Archives for May 2015

WHY IT IS SO DIFFICULT TO WIN THE TRIPLE CROWN

Ten of the eleven American Triple Crown sweeps have come in bunches, three in the 1930s, four in the 1940s, and three in the 1970s.  Why then has it been 37 years since Affirmed won the Kentucky Derby, the Preakness, and the Belmont?

Several plausible but largely unsubstantiated explanations have been offered, such as (a) horses of today are not bred to be as sturdy as their predecessors of 40 years ago and more; (b) dehydration caused by the anti-diuretic furosemide saps racehorses’ strength and prolongs their recovery time; and (c) trainers of today are not as proficient as the old-timers.

A statistically demonstrable principle is more likely, unless equine athletes are somehow immune to it.

Recently, a writer for the Wall Street Journal, Christopher Mims, adeptly described this principle “common to any number of human-made phenomena, including batting averages, the stock market, and the relative performance of economy and luxury automobiles.”  He could have included the relative performance of Thoroughbred racehorses.

To illustrate the principle, Mims said:  “Take Ted Williams, who in 1941 became the last hitter in major league baseball to bat over .400 in a season.  As observed by the late evolutionary biologist Stephen Jay Gould, the straightforward reason no one has matched Williams in the past 60 years is that all players in baseball have since become uniformly more skilled—including pitchers.  As best practices in training and recruitment spread, everyone has gotten better, and the difference between the performance of the worst player and the best one has narrowed.  In statistical terms, as the performance of players has increased, the variance in their batting averages has shrunk year after year.”

Home run feats by Babe Ruth provide another example of Gould’s explanation.  In every year from 1918-1932, except for 1925, the number of home runs hit by Ruth exceeded the total hit by entire major league clubs.  For instance, in 1920, Ruth’s home run total exceeded the home run output of 15 teams and in 1927 he hit more home runs than 12 teams.  This wide variance would be virtually impossible today because all MLB teams have players with the demonstrated capability to hit high home-run totals.

In addressing the question of why it has been such a long time since a horse won the Triple Crown, the most important issue is not whether horses of today are faster or slower than their ancestors, rather the main issue is whether the variances or standard deviations around the average running times for various distances have shrunk, and, in particular, for distances of 1 1/4 miles, 1 3/16 miles, and 1 1/2 miles.

To test this hypothesis, one would need to subject it to a large amount of data from a representative cross-section of races and racetracks.  However, there is no reason to presuppose that horse racing would be any different than other human phenomena, like the lessened performance differences between baseball players, mutual fund managers, and economy vs. luxury automobiles, etc.

With Thoroughbred horse breeders having access to the same stallions and trainers adopting uniform methods and best practices, the performance gap between the top racehorses and the worst racehorses has likely closed over the years.  Thus it takes an equine equivalent of a Ted Williams or a Babe Ruth to have the speed, stamina, and durability to prevail over his peers three times in races over a five-week period.

Maybe American Pharoah is an equine version of Babe Ruth or Ted Williams.  But we have had high expectations for other colts since 1978 and had our hopes dashed.

Copyright © 2015 Horse Racing Business

RACETRACKS ARE NOT THE ONLY COMPANIES DISCRIMINATED AGAINST IN TEXAS

Earlier this year (February 9 and 13), Horse Racing Business ran two posts on the unfavorable state government-imposed environment for racetracks in Texas (click here for reference.)   For example, Texas prohibits wagering via the Internet/telephone and pari-mutuel wagering on historical races.

Given Texas’ well-deserved reputation for fostering business and entrepreneurship, I thought the forgoing bans were uncharacteristic for the Lone Star state.  I changed my mind when I read about Wal-Mart’s current lawsuit against the Texas Alcoholic Beverage Commission.

Texas has a 1995 law that restricts hard alcohol (excludes beer and wine) sales to stand-alone stores owned by private companies holding state-issued liquor licenses.  Further, under a 1977 Texas law, a private company cannot own more than five store permits, with the huge exception that the principal owner can buy additional permits from a “first-degree” blood relative.  In other words, closely related family members can own an unlimited number of permits and stores.

In Texas, public companies (defined as firms with more than 35 stockholders) like Wal-Mart are confined to selling beer and wine.  Texas is the sole state to permit private companies to sell hard alcohol but not public companies.

In addition to Wal-Mart’s lawsuit, the corporation has joined Kroger and a number of other public companies and groups in seeking legislative relief.

The view here is that, while Texas generally offers a “can do” climate for doing business, the state nonetheless has laws and attitudes that are remnants of an insular culture intended to protect small business from the “predatory” Wal-Mart’s of the world.  The same lingering culture explains the legislature’s paternalistic stance towards its citizenry when it comes to such putative temptations as advanced deposit wagering and betting on historical races.

Copyright © 2015 Horse Racing Business

WHAT IF SUCH DECEPTION HAD OCCURRED IN THE KENTUCKY DERBY?

Instead of American Pharoah winning the Kentucky Derby, suppose that he had run out-of-the-money after going off as the favorite.  Then, the following morning, it was revealed that his trainer Bob Baffert and his owner Ahmed Zayat had for several weeks concealed a significant injury to the colt, but they had decided to run him anyway.

Can you hear the allegations that horse racing is not on the up and up, and justifiably so?

In this hypothetical, the betting public would have placed their bets on a horse that would be unable to perform up to the level indicated by his past races.  This kind of subterfuge was seemingly what happened in the May 2nd title fight between Floyd Mayweather and Manny Pacquiao.

Millions of dollars were bet on both fighters, and some wagers were reportedly as large as $1 million.  Yet, after the fight, Pacquiao’s trainer Freddie Roach said that Pacquiao suffered a right-shoulder injury three or four weeks ago when he threw a right hand while sparring.  Fight promoter Bob Arum explained that the injury was identical to the torn rotator cuff incurred by Kobe Bryant of the Los Angeles Lakers, which ended his 2014-2015 season.  According to Arum, he and Roach considered postponing the fight but opted for physical therapy.

Nevada boxing Chairman Francisco Aguilar commented that he did not hear of the injury until less than five hours before the fight when he came to Pacquiao’s locker room and was asked for permission (which was denied) to administer an anti-inflammatory shot consisting of Bupivacaine, Celestone, and Lidocaine.

Most observers would surely agree that bettors were denied highly relevant information bearing on the outcome of the fight.  An insider with such information would have bet on Mayweather and avoided betting on Pacquiao.

The view here is that people who bet on Pacquiao were deprived of pertinent information about his diminished chances.

In the 2010 Breeders’ Cup, bettors are likely to have wagered on a physically compromised entry in Life at Ten in a case that still has not been fully resolved and may never be.

Whether it is the stock market or athletic competition, investors and bettors deserve the same access to information as insiders.  Otherwise, the idea takes hold that the game is rigged…and that is real bad for business.

Copyright © 2015 Horse Racing Business