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I have been avoiding you

Gambles, algorithms, and winning without cashing in. Plus, 7 other things worth your time.

Bill Murphy Jr.

Sep 3, 2020

Forty years ago, a Pittsburgh college student and former Eagle Scout named Bill Benter grew obsessed with a book about beating the odds at Blackjack.

He grew so obsessed in fact, that he quit school and headed to Las Vegas.

Things went poorly at first. He made a lot more working at 7-Eleven than gambling in the casinos. But after a year or so, he hit his stride, bringing in $80,000 (the equivalent today of $250,000).

Then, he apparently got banned for counting cards.

Forced to choose between going home and finding another game, Benter turned to horse racing. Specifically, horse racing in Hong Kong.

Why there? First, because the industry was enormous: an estimated $10.7 billion a year.

Second, because in Hong Kong, horse gambling was governed by private clubs (that took 17 percent of the total pool), and the government (which charged a 10 percent tax). Since both entities would get paid regardless, Benter believed he’d be less unwelcome if he started winning big than he had been in Las Vegas.

Let me just give the whole thing away: Although there are many twists and turns in the story, and he’s not the only person involved, Benter’s system ultimately worked like you wouldn’t believe. He reportedly made nearly $1 billion, enough that at one point he won $13 million on a single day’s races, but never cashed it out.

I can’t possibly explain Benter’s entire system here, but if it interests you further, I’d send you to Kit Chellel’s 6,500-word article about Benter for Bloomberg Business after interviewing him a while back (highly recommended with a lot more details than I can get into here.)

To summarize, it all came down to two words: data and analysis.

In fact, maybe think of this as Moneyball for horse racing, 15 or 20 years before Moneyball.

At this point, another bit of life-changing reading material enters the Benter story: a 1986 academic article, Searching for Positive Returns at the Track: a Multinomial Logic Model for Handicapping Horse Races.

Its authors argued that race tracks simply didn’t track enough variables. So, a true statistician who compiled many more data points could probably deduce more accurate odds than the tracks.

Hmmmm. If this were a movie (maybe it will be someday), we’d now cut quickly through a bunch of scenes showing Benter doing things like:

Teaching himself advanced statistics and learning to write algorithms on old-school, 1980s computers.
Teaming up with another banned-from-Vegas gambler who had enough money to stake them both for a bit, and spending a year working together from a dilapidated Hong Kong apartment.
The partnership breaking up after they lose $120,000 in the first year, with Benter heading to Atlantic City for a while to count cards, gamble, and pull together enough winnings to stake himself once more.
Benter, back in Hong Kong, trying to find any kind of unusual data to track and provide an advantage: Weather patterns? No success. Days between races? No edge found.
And then, the Eureka moment, when Benter hits on an incredible data point that has been hiding in plain sight.

Instead of crafting his own odds from scratch, Benter came up with the idea of using the race tracks’ publicly available odds as a starting point, and improving them with his added data.

Now, things took off. In the first season after his breakthrough, Benter reportedly made about $3 million. By the first half of 1997, just before the handover of Hong Kong to China, he brought in $50 million.

Word got out. Imitators flocked to Hong Kong. By now, Benter had more wealth than he’d ever need, although he’d only been partly driven by money. As Chellel put it:

“With his intelligence, he could have gotten richer faster working in finance. Benter wanted to conquer horse betting not because it was hard, but because it was said to be impossible.”

Now, the whole thing was just too easy. Moreover, he realized that by monopolizing winnings, he was preventing ordinary citizens from having a fair shot at a prize.

So, he decided on one last, big bet: a huge jackpot called the Triple Trio in November 2001. This was a national obsession. Winning was a 1 in 10 million shot, Chellel wrote, and it required a gambler to “predict the top three horses, in any order, in three different heats.”

Benter and a new partner spent more than $200,000 placing a total of 51,000 bets. One turned out to be exactly right, and the grand prize was worth about $13 million.

Then, Benter and his colleague did something surprising. They posed for a photo with the winning betting slip, Chellel writes in his article, and they put it in a safe deposit box.

They never claimed the prize, safe in the knowledge that if nobody did, the money would eventually would be donated to charity.

The lack of an official winner became a big news story in Hong Kong, but Benter moved back home to Pittsburgh.

Today, in his 60s, he reportedly continues to bet all over the world—technology and changing laws make it much easier to do so via the Internet now.

He runs a medical transcription company, which is nowhere near as profitable as his gaming, teaches classes and lectures, and makes donations: $1 million for a charter school program, $3 million for polio immunization, more for political causes.

Most of the people he meets now have no idea how he made his money.

“I have been avoiding you, as you might have surmised,” he said in an email to Chellel before agreeing to be interviewed. “The reason is mainly that I am uncomfortable in the spotlight by nature. None of us want to encourage more people to get into the game!”

7 other things worth your time

Prescribing steroids led to a sharp decrease in the number of Covid-19 deaths, a study suggests. (WSJ)
But, Covid-19 has killed more police officers this year than all other causes combined. (The Washington Post)
Things that are being proposed by the two presidential candidates but won’t happen: President Trump said he wants both candidates drug tested before the debates. Joe Biden says he thinks there should be real-time fact-checkers. (The Hill, Yahoo News)
Police say an alleged “Antifa commander” broke down in tears when he was arrested, allegedly while carrying a flamethrower. (NY Post)
President Trump encouraged North Carolina residents to vote twice as a way to test the security of the mail-in system, although some say that would be illegal. (NBC News)
Astronomers say they’ve detected the most massive merger of two black holes ever discovered (The Verge)
Yesterday was the 75th anniversary of the end of World War II. Did you ever notice that on the official surrender document, the Canadian representative signed his name in the wrong place, which meant everyone after him had to cross out the typed titles, and write theirs in? (Canadian Forces in U.S.)

Canadian Forces in 🇺🇸 @CAFinUS

Who among us has not missed the signature line target?