the cybernetic way to think about betting on horses

the purpose of a betting system is what it does

I promised this last week, but here it is; DD’s horse racing betting methodology. I’ve called it “the cybernetic way to think about betting” because, to be honest, thinking about betting is often a lot more fun, and less expensive, than actually doing so, a point I’ll return to later.  But it’s also a fun way to think about some core cybernetic concepts, and so I’m taking my lead from an obscure Australian leftist grouplet someone once told me about, which managed to spread their message of Marxism-Leninism significantly further among the working class than many of their rivals simply because one party member was an excellent tipster and they gave him a column on the back page of their newspaper.

The basis of the system is an insight which I attribute to Ross Ashby, but which is pretty implicit in most of the mathematics of statistical prediction – that you can often use the recent history of a system to proxy for an unobservable current state.  In the case of horse racing, this is obviously talking about the form book. The mental step you need to make is that when you’re reading the form, you shouldn’t be treating it as a time series to find trends to extrapolate.  The form only matters because it’s informative about what you’re really interested in; the current state of fitness of the horse.

For me, that’s the most important thing to think about, because the First Principle of my system is that I only bet on mid-quality races.  The most prestigious and biggest races of the season are much more of a lottery, because they are races which attract the very best horses, who will be trained toward them and so be at or close to the peak of their form.  To me, picking the winner in a race like that seems like much harder work than the task of looking at an eight horse race at an unprestigious course and being able to eliminate at least half the field because they are running half-fit. Conversely, the very lowest-quality races tend to have fields which consist mainly of absolute no-hopers, plus a few unknown quantities, so you end up eliminating ten out of twelve runners, trying to guess which out of the two remaining ones might be better based on no form, then looking up to see that everyone else worked it out before you and your selection is 5/2 odds on.

(Why would someone enter a horse in a race it has no chance of winning?  Lots of reasons!  Maybe the owner fancied a day out. Maybe it needed to get experience of the course.  Maybe it hadn’t run for a while and the trainer didn’t want it to get rusty. Maybe it’s being warmed up for a better race somewhere else.  But most importantly, this happens all the time to get the handicap down.  It is very strongly forbidden for a jockey to slow-roll a horse in one race, so that it carries less weight and has higher odds in a future competition.  But there’s absolutely nothing stopping a trainer from taking a fast horse with no stamina and entering it in a series of three mile races.  Then watching it build up a hellish record for leading the field two miles out then coming in last, and finally putting a massive bet at 20/1 on it when they put it in at a one-and-a-half mile distance).

Reading the form with this in mind makes the problem easier to address, and lets you use the other big tool of narrative probability.  By which I mean – every time you read the record of a horse’s last few trips out, you’re telling yourself little stories about the horse, saying things like “this has won a few times, including at this course, but the distance is a bit shorter than it’s used to, on the other hand it did all right last time out and that was against a better class of competition”.  You take the outcomes of the past few races, consider the course, distance and class of the races (in roughly that order of importance; the difference between a flat and hilly track matters much more than the difference between twelve and sixteen furlongs[1]).  And you try to fit them into a narrative about what the horse might be like at its best, and how close to peak condition it’s in now.

Given those little stories, does it make sense to say this horse could win today?  I tend to think of the answer to that question in terms of a five point scale:

·        It really doesn’t make sense at all to say it has a chance

·        It makes a bit of sense, it’s not absolutely crazy to say so

·        It makes as much sense as it does for any other horse in the race

·        It makes more sense to say it about this horse than any other

·        It makes no sense to say it about any other horse in the race

In my experience, in a ten horse race, these statements about sense-making correspond roughly to odds-on, evens to threes, 100/30 to sevens, 8/1 to 20/1 and 25/1 or higher.  In my view, there’s really no distinction between 25/1 and 100/1 except the extent to which the bookies have pushed out the odds trying to attract enough money to balance their market, but it’s also important to remember that in horse racing, things which don’t make any sense (particularly to someone who’s only spent a short while reading the form) happen quite often.

So I look for a discrepancy between my understanding and the posted odds.  Most of the time, no such discrepancy exists and the effort has been wasted.  When it does, it’s most likely to be a horse where the odds are 7/1 but you think it should be 5/1 [2].  That’s incredibly annoying, because it’s a solidly positive expected value, but you’re going to lose 80% of your bets.

Which comes back to the point I foreshadowed earlier; this is not an easy or fun way to make money.  I tried to take it seriously for a while, a few years ago, keeping records and everything; I concluded that a) it was basically possible to reasonably consistently show a profit, and b) to do so involved more and more tedious work than I was used to from having a full time job in the stock market.  My conclusion is that the a version of Keynes’ famous maxim applies; you cannot actually make money out of horse race gambling unless you are, to say the least, a bit funny about horses.

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[1] A furlong is an eighth of a mile, for readers unfamiliar with the turf.

[2] Yes, I know that can’t be read off the table above – I’m intentionally making it impossible to actually use this as a system without further effort, to discourage anyone from losing their shirt and blaming it on me!