Suppose there is a horse race taking place today between two horses – one called Heads; his opponent, Tails. Let’s also suppose that these two horses have run against each other once and dead-heated and are trained by the same trainer. For simplicity, let’s also assume there is nothing in published information (e.g, jockey, pedigree, ground, foaling dates, etc) that could make one fancy one to finish ahead of the other when they meet again under the same conditions.
Now, as this is such a simple example, it is incredibly easy to price up based on all the available information. In a 100% book, the market would of course be Heads: evens, Tails: evens.
Let’s also assume that a bookmaker, which again for simplicity one can assume is working with the same information as you, has priced it up at Heads 11/10, Tails 10/11.
What is your betting strategy? Pretty easy stuff – you make Heads value, so must bet accordingly. You back Heads – and you may well base your stake on the margin of value you think you are getting. So, maybe 1 point here as you are offered 11/10; if it was 6/4 a bigger bet would be in order – 3 pts perhaps. There are various staking systems one could employ, but all would based on the same principle – the bigger the theoretical value you are offered, the bigger the bet. This is basic gambling theory.
Now, let’s make things more difficult. Let’s say that we can’t now assume that everyone has the same information to work with and that there is a betting exchange market where everyone, with their differing levels of knowledge and skill, can bet against each other . In this new scenario, some will know how well Heads worked last Thursday, whether Tails ate up yesterday, which one the trainer privately thinks is the better prospect, which one the work rider thinks might be going a bit doggy on the gallops – and of course, some won’t.
Let’s forward to racetime to the market after nearly all the punters have shown their hand (with one would assume the long term successful punters having exerted more of an influence over it due to bigger stakes) and the market now shows: Heads 13/8 Tails 8/13
Remember – your tissue is Heads Evens, Tails Evens. What is your betting strategy now? As the theoretical value is now much greater than the 11/10 you were offered earlier, do you necessarily have a bigger bet now?
No. There is a new and complicated problem as we know that you are now not playing against people with the same information as you. What you now have to do is make an assessment as to the relevance of what the market is now saying and then decide if you still wish to play. You don’t know exactly why Heads is such a big price, but you do know that a significant weight of money has pushed it up to that price and such significant late money could easily (but not definitely) have come from long term winning players.
Of course there is no right ‘answer’ to this problem now – some punters would rather take the 8/13 Tails to be on the ‘fancied’ horse whereas others would take the theoretical ‘value’ on the 13/8 Heads. Others, who maybe took the 11/10 Heads earlier in the day would just sigh and perhaps realise that, on this occasion at least, the ‘known unknowns’ in the market have worked against them. The sensible way to tackle the problem is to attempt to assess to what extent you are in the dark. If you are betting in competitive, high grade, high value races with top class and relatively exposed horses, then perhaps you can retain faith that you can still bet according to your tissue to a large extent at race time. If these are low grade races with unreliable horses (…not to mention connections), then it would be pure folly to ignore what the market is telling you.
One thing is certain: anyone who doesn’t realise this situation is different to the original scenario where you were playing against someone with the same information is both incorrect and likely to suffer financially if they blindly follow the same staking strategy.
Betting now should not just involve purely betting based on your assessment of incomplete information, it is about being aware of and adapting to what you don’t know.