GC,

If it’s true, I’m surprised that these guys aren’t playing the Pick 6, or the superexotics like the tris, supers, and Pk4’s, as others in this thread have speculated.

I could understand it if these computer guys were mostly “arb” guys, since they can’t see beyond the exacta pools. I keep hearing about such groups and how they're able to generate profits off their rebates alone, supposedly without any handicapping(?). I guess they could be arbing the exacta combos to the win pools in the same way that Ziemba disciples arbed the place and show pools, but I don’t know anything about them or if it’s even true at all.

I do know a fair amount about the PhD-level mathematician teams you mentioned though. A lot of info on these teams is publicly available, often straight from the horse’s mouth.

Bill Benter for instance, who is a brilliant and remarkably humble fellow for someone who just may be the most successful gambler of all-time, has given numerous public presentations over the years at various venues like the International Conference on Gambling & Risk Taking, as well as having published scholastic papers on the subject of multi-factor based computer handicapping.

From what they’ve said, these guys LOVE the superexotics. In his own words, Bill has said,

[i]“Exotic bets offer some of the highest advantage wagering opportunities. This results from the multiplicative effect on overall advantage of combining more than one advantage horse…When you string them together, you go from what may be a very small or marginal advantage to a very large advantage. In ultra-exotic bets such as the pick-six, even a handicapping model with only a modest predictive ability can produce high-advantage bets…For a bettor in possession of accurate probability estimates which differ from the public estimates, ‘the more exotic the bet, the higher the advantage’…Some professional players make only exotic wagers to capitalize on this effect.”
[/i]
He even gave a presentation at one of the ICGRT conferences dedicated entirely to how to play the Triple Trio (3 consecutive trifectas) bet in Hong Kong.

He acknowledges the difficulty of projecting the public’s betting in pools they cannot see. This is made more difficult by the fact that the public doesn’t bet horses in the superexotics in the same proportion to the win pool (they tend to overbet favorites). They deal with it through things like empirical research about public betting behavior instead of trying to predict it apriori based on assumptions of rational pubic behavior.

They also use things like the discounted Harville formula to estimate vertical superexotic probabilities, which is exactly what I use myself to estimate payouts for exactas, tris and supers.

As far as whether these computer teams have a deleterious effect on the rest of the public, Bill freely admitted that this is certainly so. Like Jerry said, it’s a zero sum game.

By Bill’s own estimate, the effect of the computer teams is to increase the effective takeout by around two percentage points. He also says that the maximum amount a computer team can expect to extract from any given racetrack is about ¼ of a percent of the total pool. And as was pointed out elsewhere in this thread, they’re not concerned with ROI but rather the net increase in their bankroll. They make wagers on all bets they deem to be advantage bets as determined by their expected value, up to the point of their maximum expectation (I’ve posted both the EV formula and the Maximum Expectation formula they use on this board somewhere before).

Much of the effect of these teams can be seen in the declining odds on favorites over the years. There used to be a fairly well-pronounced phenomenon known as the favorite-longshot bias in U.S. racing. Favorites, particularly odds-on favorites, were underbet by the public. Not enough to show a profit, but enough to maybe cut the track take in half or so. Not so anymore. Favorites now win at a higher rate, and pay lower prices, and the bias is now virtually gone. This effect is further compounded by the fact that the teams get substantial rebates, meaning they can drive down the prices even further below what they would normally be able to do and still show a profit.

The money these computer teams are siphoning out of the pools by sucking the value out of overlays is certainly detrimental to the rest of us, but it doesn’t mean the game can no longer be beat.

Yes, the pools are larger, and overlays aren’t absolute. One man’s overlay is another’s underlay. As far as I know, these teams aren’t using performance figures, specifically not Jerry’s. There are still plenty of overlays to be found, especially when you string them together in the superexotics, they might just be a little harder to come by.

Rocky R.