2014.

I mentioned in April that in the early part of the season:

13 of the Wins have been by one run, which explains why the Run Line P/L is currently negative, and 31 games (67.4%) have been Unders.

The final total for one-run wins by a shorty in April ended up being 18 (from 67 selections) and as a result, the profit / loss differential between Money Line (ML) and Run Line (RL) was the highest ever for a single month, with the RL trailing the ML by 21.9 points beating another April's (2012) difference of 13.27 points by some margin.

The total one-run wins in May was a more typical 7 (from 61 selections), and five of those were in the first eight days of May. Trilla B's research apparently suggested the Run Line was more profitable, but I'm not seeing this. 

Since 2012, when the shorties strategy became favourable, the ML has beaten the RL five seasons out of six, and including this season has a record of 167.14 points versus 92.95 points (although the Run Line's ROI of 5.7% is better than Money Line's 5.1%, calculated using the US method of betting to win 100 units). 

It is true that in the five negative seasons prior to 2012 (I only have access to data going back to 2007 for the Run Line), losses would have been less on the Run Line, but hopefully most readers are reading this blog with a view to maximising their profits rather than minimising their losses. 

Speaking of profits, I mentioned as recently as last month that in my opinion "your interest [in sports investment] should probably not primarily be quaestuary" and courtesy of @SJosephBurns comes this gem of a quote along the same lines:

In other words, a non-quaestuary quest. Try saying that after a few beers.

I digress. The trend towards Unders in these matches that I mentioned in April also continued in May. A 76-56-3 record to date is an ROI of over 12%. Caution is advised though, as this is the first season Unders is ahead in these games since 2013. The number of close games early on this season is obviously a big factor. The fewer runs a game is decided by, the more likely the Unders is. For the shorties this season, 72 matches were decided by three of fewer runs, and 52 of these ended as Unders.

The T-Bone System actually lost 0.12 points from its 27 selections in May, although the Run Line option was up 4.35 points. After 51 selections this season, the Money Line is up 6.08 points (ROI of 7%), while the Run Line is up 8.65 points (ROI 12.3%).

Ice Road Warriors

I mentioned in my previous post that the NBA Finals are about to begin, and the NHL's Stanley Cup Finals are also in progress having begun on Monday. The Vegas Golden Knights in their inaugural season are playing the Washington Capitals and lead the final series 1-0. 

For betting, the NHL is another sport where it's worth looking at the road teams when favoured.

 

The 2012 season was shortened due to a lockout, but for the five full seasons since, the records for road (away) favourites in the regular season is decent as shown above, although 2017 showed a loss for this basic strategy.

However, with many bettors subject to overreacting to the latest results, a.k.a. recency - and of course it is ultimately other bettors you are competing against and not the bookmaker - as with the NBA, it pays to look at road teams coming off a loss but who are nevertheless still favoured against a team which won its previous game:

The all important ROI more than doubles, and when including the playoffs, almost triples. It's probably not a coincidence that the NBA and NHL schedules are similar in their scheduling of road trips and back-to-back games, and thus we see similar weaknesses in the markets for these two sports.  

Baseball's T-Bone System also benefits from this extra qualifying parameter.

For the 2009 season to date, the basic T-Bone has an ROI of 4.2% from 1064 bets, while the enhanced system is at 5.2% from just 894 bets.

Road Warriors

On May 8th, 2016, the Cleveland Cavaliers won in Atlanta, beating the Hawks by one point when favoured by five.

That was the last time a road (away) team won a playoff game straight up while failing to cover the spread.

Backing road favourites in the NBA is a profitable activity, as I have written previously. This is also true in the playoffs where over the last five full seasons, plus the current one in progress, the numbers are 76-46 straight up and 69-50-3 ATS (ROI 12.9%). 

The 2017-18 season is now down to its final series, which for the fourth consecutive season is between the heavily favoured Golden State Warriors and the Cleveland Cavaliers.

The Warriors beat the Houston Rockets last night (as road favourites I might add) to reach the finals, helped somewhat by Houston going on a run of 27 missed three-point attempts, a post season record and a streak that FiveThirtyEight calculates at 1 in 72,000. The spell lasted for more than half of the game, a Game 7 for a place in the NBA Finals!  

For the first game of the series, the home Warriors are favoured by 12 points, a total only exceeded in the playoffs once this season. 

It doesn't happen often in the playoffs, but the edge on hungry road favourites coming off a loss when playing at a team basking smugly in the glory of a win in their previous game, is still there, albeit somewhat diluted, but an ROI of double figures is never to be sniffed at in my opinion. 

Here are the regular season numbers since 2006:

And those for the playoffs (note the increase in selections in recent years):

Bognor Regis Spoil The Party

As mentioned here previously, Pinnacle do have some interesting articles, but they have a habit of mistiming some of their publications and of recycling old ones that are no longer accurate. 

For an example of mistiming publication, here's a Tweet posted on May 10th concerning what can be learned from pre-season matches. 

My answer is "not a lot", but at least wait until the current season is over, and the World Cup done and dusted before publishing this.

As for recycling time sensitive articles, and also another example of poor timing, Pinnacle posted this yesterday: 

As a result of a year passing since the original article, two glaring errors are now present. One is that Germany is no longer unique among the big five European leagues in having a relegation / promotion play-off, as France now does this. The other is that this paragraph is now incorrect:

It is also interesting to note that only once in the last 15 years have all three newly promoted sides stayed in the Premier League in their first season (QPR, Norwich and Swansea in 2011/12).

All three clubs promoted to the Premier League in 2016-17 (Brighton and Hove Albion, Newcastle United and Huddersfield Town) survived this season, and uniquely not a single promoted team all the way down to the National League were relegated this season. Bognor Regis Town were relegated from the sixth level (National League South) to spoil the English party for promoted teams.

No promoted team was relegated from the Bundesliga or La Liga this season either, but the article's claim that only three of the last 18 promoted La Liga teams fails to mention that in 2015 Eibar finished the season in 18th place and were only reprieved from relegation by Elche's financial problems. Such details make a big difference. 

