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In this post I discuss some of my opinions on gambling and specifically the frustration I’ve had with a gambler I’ve known. I also outline how bookmakers make sure they have the advantage on these gamblers by explaining how their business model works.
Often, people on the outside, who have never had an interest in betting, look at people who gamble and can not understand why they do it – especially with such negative connotations attached to the betting industry.
The simple answer as to why a prominent gambler bets religiously, is because of that “big win” they once had, or how close they were to that “big win”. They got a “high” from the episode and want to repeat it. It’s as simple as that.
(For an example that might be closer to home for you and that will help you understand better why people gamble – check out this IFL Science post about sugar addiction – could you cut sugar out of your diet easily?)
The problem is, the above thought process is deterring away from just how much money went in to getting that one “big win” or that “ever so close” big win moment. The amount of people I’ve heard ranting on about how they were “just one goal away from winning a grand” has been dumbfounding. But I’ve never had the balls to properly ask: “just how many bets have you lost along the way?”.
If I were to ask, the answer would likely be hidden – or at least down-played a lot – most likely due to embarrassment.
I remember, there was this man I used to work with who would ALWAYS let the world know how close he was to winning that jackpot, and how it just wasn’t his day. It was always so very very close. But the many many losses said person incurred were always kept a closely guarded secret – as were the mounting debts he had.
I will however, never forget hearing two young 18 year olds go up to this man and ask him for some advice on which football matches to place their bets on for the weekend. He made himself out to be a betting God in their eyes – nailing the art of deception with aplomb. On top of this, he would also fool a lot of people into lending him money to feed his habit – which was upsetting to see so many people fall foul to. He really did a great job of being every bookmakers advocate, and everyone’s favourite sob story!
I was lucky enough (oh the pun) to have never been anywhere close to that big win when I placed my first few bets many years ago. I never got a taste, and fortunately, stopped betting right from the very beginning. Unfortunately, I know many people who did get that taste when they first started out betting, and it has stuck with them to this day – costing them thousands in the process.
So just how exactly do the bookmakers always win in the long run?
Well, it’s a lot easier to explain than people realise – but it’s genius how the bookies try to throw you off understanding the mechanics of how their business model works.
For instance, why do all British bookmakers use fractions to display their odds?
Quite simply, it is to fool the punter!
Lets break it down.
Betting odds are a representation of how likely an outcome is of occurring. In other words, they are probabilities of a particular team winning a game, or a certain player scoring a goal first. When you see odds at a high street bookmaker of 2/9 for Chelsea to beat Swansea for example, this means for every £9 staked, you will win £2 in profit, and have your £9 stake returned if your bet comes in. It’s a strange way of representing what is on offer for each punter.
Why do they display their odds in this way?
It’s quite simple – it is because the bookie does not want you to understand how badly you are being ripped off (I will get into this more in a bit).
So what if I wanted to stake a tenner, or a hundred quid, on that particular outcome? How would I quickly know what my return will be for Chelsea to win at a fraction of 2/9, without being a mathematical wiz, or getting out my calculator?
It’s a toughie.
To be able to do this, we have to go a different, more understandable route to get the answer. We do this by converting the fractions the bookie displays their odds as (in this example 2/9 for Chelsea to win), into decimals.
To work out 2/9 in decimal odds we do 2 divided by 9 + 1 = 1.22.
This is far simpler to understand (and something the UK’s high street bookies do not want to make obvious to their customers).
It is now clear from this example that for every £100 staked, the punter will get a return of £122 (£100 x 1.22), which equates to £22 in profit, plus their £100 stake returned if Chelsea win. As a probability, we can work this out in the following way:
1 divided by the decimal odds (in this example 1.22) x 100 = 82%.
So the bookmakers are implying that Chelsea have an 82% chance of winning this match.
So just how is the regular punter getting scr*wed?
Well, where the bookmaker is saying that Chelsea have an 82% chance of winning, these are not in fact the true odds. Far far from it.
The bookmaker has inserted a margin into these odds to ensure that their books turn out a profit whatever the outcome. The true probability of Chelsea winning this particular match may well be something along the lines of 71%, which equates to odds of 1.4.
So, for every £100 staked on odds such as these (in this case the “fair” or “true” odds of Chelsea to win at 1.4), a punter should be getting a return of £40 for their £100 staked – not the £22 profit currently available at the bookies advertised odds of 1.22.
A bookie inserts these kinds of margins into every outcome of the match, including the draw, and Swansea win.
These margins are completely ridiculous and people need to understand that they are being ripped off.
It is why you ALWAYS lose to the bookmaker in the long term.
The example above applies to sports betting and the numbers are slightly more complex. So how can we express this in simpler terms?
By using a coin toss example.
If you flip a coin, there is a 50% chance of it landing on heads, and a 50% chance of it landing on tails. This particular outcome would be represented as evens, or 1/1 in fractional terms in any high street bookmaker – that is IF they were using fair odds (and if they provided a market for bets to be placed on heads or tails!). This means that if you bet a tenner on the coin landing on heads, and the coin lands on heads, you receive your ten pounds back, along with ten pounds as your profit (your £10 profit is the bookmakers liability to you).
Using our fraction to decimal conversion example above, this is expressed as 2.0 in decimal terms (1 divided by 1 plus 1 = 2.0).
The 2.0 represents the fair odds of the outcome of “heads” occurring.
So just how would a bookmaker represent the outcome of heads occurring from the coin toss to suit their business model?
They would offer a punter odds of 1.8, which implies that there is a 55% chance of heads occurring (which we know to be ridiculous), rather than offering the true odds of 2.0 – which obviously represents the true probability of 50%.
So for every one hundred pounds staked, a punter would be receiving £80 worth of profit if heads came up, rather than £100 of profit if the odds were fair at 2.0. Apply this formula to the millions of people who bet every day, and you can see why the bookies are rolling around with silly grins on their faces.
This is how the odds are always stacked so heavily in favour of the bookie, and why you never see a gambler who is truly successful – no matter how much they shout to the roof when that one win comes in. How much did it cost them to get it?!
So now we know the makings of a bookies business model, it makes it far easier to understand how they can give out all these free bets (important for a bookie trying to attract new punters), but a nightmare for their business model with the small percentage of people who understand how things work, and do matched betting like we do!
The bookies sole aim is to get people betting in the traditional sense, and if that means enticing people with free bets, they will do so – as they take normal punters to the cleaners regardless!
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