In Review: The Oceanside Stakes

The public is a great pre-race handicapper. It is very skilled at taking the available data (i.e. past performances, visual impressions, word of mouth) and whittling it down to accurate estimation of the probability of winning. Their top choice — the post time favorite — wins more than any other horse. In fact, their probability estimates tend to be spot on down the line — with 2-1’s winning more than 3-1’s and so on. Overall, the crowd says with good confidence that “this is the best horse.”

This obviously doesn’t mean that the public’s choice always wins (the favorite only does that about 1/3 of the time). Randomness, variance, unknowns, and all the things that happen during a race take care of that. But it does mean that the public routinely finds the horse with the best chance of winning. Often, but not always, the public sides with the horse that has ran the fastest speed figure, particularly when done at today’s distance, surface, and class level. That is why situations such as the one that happened during the Oceanside Stakes yesterday during Del Mar are so fascinating.

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In the Oceanside Stakes — a restricted stakes for 3YO turf milers held traditionally on Del Mar Opening Day — the curiosity wasn’t that second choice Soul Driver won over front running turf-debuter Forest Blue. Instead, it was that the public made Papacoolpapacool the heavy 6/5 favorite over Soul Driver at 5/2.

Let’s look at the PP’s:

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A quick glance shows the speed advantage of Soul Driver, who had run significantly faster than Papacoolpapacool and had done so more recently at today’s distance, surface, and class level. Soul Driver had run a 94 Beyer Speed Figure (BSF) in his last effort, but Papacoolpapacool had only run an 85 BSF in his most recent race and a career best 87 BSF. The public, which can be typically counted on to support such a speed advantage at the windows, did not in this case.

So why did the public not support the horse with the fastest speed in the Oceanside?

While there may have been some slight trepidation in the public’s eyes that Soul Driver would repeat the figure, the odds-setting seems much more about the overrating of Papacoolpapacool. Ultimately, the betting crowd for the Oceanside chose to heavily weight other factors at the expense of speed. The crowd was influenced by his prior stakes success, even though the speed figures were lower. Papacoolpapacool had earned a solid reputation in Southern California prior to today’s race, with some well-earned success on the track throughout the winter and spring. He had won 3 consecutive races and 2 consecutive stakes. In the first stakes win, he beat Soul Driver (prior to Soul Driver’s improvement) head-to-head. In the second stakes, he was dominant, winning by 4 1/4 lengths.  The public was also heavily persuaded by his performance in the G3 Penn Mile. He then shipped east for the Penn Mile, an increasingly attractive destination for top-notch 3YO turfers. He finished a closing 7th and only ran a BSF of 85, but ran with 1 1/4 lengths of winner Force the Pass, who went on to win the Grade I Belmont Derby. Despite the comparatively average BSF for the Penn Mile, he gained a tremendous amount of buzz out of this race, due, in part, to Force the Pass’ huge step forward to win at Belmont. He also had a visually-impressive finish in the Penn Mile. The hype growing behind Papacoolpapacool may have been further reinforced in the public’s eyes when Gary Stevens, who had ridden both, chose Papacoolpapacool. Finally, the public is often over-influenced by positive trainer stats. Papacoolpapacool is trained by arguably the hottest trainer in California in Phil D’Amato, with high ROI stats for almost every relevant category.

All of these factors combined to lead the public to heavily support Papacoolpapacool. It typically takes a good deal of intangible, or secondary, factors to move the crowd away from the horse with a significant speed figure advantage and the Oceanside Stakes was no exception.

 

 

Stealing Money from the Crowd

A contrarian guide to betting on horse racing. Please click on the images below for preview:

 

Table of Contents:

Introduction 2

The Favorite/Longshot Bias 6

Deconstructing the Past Performances 12

Conclusion 17

19 pp.

Now available for free download!

Stealing Money from the Crowd Free Download

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Thaler and Ziemba on Efficient Betting Markets & Favorite/Longshot Bias

I’ve read it before (around 2005), but not since being exposed to Thaler’s other excellent work in behavioral economics a few years back. Ziemba (Dr. Z) is, of course, a legend for his work on arbitrage in place and show pools. I’ve always believed that betting markets are mostly efficient (especially regarding public information), but that certain public cognitive bias can be exploited to find long-term value. This article explores this area.