Even with up to date data, it's highly unlikely that any basic information of this nature will give you an edge. I track this sort of thing because I find it interesting. I'm not naïve enough to think I can profit from it. 

Plausible Hypotheses In The Hunt For Gold

After a couple of relaxing weeks away touring the Scottish Highlands and the Lake District, mostly in perfect weather, you'll be pleased to know I am back, although not quite to normal as it's a holiday weekend and my poor old 90 year old Dad, declining fast with Alzheimer's, had a fall a couple of days ago which has prompted some discussion among my siblings and I regarding parental living arrangements. I'm sure many readers have been through similar challenges - how to take away the freedom to drive, when does a house with stairs become a danger etc.

At 90, my Mum insists on continuing to drive despite needing help with taking the hand brake off last week, parking in front of driveways that are clearly in use, resulting in angry neighbours knocking on the door, and requiring enough clear space in front of her when pulling out of a parking space from which a 747 could comfortably take off. 

One mildly amusing incident was when I was doing the washing up last week and my old Mum was drying while talking about my Dad's decline. After a brief pause she said, in what I thought was a very calm voice "well, the end is nigh". Rather shocked at the seeming acceptance of the imminent demise of my Dad, I looked at my equally confused wife with a look of wtf, before my Mum's next comment made it clear that she was actually referring to the status of the task of washing the dishes. 

This is all a rather long winded way of saying that I have other priorities in life right now, so posts on betting may be fewer and farther between than is normal. 

One comment on my last post from Konstantinos Charalampous asked:

Are Pinnacle odds opening, closing or the ones you have taken personally?

The odds used are all from Joseph Buchdahl's excellent Football-Data.co.uk site. Closing odds are as the name suggests, the odds close to the event start time, while what I call 'interim odds' are the odds as extracted a day or two prior to the event.  As Joseph clarifies - "Betting odds for weekend games are collected Friday afternoons, and on Tuesday afternoons for midweek games."

Joseph's web site is very useful for backtesting ideas, but as this finance article makes very clear, "backtesting should not be used as a research tool". 

As this blog post explains: 

In other words, before we can determine whether or not we have an edge (in systematic or discretionary trading), we need to establish knowledge. A theory explains how and why something occurs. Testing of historical data can help us conduct limited, targeted tests to determine whether our theory holds up in practice. Before we test, we must formulate a plausible hypothesis.

Computers offer us all the ability to look at thousands of combinations and come up with something that "works", but if your "edge" is in the MLS Second Division backing the draw when both teams have two vowels in their name, even if backtesting shows a profit, you don't have a real edge. And yes, I do know there is no such league.

There are web sites that target unsophisticated bettors with "information" such as these real life recent examples:

The Royals are 0-11 OU (-2.55 ppg) since Jul 15, 2016 when Ian Kennedy starts after he threw over 100 pitches in a team loss in his last start. 

The Cardinals are 12-0 since Aug 03, 2016 past the first game of a series as a favorite when facing a lefty after facing three straight righties.

Fascinating, but completely useless noise. Run enough queries and you are guaranteed to find something.

Readers of this blog will know that I have for a long term encouraged a very simple approach to investing which is to invest regularly in index funds and forget about it. It's encouraging to read in The Growing Crisis In Modern Finance article that:

The challenge here can be seen in some recent studies of individual investor behavior. For example, the 2017 DALBAR report found that over the 30-year period ending in 2016, individual equity fund investors averaged only a 4% annual return, compared with 10.2% that could be had by simply investing in a low-cost S&P 500 index fund. As we have pointed out, most of the shortfall is due to panic selling in downturns, lack of diversification, not understanding the basics of long-term compounded returns, and, in the end, a failure to establish a rational financial plan and stick with it over the long term.

If most consumers do not understand, much less practice, the basics of rational investing, and if even fewer understand that reliance on charts, graphs and frequent trading is not the answer, then it is much less likely that individual consumers can understand difficulties with backtest overfitting and other potential pitfalls that unfortunately pervade the investment world.

Invest your £100 at 10.2% and after 10 years it's worth £264, after 20 years £697, after 30 years £1,842. The power of compounding, the eighth wonder of the world, as Albert Einstein is quoted as saying.

This paragraph also supports my policy of low-fee index fund investing, as well as highlights the futility of trying to beat the market:

On the bright side, one upside to the “arms race” of competing quant operations is that the resulting market prices are closer to the “true” market price, since if some price were not, a savvy computer program will quickly capitalize on the situation and arbitrage it away. Thus when an individual investor buys or sells a security, it is more likely that he or she is getting a “fair" price. In particular, this system benefits those wise investors who simply invest in a diversified portfolio, or even a handful of low-fee index-tracking funds, and hold these securities consistently over the long term.

Another paragraph from the article stood out, a metaphor for not only financial markets but also one perhaps more appropriate for the riches once relatively easily available to the savvy exchange bettor:

Centuries ago, gold could be found near the surface of the earth and could be mined by enterprising individuals with shovels and pick axes. As the visible gold supply dwindled, it became necessary to utilize complex techniques for detecting microscopic gold and gold hidden far beneath the earth's surface. The days of California gold rush, where individuals could strike out and find their fortune, are long gone.

Profits are still there to be made, but the riches near the surface have long been exhausted. The claim of easy riches by unscrupulous individuals who should be well known to readers of this blog, are unfortunately actually pyrite, also known as fools' gold.

Away We Go

The 2017 part of the 2016-17 season (-13.87 points) had hinted it was coming, but the value long offered on League Two Aways has well and truly dissipated this season just ended, with a loss of 62.91 points. Hopefully no one saw this system through to the end this year. As I wrote almost exactly a year ago with this scenario in mind: 

All trends will end, and it would be folly to build up 100 points of profit over a couple of years, and then see it all disappear. How much you take off the table is a personal choice, but waiting for the trend to return can be lengthy and costly.

Even backing the Away teams at the mythical maximum price every time would have resulted in a loss this season.  The number of Away wins was the fewest in this Division since 2010-11, a full 24 fewer than 2016-17, and 32 fewer than 2015-16.  As I've mentioned before, a simple 'strategy' like this won't work for long, but it had a good run.  

