Dave brings Elihu Feustel on the show today to dig into the numbers behind his mathematical approach to sports betting. Elihu is a professional sports gambler, lecturer and author of the book Conquering Risk: Attacking Vegas and Wall Street.
Elihu has a vast background in statistical analysis and specialises in developing mathematical models for different sports betting scenarios. Dave picks his brain to bring you some insights into examining a sport for its gambling potential, determining whether you’re ready to go pro, and managing your bankroll even during a losing streak.
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Punting Insights You’ll Find
- The most important elements you need to consider before quitting your day job to go pro.
- The minimum level of mathematical skills necessary to make a living from gambling.
- Why betting percentages based on your edge and your bankroll is essential for long term betting.
- How you can determine if you’re ready to go pro, and why it’s more of a lifestyle change than you might think.
Today’s Guest:
Elihu’s Parting Advice:
The everyday gambler doesn’t use heavy math. They bet on hunches and teams they like, but they aren’t serious about winning. If you’re not working 40 hours a week, you’re probably not doing the work necessary to keep winning going forward.
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Episode 002: Dave Discusses Turning Pro with Elihu Feustel
Welcome to Betting 360, your number one resource for horse racing and sports betting insights. Coming around the bend is your host, David Duffield with another expert interview to give you the winning edge!
David: Hello and welcome to Betting 360, I’m your host David Duffield and every week I’ll bring on a special guest to look at punting from all angles. Many people think the life of a professional gambler has plenty of glitz and glamor with no losing runs. The reality is almost always very different to that. Today on the podcast I have a special guest with a pretty fascinating background. He’s a professional gambler, a lecturer, he manages a syndicate for a tennis betting model and he’s a co-author of a great book called Conquering Risk: Attacking Vegas and Wall Street. His name is Elihu Feustel.
David: Welcome back to the show, I’m happy to welcome our special guest Elihu Feustel. Thanks for your time today Elihu in helping educate the punters from down under.
Elihu: Good morning!
David: Good morning. Now many of my listeners will be familiar with your background from an article I published recently on your thoughts on developing sports betting models and in particular tennis betting. But just in case they missed that can you give us a quick overview of who you are and what you do?
Elihu: I used to be a lawyer, I have a degree in math and now I’m a full time sports bettor. I analyse data for sports and come up with mainly quantitative ways to beat sports. I don’t put much emphasis on subjective information, it’s all data.
David: Alright and so how do you even get started doing that? Obviously you need access to the data, but what type of theories do you use or how are you coming up with edges on the market?
Elihu: Well you have to understand the sport. If you understand the sport, you can describe what you think will happen in terms of math. If you understand it, you can translate that understanding into mathematical equations, and then get lots of data. You analyse sports, make predictions and if you do a better job than the books you can bet openers and if you do a better job than the world you can bet closers.
David: I’ve heard you discuss that before and use that as a way of assessing your edge on the market. Whether you’re beating the closing line.
Elihu: Yes.
David: So today I want to discuss being a full time gambler. The question of should I quit my day job and go pro is a fairly wide ranging topic. What do you think are the most important things to look at when someone is considering taking that big step?
Elihu: Well the very first thing is are you good enough to do it? Lots of people may try without the sufficient skills to do it. A newer sports bettor may find a couple of ways he can win and make $50,000 for the first few years. But that doesn’t mean he’s going to keep winning. So it’s important to have a skillset where you can win in a variety of ways. Pretty much every successful sports bettor I know has a background in some other type of gambling. Mostly blackjack or poker. Once you learn the basics from these games, it gives you the skillset to know what you can beat. If you don’t have the math skills to beat blackjack or poker, there’s no way you’re going to win at sports betting. It’s not good enough to have one or two tricks, but you pretty much have to have success at everything you attack. You need to be able to take something new and beat it. If you can beat all the easy stuff, and you can beat a couple new markets and you’re able to do this for a couple years, then you probably have the skills to do it. But if all you can do is pick the low hanging fruit, I don’t think you’re good enough because that may not always be there. One key thing about sports betting is opportunities are always drying up. Whatever you can win at today, you probably won’t be able to win at a couple years from now. So you need not only a good barrage of things to attack, but you need to develop tools for new markets to attack.
David: So when people look at the last few years of data, and you say the opportunities dry up, why does that happen and how do you measure that edge disappearing?
Elihu: When more people start doing the same thing, then you’re competing with the same people for the same piece of the pie. An example would be NFL teasers. NFL teasers used to be very beatable. You used to be able to bet two team six point teasers +100. Everyone started doing it and the price to play these teasers went up. These are pretty much gone now so that’s an example of an opportunity that existed that has disappeared. Ten years ago, in Arena Football you could bet every single dog blindly and hit 56% but then other people started studying it and they saw the edge. Lots of people saw the edge, and as more people started betting the edge, the books were educated and it disappeared. Over time the books figure out things and anything you’re doing will eventually either be figured out by the book or other bettors. There are some instances of opportunities that will last by betting openers but you’re still going to be competing against other sports bettors for those openers. As more and more smart people learn what you’ve figured out to beat the openers, the amount you’ll be able to make becomes smaller as it becomes a race to bet openers.
