WHY PARI-MUTUEL BETTING IS TOO COMPLICATED

Racino earnings from slot machines have helped to support pari-mutuel purses in North America during a time when wagering on horse racing has been in decline. However, there has not been the hoped-for migration of slots clientele to pari-mutuels. This is unsurprising because slots are simple to understand, easy to play, and provide immediate feedback, whereas effective handicapping of horse races requires in-depth thinking about esoteric information and a significant commitment of time.

The intellectual challenge of deciphering past performances and evaluating odds and probabilities is incompatible with the skill sets and/or proclivities of a significant slice of the American population. Consider some of the abundant evidence.

The Organization for Economic Cooperation and Development periodically administers competency tests to students across the world. In the latest study of 470,000 15-year-old students in 34 countries, the United States ranked 25th in math and 14th in reading.

The Newsweek issue of April 4, 2011, carried an article titled “How Ignorant Are You?” that reported the results of a scientific poll the magazine commissioned to ascertain how well Americans would perform on the official U. S. Citizenship test. This test asks 10 questions randomly selected from an inventory of 100 standard questions and is comprised of five categories covering American government and history. A score of 60% is passing. In February, Newsweek had a pollster administer the U. S. Citizenship quiz to a representative sample of 1,000 adult Americans.

Overall, 62 percent of the respondents passed and 38 percent failed. Outcomes from many of the questions posed were dismal. For example, only 65% of the test takers knew what transpired at the Constitutional Convention, 40% were unable to identify who the U. S. fought in World War II, and 80% did not know who the American president was at the time. Sixty-three percent could not correctly stipulate how many judges are on the Supreme Court and 81% could not articulate a single constitutional power of the federal government. Twenty-seven percent did not know that the president is in charge of the executive branch of government, 29% could not name Vice President Joseph Biden, and 59% could not designate Speaker of the House John Boehner. Worse yet, 33% did not know when the Declaration of Independence was adopted and 67% missed the question “What is the economic system in the United States?”

The repercussions of having so many uninformed citizens—combined with inadequate competencies in reading and math–for the future competitiveness of the United States are beyond the scope of this analysis, but the implications for the future of pari-mutuel wagering are not. While there will always be a relatively small segment of Americans who have the time, inclination, and aptitude to handicap, the vast majority will not. Reversing or moderating the downward trend in pari-mutuel wagering necessitates relentless experimentation with products that are as effortless to grasp and play as lotteries and slots and have the promise of big payoffs.

Copyright © 2011 Horse Racing Business

Originally published in the Blood-Horse. Used with permission.

Comments

  1. The win bet is effortless to grasp. I would hate to see racing alienate their core audience by paring down exotic wagers. I know that’s not exactly what you’re suggesting but my fear is that a racing executives who don’t also play might have that reaction.

    I would add that there’s no obligation to spend any time handicapping or have any comprehension of wagering strategy or odds to hit an exotic wager. Case in point: I was once sitting by a group of people at Saratoga that hit $2000+ trifecta by playing their hotel room number (this was demoralizing because I had spent all night handicapping had came up with nothing).

    I hear your point, but let’s hope that dumbing down one of the things that makes racing enjoyable to the few people who currently participate doesn’t end up being the solution.

  2. One of the common complaints of the modern horseplayer is that mutuels are too low. The disappearance of public and/or uninformed money and the proliferation of more advanced handicapping tools has made it a very tough game to beat.

    The industry could dumb down the wagering menu, but it would it have the same component of skill as a pick 6 wager? Existing horseplayers would not embrace it if random chance was the main determinant of cashing a ticket.

    The game of poker has proliferated in recent years, despite the general decline in math and science competency. It requires skill and patience, something the average slots player lacks. Maybe racing should study why they are thriving…

  3. Bill Shanklin says

    I am not suggesting that the current bets be simplified. Rather, I am suggesting that some lottery-like bets be made available that don’t have to be handicapped.

  4. I see…. yes, something like the V75 harness racing bet in Sweden ? Seems to have widespread appeal there…

  5. Bill Shanklin says

    Exactly, Kevin. The V75 is the best example.

  6. The American public isn’t too stupid to understand day trading or investing in the stock market. Many can understand craps too. And they understand poker.
    What keeps the vast majority of people away from horse racing and its learning curve is the fact there are no visible winners out there.
    Show Americans the game can be beat long term and they will flock to it.
    But then again, with a 21% average takeout, try finding long term winners (who don’t get substantial rebates), to use as poster boys. Poker had them, and that is what fueled interest and participation.
    Sure a lottery would work in getting people to play the lottery, but attacking the learning curve, I don’t think so, but I guess since takeout rates aren’t about to drop to optimal levels any time soon, might as well try it.

