You Can't Beat The Bookie If You Don't Ask This Question

Thursday, February 7, 2019 12:52 PM UTC

Thursday, Feb. 7, 2019 12:52 PM UTC

Wins and losses are subject to luck and randomness, so focus your strategy on something else.

I have a simple betting proposition for you. I'll bet you can't flip a coin three times in a row and get heads to come up three times in a row. In fact, I'll bet you can't flip it twice in a row and get heads both times. Whaddya say? Are you in?

Don't like coins? OK, let's play cards instead. Here's a deck of 52, I'll bet you can't pick one at random and turn up a face card (Jack, Queen, or King). Will you take that bet?

A lot of recreational gamblers immediately will approach these propositions from the standpoint of whether or not they think they can achieve the desired outcome (turning up a face card, flipping heads twice in a row). But there's an even more important question that should come first: how much do I stand to win on this bet?

OK, so let's reframe the question: for a $100 bet, if you can pull a face card out of the deck, I'll pay you $250. Now what do you say?

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Even at this point, most gamblers are still thinking about whether they can pull the right card out of the deck, but there's still a much more fundamental question that should be the very first question considered. It's the question of whether the payout is a fair payout given your risk of loss. This is the single most important question that needs to be answered in any wagering proposition, and you'd be amazed how many people never bother to ask the question before putting their money on the table.

What is your risk of loss on this bet? It's simply the number of times you expect to lose that bet over a long period of time, let's say, 100 plays. There are 12 face cards in the deck, which means you have a 23 percent chance of winning the draw. Expect to win that bet 23 times out of 100, and expect to lose 77 times.

At $250 per win, and $100 per loss, you stand to win $5,750 over 100 plays, and lose $7,700, for a net loss. (Your expected return on investment, or ROI, is about -20 percent in this case.)

This is why the financial question is the most important question, and the issue of whether you think you have a decent shot at drawing a face card doesn't matter at all. Over enough plays, you will lose money as a matter of mathematical certainty.

What about that coin flip bet? For a $100 bet, I'll pay you $285 if you can flip heads twice in a row. Should you take that bet? It seems tantalizing, because really, how hard is it to flip heads twice in a row? Easy money!

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But that's another loser bet, because your chances of flipping heads twice in a row is 25 percent, so you're only going to win one out of every four bets. That's $300 you lose the three times you fail, and only $285 for the one time you succeed, so you're still losing money (nearly -4 percent ROI).

This example is really useful because you can very quickly see how much you stand to lose ($300), and now you know exactly what the payout needs to be on your one win in order to break even (a $300 payout), or to make profit (anything over a $300 payout).

Our approach to wagering should not be any different when we take coins and cards out of the picture and replace it with the Cleveland Cavaliers vs. the Milwaukee Bucks, but for some reason the temptation is to start thinking differently when the question is "will you take the bet on the Bucks?" Suddenly rosters are being analyzed, offense and defense are being compared, team chemistry and head coaches are under the microscope.

There's only one issue that should take center stage: "How much am I getting paid for a Bucks win, and is that enough to pay for all the times I expect to lose this bet?"

Here's a handy reference to help you make that decision:

  • If I expect to win 10 of 100 games, I need +900 to break even
  • If I expect to win 20 of 100 games, I need +400 to break even
  • If I expect to win 30 of 100 games, I need +233 to break even
  • If I expect to win 40 of 100 games, I need +150 to break even
  • If I expect to win 50 of 100 games, I need +100 to break even
  • If I expect to win 60 of 100 games, I need -150 to break even
  • If I expect to win 70 of 100 games, I need -233 to break even

(Fun fact: in general, you're only going to win 50 out of 100 spread bets or totals bets, so keep this chart in mind next time you take a spread or total bet.)

Stay tuned for future betting strategy posts, and be sure to check out my other sports analysis on Twitter at @HooksPicks and on Patreon at patreon.com/hookspicks!

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