Me and My Monkey

by Steven G. Berry

The difference between parimutuel horse race betting and what you get in a casino is that the odds are not guaranteed to be against you. If you are rolling dice, betting cards, playing roulette or yanking a one-armed bandit, you are playing against odds that are fixed mechanically. The odds are fixed against you and your only hope is to be lucky over a period of time.

In horse racing, the track removes about 20% of the money bet into a wager pool before they calculate potential payoffs. There are no fixed odds on the horses, the odds are set by the opinion of the bettors based on the amount of money they wager on each proposition.

Let us suppose a five horse race for example. For simplicity, consider five players betting $2 each into the wagering pool. If each of the five bettors bet a different horse, there is $10 bet with $2 on each entrant. Let us further assume each horse has an equal chance of winning. The track removes $2 as their cut (takeout.) There is only $8 left in the pool. Whichever player selects the winner collects just $8. All players chances of winning is always one chance in five or 4-1. A player can only hope to collect $8 every five races, yielding a loss of $2. The poor house is not far away.

As far as the track is concerned, the outcome of a race could be determined at random by a monkey slinging his feces at a bullseye target. They don't care. They have their money safely put away.

Now, suppose that one of our five players is a very good handicapper and picks more winners than the others. The other players payoffs will be lower because they will occasionally share the win with the expert player. The expert is named Cheetah and he reads the Daily Racing FormTM.

The monkey setting the parimutuel odds is a pretty good handicapper and he is practiced at slinging crap right on target. Cheetah thinks the 4 will win, so he aims at the 4 and sometimes he hits it. Cheetah can be thought of as the collective betting intelligence of all players betting on the race – the tote.

I am Tarzan. I think I'm smarter than Cheetah, at least a little. If I have an opinion against the tote board, I'm more inclined to think I'm right rather than some damned simian. If I agree with the tote board, there isn't much point in betting. Mark Twain said,”It were not best that we should all think alike; it is difference of opinion that makes horse races.”

When we bet against the tote, we are betting against Cheetah. Considering Cheetah is picking some good horses AND the track stole twenty percent, we might have to be 30% better than your average monkey just to break even! That's just to win, you might imagine forty percent better to break even on exotics. No wonder 95% of horse players lose money.

Considering the task set before us, you might wonder why anyone bothers to bet. You may wonder why is it that horse racing is a multi-billion dollar affair! Hell, you might even wonder why you'd give me any part of your hard-earned pittance for any opinion I might have upon such a proposition.

Well, damn it man, aren't we 50% smarter than any monkey? That's what it takes to win, I imagine.

Here's the key, and I honestly believe this. The bigger target you give the monkey, the harder it will be for him to hit his mark. It's when the monkey (tote) is right that you will lose. What we need is bigger fields and more combinations to overcome the monkey's limited ability.

If you give a monkey 9 possibilities, he's liable to be right 3 times. You might be right 4 times, but if you choose the monkey's picks twice you might not break even! The more you agree with the tote board the less likely you are to profit.

Give that monkey 72 possibilities, make him select the winning exacta combination in a nine horse field. Now his job is eight times harder and you may manage to show a profit. You're probably beating the monkey at this point, but there is still the track takeout to account for.

Toughen up a bit more with a trifecta instead of an exacta, make him hit one out of 504! As the job gets tougher, a human making rational selections will eventually out-perform a caca slinging monkey. Are you 50% better than a monkey if the test is 50x harder? I think so. Trifectas may be a perfect bet.

If you extend the challenge to selecting the top 4 finishers, you have increased the odds against Cheetah beating you by 300-1! Of course, the chances of you being right decrease as well. A nine horse field has 3024 possibilities, how many can you buy? Cheetah has everyone's money, so he has bought them all (usually.) I think any rational handicapper can beat the tote in superfectas, assuming he has enough money to outlast prolonged losing streaks and avoids stupid bets.