The Smart Money: How the World's Best Sports Bettors Beat the Bookies out of Millions

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The Smart Money

Simon & Schuster

Preface

Gambling is America's second-favorite indoor pastime. Casinos, home poker games, bingo halls, state lotteries -- wherever Lady Luck can be courted, we're eager to stake our money on the turn of a card or the bounce of a ball.

Particularly the bounce of a ball.

Betting on sports is an American obsession. If you yourself don't participate in an office pool, or have a local bookmaker, or maintain an offshore Internet account, you probably know someone who does. Betting on football and baseball, hockey and basketball -- even NASCAR auto racing and PGA Tour golf -- makes the most banal athletic competition exciting. It imbues the ordinary with drama. It gives viewers a personal stake in the outcome of the contest, no matter how inconsequential the final score might be in the course of world events.

Since almost all sports betting in America occurs in the shadows, hidden from the scrutiny of actuaries, putting a definitive number on the size of the sports betting industry is impossible. But most reliable estimates, based on data from the highly regulated Las Vegas sportsbooks, extrapolate stunning figures that would be the envy of anyone in the entertainment business. Most experts estimate that the bookmakers who take the bets gross billions of dollars a year.

Thereason the bookies win so much money is that, in the long run, almost nobody can beat "the line." Also known as "the point spread," the line expresses the imbalance between two unevenly matched teams, thereby reducing every contest to the mathematical equivalent of a coin flip. For example, if the Los Angeles Lakers played against the Hollywood High School basketball team, no one but the mentally ill would bet on the high school squad. But if gamblers who wanted to wager on the mighty Lakers had to give the adolescents an 83-point head start -- well, even fans of Kobe Bryant would have to think twice. In the real world, when the Lakers play the Chicago Bulls, the Lakers are usually forced to give the weaker team an 11- to 12-point handicap. About half the time the Lakers win by more than 11, and half the time they don't.

Every NFL football game, every NCAA basketball game, every NHL hockey match has appended to it a point spread -- indeed, many newspapers, including USA Today, publish the daily lines. Though the TV announcers aren't supposed to make reference to the point spread (which the NCAA likes to pretend doesn't exist), sly innuendo -- "With one minute to go, Duke is up by twenty-two, but there's still some business to be decided!" -- suggests that the television networks understand that gambling on sports keeps viewers fixated on otherwise meaningless contests.

Except for the illegal drug trade, sports betting is probably America's biggest, most lucrative unregulated business.

The bookies count on the line to be accurate -- or at least accurate enough that half the people in America will like the favorite and the other half will go for the underdog. Traditionally, bookmakers act as brokers, a human clearinghouse for their customers' compulsions. The standard bet requires gamblers to lay $11 to win $10. If you bet $10 with a bookie you don't win $10; you win $9.10. In the classical bookie business model, winners are paid with the losers' money and the house keeps the "juice," or "vig." Ideally, when the Patriots play the Panthers, Joe Bookmaker's clients collectively bet $550,000 to win $500,000 on New England and $550,000 to win $500,000 on Carolina. Unless the game ends in a point-spread tie, or "push" -- for example, the line is 3 and the final score is 20-17, a 3-point differential -- Joe Bookmaker collects $550,000 from the losers, pays $500,000 to the winners, and keeps $50,000 for his trouble.

It's a very nice business -- particularly because the combination of an accurate line (a point spread that accurately expresses the disparity between two teams) and the 11-10 juice is almost impossible to overcome. Common wisdom says that over the course of a long football season the average American man -- or his girlfriend, dartboard, or pet monkey -- will pick approximately 50 percent winners. Thanks to the juice, the only one who profits in this scenario is Joe Bookmaker. In fact, sports bettors must pick 52.4 percent winners just to break even.

The line is generated by highly paid consultants in Las Vegas and the Caribbean who weigh the relative strengths of the teams and, more important, the public's perception of those strengths. Because of regional prejudices -- people in Chicago, for example, think more highly of the Cubs than do people in New York -- the line can vary slightly from shop to shop. Furthermore, on games where the bettors are disproportionately betting on one team, bookies will incrementally adjust the line to make the underbet side more attractive. Thanks to the general brilliance and accuracy of the point spreads, gamblers who can consistently beat Joe Bookmaker are as rare as honest politicians.

But it can be done.

The bookies fear (and despise) a tiny coterie of professional bettors known as "wiseguys," or "the sharps." Fewer than 0.0001 percent of gamblers, the proverbial "one in a million," are able to consistently pick point-spread winners. But there are betting syndicates privy to the most up-to-date information on injuries, weather, game plans, and, most important, the real power of the teams involved. These wiseguys are often able to derive a more precise, more accurate, more valuable point-spread line than the oddsmakers. Essentially, they create their own theoretical line on the same slate of games offered by the bookmakers. Then they compare their numbers against the bookies'. When the sharp players spot a discrepancy between their line and the one the bookies are offering, they bet.

A lot.

Hundreds of thousands of dollars. Sometimes as much as $1 million on a single game.

The avalanche of money that cascades down upon the bookmakers is what moves the line. When you see that the Jets have gone from a 3-point favorite to a 4-point favorite, it's often because the smart money (and the hordes of followers who try to track their bets) likes the boys from the Meadowlands.

The members of the MIT blackjack team made famous in Bringing Down the House are small-timers compared with the biggest sports bettors.

In some ways, the gulf between the big betting syndicates and recreational gamblers is as wide as that between Wall Street's institutional investors and an unemployed speculator sitting in his underwear at home dabbling at day trading. But the professional bettors have something in common with the millions of people who gamble on the weekends: They desperately want their team to win, to cover the point spread. The big difference is that instead of sweating a hundred-dollar wager, the smart money sweats millions every weekend.

Gamblers whisper about a legendary -- some think apocryphal -- syndicate known as the Brain Trust, a sobriquet earned because its members seem to understand more about sports betting than anyone else. Though they operate in secret, the Brains are the most influential force in the world of sports betting. They're to gambling markets what Warren Buffett is to the New York Stock Exchange. Everyone involved in sports gambling wants to know what the Brains are doing -- which matchups they favor, which teams they're investing in on any given weekend. Everyone who bets on sports -- from the degenerate action junkie to the half-sharp sports fiend who watches ESPN sixteen hours a day, from small-time professionals to big-time bookies -- they all try to figure out how the Brains do what they do. And, especially, what they'll do next.

I'm one of the few people in the world who can tell you. Because for several years I was one of them.

Copyright 2006 by Michael Konik

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Excerpted from The Smart Money by Michael Konik Copyright © 2006 by Michael Konik. Excerpted by permission.
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