3min chapter

Risk of Ruin cover image

A Family Business

Risk of Ruin

CHAPTER

Taking Big Swings Will Just Be a Part of Your Life

Jim and Dan have a unique attitude towards risk and variance. They weren't used to losing because of the types of bets they were making. If you think you have a small edge, then yes, it's easy to lose. But if your estimated edge is big and you're losing, then the data is not matching the hypothesis.

00:00
Speaker 3
Jim and Dan have a unique attitude towards risk and variance for reasons that are related to the bets they were making and also to their life experiences, you know, who they are and where they come from. So let's spend a little time on this because it's a pretty interesting part of the story. First, I will just point out that if you bet small edges, like let's say you have a 1% edge betting NFL point spreads, then you are going to have wild variants. Taking big swings will just be a part of your life. And if you work all NFL season and you're a small loser at the end, it wouldn't be especially odd. But if you have a big edge, like the correlated parlays that these guys found, well, losing would be much more rare. And so they weren't used to a lot of losing because of the types of bets they were making.
Speaker 2
We don't have losing years. We barely have losing months. We might have a losing week, but when we have a losing week, it's kind of traumatic for us because we're not used to it. So we go exploring what we lost on. And if it's one of these things that just seems like a clear mathematical edge or whatever we thought our edge was, we're voicing the bet, it spurs a
Speaker 3
conversation. Sometimes the guys would find stuff that looked good, but for whatever reason wasn't winning. And for any edge you think you have, you can compare it to the actual results. If you think you have a small edge, then yes, it's easy to lose. But if your estimated edge is big and you're losing, then the data is not matching the hypothesis.
Speaker 2
If 90% of the accounts you got wouldn't allow something, there was probably a reason for that. So when I got a book that was offering these parlays, I figured these must be plus EV because the other books have locked them out for some reason. And we went several weeks of playing them. We didn't get killed. But when you think something's going to be a big edge and you're losing, then it's time to hit the brakes, dissect the corpse, and figure out what went wrong. And never did really go back to betting it. Never did figure out exactly why it didn't work, but was pretty convinced that it was not a significant enough correlation to overcome the juice that you're paying on both legs of the parlay. I mean, these books are all getting rich booking parlays. So you do have to, it's not enough to just, there's a reason to let you parlay a dog plus three and under 47 in an NFL game. It's not enough of a correlation. So I think that's, we ran into one of these instances where it looked like it was going to be a big correlation and it was not. We are the first to hit the brakes on anything that might have been successful for a long time and just say, did some underlying dynamic change that we're not aware of yet? In the case of hockey, no, I don't think there ever was, but there have been other spots where hitting the pause button did perhaps, you know, was the right thing to do.

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