National gambling day

Today is Melbourne Cup day: a national celebration of gambling and excess.

I tend to steer clear of gambling, but I wanted to offer a tip of how to maximise the expected return of any bets you make.

My tip: don't bet on the horse you think most likely to win

This probably seems like silly advice, but what you need to consider is that the odds determine your winnings. If a horse is very likely to win, and you bet on it, and it wins, you will not win very much (because its odds of winning are good (say 2-to-1 or even 3-to-2). When horses are very likely to win it is even possible to receive less than you bet (when your horse wins)!

Instead, what you need to do is identify the horses whose odds are overestimated. For example, if a horse is listed as 40-to-1, but you think it's really a 30-to-1, then you should consider betting on it. What this means is that your potential winnings are higher than the risk of the horse not winning.

Of course, doing this is a lot harder than just trying to pick the winner! That's why I don't bother gambling: in my opinion, the race organisers have it all worked out -- the best way to maximise your money at the end of the day, is not to place any bets ;-)

--------------------------

This article was written by Angus Wallace and first appeared at
guesstimatedapproximations.blogspot.com.au