After re-reading it again, it’s still a very worthwhile read, and a solid introduction to the field. It’s chock full of rigorous examination of much of the “folklore” (the authors’ word) of the racetrack. It’s especially useful for conclusions regarding the public’s typically sharp handicapping, finding that “the racetrack betting market is surprisingly efficient,” which cuts at most of the common claims of the mainstream handicapping literature. It does however find inefficiencies (at least at the time), especially with the well-documented “Favorite/Longshot Bias,” which generally finds pricing errors at the very top (for example, 3/5 or less) and very bottom of the odds (for example, 20/1+). In my favorite part, the authors lay out the potential reasons for the bias:

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Indeed, just like with other decisions, bettors are motivated by a mix of both rational and irrational motivations. I especially like the serious consideration given to the process of betting and particularly, the added utility derived, especially from longshot betting. The short time horizons of most bettors also tend to influence irrational behavior, which also explains the increased severity of the favorite/longshot bias toward the end of racing cards. The goal of the sharper bettor is to find and exploit the irrational crowd decisions, while maintaining their own rationality.

Click here for full article

Image: Rachel Kramer, 2012.

Indiana Jones & The Willingness to Be Wrong

To play the races well, you have to be willing to be wrong. And this means everything involved in losing – the loss of capital, the embarrassment, and, especially, the ego blow. The game is far too competitive to avoid good value propositions simply out of fear of feeling and looking stupid.

An interesting example of the mindset needed for risk taking comes from Indiana Jones and the Last Crusade. For those who might be unfamiliar, Indiana Jones, who is a university archeology professor with a fairly adventurous side, is about to find the Holy Grail, perhaps the greatest artifact in history. Very close to his goal and with his father’s life on the line, Indiana Jones has to pass a series of obstacles to see if he is worthy of possessing the Grail. The first two are riddles, which Indiana Jones thankfully solves just in the nick of time. But the third ordeal is different.

The scene is epic.  Here’s the clip:

He looks down at his father’s journal – and sees a scribble of person walking in the air across to the other side. But when he looks across the chasm, all he sees is air, and a terrible drop to certain doom.  The only solution is to take a step into the air – with nothing under his feet.  He has some evidence on which to base his belief — the picture in the journal – but, based on what he sees, there’s still a pretty good chance that he could fall right down into the chasm. He had to bet everything on his belief that, despite what he saw, he would not fall. He was willing to be wrong.

You need to have an unwavering belief that you will be right over time and an absolute acceptance that you may be wrong often.

Just as Indiana Jones takes a step into the air and passes the point of no return, his foot hits a bridge. Despite not being able to see it, it was there all along. It was a test of his faith, and he only passed when he was willing to take the risk. He had to be willing to be wrong in order to pass this challenge.

Betting well certainly doesn’t require religion and it doesn’t require that you put your life on the life, but it does need require strong conviction. You need to have an unwavering belief that you will be right over time and an absolute acceptance that you may be wrong often. You need to have a deep faith in your own ability and you must be willing to look silly, even foolish, in the short-term. Simply put, you need to be willing to be wrong.

It is, of course, perfectly acceptable to not like being wrong – I can’t imagine any scenario where being wrong actually feels good. But, embracing it as a possibility – even a very strong possibility based on style – is required in order to survive the long-term.

Image: Rob Young. Copyright 2008.

 

From the Archive: Horseplayer’s Axis of Evil (2006)

[I wrote this article back in 2006. A little dated with Bush-era terminology, but still applicable, it was the first piece on playing the races that I ever wrote. SA]

As horseplayers, we are always seeking value in our selections. Whether you’re wagering on a horse at 15-1, 4-1, 8-5, or 3-5, the ultimate goal is to find the overlay. Yet, while the overlay concept is sound in theory, it’s typically wrecked in practice by all but the most emotionally disciplined of players. This is the work of the horseplayer’s axis of evil, which gains its strength by praying on our all-too-human characteristics. Without further ado, let’s meet its membership:

(1) GREED: This first member of the axis is deceptive and devious, and, when we’re not looking, he runs off with large portions of our bankrolls. He makes us think we’re getting value when we’re really just looking to get something for nothing. Through his subtle manipulations, he throws wrenches into a well-reasoned handicapping process, and causes us to lose more money than we would simply by betting the favorite.

Greed shows up all the time in our handicapping, especially in our search for overlays. As horseplayers, we hate short prices. There’s risk in every horse race — a jockey error, a catastrophic injury — and we must be compensated for this risk. But, unfortunately, on many occasions, a disdain for short prices often clouds our judgment. We perceive negative value and move away from a horse solely because of the low anticipated payout.

(2) HOPE: Red, of The Shawshank Redemption, had it right: “Hope is a dangerous thing.” And, much like the classic handicapping quote about time and prison, when it comes to playing the races, hope is best left behind the prison walls. Yes, hope is a wonderful, inspiring feeling that makes you feel happy when things aren’t going well. It’s also something that has absolutely no place in handicapping.