  7. Bill Shanklin says

    Cangamble,

    You and I are in total agreement on takeout. I would like to point out that investors are fleeing the stock market in huge numbers. They evidently think it is a bad deal because of high-speed players using computers etc.

  8. bill marshall says

    There are no judges on the Supreme Court. There are nine Justices, one of which serves as Chief Justice. Was this a trick question?

  9. Bill Shanklin says

    Touche, Bill. You would have been tough to deal with in college on multiple choice questions.

  10. Hairy Reason says

    The complexities to which you allude have exactly zero to do with “parimutuel wagering”.

    There is parimutuel wagering on the head-to-head bet, and yet there is nothing at all “complicated” about that.

    That you are “in total agreement on takeout” with Cangamble identifies you as more of the problem facing racing, and far, far away from being anywhere near to the solution.

    Cangamble and his ilk ARE the main problem facing those trying to stem the giant tide of racing’s dwindling fanbase in 2011.

    When will you people get it through your collective heads that NOBODY CARES ABOUT TAKEOUT!!!

    A racing study just unearthed the fact that merely 20% of racegoers even “KNOW ABOUT takeout”, and the tiny sliver among them who “CARE” about takeout is further insignificant.

    Racing must stop catering to those who ARE the PROBLEM, and create a risk-reward equation far better suited to those (99+% of society) who could be bothered to solve it.

    When the ball of common sense is hiked to all things horse racing in North America, the only instinct to date has been to take said ball and run toward its own end zone, and as far away as possible from the ultimate goal.

    With this senseless rant on “pari-mutuel wagering” being too complicated, you are falling in line with those who are wrong.

    (now if your gripe were based on not being able to pinpoint show prices after the race anymore, given the effects of “Net Pool Pricing”, then I could give you some credit. But to complain about “parimutuel wagering”, which goes on stealthfully, behind the scenes, is akin to complaining that the intricasies of the modern slot machine electronic chips are “too complicated”, when nobody need understand their complexities to put $20 in and play)

  11. Hairy,

    The McKinsey study showed that betting is too complicated (the consultants showed a video on the subject) and that takeout matters a lot to big bettors who account for most of the handle. You should read the study and watch the presentation before spouting uninformed and rambling rants. Have another drink.

  12. Hairy Reason says

    Caro,

    Any fool knows that “betting (on horses) is too complicated (for novices)”. This post is about “parimutuel wagering”. (we could have “parimutuel wagering” on coin flips… and WHAT, in your parallel universe, would make such a thing “too complicated” ??)

    I am here to tell you that people putting their money down on a KENO game in some backwoods BAR somewhere DO NOT GIVE A DARN how the payoff is computed. They do not care whether it is parimutuel, whether they are playing against “the house”, or whether there are martians backing their action via Betfair.com.

    The same is true of novice racegoers betting their first $2 on a horse, a mule, or a drunken jockey.

    “””PARI-MUTUEL WAGERING””” is in NO WAY the PROBLEM.

    “Pari-Mutuel Wagering” COULD BE the SOLUTION if all of you clowns would cease to be AT ODDS WITH COMMON SENSE all the time, to the steady detriment of all things horse racing in North America.

    The so-called “big bettors” you reference ARE the very people who are KILLING HORSE RACING in North America.

    Nobody wants to go into the same dark bar referenced above, to play the same KENO game referenced above, when the guy sitting at the next table has a markedly better chance of winning while betting the same amount of money.

    (and yes, as always, when I say “nobody”, I exclude just 99.5% of everyone in our circles)

    Now, as has been the case for TWENTY YEARS, you can take the “parimutuel wagering” (deemed above as being somehow so “problematic”) and SOLVE THE G** D*** problem once and for all WITH that very parimutuel wagering working in your favor like nothing casinos or alternate forms of gaming can match.

    BUT NONE OF YOU PEOPLE have or exercise ENOUGH COMMON SENSE to take advantage of the unparalleled benefits to that (oh-so-“problematic”) parimutuel wagering to make it work FOR RACING, instead of against racing.

    Now how dense do you people have to BE in order to remain IN THE DARK as to such SIMPLE CONCEPTS.

    Why even the casinos offer blackjack “lessons” and “beginner games”, even though every time you get “21” … THEY lose money!!!

    Now how come horse racing won’t even do that much after TWENTY YEARS of wide-open opportunity for FAR GREATER GAINS??????

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