When looking to place a bet the number one question is who is going to win, right? Wrong. Daft as it may sound that is not the most important factor in picking your bet, not, that is, if you are betting to make money. Value. Value, even when using a free bet, is what you must look for and so the first question is “Which of these selections is a value bet”?
What is a bad value bet?
A value bet is one where the probability of the outcome is greater than the odds reflect. In a way this is easier to understand by looking at the opposite, a bet that is bad value. Some bookmakers have a market in cricket matches as to who will win the toss and this is often priced as 1.9 (again I think using decimal odds makes things clearer) for both sides. Odds of 1.9 imply a probability of the event happening of 52.61% (this is calculated by dividing 1 by the decimal odds, in this case 1/1.9) but we know the true probability with a coin toss to be 50%. The more likely an outcome the lower the odds a bookmaker offers so if your bet has a 50% chance of winning but you are only being paid the odds for a 52.61% chance, then you’re being short-changed and in the long-term the bookmaker will win.
This latter point is key: in the long-term. In the short-term you might guess who will win the coin toss once, twice, even 10 times in a row and betting on it at 1.90 or even 1.80, in fact any price of course, you will make a profit. However, keep going and eventually the simple fact that the bookmaker is paying you 90p when you win but taking 100p when you lose, on an outcome that is an exact 50/50, means you will lose.
You never see a bookie riding a bike
So the saying goes. Obviously this was coined before our modern, green-thinking ways and is a reflection of wealth not a lack of social conscience, bookies being famously concerned with the wellbeing of others and the fabric of society!
Bookies make money by, as discussed above, offering lower odds than they “should”. In any event the odds they offer will result in a loss if you back each selection to win an equal amount. In our original example, if you place £1 on each option you will stake £2 and get £1.90 back. The odds paid imply a probability of greater than 100% – in this example 52.61 + 52.61 = 105.22%. A probability can never be more than 100% and this extra percentage is called the overround. In simple terms this is the bookies’ mark-up and is what keeps them rich and most punters poor.
But if I pick the winner, I win!
Of course, this is true. No matter what odds the bookie offers, if you pick the winner, you win. But, to use a phrase beloved of my grandfather, the only dead certs are in the graveyard. Now, he’s dead and that’s certain but his words remain true. No matter how short a price is and how sure the result seems, it is not in the bag. If it was, bookmakers couldn’t do business. I know of a student who bet everything he had and a lot more than he could afford at 1/100, 100 to one ON, 1.01, whatever name you give it, on Angola to beat Mali in the Africa Cup of Nations 2010. Why were the odds so low? Well, Angola were 4-0 up on home soil with 16 minutes of the game left. It finished 4-4 and makes our list of the worst bets ever! Sport, like life, is unpredictable and amazing things happen every day, many times a day in fact – you can see our best bets feature for yet more proof of that!
This is central to the argument for backing value. It is impossible to know who is going to win, unless you are involved in fraud (in which case can I have the tip too but we’ll both have to watch out for the law and its long arm). Therefore we cannot know we are backing the winner. However, if we are consistently picking selections at favourable odds then we can be sure we will win…in the long-term.
Back to the bloody coins
If you were offered odds of 2.10 (odds that imply the probability is 47.64%) on the toss of a coin, you would either assume that the person doing the offering was mad or a cheat. If neither of those were true you would go to the cash machine and maybe get a loan as well and then stake as much as you could on the coin (depending on your Staking Plan). Again, from the other perspective, if someone offered you 1.60 (in fact anything less than 2.00), you wouldn’t bet on it.
I don’t normally bet on coins
No, me neither (although it has been known!). But the principle is the same. If you wouldn’t bet on heads at 1.90, why bet on a football team that has a 50% chance of winning at 1.90? At odds that reward you as if it actually has 52.61% chance? Of course, the difficulty with any “real world” application of probability is calculating what it is. Effectively the bookies try to do this, then take their cut and the result is the odds you see. But calculating the probabilities accurately is very difficult, as with a horse, a football team or golfer, there are almost infinite variables. You may think, with it being so difficult, why not just try and pick the winner. Well, ok, let’s consider that notion. You think that Tiger Woods will win the British Open (the golf, not a womanising contest held in Romford and hosted by Jim Davidson) so you back him at odds of 5.00, implying a 20% chance of victory. But would you back him at 4.00? What about 3.00? What about evens, a bet that suggests you expect him to win 50% of the time? Unless you blindly back selections irrespective of price then you are already considering value.
So I should bet even if I don’t think my pick will win?
Yes, sometimes. Let’s dispense with the coins and crack out the dice. Suppose the proposition is “will the die land one, two, three or four or, will it land on five or six”? The first bet, numbers one to four has a 66.67% chance of happening and the second, five to six, a 33.33% chance of happening. What would you bet on if the odds were 1.20 on one to four and 3.00 on five and six? 1.20 implies an 83.33% chance of the event happening, far higher than the actual probability whereas 3.10 implies a 32.26% chance, which is less than the true probability (so you are getting higher odds than you “should”). Although one to four is twice as likely to happen, the far better value bet is for five or six. So in this instance, the value bettor, the professional, YOU in other words, backs the high numbers knowing they are unlikely to win. But also knowing that if they can replicate such a situation enough times then they will be GUARANTEED to make money from betting.
Nobody is offering 3.10 for two numbers though
True. And as discussed the bookies, through the overround, put the odds in their favour. In a theoretical world, a world the bookmakers would love to create, every bet they offer would be a bad value bet. For every bet they offered the odds would be between 10 and 20% below where they should be and they would never lose. But that’s not the real world and bookmakers do not know everything. Let’s say that your local football team have an injury and the striker who normally takes the penalties isn’t playing. The bookmaker may not know, and the lower down the footballing ladder we go, the less likely it is that they will, that the centre-back is the second penalty taker. Consequently his odds to score will probably be higher than they should and you have a value bet. Or you may have a centre-back being used as an emergency striker or a full-back as a winger and again the same situation arises. Or you may be smart enough and quick enough to spot a plain and simple error by the bookie (be careful to avoid “palps” – this is a different thing altogether). The best example of this and an oft-cited tale of bookmaker pain is The Hole-in-One Gang. In 1991 two intelligent chaps approached several bookmakers on the UK high street asking for odds on a hole-in-one at the British Open. They had calculated the chance at around 50% and therefore the odds should have been 2.00 or more likely 1.80 given the bookies’ fleecing habits. They were offered 100/1 and placed several large bets, pocketing between £500,000 and £1m depending who you believe. Opportunities are out there – you just have to spot them.
Value, value and value
It is worth noting that with the Hole-in-One gang there was still a large chance the bet could have lost. But I hope I have demonstrated in this article that backing value, rather than backing “the one that will win” – counter-intuitive as it may be – is what you must strive for.