Beating the odds – Part 1

03-May-2010

TrophyI had an interesting conversation recently that made me wonder - is it possible to make a (relatively low risk) living from gambling?

I was talking to a friend of a friend, a guy who indeed makes a living from gambling. That doesn't really do him justice - when I say "gambling", he actually owns a company that uses complex mathematical modelling to predict the outcome of sporting events. And when I say "makes a living", he makes a lot more than a living - anyone who flies their own helicopter to work must be doing something right! For this guy, it's fair to say that gambling does indeed pay.

It got me thinking - if this company can make huge profits by modelling all manner of global sporting events, can modest profits be made by modelling a tiny subset of the sporting world - English Premiership football for example?

To be clear, this has nothing to do with sporting knowledge. My acquaintance knows even less about sport than I do. He's an Oxbridge educated mathematics boffin - all of his success comes from his mastery of complex statistical analysis. Now, I don't know much about sport, and I'm not that hot at maths either, but I reckon I know enough to have a stab at this.

As an aside, I worked as a software developer in the City for a number or years where this sort of software modelling is common. Instead of sporting events, we used to model complex financial products, predicting changes and trends in international markets, currency prices, etc. The difference between gambling on financial products and gambling on sporting events is that in the City most of the people you're gambling against are using their own complex software models - success and failure ends up being more a question of luck than skill. And the margins are so tight that the only way to make substantial gains is to take huge risks. And we've all seen where that leads...

In the world of sports betting you're competing against a much more varied range of opponents. Some, like my maths acquaintance, will be using complex software models, some will be betting based on their vast knowledge of the sport, and plenty of others will be betting on nothing more than an emotional feeling - maybe their team made it to the cup final, haven't got a chance of winning, but what the hell, worth a flutter!

In part 2 we'll take a look at the software model itself. I'll suggest the approach I'd take in building something like this, and if I ever find the time I might even try and put my hair-brained scheme into practice!