Following Away teams in the National League has similarly been profitable, and in fact is now more profitable over the six years of Pinnacle data than its elder brother League Two. Small profits were made this season using Pinnacle's prices and a large profit from backing at the impossible maximum every time.

Although the Premier League isn't yet finished, there are no more Big 6 matches and here are the final numbers for backing the Draw in those games:

Manchester City featured in no draws at all, and the season has ended on a losing run of 10. I'll probably write more on the Draw in the summer when the season is finished. 

Continuing with the Away theme, forewarning that after the West Bromwich Albion game on Sunday, I shall be headed away to the Lake District and Scotland for a couple of weeks but even if there's no new content, there's plenty in the archives to keep you all busy.

Top Half Palace

Although posts about Crystal Palace don't really belong here, on occasion I can't help myself. With Palace securing a record sixth consecutive season in the top flight of English football yesterday, today is one of those occasions. 

As Palace started the season P7 L7 F0 A17 and traded at 1.5 to be relegated, I wrote here that all was not lost calculating that Palace should "make that 35 points, which is very close to the probable 36 / 37 points required for safety". 

That estimate looks to be about right on the money. Palace picked up points where they needed to, and could yet finish in the top half of the table if Newcastle United drop points in their remaining matches at home to Tottenham Hotspur and away to Chelsea, while Palace beat not-quite-yet-relegated West Bromwich Albion on the final day. How West Brom must be ruing the appointment of Alan Pardew this season! Or perhaps staying with him for as long as they did.

An even older post from 2014 contained a couple of lines that have proven prescient. While discussing the vacant managerial position at the club, I wrote:

The position of manager at Crystal Palace is a lot more attractive than at most clubs these days, and the CVs dropping in to the mat at Selhurst Park next week should be impressive. Sir Alex may well be considering coming out of retirement as you read this, and Pep Guardiola is quite possibly reading the fine print on his contract. Malky MacKay is reportedly licking his chops. Roy Hodgson's a Croydon boy and a former Palace (youth team) player. He might be interested in a bigger challenge...

Pep's done OK for himself I guess, but poor old Malky MacKay won five (of 24) games for Wigan Athletic, before ending up as Scotland caretaker manager. How the mighty are fallen, although it couldn't happen to a nicer chap:

It subsequently emerged that some of the allegations related to text messages considered to be racist, sexist and homophobic in nature.

And sure enough, three years later and Hodgson's in place, doing a fantastic job, and in the running for Premier League Manager of the Season. I also wrote in 2014 that: 

Palace are not yet Manchester City. Heck, they're not yet Stoke City, but ironically the latter is the kind of example they might be looking to follow.

After yesterday's result, maybe Stoke City isn't an example to follow. What I meant of course, is that we want to become an established Premier League side, and we seem to be doing that, although as Palace fans know all too well, it's seldom easy. On the rare occasion when we start a PL season off well, 2015-16, we manage to win two of the final 21 matches. 

I'm hopeful that Hodgson stays and that we won't give everyone else a seven game start next season. 

If we'd 'played properly' as my Mother likes to say, from the start, we'd be on course for 52 points and in contention for European Football. A Palace fan can dream.    

One-Trick Pony

Courtesy of Bet Trade Share and High Class Equine, this Bloomberg long-read is an excellent article by Kit Chellel even if you're not a horse-racing enthusiast.

There are plenty of nuggets for those serious about making their betting profitable. A couple of lines that particularly resonated with me, since I am of the same opinion, were these:

He told me he’d been driven only partly by money—and I believed him. With his intelligence, he could have gotten richer faster working in finance. Benter wanted to conquer horse betting not because it was hard, but because it was said to be impossible.

A breakthrough came when Benter hit on the idea of incorporating a data set hiding in plain sight: the Jockey Club’s publicly available betting odds. Building his own set of odds from scratch had been profitable, but he found that using the public odds as a starting point and refining them with his proprietary algorithm was dramatically more profitable. He considered the move his single most important innovation, and in the 1990-91 season, he said, he won about $3 million.

Your interest should probably not primarily be quaestuary in other words, but if you're anything like me, you can't help but be encouraged by stories like these. 

Put in the time and effort to understand probability theory and find edges, stake sensibly (Kelly gets a mention of course), be patient and disciplined (alcohol and drugs get a mention), be adaptable (able to overcome the challenge of bans and restrictions), and while you might not make close to a billion dollars, you can certainly be very profitable. 

Here's the article in full, but for pretty pictures, use the Bloomberg link. 

The Gambler Who Cracked the Horse-Racing Code By Kit Chellel


Bill Benter did the impossible: He wrote an algorithm that couldn’t lose at the track. Close to a billion dollars later, he tells his story for the first time.

Horse racing is something like a religion in Hong Kong, whose citizens bet more than anyone else on Earth. Their cathedral is Happy Valley Racecourse, whose grassy oval track and floodlit stands are ringed at night by one of the sport’s grandest views: neon skyscrapers and neat stacks of high-rises, a constellation of illuminated windows, and beyond them, lush hills silhouetted in darkness.

On the evening of Nov. 6, 2001, all of Hong Kong was talking about the biggest jackpot the city had ever seen: at least HK$100 million (then about $13 million) for the winner of a single bet called the Triple Trio. The wager is a little like a trifecta of trifectas; it requires players to predict the top three horses, in any order, in three different heats. More than 10 million combinations are possible. When no one picks correctly, the prize money rolls over to the next set of races. That balmy November night, the pot had gone unclaimed six times over. About a million people placed a bet—equivalent to 1 in 7 city residents.

At Happy Valley’s ground level, young women in beer tents passed foamy pitchers to laughing expats, while the local Chinese, for whom gambling is a more serious affair, clutched racing newspapers and leaned over the handrails. At the crack of the starter’s pistol, the announcer’s voice rang out over loudspeakers: “Last leg of the Triple Trio,” he shouted in Australian-accented English, “and away they go!”

