How and Why We Don't Bet On It! (Part 2)

Let's get this out of the way up-front: there are people who make a living off of sports betting. They're called sports books, i.e. the people who set lines, figure out odds, and take bets. Sure, some people do make money off of betting on sports. But these people do it as a full time job, and for three reasons, you will almost certainly never be one of them: 1) You aren't smarter than (everyone else) in Vegas. 2) The odds are literally against you. 3) Even if you could figure out a way to win, Vegas wouldn't let you do it for long.

Note: I picked up a lot of the information in this article from The Smart Money: How the World's Best Sports Bettors Beat the Bookies Out of Millions by Michael Konik. It's entertaining and informative, and you should check it out if you're really interested in the ins-and-outs of sports betting.

You are not smarter than (everyone else in) Vegas.

The first thing you need to know in order to understand why winning money betting on sports is practically impossible is that you have to outsmart the sports books, the professional gamblers (a/k/a the smart money), and everyone else who is betting on the game. The best way to explain this is to explain how the line is set.

Kenny White set the lines for 90% of Las Vegas sports books while serving as the CEO of Las Vegas Sports Consultants. (He left the company in 2010.) His routine for setting lines for the college football season began each summer as he evaluated each individual player and each coaching staff for each of the 120+ FBS teams. This took about 3 hours per team, which might not seem like a lot until you remember that he could start with his notes from the prior season and focus on updating for recent developments and new recruits.

During the season, after Saturday's games ended Kenny would meet with four of his associates -- each of whom had their own rankings and systems -- to set the early lines.  The early lines aren't open to the public. Instead, they're shown to a select group of professional gamblers who are given the opportunity to bet against the lines before anyone else even sees them. Based on whether and how these guys bet on the early lines, the sports book will move the lines and ultimately open them up for public betting. The initial lines that are open to the public are called, easily enough, the opening lines.

But we're not done yet, and here's where things get a little tricky: the sports book will actually move the lines if a lot of money comes in on one side. For example, the line for Florida at Missouri opened at Florida (-10), but so much money came in on Missouri that the line has now fallen to Florida (-3).

So why does the line move? Remember that the sports books collect vigorish on every bet. So, typically, you have to bet $110 on a line in order to win $100 if you correctly predict the outcome against the spread. This means that the sports book will make a risk-free profit if equal amounts of money are bet on each side of the line -- the book can use the losers' money to pay off all of the winners and keep the vigorish as a profit.

Think about it. If I bet $110 on Texas A&M (-12.5), and you bet $110 on the opposite side (Auburn (+12.5)), the sports book collects $220 total. But then the sports book will only have to pay $210 to whoever wins (the $110 initial bet plus the $100 in winnings), and it will keep $10.

This means that Vegas isn't necessarily setting lines based on what they think the actual outcome will be. They set the lines in order to collect an equal amount of bets on each side. This is why Bob Martin called the 18-point line he set in favor of the Baltimore Colts in Super Bowl III the best line of his career, despite the fact that the underdog New York Jets won the game. An equal amount of money came in on both sides, and people bet a lot of money on the game.  He made a killing off the vigorish.

The most important thing to remember is that only the amount of money on each side matters, not the total number of bets. If I bet $110 on a game and you bet $1,100 on the other side, the number of bets is equal, but the book stands to lose a lot of money if you picked correctly.  But if the amount of money bet on each side is equal, the book gets to keep the vigorish no matter what happens.

This distinction is particularly important because the truly savvy gamblers, a/k/a the smart money, place much larger bets than the rest of us. A $100 bet might be a big deal for you or me. But some of these smart-money dudes are regularly dropping $100,000 on just one game and will bet several games each week. So sometimes a sports book will have equal money on both sides of the line, but the money on one side will come from a few huge bets placed by people in the know.  The money on the other side will come from a bunch of relatively smaller bets from the general public. Which side do you think usually comes out ahead in these situations?

Keep in mind that, in addition to gambling full-time for a living, the smart money has so much riding on the games that some of them employ a full-time staff to support their wagers, including people writing sophisticated prediction software on high-end computers.

