"Dissecting the Line"

If you enjoy this site, I think it's likely that this will be the most interesting thing you'll read all day. It's 22 months old, but its subject is one that isn't at all time sensitive. A few highlights:

"If you had bet $5,000 on the home underdog in every N.F.L. game over the past two decades, you would be up about $150,000 by now (a winning rate of roughly 53 percent)"

Interesting to see that this well-known theory is true. 53% is actually pretty significant, considering the large sample size there. It is unclear if the author is considering the "vig" here; a 53% winning rate is barely above the threshold necessary to be profitable. But either way, it's an impressive percentage.

"The most certain way for a bookmaker to turn a profit is to balance his book — that is, to set a point spread that produces an equal number of dollars wagered on both sides of the line. Since only losers pay the house a 10 percent fee (known as the vigorish, or vig) on top of wagers, a balanced book guarantees the house a 5 percent gain. The conventional wisdom holds that bookmakers set point spreads to achieve this balance."

Until about two months ago, I thought the conventional wisdom was true. It is not. The following is a much more realistic depiction of betting markets.

"Let's say that a bookmaker is handicapping a game between the Broncos and the Pittsburgh Steelers. He first studies every conceivable element of the game: strengths and weaknesses, momentum, injuries, tendencies, weather forecast, etc. He then decides that the true line — that is, a line that he figures will give each team a 50 percent chance of winning the bet — happens to be Denver minus 7 points.

But because of bettor bias, perhaps as much as 80 percent of the money will inevitably flow to the favorite. So what if the bookie sets the line a little higher, at 9 points? Denver is still likely to draw the majority of the wagering, but its chances of winning the bet are now slightly less than 50 percent. The bookie has thus managed to tempt the majority of the wagering toward an outcome that is unlikely, even if only slightly, to happen."

So, how does this translate to actually wagering on games? This means that the best strategy has nothing to do with trying to outsmart the bookmaker (which I don't think is particularly hard to believe). The best strategy is to bet with the bookmaker.

The key here is to find out what side the majority of the public is on, and then go against that side. If 80% of the public is on the Broncos, that tells us that the bookmakers likely don't think Denver will cover, so betting against them would be a good move.

This, however, is easier said than done. Sites like Wagerline give us a broad sense of where the public opinion lies, but getting a more accurate picture of the situation is much more complex, and an art that I'm not even going to pretend to have mastered.