As the pack thundered around the final bend, two horses muscled ahead. “It’s Mascot Treasure a length in front, but Bobo Duck is gunning him down,” said the announcer, voice rising. “Bobo Duck in front. Mascot fighting back!” The crowd roared as the riders raced across the finish line. Bobo Duck edged Mascot Treasure, and Frat Rat came in third.

Across the road from Happy Valley, 27 floors up, two Americans sat in a plush office, ignoring a live feed of the action that played mutely on a TV screen. The only sound was the hum of a dozen computers. Bill Benter and an associate named Paul Coladonato had their eyes fixed on a bank of three monitors, which displayed a matrix of bets their algorithm had made on the race—51,381 in all.

Benter and Coladonato watched as a software script filtered out the losing bets, one at a time, until there were 36 lines left on the screens. Thirty-five of their bets had correctly called the finishers in two of the races, qualifying for a consolation prize. And one wager had correctly predicted all nine horses.

“F---,” Benter said. “We hit it.”

It wasn’t immediately clear how much they’d made, so the two Americans attempted some back-of-the-envelope math until the official dividend flashed on TV eight minutes later. Benter and Coladonato had won a jackpot of $16 million. Benter counted the zeros to make sure, then turned to his colleague.

“We can’t collect this—can we?” he asked. “It would be unsporting. We’d feel bad about ourselves.” Coladonato agreed they couldn’t. On a nearby table, pink betting slips were arranged in a tidy pile. The two men picked through them, isolating three slips that contained all 36 winning lines. They stared at the pieces of paper for a long time.

Then they posed, laughing, for a photo—two professional gamblers with the biggest prize of their careers, one they would never claim—and locked the tickets in a safe. No big deal, Benter figured. They could make it back, and more, over the rest of the racing season.

Veteran gamblers know you can’t beat the horses. There are too many variables and too many possible outcomes. Front-runners break a leg. Jockeys fall. Champion thoroughbreds decide, for no apparent reason, that they’re simply not in the mood. The American sportswriter Roger Kahn once called the sport “animated roulette.” Play for long enough, and failure isn’t just likely but inevitable—so the wisdom goes. “If you bet on horses, you will lose,” says Warwick Bartlett, who runs Global Betting & Gaming Consultants and has spent years studying the industry.

What if that wasn’t true? What if there was one person who masterminded a system that guaranteed a profit? One person who’d made almost a billion dollars, and who’d never told his story—until now?

In September, after a long campaign to reach him through friends and colleagues, I received an email from Benter. “I have been avoiding you, as you might have surmised,” he wrote. “The reason is mainly that I am uncomfortable in the spotlight by nature.” He added, “None of us want to encourage more people to get into the game!” But in October he agreed to a series of interviews in his office in downtown Pittsburgh. The tasteful space—the top two floors of a Carnegie Steel-era building—is furnished with 4-foot-tall Chinese vases and a marble fireplace, with sweeping views of the Monongahela River and freight trains rumbling past.

Benter, 61, walks with a slight stoop. He looks like a university professor, his wavy hair and beard streaked with gray, and speaks in a soft, slightly Kermit-y voice. He told me he’d been driven only partly by money—and I believed him. With his intelligence, he could have gotten richer faster working in finance. Benter wanted to conquer horse betting not because it was hard, but because it was said to be impossible. When he cracked it, he actively avoided acclaim, outside the secretive band of geeks and outcasts who occupy his chosen field. Some of what follows relies on his recollections, but in every case where it’s been possible to corroborate events and figures, they’ve checked out in interviews with dozens of individuals, as well as in books, court records, and other documents. Only one thing Benter ever told me turned out to be untrue. It was at the outset of our conversations, when he said he didn’t think I’d find anything interesting to write about in his career.

Benter grew up in a Pittsburgh idyll called Pleasant Hills. He was a diligent student and an Eagle Scout, and he began to study physics in college. His parents had always given him freedom—on vacations, he’d hitchhiked across Europe to Egypt and driven through Russia—and in 1979, at age 22, he put their faith to the test. He left school, boarded a Greyhound bus, and went to play cards in Las Vegas.

Benter had been enraptured by Beat the Dealer, a 1962 book by math professor Edward Thorp that describes how to overcome the house’s advantage in blackjack. Thorp is credited with inventing the system known as card counting: Keep track of the number of high cards dealt, then bet big when it’s likely that high cards are about to fall. It takes concentration, and lots of hands, to turn a tiny advantage into a profit, but it works.

Thorp’s book was a beacon for shy young men with a gift for mathematics and a yearning for a more interesting life. When Benter got to Las Vegas, he worked at a 7-Eleven for $3 an hour and took his wages to budget casinos. The Western—with its dollar cocktails and shabby patrons getting drunk at 10 a.m.—and the faded El Cortez were his turf. He didn’t mind the scruff. It thrilled him to see scientific principles play out in real life, and he liked the hedonistic city’s eccentric characters. It was the era of peak disco, with Donna Summer and Chic’s Le Freak all over the radio. On a good day, Benter might win only about $40, but he’d found his métier—and some new friends. Fellow Thorp acolytes were easy to spot on casino floors, tending to be conspicuously focused and sober. Like them, Benter was a complete nerd. He had a small beard, wore tweedy jackets, and talked a lot about probability theory.

In 1980 he’d just applied for a job as a night cleaner at McDonald’s when his buddies introduced him to the man who would change his life. Alan Woods was the leader of an Australian card-counting team that had recently arrived in Las Vegas. Woods was then in his mid-30s, with a swoop of gray hair and cold blue eyes. Once an insurance actuary with a wife and two kids, he’d decided one day that family life wasn’t for him and began traveling the world as an itinerant gambler.

Woods impressed Benter with his tales of fearlessness, recounting how he’d sneaked past airport security in Manila with $10,000 stuffed into his underwear. Most appealing, he pursued the card counter’s craft with discipline. His team pooled its cash and divided winnings equitably. Having more players reduced the risk of a run of bad luck wiping out one’s bankroll, and the camaraderie offset the solitary nature of the work. Benter joined the squad.