I'm telling you all of that so that you understand this: when you place a bet, you're really wagering that you know more about the outcome of a particular sporting event than everyone else in Vegas.  If the line is obviously wrong, a lot of money from the public will flow to the right side, and the line will move.  If the smart money figures out an edge, they'll bet a lot of money, and the line will move.  The line is where it is because a lot of people with a lot of time and money riding on the game think that's where it should be.

Now hopefully you understand why even people on the cutting edge of advanced statistical analysis have a hard time beating the spread.

The odds are literally against you.

I hope that you're already convinced that wagering on sports is a losing proposition. But maybe you still think that you can outsmart the smart money.  And let's assume that you can. There's still a catch, and you can't outsmart this one.  It's the vigorish, and it mathematically stacks the deck against you.

On a bet against the spread, the vig ensures that you have to bet more than you'll be getting back if you win. Standard vigorish is -110, so you have to bet $110 to win $100.  When you win a bet you win less money than you lose when you lose a bet.  Mathematically, that means that you have to be right more often than you are wrong just to break even. At standard -110 vig, you actually have to be right 52.381% of the time just to avoid losing money.

So not only do you have to outsmart all of these smart people who are working full-time to beat you, you have to outsmart them more often than they outsmart you just to break even.

Let's make it even more concrete. Assume that you have a system that picks winners against the spread 60% of the time (which would be truly phenomenal). On average, over the long run, you would need to wager $6,875 on (a bunch of different) bets against the spread at -110 vig in order to win $1,000. That's not a terrible return on investment, but to get it you would essentially have to devise the best betting system in the world.

The effect of the vigorish on other types of bets is even more pronounced. For example, look at the moneylines for this weekend's Texas Tech at WVU game. One book has the moneylines at TTU -230, WVU +190. That means that Vegas thinks TTU is a 2:1 favorite to win.

Let's assume for a moment that Vegas got the odds right. Statistically speaking, that means that if TTU and WVU played each other 3 times, we would expect the Red Raiders to win twice and the Mountaineers to win once. So, hypothetically, if they did play three times, and you bet $230 on Texas Tech each time, you would win $100 twice and lose your $230 bet once. You would lose $30 total, even though you were right more often than you were wrong.

To put things in more technical terms, the vigorish means that the expected value of every bet you place is negative. In other words, if Vegas is right about the odds, due to the vigorish you are actually losing money every time you place a bet.  You might win individual bets here and there, but in the long run the house will take all of your money.

And we haven't even talked about what a huge factor dumb luck plays in determining the outcome of football games. Your meticulous analysis of a particular match-up could become utterly irrelevant due to one unfortunate bounce of an oblong ball.

Even if you could win, Vegas wouldn't let you.

Maybe you're still not convinced. Maybe you still think you can outsmart everyone in Vegas and beat the laws of statistics. Let's even assume, yet again, that you could. Why on earth would sports books keep letting you bet? Obviously, they wouldn't.

You've probably heard about the MIT Blackjack team who made millions counting cards in Vegas. All of those guys (and gals) are banned from casinos for life. Similarly, sports books will stop taking your bets if you win too much. For example, Michael Konik was only able to write The Smart Money because he was hired by a group of wealthy sports bettors who had a system that (for a while) was able to beat the spread; the sports books had stopped taking bets from them, so they hired Konik to place bets for them.  But, of course, Konik was ultimately banned himself.

Even if you don't get banned, most sports books cap the amount that anyone can bet on a particular game. This limits their potential exposure, but it also limits your ability to exploit any edge you think you might have on a particular game.  Vegas is not in the business of losing money.

The bottom line is that, practically speaking, you will never make money betting on sports. If you happen to be in Vegas, it's worth stopping by one of the sports books to place a (small) wager and watch a game. It's a fun experience, and even a small wager gives you a personal investment in the outcome of what might otherwise be a wholly uninteresting game. But don't expect to win, and don't ever bet more than you can afford to lose. No one wins in the long run except the house.