Epoch Eclipse
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Epoch Eclipse

Life Lessons Learned From Handicapping Horse Races

The first thing I learned is that there is smart money and then there is dumb money.

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Obviously, if you want to walk away from the track as an overall winner you must be smart money and not dumb money. In the world of pari-mutuel betting found at the horse racing tracks, smart money walks out with the cash-in-fist that the dumb money loses.

Since you are not betting against the house that always wins like when you go to Las Vegas or Atlantic City, but instead betting against other bettors, you have to understand how people choose their bets, including you. If you don’t understand why you place your bets, in other words, if you don’t have a better betting system than most bettors, then you are dumb money and an overall loser.

Besides the blatant ways dumb money bets on their “lucky” numbers seen at the gate, the awesomeness of the horse’s name, or their favorite color when seen on a jockey’s jersey, dumb money frequently places sucker bets on the favorite to win. Dumb money also tends to seek the “big win” to compensate for the accumulated losses of previous bad bets. Let me explain why these last two are also dumb money examples.

Let me explain why these last two are dumb money examples.

First dumb money example: the favorite to win is always featured at the top of the tote board along with its odds as initially determined by the track and then updated to reflect actually placed bets. Statistically, the favorite only wins about one-third of the time. You would have to get 2:1 odds to just break even over three races, getting $2 for every $1 you bet on a winner. You will receive $2 if you win (plus your original $1 bet) for a total of $3.

But the odds are always worse than that on favorites and past performance is no guarantee of future results. Even if you could get 2:1 odds you could easily see an entire day of racing where none of the favorites win.

For one thing, the track and the government take their cuts off of the top, the takeout, reducing the amount in the pool which is then split among winning bettors. Typically, 16% to 24%, depending on the type of bet, is taken from the pari-mutuel pot and never available for payout to the winners.

For another thing, since the payout is split between all those placing winning bets, every winning bet placed reduces the percentage of the remaining pool that each winning bettor receives. The favorite always gets the most bets, that’s why it’s the favorite in the first place. Since so much dumb money places bets on the favorite, the fraction each receives is proportionally less than the actual odds of the horse winning.

Second dumb money example: there is a noted tendency among bettors to “throw good money after bad money”. This is exemplified in the practice of doubling the bet after every loss known as the Martingale betting system, proven to be a losing system. It is merely the most egregious example of dumb money simply seeking the “one big score” to offset a history of bad bets.

This is often seen with dumb money routinely placing huge bets on the favorites for the “big win” on the erroneous assumption that past performance somehow guarantees future results. I’ve already covered why betting favorites is a sucker bet. When one combines these two examples of dumb money like this, I suppose you could call it double-dumb money, 2x dumb money, or even (dumb money)².

Smart money is a rare thing in racehorse handicapping. I am not a professional bettor, tip sheet provider, or financial advisor. Do not take this as betting or investment advice. What follows is me merely reporting my humble observations of the game.

Smart money is a rare thing in racehorse handicapping. I am not a professional bettor, tip sheet provider, or financial advisor. Do not take this as betting or investment advice. What follows is me merely reporting my humble observations of the game.

My first observation is that smart money is always, as in it always depends upon, engaging in DYOR (Do Your Own Research).

My second observation is right off the top, smart money never assumes that all of its picks will be winners. Eventually picking some losers is inevitable and smart money accounts for this. Of course, smart money attempts to initially avoid this with DYOR and then compensate for it within their overall betting system.

My third observation is smart money betting requires DYOR to compute the real odds of each horse in a specific race actually winning. This would include at minimum researching the pedigree of the horse and its past performances, the record of the trainer-jockey team, the type of race, and how track conditions affect different races, horses, and teams.

All of the horses in a specific race are analyzed as to their individual chances of being one of the approximately 70% of non-favorited horses that actually win races. Of course, sometimes the favorite will appear to likely be the winner. In this case, it and the race will not be candidates for a straight bet but they still might be keys for an exotic bet, which I will get into a little later.