Within six weeks, he found himself playing blackjack in Monte Carlo, served by waiters in dinner jackets. He felt like James Bond, and his earnings grew to a rate of about $80,000 a year. Benter abandoned any idea of returning to college. When his mother’s friends in Pittsburgh asked how his studies were going, she told them, “Bill’s traveling right now.”

After a couple of years, Benter was playing quietly at the Maxim one day when a meaty hand descended on his shoulder. “Come with me,” said a burly guy in a suit. In the back, Benter was shoved into a chair and told to produce some identification. He refused. The guard walked out, and an even more menacing guy walked in: “Show me your f---ing ID!” Benter got out his wallet.

Benter and his teammates got a house in the Vegas suburbs, living like geeky college fraternity brothers. Woods strictly forbade drinking on the job, so the men would wait until after their shifts to knock back beers and trade stories of scrapes with casino security, who were constantly on the lookout for card counting. Bull-necked pit bosses patrolled the floors. A suspicious player would be told to leave or, worse, back-roomed: interrogated in a dingy office. There were rumors of counters being beaten and drugged. Benter thought the treatment was unjustified. He wasn’t a cheat. He just played smart.

Afterward—it was probably 1984—Benter, Woods, and some of their partners earned a place in the Griffin Book, a blacklist that a detective agency circulated to casinos. On top of the indignity of having their mug shots next to hustlers and pickpockets, the notoriety made it almost impossible for them to keep playing in Vegas. They needed to find another game.

Woods knew there were giant horse-betting pools to tap in Asia—and that the biggest of all was run by the Hong Kong Jockey Club. Begun in 1884 as a refuge for upper-crust Brits who wanted a stretch of England’s green and pleasant land in their subtropical colony, the club changed over time into a state gambling monopoly. Its two courses, Happy Valley and Sha Tin, were packed twice a week during a racing season that extended from September to July. Hong Kong’s population was then only about 5.5 million, but it bet more on horses than the entire U.S., reaching about $10 billion annually by the 1990s.

Hong Kong racing uses a parimutuel (also known as “totalizer”) system. Unlike odds in a Vegas sportsbook, which are set in advance and give a decisive edge to the house, parimutuel odds are updated fluidly, in proportion to how bettors wager. Winners split the pool, and the house skims a commission of about 17 percent. (After costs, the Jockey Club’s take goes to charity and the state, providing as much as a tenth of Hong Kong’s tax revenue.) To make money, Benter would have to do more than pick winners: He needed to make bets with a profit margin greater than the club’s 17 percent cut.

He went to the Gambler’s Book Club, a Vegas institution, and bought everything he could find on horses. There were lots of “systems” promising incredible results, but to him they seemed flimsy, written by journalists and amateur handicappers. Few contained real math. Benter wanted something more rigorous, so he went to the library at the University of Nevada at Las Vegas, which kept a special collection on gaming. Buried in stacks of periodicals and manuscripts, he found what he was looking for—an academic paper titled “Searching for Positive Returns at the Track: A Multinomial Logit Model for Handicapping Horse Races.” Benter sat down to read it, and when he was done he read it again.

The paper argued that a horse’s success or failure was the result of factors that could be quantified probabilistically. Take variables—straight-line speed, size, winning record, the skill of the jockey—weight them, and presto! Out comes a prediction of the horse’s chances. More variables, better variables, and finer weightings improve the predictions. The authors weren’t sure it was possible to make money using the strategy and, being mostly interested in statistical models, didn’t try hard to find out. “There appears to be room for some optimism,” they concluded.

Benter taught himself advanced statistics and learned to write software on an early PC with a green-and-black screen. Meanwhile, in the fall of 1984, Woods flew to Hong Kong and sent back a stack of yearbooks containing the results of thousands of races. Benter hired two women to key the results into a database by hand so he could spend more time studying regressions and developing code. It took nine months. In September 1985 he flew to Hong Kong with three bulky IBM computers in his checked luggage.

The Hong Kong that greeted Benter was a booming financial center, with some of the most densely populated spaces on the planet. The crowded skyline that had recently inspired Ridley Scott’s dystopian megacity in Blade Runner seemed to sprout towers weekly.

Benter and Woods rented a microscopic apartment in a dilapidated high-rise. Warbling Cantonese music drifted through stained walls, and the neighbors spent all night shouting in the hall. Their office was an old desk and a wooden table piled high with racing newspapers. If they went out at all, it was to the McDonald’s down the street.

Twice a week, on race days, Benter would sit at the computer and Woods would study the racing form. Early on, the betting program Benter had written spat out bizarre predictions, and Woods, with his yearlong head start studying the Hong Kong tracks, would correct them. They used a telephone account at the Jockey Club to call in their bets and watched the races on TV. When they won, there were satisfied smiles only. They were professionals; cheering and hooting were for rubes.

Between races, Benter struggled to make his algorithms stay ahead of a statistical phenomenon called gambler’s ruin. It holds that if a player with limited funds keeps betting against an opponent with unlimited funds (that is, a casino, or the betting population of Hong Kong), he will eventually go broke, even if the game is fair. All lucky streaks come to an end, and losing runs are fatal.

One approach—familiar to Benter from his blackjack days—was to adapt the work of a gunslinging Texas physicist named John Kelly Jr., who’d studied the problem in the 1950s. Kelly imagined a scenario in which a horse-racing gambler has an edge: a “private wire” of fairly reliable tips. How should he bet? Wager too little, and the advantage is squandered. Too much, and ruin beckons. (Remember, the tips are good but not perfect.) Kelly’s solution was to wager an amount in line with the gambler’s confidence in the tip.

Benter was struck by the similarities between Kelly’s hypothetical tip wire and his own prediction-generating software. They amounted to the same thing: a private system of odds that was slightly more accurate than the public odds. To simplify, imagine that the gambling public can bet on a given horse at a payout of 4 to 1. Benter’s model might show that the horse is more likely to win than those odds suggest—say, a chance of one in three. That means Benter can put less at risk and get the same return; a seemingly small edge can turn into a big profit. And the impact of bad luck can be diminished by betting thousands and thousands of times. Kelly’s equations, applied to the scale of betting made possible by computer modeling, seemed to guarantee success.

