Holiday reflections

I'm currently on holiday (Sri Lanka) and I've been thinking about the blog and the way forward.
My opinion is that betting in general on horse-racing is becoming tougher mainly due to the expansion of rating services which is chiselling the "edge" away from old hands like me.  Horses which used to go off at 10/1 are now running with an SP of under 5/1 - what that means is that the "risk" factor is being reduced. 

To explain, I generally try and operate on a winner from every 5 wagers (20% strike rate), so to break-even my winners have to have odds of 4/1.  To make a profit, my selections have to have average odds of 9/2 or longer.  After building-in "margin" (about 2pts) and risk of the unexpected (another point), I'm looking for wagers at odds of 8/1 or longer on horses that I consider to have a chance on my odds-line of 4/1 or shorter.  Those opportunities are getting fewer, and I am looking at ways of overcoming the situation.

I've been reading a book called "Against The Odds - the remarkable story of risk" by Peter Bernstein.  It confirms what I had already concluded myself (although I do not consider myself a scholar or professor) that knowledge of risk is understood by very few.  I have made note of a passage which summarises the 1992 paper (by Kahneman and Tversky) titled "Prospect Theory": "Theories of choice are, at best, approximate and incomplete... Choice is a constructive and contingent process. When faced with a complex problem (ie. horseracing) people use computational shortcuts and editing operations." Since 1494, when Luca Paccioli set out the basics of algebra in his book Summa de arithmetic, geometria et proportionalita, mathematicians have tried to ascertain how to measure risk as a formula and, essentially, all have failed - although in the intervening years each advance in risk management has brought a greater understanding of risk and its complexities. What reading this book has confirmed to me is that few people understand what risk is, so if you don't understand it how can you value it? However, if you are to make a long-term profit from gambling on horseracing then you must at least make due allowance for risk in the structure of how you wager.  Right now, I don't think enough people take risk into account when placing a wager, and so they accept odds that do not accommodate a reasonable element of risk. It is not good enough just to bet on the winner of a race if the odds do not accommodate risk and offer the punter "value" - unless you are capable of finding winners at a very high strike-rate; and by high I mean over 40% of all wagers must win. If you do not accommodate risk within your odds assessment, then you will lose in the long run. 

What this has led me to consider is that with high a turnover of wagers, shortcuts have to be taken and, in taking shortcuts, you end up making decisions with incomplete or approximate information. As such, I will be intending to reduce the number of wagers I make in the coming 12 months to enable me to take as much information into account as possible.  With a reduced number of wagers, there needs to be a corresponding increase in the stake applied. Some years ago, I suggested that in order for wagers to have significance they should be at a level at which losing would "hurt". I took this from the memoirs of Sir Clement Freud and, at the time, I suggested the wager amount should be a days wage.  This produced a fair amount of comment back then, and I expect it will do the same again. As a freelance consultant in construction, I know what my daily rate is but, if you don't and you are on a salary then you have to divide your salary by 230 which is approximately the number of days a typical person works in a year. You can do this in your head by dividing your salary by 100 (if your salary is £40,000 divide by 100 equals £400), then halve that number (half of £400 is £200) and taking off another 10% (that is 10% of £200 which is £20), so £180 is a days wage for someone on £40,000pa.

I will be trialling this approach over the coming weeks, and the Royal Ascot meeting will provide several suitable races. I will be using every tool in my betting armoury to make a profit including laying-off my stake before the off should the odds provide the opportunity.

Post-blog notes: some differing responses via twitter with one suggestion being to give up betting on horseracing altogether, and another suggesting I increase the number of wagers and reduce the stake rather than reduce them and increase the stake. I have tried that latter suggestion before privately, but that is akin to adopting horseracing betting as a full-time occupation. This blog is essentially to provide readers with entertainment and information that will (hopefully) provide a profit.