Once the smart money bettor has determined, in their own estimation, the likelihood of a non-favorited horse winning they then observe the odds offered for bets on the tote board for that horse. To actually be worth a bet, a likely winning horse must offer odds high enough so that the payout more than compensates for the eventual picking of losers.

To actually be worth a bet, a likely winning horse must offer odds high enough so that the payout more than compensates for the eventual picking of losers.

Just to provide examples, picking horses to win at 3:1 would mean that you would still just break even if your horse wins only once out of four races. Similarly, picking horses to win at 4:1 means you would still break even if you were wrong about the winner in four other races. With high enough odds, a bettor could even profit by placing bets on multiple non-favorites likely to win. Of course, this all depends upon your skill in picking the non-favorited winner.

The second thing I learned was to not bet on every race.

Exotic bets, making multi-horse or multi-race bets, are a little more complicated. Exacta, trifecta, and superfecta bets take place within the confines of a single race. Daily Double, Pick 3 and Pick 4 bets will take place over several races. These are similar to the parlay bets one finds in sports betting where a bettor makes two or more bets and ties them together into one bet.

So even when DYOR concurs with selecting the favorite as the likely winning horse, by going further to determine which horses are likely to finish first and second (exacta), first, second and third (trifecta), or even first, second, third, and fourth in the case of superfecta bets, a bettor can still find a bet. The same DYOR can enable a bettor to discover multiple race bets on the likely winners of two races (Daily Double), three races (Pick 3), or four races (Pick 4).

It takes a lot of number-crunching combined with skill in picking likely winners to find these bets. The bettors placing these types of bets tend to have a large bankroll and place multiple low-cost bets when each offers a huge payout. They are betting on their ability to correctly evaluate multiple horses in a single race or multiple horses across multiple races relative to the potential payouts.

Of course, this involves knowingly making multiple losing bets on the assumption that one bet will result in a huge payoff that more than compensates for all of the losing bets. It’s not lost on me that this seems like throwing good money after bad money simultaneously. The very simple reason that the potential payouts are so huge is that there is a lot of dumb money placing these bets.

I no longer handicap horse races.

I no longer handicap horse races. For one thing, the horses are treated as expendable and replaceable assets, not as the awe-inspiring sentient entities that they are, which deserve better treatment. One of my biggest payouts resulted from the favorite injuring itself during a race so badly that it was put down on the track because of it. It broke my heart and even collecting my winnings did nothing to ease the pain.

For another thing, I faced up to the fact that I’m really not that good at picking winners. Sure, I did everything smart money was supposed to do, I enthusiastically engaged DYOR, and I’m not stupid. Even when I scored on a Daily Double or an exacta I was lucky, yes lucky, to break even for the day.

The best I can say for myself is that I exercised discipline in my betting, primarily by never betting more than I could afford to lose. It just became a hobby based on the exploitation of horses that deserved better while arrogantly thinking I was smart money in an environment built to profit from dumb money.

So now I often reflect on my experience handicapping horse races as parallel life lessons learned.

I see that the only consistent winners are the corporations and governments that profit from the takeout before the betting pool is split among the winning bettors.

I see that programmers and artists are judged by their academic and productive pedigrees, much like racehorses, and that they are exploited as expendable and replaceable assets. I see how the winning celebrity trainers often cheat like Bob Baffert, much like some late-stage capitalist bankers on Wall Street and venture capitalists in Silicon Valley.

I see how winning celebrity jockeys value psychological manipulation to maintain their edge, much like the mainstream media and social media gurus that make up an essential part of every successful product launch.

I see how the tracks themselves are similar to the various industries even when they appear to be new like cryptocurrencies and NFTs. I see how track conditions are regularly affected by weather conditions much like how various industries are affected by regulation, climate change, and war.

Finally, I see how thinking that I’m smart money, even with my successes in academia, in programming, and in the arts, is merely arrogant in an environment built to profit from dumb money.

In reality, I’m little more than a pedigreed racehorse with enough heart to run a race and strive to cross the finish line in first place against a favorite backed by a team that may cheat more ruthlessly than mine.

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