If, that is, the model were accurate. By the end of Benter’s first season in Hong Kong, in the summer of 1986, he and Woods had lost $120,000 of their $150,000 stake. Benter flew back to Vegas to beg for investment, unsuccessfully, and Woods went to South Korea to gamble. They met back in Hong Kong in September. Woods had more money than Benter and was willing to recapitalize their partnership—if it was renegotiated.

“I want a larger share,” Woods said, in Benter’s recollection.

“How much larger?” Benter asked.

“Ninety percent,” Woods said.

“That’s unacceptable,” Benter said.

Woods was used to being the senior partner in gambling teams and getting his way. He never lost his temper, but his mind, once set, was like granite. Benter was also unwilling to budge. Their alliance was over. In a fit of pique, Benter wrote a line of code into the software that would stop it from functioning after a given date—a digital time bomb—even though he knew it would be trivial for Woods to find and fix it later. Woods would keep betting algorithmically on horses, Benter was sure of that. He resolved that he would, too.

Benter’s Las Vegas friends wouldn’t stake him at horse racing, but they would at blackjack. He took their money to Atlantic City and spent two years managing a team of card counters, brooding, and working on the racing model in his spare time. In September 1988, having amassed a few hundred thousand dollars, he returned to Hong Kong. Sure enough, Woods was still there. The Australian had hired programmers and mathematicians to develop Benter’s code and was making money. He’d moved into a penthouse flat with a spectacular view. Benter refused to speak to him.

Benter’s model required his undivided attention. It monitored only about 20 inputs—just a fraction of the infinite factors that influence a horse’s performance, from wind speed to what it ate for breakfast. In pursuit of mathematical perfection, he became convinced that horses raced differently according to temperature, and when he learned that British meteorologists kept an archive of Hong Kong weather data in southwest England, he traveled there by plane and rail. A bemused archivist led him to a dusty library basement, where Benter copied years of figures into his notebook. When he got back to Hong Kong, he entered the data into his computers—and found it had no effect whatsoever on race outcomes. Such was the scientific process.

Other additions, such as the number of rest days since a horse’s last race, were more successful, and in his first year after returning to Hong Kong, Benter won (as he recalls) $600,000. The next racing season, ending in the summer of 1990, he lost a little but was still up overall. He hired an employee, Coladonato, who would stay with him for years, and a rotating cast of consultants: independent gamblers, journalists, analysts, coders, mathematicians. When the volume of bets rose, he recruited English-speaking Filipinos from the ranks of the city’s housekeepers to relay his bets to the Jockey Club’s Telebet phone lines, reading wagers at the rate of eight a minute.

A breakthrough came when Benter hit on the idea of incorporating a data set hiding in plain sight: the Jockey Club’s publicly available betting odds. Building his own set of odds from scratch had been profitable, but he found that using the public odds as a starting point and refining them with his proprietary algorithm was dramatically more profitable. He considered the move his single most important innovation, and in the 1990-91 season, he said, he won about $3 million.

The following year the Hong Kong Jockey Club phoned Benter at an office he’d established in Happy Valley. He winced, remembering the meaty hand of the Las Vegas pit boss on his shoulder. But instead of threatening him, a Jockey Club salesperson said, “You are one of our best customers. What can we do to help you?” The club wasn’t a casino trying to root out gamblers who regularly beat the house; its incentive was to maximize betting activity so more revenue was available for Hong Kong charities and the government. Benter asked if it was possible to place his bets electronically instead of over the phone. The Jockey Club agreed to install what he called the “Big CIT”—a customer input terminal. He ran a cable from his computers directly into the machine and increased his betting.

Benter had achieved something without known precedent: a kind of horse-racing hedge fund, and a quantitative one at that, using probabilistic modeling to beat the market and deliver returns to investors. Probably the only other one of its kind was Woods’s operation, and Benter had written its code base. Their returns kept growing. Woods made $10 million in the 1994-95 season and bought a Rolls-Royce that he never drove. Benter purchased a stake in a French vineyard. It was impossible to keep their success secret, and they both attracted employees and hangers-on, some of whom switched back and forth between the Benter and Woods teams. One was Bob Moore, a manic New Zealander whose passions were cocaine and video analysis. He’d watch footage of past races to identify horses that should have won but were bumped or blocked and prevented from doing so. It worked as a kind of bad-luck adjuster and made the algorithms more effective.

The computer-model crowd spent nights in a neighborhood called Wan Chai—a honey pot of gaudy bars and topless dancers that’s been described as “a wildly liberated Las Vegas.” Moore favored Ridgeway’s pool bar, where he’d start fights and boast about his gambling exploits. Woods didn’t drink much, but he enjoyed ecstasy, and he could be found most nights in Neptune II, a neon dungeon full of drunk businessmen and much younger women.

Benter was a more reserved presence. He could often be seen sitting at the end of a bar, engaged in quiet conversation. Over time an aura built up. To the small group of insiders who knew that software had conquered Happy Valley—perhaps a dozen people—Benter was the acknowledged master. Even Woods (in an interview he later gave to an Australian journalist) admitted that his rival’s model was the best. But the two men couldn’t resolve their differences. When Benter saw his old partner in Wan Chai, he would smile politely and walk away. They’d gone 10 years without speaking.

Throughout 1997 a shadow loomed over Hong Kong. After 156 years of colonial rule, the British were set to hand the territory back to China on July 1. There were news reports of Chinese troops massed at the border, and many islanders feared it would be the end of Hong Kong’s freewheeling capitalism. China tried to reassure residents that their most treasured customs would be protected. “Horse racing will continue, and the dancing parties will go on,” said Deng Xiaoping, the former Communist Party leader.

Benter faced an additional and more peculiar anxiety. A month before the handover, his team won a huge Triple Trio jackpot. They were in the middle of an epic winning season, up more than $50 million. The Jockey Club normally put Triple Trio winners in front of the TV cameras to show how, for example, a night watchman had changed his life with a single bet. This time, nobody wanted to tout that the winner was an American algorithm.