David: Do you think that obsolescence or the edge disappearing is happening quicker these days?
Elihu: Yes. More and more information is coming around and it’s easier to get the data you need on the internet. The methods used to analyse things are becoming more well known. Better information and better understanding of what to do with the information so you’ll find your edges disappearing faster than in the past. You always have to be working on something new.
David: I’ve heard you say that you’re an applied mathematician and you’ve said “Use math or die”. How does someone acquire those skills if they don’t have a strong educational background in terms of math? How do you suggest gamblers improve their skills in those areas?
Elihu: The minimum level of math you have to do to gamble on any level is algebra and percentages. If you walk into a bar and you ask 20 people what is 2% of 200, 9 out of 10 Americans can’t answer that. This is scary to me since it’s the minimum level of competence you need to even play blackjack with percentages. You don’t have to be a rocket scientist or do differential equations in your head, or advanced probabilities but eventually you’ll end up learning that if you get into gambling. If you don’t have algebra, then eventually you’re going to need to learn that if you want to do modelling. If you’re not willing to learn algebra, save your money, put it in the bank or just throw it away since it’s the same as trying to gamble without knowing algebra.
David: So being “Good enough” is the first step for becoming a full time gambler. What’s a realistic return? Many everyday punters believe that the professionals are operating on pretty fat margins and it’s relatively straight forward, and they have a pretty big edge working for them. The reality is often different and I think you’ve mentioned before that the tennis betting model is a huge volume but 1.5-2% return. How does that factor in to figuring out if you’re good enough? What is a reasonable edge or does it really come down to volume being as important? How many bets you can get on and how much you can get down.
Elihu: You just said it. What’s your edge and how much are you getting down? If you’re going to hold 2% of a million or 20% of 100,000 you’re still making the same amount of money so it depends what you’re attacking. The smaller markets are much easier to beat. If no one’s heard of the sport or if no one knows the rules of the sport, it’s probably easier to beat than a sport everyone talks about. If your bank roll is smaller, say you’re dealing with under 100,000 it makes sense to attack the smaller sports because you won’t have to do as much research to defeat it. But if you want to bet on English Premier League soccer, an hour before where some of these books are taking a quarter million in a single pop, you’re going to need a lot more resources to try to bet that successfully.
David: What about another important part of deciding if you’ve got the skills and resources to go pro? The size of your bank roll. How do you calculate whether you’ve got enough money behind you?
Elihu: That’s a complex question. First you have to say “How much am I making a year”. You need to compare that with your day job. Say in your sports betting you made 30,000 a year for the last two years but you’re making 50,000 working your regular job. You’re probably not ready to quit your job yet. I wouldn’t consider quitting your real job until you can look at the time you’re spending at your job and say you could make more by quitting the job and spending that time on sports betting. A big step before you quit and walk away from your job is considering time. You’re working two jobs, your day job and 20 – 40 hours a week on your sports betting. If you have enough to have a losing year, still pay your bills and still have enough to bet, that’s probably enough. Again that depends on how much money you are making. For example, if you’re making 50,000 and you have a break even year. You’re going to spend 50,000 and you’ll need 100,000 to bet then you had better have 150,000 before walking out of your job. You have to be real careful because things go wrong a lot faster if you don’t have steady income.
David: In terms of bankroll management, I’ve heard you say that anyone that overestimates their edge by a factor of two is almost certain to go bust. Can you expand on that because I think a lot of people will be surprised that a winning player can go bust?
Elihu: Pretend we’ll play a game where we flip a coin, and if you win the coin flip I pay you out double what you bet. So you either lose a dollar or you win two dollars so it’s a huge advantage. So every two flips you’re up a dollar so it’s a 50% edge. But if I say now that you have to bet 100% of your bankroll on every flip, then at some point you’re going to lose a flip and you’ll lose everything. But what if I say you have to bet 90% of your money. If you win a flip you nearly triple your money, then you lose a flip and you lose 90% of that 300% so you’re down to 27% of your bankroll. There’s a scale where the closer you bet to your optimal amount, the fastest you’ll grow. On an even money game with a 50% edge, you want to bet pretty close to 50% of your money. It’s much easier to do the advantages when you’re talking small. If you’re in a 1% edge even money you want to bet 1%. The math is kinda funny when you hit the extremes or you talk about different odds. But if you bet too little you won’t make enough money and if on a 1% edge you’re betting 3% of your bankroll, there’s 100% chance you’ll lose all your money. It’s just a matter of time. You really need to pay attention to what your edge is. In that case, betting 2% of your bankroll on a 1% edge it will bust you. You need to spend a lot of time to determine just how good is this advantage.
David: That’s key. If you don’t know that, and you’re not anywhere near your optimum bet you’re either wasting opportunities or you’re heading towards going bust.
Elihu: Yeah and the other thing is if you are betting real money and you don’t what your edge is, then you probably don’t have one.