Hope rears its ugly head all throughout the handicapping process, but it’s especially dangerous when you’re dissatisfied with the price you’re going to get on your top selection. You may begin to desperately look for positive things in the other horses. You’ll use words like “maybe…could…possibly.” You know the types of horses, and you’ve seen enough of them come in to convince yourself. But, unfortunately, you’ve come under the spell of hope, and started to let it guide your selections.

Overlays are great theory, but finding one in the heat of the handicapping moment can be an emotional minefield.

(3) FEAR: By far the trickiest of the members of the axis, fear subtly influences our selections in several ways. Aware of the effect of scared money and facing the fear of loss, the horseplayer must fearlessly enter a risky environment and stay brave amid tremendous uncertainty. Yet, despite our bravery, fear is not without a weapon here. For if we feign fearlessness where it is unwarranted, he attacks with the fear of regret, which guides us into situations where the risk does not equal the reward.

The player may seem confident in his selection, but will still be motivated by fear. When making this type of decision, the horseplayer’s phrases are well-known: “I’ll be devastated if I passed on this one”; “This big payday will make my day/week/month; I can’t miss it if it comes in.” (And, believe me. . . I know these phrases all too well. ) Fearful of missing the big payday, you turn a deaf ear to the important cautions in your gut.

Together, greed, hope, and fear constitute a nasty confederation that confounds the reasoning of the value-seeking horseplayer. Overlays are great theory, but finding one in the heat of the handicapping moment can, indeed, be an emotional minefield.

Wise Dan: Let it Ride

I’ve tried to constantly beat Wise Dan on the turf, but instead, he always beats me. Not only have I lost money, but also the opportunity to wager on one of the most reliable horses in all of racing. So, out of curiosity, I decided I wanted to figure what he would have paid if I had fully embraced him from the beginning.

Let’s say a bettor put a minimum $2 on him back in August 2012 when he made the (now) permanent move to the turf. This bettor would have won only $5.00 that day, but let’s say he saw a turf monster in the making. So, wanting to make more, he decides to “Let it Ride” and re-invests his entire winnings each time Wise Dan runs on the turf, or he retires. For argument’s sake, he doesn’t bet Wise Dan when the Shadwell is moved to the polytrack last year knowing that there’s more risk with the surface change (a fair assumption, I think).

Sounds silly, and a bet that surely would have to catch up to you eventually. And, besides, what could it possibly pay? I mean, he’s been odds-on in every start since the Breeders’ Cup, so you can’t possibly make any money doing this. But, I was curious, so I opened up excel, typed in some odds, and let it do its magic.

If our hypothetical bettor had put $2 on Wise Dan and just let it ride through the streak, he would have made over $1,100 going into tomorrow. 

The result, of course, is very dependent on “letting it ride.” Pocketing just 20% of your winnings demolishes the return and leaves you with $75 pocketed and only a very Douglas-Adams-like $42.42 headed to tomorrow.

It would, of course, be much tougher to make these bets with $100 units (and rationally, I can’t imagine not taking profits) but, just for fun, here’s how it would have turned out:

Here’s the 20% pocketed at $100 units.

Can he do it again on Saturday? Well, he’s certainly done it before, and I’m officially done trying to beat him.  I’m not recommending this type of bet (one wipe out is catastrophic), but at least with Wise Dan, it would have paid very handsomely.

Scared Money & Multi-race Wagers

One reason I’m handicapping in public through this Belmont meet is to share the “inner game” of playing the races everyday. The game of betting is much more than just analytics; it is also a constant battle for self-discipline and emotional control. And this means more than not just staying strong through the lean times, but also maintaining proper perspective through the great times. In fact, this is one reason this game is so challenging, and why betting is growing more popular everyday. It not only requires analytical thought, but also strong self-discipline and constant learning.

One thing that often gets in the way is a phenomenon known as “scared money.” Essentially, it’s when you make any wager that you are afraid to lose. It’s related to “pressing,” or making bets because you really want a score right now.  In contrast, I find that when I’m playing patiently, I never expect any particular bet to hit, but I know that somewhere and sometime, the right number of bets will hit. Scared money–motivated by impatience–makes any one particular bet far more important than the long-term.

Scared money can be very deadly in in a multi-race wagers, such as the P3, P4 or P5. I find that if I am adding horses to a ticket only because I am afraid that the ticket is going to miss if I don’t, then I’m making a mistake. Even if the bet hits, it still was a bad bet. In contrast, like any set of wagers, each multi-race ticket needs to be part of a bigger long-term, value-seeking strategy.

