When You Should Bet

I have an AFL analytics site, and since football and betting have become so intertwined it can be hard to tell where one stops and the other begins, people sometimes ask me whether they should bet.

I’ve found it hard to give a short answer, so instead I prepared this handy guide.

Photo: Michael Coghlan

Here are circumstances in which I think it’s a good idea to bet:

  • You have a terminal disease and nothing better to do with your money. The Great Beyond looms; you have no energy for rock-climbing or international travel; you hate your children; so maybe you can, even for a few moments, feel a connection to the spark at the heart of the universe by plonking down some cash on Martin to kick the first goal. If you lose, well, you were in a bad mood anyway. Because of the terminal disease.
  • You have inside information. I think it’s definitely easier to have inside information than be consistently smarter than everyone else in the market, so this strikes me as a good way to go. You do have to be careful not to, you know, get mixed up in organized crime. I’m not saying it’s completely risk-free. But if you can get yourself a steady source of exclusive information that’s timely, relevant and reliable, you should be able to beat the market more often than not. So if that’s your situation, I say go for it.
  • You enjoy losing money. I’m not sure this is a common scenario. But I want this to be a comprehensive document. You are normally guaranteed to lose money if you bet long enough, so this would be a good strategy for you.
  • You have located a stupid bookmaker. You shouldn’t expect this to last long, because other market players will also locate this stupid bookmaker and begin to exploit their stupid practices, thus sending the stupid bookmaker a strong signal to cease being stupid, e.g. by bankrupting them. But it certainly is possible to be profitable through information arbitrage, where you may know nothing about the actual sport but are able to efficiently exploit asymmetries in how different bookmakers engage with the market.
  • You are extremely smart, highly informed, equipped with an objective, evidence-based strategy that you intelligently supplement with personal insight, capable of dealing with extended periods of losses both financially and emotionally, and equipped with a thorough understanding of the myriad ways in which your human psyche will attempt to trick you into making bad decisions at the worst possible time. Congratulations, by the way. That’s really impressive. I do kind of wonder why you don’t apply yourself to something with a better risk/reward ratio, like, why are you gambling with your mortgage instead of pulling down high six figures from Citibank? But that’s your call. If you tick all these boxes, you should probably bet. You do have to tick them all, though. If you miss one, it will eat you.
Photo: Simon Yeo

On the flip side, here are some circumstances in which I think it’s a bad idea to bet:

  • You believe life is more predictable than it really is. This is everyone, by the way. It is something like 99% of people. If this surprises you, you are definitely one of those people. The human brain is excellent at detecting patterns in random noise, which used to be super helpful back when we were being stalked by jaguars, but today means we tend to wildly overrate the significance of Sydney losing their last three games at home. The universe is full of randomness that humans are bad at identifying. We don’t even like to acknowledge it’s there; we gravitate to stories with logical cause and effect. Those are illusions. It’s chaos out there.
  • Your emotional state depends on whether you win or lose bets. Holy shit, man. Get out of there. You know what you’re doing to yourself.
  • You struggle for status and respect in a heartless world and earn some by bragging about betting wins. I considered putting this in the “good reasons to bet” section, since at least you’re getting something out of it. Not money, obviously. But something of value to you. But it’s here because it’s still ultimately self-destructive and more costly than it first appears, like gambling in general.
  • You hear people talking up wins but not mentioning serious losses and think this means betting is a generally profitable pastime. It is not. You’re competing in one of the most ruthlessly efficient markets on Earth against people and companies who have been doing it for longer than you, with more capital, resources and information. The playing field is also tilted so that to be profitable you must outperform the average waged dollar — not the average bettor, mind you, the average dollar, bearing in mind that the market effectively strips out stupid dollars and inflates smart ones—and must also outperform it by a wide enough margin to beat the vig.
  • Similarly, you hear a lot of talk about betting and get the idea that everyone is doing it, at least occasionally. This is an illusion created by betting companies who wedge sponsorship dollars into every visible crevice — dollars they have because they take them from bettors. I’ve been approached three times in two years about putting betting material on this site, including one who offered to pay me only if I didn’t reveal I was being paid. Betting is not common; the vast majority of it is done by a minority of people.

So that’s my view. It mostly stems from respect for two powerful systems: the free market, which can be extraordinarily efficient, and human psychology, which is impressively terrible at discerning objective reality.

That’s a high bar to clear in order for you to be good at betting—as good as you are at, say, driving a garbage collection truck, for which you can reliably generate $26 per hour.

So I don’t bet. I don’t like the feeling of losing money (or even risking it); I don’t receive much emotional gratification from winning it, since I’m very aware of how big a factor luck is; I suspect I would lose my nerve after a period of heavy losses; I’m primarily interested in learning how football works, not beating bookmakers; and, most of all, I don’t think it can be done reliably over the long-term without an oversized investment of time and energy. And maybe not even then.

You may be different, in which case, I wish you all the best! You go live your life your way. But I’ll be buying index funds.