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  • The Happy Valley and the Hong Kong Jockey Club,

  • it's kind of a Mecca for horse racing.

  • People there bet more in terms of their income than almost anywhere else on the planet.

  • In 2001 a very large jackpot had built up. Roughly 20 million dollars U.S.

  • One million people placed a wager on the Triple Trio for that race. That's equivalent to

  • about one in seven of the population of Hong Kong at the time.

  • Last leg of the Triple Trio and away they go

  • The Triple Trio is three races, the top three finishers in any order in all three races,

  • the odds are something like 10 million to one.

  • Bobo Duck in front, Mascot fighting back, Bobo in front and there's the training double

  • for Derek Cruz.

  • No one came forward to claim the prize.

  • The winner was an American professional gambler.

  • At that point he was making so much money from his gambling activities that it didn't

  • matter to him.

  • This is the story of a shy computer nerd who came up with a system to beat horse racing

  • and made a billion dollars.

  • My name's Kit Chellel. I'm a reporter for Bloomberg and a writer for Businessweek.

  • The fundamental unfairness of sports betting is that over a period of time, you will almost

  • always lose if you make a lot of bets. Gambling, sports betting is slanted against you as a

  • punter, as a gambler.

  • Bill Benter decided to beat that system.

  • He just became captivated with this idea that these games, which supposedly casinos had

  • this long standing advantage, you could actually beat with the right methods.

  • I'm Adam Kucharski. I'm a mathematician and science writer.

  • When he was younger he saw a sign in Atlantic City that said "card counters are banned from

  • our games" and for him that sign basically said card counting must work.

  • He picked up a book by Ed Thorpe, called Beat The Dealer, which outlined the fundamentals

  • of card counting.

  • You're looking for how many high or low cards have emerged and how many might remain in

  • the pack. If you think there's a high chance that there are lots of high cards left in

  • the pack, that changes the odds in your favor.

  • Lots of people went and tried card counting.

  • Bill was more successful than most,

  • managed to make some money and make a career out of it.

  • He teamed up with Alan Woods, an Australian professional gambler,

  • but as is always the problem with professional gamblers, casinos don't like people who win.

  • And they were systematically excluded from all the major casinos around Vegas.

  • So they needed to find a new game.

  • Alan Woods was interested in horse racing and between them they talked about it and

  • became attracted to the betting scene in Asia and in particular the Hong Kong Jockey Club

  • where they were aware there was this huge

  • horse racing market they might be able to tap into.

  • One of the reasons that Hong Kong has a big advantage if you're trying to use

  • mathematical and statistical methods

  • is it's almost like a laboratory for studying horse racing.

  • In Hong Kong, you've got two race courses that dominate. You've got a huge amount of

  • betting activity. You've got a pool of about a thousand horses. You've got hundreds of

  • races a year. So if you're designing something that's going to generate reasonably consistent

  • data to study these patterns, Hong Kong is the place that you want to go.

  • So they sent Alan Woods to Hong Kong and he came back with all the results of racing in

  • Hong Kong going back five, ten years I think. And they manually fed that into a very basic

  • early computer to try and create a statistical model.

  • They fed the numbers into their computer. Took them a long time. It took them about

  • nine months.

  • So what they would do is use these measures of horses' quality and come up

  • with a prediction of each horse's, in a given race, their chances of winning. And then they

  • would compare that to what the odds on the board implied those horses of chance of winning

  • and what you want is a horse where the odds imply it has a very low chance, but your model

  • says it has a pretty decent chance.

  • In the course of researching this story I spoke to gambling experts they said it was

  • impossible, couldn't be done. If you bet long enough on horses, you will lose money.

  • There are lots of factors that go into a horse winning or not. The favorite doesn't always win.

  • In his first year of betting, I think he lost $150,000.

  • It had all sorts of glitches because their data wasn't perfect.

  • The fact that the Jockey Club takes a 15, 17% cut makes it harder to be sustainably

  • profitable. It means you have to be not just better than the market, but you need to be

  • about 20% better than the market to start making a profit.