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.

Benter had his Big CIT privileges revoked. On June 14 one of his phone operators called the Telebet line and was told, “Your account has been suspended.” Woods was also blocked. Club officials issued a statement saying they had acted to “protect the interests of the general betting public.” Benter flew back to Vegas, as he did every summer, to think about his next move. He reread the club’s statement. Phone betting was out—but nowhere did it say he was prohibited from betting altogether. He got an idea. As in his blackjack days, it would require a low profile.

One Friday evening that autumn, after the handover of the territory to China, Benter paid for a hotel room in Hong Kong’s bayside North Point district. He made sure to get a space on the ground floor for easy access. He had helpers haul in laptops, a 50-pound printer, and stacks of blank betting slips. On Saturday morning—race day—they checked the internet connection and put a “Do Not Disturb” sign on the door.

At 1:45 p.m., 15 minutes before the first race, the laptops received lines of bets from Benter’s Happy Valley office. The printer began to suck in blank tickets and churn them out with black marks in the relevant betting boxes.

Eight minutes to starting pistol. Benter grabbed a pile of 80-odd printed tickets and a club-issued credit voucher worth HK$1 million and bolted for the door. Across from the hotel was an off-track betting shop. It was loud and smoky inside, and he found an automated betting terminal free at one side of the room. Two minutes to go. He started feeding in tickets, one after another after another, until the screen flashed a message: “Betting closed.”

Benter hurried back to the hotel room to see which wagers had hit. At 2:15 p.m. the laptops downloaded the next package of bets from the office. Time to go again. Simultaneously, other teams hired by Benter were doing the same in different parts of Hong Kong.

Benter’s solution to the phone ban was time-consuming and required him to manage teams of runners, who risked being robbed. But it was almost as profitable as his old arrangement. The club continued to exchange his cash vouchers for checks, and no one came to shut him down. Woods kept betting in a slightly different manner, sending members of an extended roster of Philippine girlfriends directly to the racetrack with bags full of cash.

Publicity is a hex for professional gamblers. That fall an increasingly erratic Moore drew more attention to algorithmic betting, first by bragging to the local press—who nicknamed him the “God of Horses”—and then by fatally overdosing on sleeping pills.

Afterward, Hong Kong’s tax authority began to investigate the Woods syndicate. By law, gambling winnings were exempt from taxation, but company profits weren’t. The question was whether the syndicates had moved beyond conventional betting and started behaving like corporations. The implications would be dire if the Inland Revenue Department decided to tax profits retroactively. When agents asked Woods for a list of his investors, he fled to the Philippines.

Benter continued to operate his in-person betting scheme through the turn of the millennium, with his model expanding to track more than 120 factors per horse, but the logistics were proving a grind. He felt disconnected from his gambler friends in Wan Chai—a nocturnal clique of geeks and rogues. He had started mixing with a more professional crowd, adopting their dress code of smart suits and ties, and he’d taken a more active role in the local Rotary Club chapter. Benter embraced its motto of “Service Above Self,” giving millions of dollars anonymously and visiting impoverished schools in China and refugee camps in Pakistan. For the first time, he thought seriously about quitting and moving back to the U.S. If it all has to end, he thought, I’ve had an incredible run.

It was then, in November 2001, that he decided to have a final punt on the Triple Trio. Benter had avoided major prizes since 1997 for fear of angering the Jockey Club’s management, but this jackpot was too big to resist. Wagering on it was something of a lark, albeit an expensive one: He spent HK$1.6 million on the 51,000 combinations. If he won, he decided, he would leave the tickets unclaimed. Club policy in such cases directed the money to a charitable trust.

After Bobo Duck, Mascot Treasure, and Frat Rat romped across the finish line—and then days turned into weeks, with no one collecting the prize—Benter was unprepared for the level of mounting public interest. “The ghost of the unclaimed $118 million Triple Trio,” wrote the racing columnist for the South China Morning Post, “is still banging around like an unwanted poltergeist.” Outlandish theories spread across Hong Kong. One held that the winner had watched the final leg and died of shock.

Finally, Benter sent an anonymous letter to the Jockey Club’s directors explaining his intentions. But the organization never shared it with the public. (Club spokeswoman Samantha Sui told Bloomberg Businessweek, “We are not in a position to disclose or comment on matters related to specific customers due to privacy and confidentiality concerns.”) At the time, head of betting Henry Chan told the Morning Post that there was no way of knowing who the ticket holder was. “Although this is bad luck for one winner,” he said, “it means there will be a lot of winners through the charities.”

Later in 2001, without any warning, Jockey Club officials lifted the telephone betting ban. It was as if Benter’s gift had appeased the gambling gods. The club also bowed to public pressure and allowed customers to wager over the internet from their homes. Benter opted to move back to Pittsburgh, where he continued to bet. He didn’t want to spend his whole life in Hong Kong.

In Manila, Woods lived like a hermit, bingeing on drugs for days at a time, waited on by young women he hired to keep him company. He employed gamblers remotely in Australia and Hong Kong, but he was a difficult boss; he accused staff of stealing, and once he made everyone take IQ tests before telling them all how much smarter he was. Woods started calling himself Momu—short for “master of my universe.”

In December 2007 he sent a letter to Business Review Weekly, an Australian magazine, asking to be considered for its rich list. “I had planned to delay my hope for inclusion until I could make it into the top 10,” he wrote. “However, as of today, it does not appear I will live long enough.” Woods had been diagnosed with cancer. He came back to Happy Valley for treatment; the Hong Kong Sanatorium & Hospital was within sight of the racetrack. He spent his final days beating his friends at a Chinese card game known as chor dai di and died on Jan. 26, 2008, at 62.

Interviews with Woods’s friends, employees, and other sources indicate he had amassed a fortune of A$900 million (then about $800 million). Mike Smith, a former Hong Kong policeman who knew Woods, wrote about him in his book In the Shadow of the Noonday Gun: “He left a very simple will that pretty much summed up his lifestyle. Assets: A$939,172,372.51. Liabilities: A$15.93.”