David: Let’s discuss bankroll management and losing runs. How do you identify what’s expected in terms of variance and I suppose what happens at some stage, and what is your edge disappearing. Because you have quantitative models and you don’t want to be tinkering with those when it’s just a normal period of drawdown.
Elihu: One metric is to see how much you’re beating the closing line. If my average price is pick to even money and the average closer is -120, then that’s a fantastic result to see the 20 cents move. Over time that will likely decrease as the market becomes more efficient. One thing you can do when you’re tweaking, you can ask how have I done in the past? If adjustment has shifted my average closing from 5% to 6% then that’s a good adjustment. I’ve been on some horrendous losing streaks and the thing I look at is whether I’m beating the markets. If I’m still beating the markets, I’m not too distressed as the laws of large numbers will win out for me eventually as long as I’m not betting too much.
David: In developing the models you live by, how do you determine the difference between research and analysis, and what I would call backfitting? Getting results that fit historical patterns that may not continue to occur in the future?
Elihu: Make it simple. The simpler the model, the simpler your approach, the less likely it is to be backfitted If you’re going to look at 15 games and you make the degree 15 equation you can fit it perfectly. If you’re looking at 1,000 games and you’re looking at just one component, one variable, the risk of backfitting is much less.
David: So the greater the rules, the greater the chance that it’s backfitted in some way and less likely to continue in that way?
Elihu: The more complex your solution, the more likely it is to be backfitted.
David: I know you spent some time developing a college basketball model, but you threw it out because you weren’t convinced that it would work well enough to bet. In general terms why were you certain it wasn’t worth pursuing?
Elihu: It actually worked several years ago, but I think the market caught up. When I was thinking of betting it this year, I backtested it for the last few years and the results were not positive. So if I used that approach and I duplicate what happened the last two years I would lose money so I just think I’ll not do that.
David: Back to the question of going pro. If they’ve determined with a lot of confidence that they’ve got an edge on the market and a bankroll big enough to support their lifestyle, what about the social aspect of being a pro. It’s not all the glitz and glamour and sometimes it really does affect your social life. Can you expand on that for the listeners?
Elihu: When you have a job, you have contact with the same people every day. Suddenly, you take that component out of your life and half the people you know are those you work with. When you go pro, you’re not just changing jobs, you’re probably changing to working in your home. All the time you’re spending now where you used to have contact with other people, you no longer do that. Your world becomes a lot smaller. You have to make a conscious effort to get out more and meet people, to interact. Your world becomes much smaller when you go pro and aren’t working for someone else. So if you aren’t prepared for that, it’s a big big change.
David: Definitely. To finish up then, what would you see as the most common mistakes of losing gamblers? You’ve mentioned the math behind it all and the fact that it’s very simple for them to wipe out completely but what do you see as the biggest mistake that the everyday gambler makes?
Elihu: Well the everyday gambler doesn’t use heavy math. They bet on hunches, teams they like, but they aren’t serious about winning. If you’re not working 40 hours a week, you’re probably not doing the work it’s gonna take to keep winning going forward. It really is a full time job. I probably spend 60-70 hours a week now. You have to look at it as it’s a problem, and there is a solution to the problem, and if you’re not looking for the answers, looking for the big picture, for all things that affect games and studying the data or analysing it and treating it as a job, I don’t think you can win. At least not enough to support your self.
David: You mentioned 60-70 hours a week, am I right in saying you don’t even watch the games? It’s all about the data?
Elihu: I’ll watch some games that I’m betting in-game, but other than that I don’t watch the games. The nice thing about in-game, like soccer, the market size on some of these things are growing huge. It’s getting easier to bet some stuff in game than it is pre-game. If you’re looking forward to the next two years, one thing you might look at is attacking in- game markets more.
David: It’s unfortunate here in Australia, we have a ridiculous law that says we can’t bet online in-game. Although we’re a bit more developed than the U.S. for corporate bookmakers and general gambling. We have a law that says you can phone up to make a bet during the game but you can’t do it online. It’s pretty restrictive and unfortunate that the political climate we’re in looks like it won’t change any time soon.
Elihu: The U.S. has at least as many ridiculous laws. The FBI or Department of Homeland Security says it’s illegal to bet on the internet suggesting it’s against Federal law. There isn’t a law against it, but they still propose it. The whole duel between the U.S. government and sports betting is more of a money grab than the application of justice. It’s very frustrating if you start betting on a real level. It’s made me consider moving abroad just because of the way the U.S. treats sports bettors.
David: I won’t complain too much then having to struggle with the in-game betting. We’ll leave it there for today Elihu, I really appreciate you giving up your time and I’m sure all the listeners have learned a lot. Thanks again!
Elihu: You have a good one, thanks!
Thanks for tuning in to Betting 360. Get more in depth analysis, tips and that betting edge by heading over to ChampionPicks.com.au where you’ll find a full transcript of this episode. If you liked the show, share us with a fellow punter or drop by iTunes to leave us your thoughts. Betting 360, punting from all angles.
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