It's the best time of the year for horse racing fans; it's Breeder's Cup week. I've stewed over this horse racing list for a few weeks and decided to just publish it now it to kick off the big week.
It's about how I've seen some lessons from betting horse races creeping up into real life lately and I thought I'd point them out.
1. On Giving Yourself a Chance for a Huge Payoff
Picking big upsets is really hard. It's hard to identify which races the upsets will occur, and then it's hard to know which of the 7 or 8 mediocre horses will step up and do the upsetting.
One strategy to winning large payoffs is to spread it around a little. If you're unable to rule out a longshot in your exacta or pick 3, just bet on it. Instead of betting on one horse to win, you're betting on a few combinations, even if the consensus suggest they aren't the most logical winners. You can see why Daily Racing Form publisher Steven Crist, refers to similar strategies as, "casting a wide net" as opposed to one rod and one reel, with one hook and one worm.
Using horses that aren't the logical winners isn't designed to win more often, but rather to pay well when it does.
The lesson that taught me is not be afraid to think differently and think big, and go with your gut. It's one thing to make mistakes, but make your own mistakes, and don't make mistakes based on bad advice you disagreed with. If you don't aim high, you don't hit high.
2. On Forgiveness: Draw a Line Through it
In the Daily Racing Form, all the info for each of the horse's previous races is written on a single line. Much like people, sometimes a horse just doesn't have it that day and throws in a clunker. It doesn't necessarily mean the horse's talent is eroding, it just means it had a bad outing.
When horse players are willing to forgive a horse's poor performance they will say, "You can draw a line through that race", meaning that you can scratch off that line in the racing form and pretend it never happened.
If Impeccably bred race horses who can be sold for several million dollars at age one, before they ever race deserve forgiveness for a poor showing, so do people.
3. On Dogmatism vs. Stupidism
A lot of unsuccessful horse bettors love to tell you of their betting principles. Some refuse to bet a horse in a sprint race if that horse has raced only in long-distance races, while others never bet on New York sprinters in California. But those are always just the loudmouth hacks sitting next to you. Invariably, the expert handicappers are more nuanced, more thoughtful. They weigh as many factors as they can find and their make their bets accordingly.
Real Life App: On a recent Freakonomics Podcast titled, "The Folly of Prediction", University of Pennsylvania professor of Psychology Philip Tetlock discussed the results from his polling a few hundred highly-regarded political experts from around the world. He asked them to make specific predictions about a myriad of political situations from around the world, and then he waited a few years until these various situations played out, and went back and graded his subjects on their accuracy.
What he found was that experts routinely thought they knew more than they did, citing a chasm between the confidence of their predictions and the actual accuracy of those predictions. In fact, the erudite elites barely outscored the control group of freshman undergrads at Berkeley. When asked what causes such a discrepancy Tetlock replied simply, "Dogmatism".
4. On Relative Talent: 100% vs. 90%
When a race features a standout favorite I try to assign a percentage of his potential that he could run and still beat every other horse, even if every other horse runs 100% to it's potential.
In the video above, Uncle Mo was an odds-on favorite against two very talented horses and one moderately talented horse. I surmised that if the other three ran their best possible race and Uncle Mo ran only 90% to his potential, he would still win. You can tell from his dominant performance why I might think something like that. But in order to win Saturday's Breeder's Cup Classic, I think he will have to run his 100% best to win.
Sometimes I'll add another dimension to this- the likelihood that they run 100%. Uncle Mo runs to his potential pretty regularly (his only clunker came after it turned out later that he was diagnosed with rare liver disorder), but other horses seem to have only a 50% likelihood of running to 100% of their potential (Commentator, as show above, comes to mind), and I try to factor in that coefficient as well when necessary.
It helps for any kind of talent evaluation, but it also works for assessing friends. Does that sound screwed up? I hope not. Anyway, some friends or potential mates are really awesome, but they're inconsistent. They may not help you move, or pick you up when you really need a ride, and when you go out with them they may do something that eventually embarrasses you, but their upside is huge. They might have the most fun-potential of anyone you know and you've had 3 of the 5 best nights of your life with that person. So maybe they're as awesome as anyone could ever be (100%), only 20% of the time giving them a success rate of only 20%, whereas your more boring-yet-consistent friend tops out at only 80% awesome, but you can bank on them being 80% awesome 100% of the time, for a success rate of 80%.
Sometimes numbers help clarify choices.
5. Get a hunch betta bunch
When you feel strongly about a horse you just gotta bet big on him- maybe a big win bet, or single it in a huge Pick 4. Get a hunch, bet a bunch. Traders call this "taking a position".
6. Favorites win Only 1/3rd of the Time
Horse racing odds don't magically reflect the true win likelihood for any given horse. Instead it's a function of what percentage of the money was bet on that horse to win. If I raced Uncle Mo today in a match race, and for some reason Bill Gates bet $400,000 on me to win, and everyone else's win bets on Uncle Mo foolishly totaled only $390,000, guess who would be the favorite to win? Me.
Statistics show us that favorites win only about 1/3rd of the time. In other words, the majority is wrong the majority of the time. Keep that in mind next time two co-workers disagree with you and attempt to imply they're correct simply because it's two against one, or when you wonder why American Idol or the Kardashians are still popular.
Filed under: Horse Racing