Woods left the bulk of his estate to his two children in Australia and gave token sums to various ex-girlfriends, including a Filipina who said he’d fathered her child. A wake was held in a bar at the Happy Valley racetrack and attended by an eclectic crowd of gamblers and hustlers. To the last, Woods never believed that Benter had won the 2001 Triple Trio and given up the jackpot.

“Gambling,” Benter told me in his Pittsburgh office, “has always been the domain of wise guys from the wrong side of the track.” Perhaps more than anyone else, Benter has changed that perception—within the tiny population of people who gamble for a living, that is.

By the time he moved back to Pittsburgh, he’d inspired others in Hong Kong to form syndicates of their own. In response, the Jockey Club began publishing reams of technical data and analysis on its website to level the playing field. With a little effort, anyone could be a systematic gambler—or mimic one. The odds boards at Happy Valley and Sha Tin were color-coded to show big swings in the volume of wagers on a horse, specifically to reveal whom the syndicates were backing.

The robo-bettors’ numbers have continued to proliferate. After Woods’s death, his children maintained his Hong Kong operation, but other members of the team went into business for themselves. And Benter spread the secrets of his success in various ways: He gave math talks at universities, shared his theories with employees and consultants, and even published an academic paper laying out his system. The 1995 document—“Computer-Based Horse Race Handicapping and Wagering Systems: A Report”—became a manual for an entire generation of high-tech gamblers.

Today, online betting on sports of all kinds is a $60 billion industry, growing rapidly everywhere outside the U.S., where the practice is mostly banned. The Supreme Court, however, may lift federal restrictions this year, and if it does, American dollars will flood the market, increasing liquidity and the profits of computer teams. Big names from the world of finance have taken notice.

In 2016, Susquehanna International Group LLP, an American quantitative trading company, started an Ireland-based operation called Nellie Analytics Inc., targeting basketball, American football, soccer, and tennis. Phoenix, a proprietary sports-betting company with headquarters in Malta and data-mining operations in the Philippines, won a £9 million ($13 million) investment in 2010 from a unit of RIT Capital Partners Plc, the £3 billion trust chaired by Lord Jacob Rothschild of the global banking dynasty. (RIT sold its stake in 2016 to a private buyer, quadrupling its money.) What isn’t widely known is that Phoenix was founded by former employees of Woods, including his protégé Paul Longmuir.

Many of the biggest players in sports betting can trace a lineage directly to the Benter-Woods axis. For example, the Australian press has called Zeljko Ranogajec “the world’s biggest punter.” Today he runs a global algorithmic gambling empire, but he began his career in Las Vegas counting cards with Benter and Woods, then followed them to Hong Kong. During a rare interview in London, Ranogajec said, “A substantial portion of our success is attributable to the pioneering work done by Benter.”

The Hong Kong Jockey Club now offers individual gamblers tools to help them mimic the betting patterns of the syndicates.

Benter has few regrets. One relates to an attempt in the early 1990s to create a model for betting on baseball. He spent three summers developing the system and only broke even—for him, a stinging professional defeat. America’s pastime was just too unpredictable.

That failure, however, led to a second period of his career as lucrative as Hong Kong was. He worked with one of his baseball backers to start betting on U.S. horse racing. Parimutuel tracks are scattered around the country, and by the late 1990s it became easier to amass data on a lot of them. The U.S. business took off just as competition began eroding profits in Hong Kong. “There is a golden age for a particular market,” he said, fiddling with a stack of decommissioned casino chips. “When there aren’t many computer players, the guy with the best system can have a huge advantage.”

In 2010, Benter married Vivian Fung, whom he’d met at the Rotary Club in Hong Kong. The couple have a young son, and Benter seems in every sense a contented man. An active philanthropist, he donated $1 million to a Pittsburgh charter school program and $3 million to a polio immunization effort in Afghanistan, Pakistan, and parts of Africa. In 2007 he started the charitable Benter Foundation, which donates to health, education, and the arts. Many of the people he meets at fundraising galas and nights at the opera have no idea how he made his money.

And how much is that—exactly? During our interviews, it was the one topic that made him visibly uncomfortable. William Ziemba, a finance professor at the University of British Columbia who studied the Hong Kong syndicates, has said that a first-rate team could make $100 million in a good season. Edward Thorp (who’s still writing about gambling in his 80s) asserted in a 2017 book that Benter had a “billion-dollar worldwide business betting on horse races.” When pushed, Benter conceded that his operations have probably made close to a billion dollars overall, but that some of the money has gone to partners in Hong Kong and the U.S. “Unfortunately,” he said, “I’m not a billionaire.”

Thirty-two years after he first arrived in Hong Kong, Benter is still betting on horses at venues around the world. He can see the odds change in the seconds before a race as all the computer players place their bets at the same time, and he’s amazed he can still win. He continues tinkering with his model. The latest change: How much does moving to a new trainer improve a horse’s performance?

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.” 

April Shorties Update

At the start of April, I wrote:

The table above shows the results of backing short priced (1.5 or shorter) MLB favourites during the opening month of the season. The returns are calculated using the American method of betting to win 100 units.

This season the trend repeated again, for the eighth consecutive season, with the updated returns below:

No less than 45 of those selections were where the opponent is one of the eight teams currently on track to lose 90 games this season. The MLB is usually more competitive than this, (according to the article linked to, it's not since 1969 that there have been this many no-hopers) and an increase in the number of 'easy' wins for stronger teams means that if the market is slow to adjust, as it appears to be, there are profits in following hot favourites, at least for a while.

As I mentioned, the returns are calculated using the US method of betting to win 100 units, but for comparison, using a one unit level stake, the April returns were +9.50 points and an ROI of 14.2%.

Perhaps of interest to some is that the record number of 13 Away qualifiers had an ROI of 34.4%. In the five seasons from 2011-2015, there were a total of just two away selections, but in recent years the number has increased dramatically. Their full April record is 22-4, +13.90 points and an ROI of 24.6%.

Our attention now turns to May...