  • In a parimutuel system, in this case the Hong Kong Jockey Club, the odds are determined

  • by the action. So the number of people betting on each particular horse, and the sums they

  • bet, determine the odds.

  • And what they did, alongside developing predictions, was find ways of really carefully trickling

  • their money into the market

  • if there's a certain amount in the pot and you go and put a huge amount on a particular

  • horse, you're actually going to affect how much money you can make back because you're

  • going to swing the market so much towards a particular horse.

  • Eventually he came to incorporate the public odds into his model and that was a huge breakthrough

  • for him.

  • He'd worked out that the individual decisions of a million punters in Hong Kong were actually

  • a fairly accurate predictor of a horse's chance of success.

  • Bill Benter has been betting for a few years in Hong Kong and he's starting to make serious

  • money, enough that he can hire employees to place bets over the phone for him.

  • He buys a load of computers, he hires a nice office.

  • It was really operating like a business and much like you'd see the sort of actions in

  • a modern hedge fund

  • in that they were accumulating really good data,

  • they were analyzing that data and then they were developing predictions that they could

  • act on.

  • And really the nature of this business, these syndicates, it wasn't that they were placing

  • the odd bet and then celebrating. It was just almost a systematic trading role where they

  • were expecting to make money over time.

  • One day he gets contacted by the Hong Kong Jockey Club

  • and as a professional gambler who's worked in Vegas, I think he assumed it was going

  • to be bad news, they might try and kick him off the betting pool.

  • And instead they said "You're one of our best customers. What can we do to make your

  • life better?"

  • Because they take a percentage of the total betting pool, the more computer bettors there

  • are, the more money they're betting, the more profit they make.

  • Bill wanted a computer and they gave him one.

  • They gave him something called the 'Customer Input Terminal' and allowed him to stop having

  • to have employees pick up the phone and spend 10, 20 seconds each time placing a bet.

  • He could do it in a fraction of a second. So it allowed him to make more bets.

  • The more bets you make, the more likely it is that your edge pays off. So when he was

  • suddenly able to make thousands upon thousands of bets at the click of a button, it dramatically

  • increased his profitability.

  • There grew this kind of subindustry of specialists.

  • I don't think the Hong Kong betting public had broad awareness that there were computer

  • experts using statistical modeling to bet in the same pools that they were. They simply

  • weren't well known. They never appeared in the press. No one knew the name Bill Benter.

  • The amount of money that was coming out of the pool and going to computer teams just

  • grew and grew and grew and grew.

  • The computer betting teams got too good. They were making too much money, they were making

  • so much money.

  • The Jockey Club saw what was happening and they realized that if word got out, that the

  • specialist computer teams, foreign-owned and run, was siphoning money out of the betting

  • pool to the detriment of the average bettor, it might discourage people from going to the

  • race track and making bets.

  • They abruptly cut off Bill Benter.

  • But then this record jackpot came along.

  • I think they made 50,000 bets, they spent well over a million Hong Kong dollars,

  • they went into it deciding that even if they won, they weren't going to claim the money.

  • They almost did it to test how good their model was by this point.

  • Does Bill Benter fit into the stereotype of a professional gambler?

  • No, hardly at all.

  • He had more than 30 winning combinations, but he had one single winning ticket that

  • correctly predicted all nine placed finishers.

  • And that was the one that had the big payout.

  • There was a purity about what he did, you know, he was faced with a technical, numerical

  • challenge. His job was to beat the odds in horse racing and the way he did it was applying

  • science to this problem in a way that most gambling people don't.

  • He's still working away at that problem, you know, the algorithm is constantly evolving

  • and changing and improving.

  • Bill was really one of the first people to apply computing power and technology to a

  • system of odds-making. But that practice is now spread all over the world, not just by

  • bettors but by bookmakers too. So in a sense he transformed the industry.

  • His obsession is the science of gambling and probability

  • and to this day it's what he does.

The Happy Valley and the Hong Kong Jockey Club,

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How To Make $1 Billion On Horse Racing

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    林宜悉 posted on 2020/04/15
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