During the 1980s, I was part of a group that used computers to win millions in sports bets in Las Vegas casinos. This was before personal computers were in everyday use. The invention we don’t call the Internet was years away from having access to disability statistics and data. We were successful for two reasons. First, we stay ahead of the odds makers in gathering important information. They were still doing things the old-fashioned way, and we took advantage of that loophole.
Those days are gone forever. The second key to success is understanding how numbers really work.
ODDS DO NOT PREDICT THE WINNER
Think of it this way. “Odds don’t predict who will win. They actually predict who the public THINKS will win.” Most sports bettors, both professional and novice, do not understand the secrets of the bookmakers.
Two-way sports bets (meaning two teams with a 50-50 chance of winning with no ties) are posted at odds of 11-10. This means that you bet €11 to win €10. Half of the punters select team A and collect their £10 when they win. The other bettors choose team B and lose the contest by paying their bookie £11. You might think that this gives the house or bookmaker an edge of 4.55%. You would be wrong with this assumption, but don’t feel bad, 99.5% of bettors think like you.
THE BIG MISTAKE
The general thought is something like this. Bookies secure a profit just by balancing their books. In other words, they hope to get half the bets on each of the teams, so they always win. In reality, they hardly ever balance their books, or even come close. You may find small local bookmakers, with small funds, trying to operate this way, but with so many internet shops available, even they can match the unbalanced books. Many small bookies don’t even know the secret. They are like other cattle and travel with the herd. The mistaken belief that the big sportsbooks need to balance their bets is the big secret of the industry. What they do need to accomplish is secure a lot of volume on both sides, without really balancing the books.
THE SECRET OF THE BETTING HOUSE REVEALED
Suppose the bettors in our example game risked $165,000 to win $150,000 on the favorite. But the crowd only bet $82,500 on the underdog trying to win $75,000. This seems like a mismatch, with the bookmaker heading for big trouble if the favorite wins. If the dog prevails, the bookmaker makes a profit of $90,000. Win $165,000 from Favorite Bettors and pay out $75,000 to Dog winners. If the Favorite wins, the bookmaker loses $67,500. He’ll win $82,500 from underdog backers, but lose $150,000 to fans backing the favorite. This results in a loss of $67,500.
Now you too may be saying that math doesn’t make the house a winner. So let’s review, when the Underdog wins, the bookie wins $82,500 but if the favorite wins, he loses $67,500. The favorites and underdogs usually split the winnings equally with each side winning 50% of the time. Half the time you will lose $67,500, the other half will win $82,500, so your profit is $15,000 no matter who wins. So, in our example, what is the bookmaker actually risking? The bookie is actually risking $67,500 to win $82,500. In simple terms, he is essentially betting $75 to win $100. That means he doesn’t have to win even 50% of the time to break even. The house only needs a 42.9% strike rate, after that it’s all profit.
MAKE A 33% PROFIT NO MATTER WHO WINS
Give me the odds of losing $75 and winning $100 on a 50-50 coin bet. I will always beat you with this great house edge. For most fans, the general thinking is that the bookie needs to balance his books with even bets. From my example, you can see that this is not true. When you have double risk bettors on the favorite side, you get a 33% return on every dollar.