Hindsight is always perfect, but in both making my wagers and reviewing my wagers, I always try to ask myself if I’m motivated by fear of missing the ticket, and whether adding additional horses actually adds value to the ticket. I’ll still screw up — although thankfully much less than I did when I was younger — but seeing and learning from mistakes is the key to avoiding the same pitfall in the future. But, then again, nobody said that playing the races was easy!

 

 

 

 

Trying to Not Smash the Egg

“The key to everything is patience. You get the chicken by hatching the egg, not by smashing it.” — Arnold H. Glasgow

One reason that I love wagering — whether at the racetrack, OTB, or at the sports book — is that it forces me to be emotionally-disciplined in order to succeed. You can be a brilliant analyst, but this game will eat you alive if you can’t keep your feelings in check. And, to be honest, being emotionally-disciplined is not natural for me. In fact, if I let emotion rule my betting (as I did when I was younger), I might as well just burn my money instead.

For example, it is simply not natural for me to sit on the sidelines and watch and wait. Many times, I’ll look at the card a number of times, and just not t see any plays. With potential opportunities ahead, I want to preserve my capital for bigger chances into the P3 and P5 pools. Sounds rational, so it should be easy, right? Wrong. Even though I know that it’s in my long-term interest to pass the card, the lure of betting is always strong. I know I’ll be tempted by action and, especially, the fear of missing out on an opportunity. Nothing motivates bad decisions, in betting or in life, like fear of regret.

But fear of regret is, perhaps, the worst reason to make a bet. I’ve learned through the years that the only reason to make a bet is value, and not for some sort of emotional satisfaction. Yet, like most things in this terrific game, that is so much easier said than done. I still violate this cardinal rule all the time, especially after very tough losses or very big wins. And, that’s why I love this game — it is just so freaking hard.

Wish me luck sitting on my hands, and good luck if you are playing.

Image: Mark Turnauckas, Chicken and Egg. Copyright 2011.

 

Recommended Book for Horseplayers: The Inner Game of Tennis

It’s a book on the surface about tennis, but it’s really about the mental side of any competitive activity. And, as most horseplayers know, it’s in this mental side of the game, where the best handicapping can come unglued. Tilt, overconfidence, self-doubt to name a few. Recommended to me by several sharp horseplayers years ago.

Links are to Better World Books and prices are typically competitive for used books. They are a leader in “Triple Bottom Line,” which means that they not only care about profit, but also planet and people. As part of their mission, Better World Books has raised an enormous amount of money for literacy and libraries, and I encourage you to check them out. I’ve used them for years — they ship quick and are reliable — and I really support their mission.

Image: Marianne Bevis, Copyright 2013.

On Context: Interpreting the PP’s

I fell in love with racing for many reasons, but none greater than a love of the data, specifically the past performances. As a kid, I’d always read the box scores in the sports section with breakfast. I’d recreate last night’s games (or the late games from the previous night) in my head over my frosted flakes. I love taking the data and trying to understand not only what’s on the surface, but what fascinating stories are hidden below the data.

With horse racing, the data tells several stories. In particular, the past performances telling the histories of the horses. There’s tons of data available — typically, the running lines of the last 10 races with speed figures and a race/class level description. Some more advanced past performances add pace, pedigree, and trainer statistics.

Interpreting the past performances entails understanding a horse’s history to predict what that horse will likely do today. Indeed, that’s the essence of handicapping. In interpreting the PP’s, there are many different stories. The first story is simply what happened in a race. It recounts the basic facts of what happened. An example of this is the running line, which tells how far behind/ahead a horse was at certain points in a race. A similar story is also told by speed and pace figures, which add context for track condition/speed. This permits taking a race and comparing it to other races.

Interpreting the past performances entails understanding a horse’s history to predict what that horse will likely do today. Indeed, that’s the essence of handicapping.

But another story is also told by the past performances, and one that requires more than surface analysis to see. This story is crafted by looking deeper into the circumstances surrounding a particular race and understanding why that race may or may not be predictive for today’s race. Importantly, in doing so, this type of analysis raises more questions than answers, but ultimately brings about a relatively accurate assessment of the riskiness of a contender. In particular, relevant data from other contexts, such as trainer intent or class shifts, often informs understanding the previous races and the reasoning behind today’s entry.

Because they are difficult to see, these second stories — the contextual ones that require analysis — are the ones that offer opportunities for profit at the racetrack. In short, context matters, especially when betting against the public.

Image: Lauren Turner, Uttoxeter Races_026. Copyright 2011.