Wizard Daily Report and Research - Wednesday, 6 December 2023.
- Standing on the Shoulders of Giants (part 3)
Standing on the Shoulders of Giants (Part 3)
It would have been around 1980 that I first met Don Scott. At that time, I was publishing a monthly racing magazine as well as Superform and I had asked Don if I could interview him. He was happy to agree to the meeting and that was the start of a friendship that lasted for many years.
I always found Don to be remarkably humble and self-effacing, thoughtful, very intelligent, and all-in-all a very decent and good-to-know human being.
So, years ago I published the following interview with Don, one of Australia's great horse-race bettors. I think the interview provides an excellent insight into the mind of a truly intelligent investor - an investor, not a gambler - and despite the passage of time it is as relevant today as it was in 1980.
Warren: When you were developing your skills as a race analyst were you working alone or were there others who were interested in the same thing?
Don: Oh, it was an individual passion. I was quite alone.
Warren: During the early days was there anything of special significance you learnt?
Don: There was one important piece of research I did, completely independent from that concerning the weights carried by the horse. It was a simple analysis in which I tried to relate the chances of horses to their starting prices.
What I did was to determine that there was (say) around 20,000 starters and about 1,400 winners over the period I was analysing. I then found the starting price of each of those winners. I then worked out what their real price should have been.
Surprisingly enough, it worked out that for horses shorter than 7/2 there was a disadvantage to the backer of only 5%. Which meant that if you could get 3/1 about a horse that started at 5/2 you would actually show a profit of 5% to 8%. When I realised this fact, that although the average disadvantage to the bettor was something like 17%, if you concentrated on the shorter priced horses there is only a 5% disadvantage, and that you could then turn this into an advantage if you could secure just 3/1 about a horse starting at 5/2.
I therefore felt that the bookmakers were on a very narrow edge; that there really wasn't such a big difference between winning and losing and that if I backed all this up with my knowledge of the form and my analysis of weights and concentrated mainly on these shorter priced horses I would have to win mathematically.
Warren: How did you develop the idea of weight ratings?
Don: The idea of the rating method developed from a study of the Official Club Handicappers weights and the differences between the classes. I could see these differences between the classes of races and felt that I could use the Handicappers weights as the basis for a rating.
So instead of comparing the horses, one against another, I thought, lets think about an imaginary horse which carries the limit weight in a certain class of race, say a Welter class race; then compare all the horses to this average horse, which always perform in an average sort of way and carries the limit weight all the time. How do these horses compare with that average horse the imaginary one?
You see, that imaginary horse exists in all classes if you know the difference between the classes.
You know the basic class of each race and the basic class of the horses engaged in it but you also know that every race will be different, and you have got to be able to say whether this race is better or worse than average, and if so, is it 1kg or 3kg better or worse than average. That was the essence of the rating method I developed.
Warren: What was the next research milestone?
Don: The next breakthrough came a year or two later. It was to try and price all the horses in a race. It occurred to me that one should be thinking in terms of value and price. I felt that if I priced the horses according to their chances after I had made my calculations in terms of weight and allowed for all the other factors, and then if I could price the horses more accurately than the bookmakers, I must have a big advantage.
Furthermore, if I placed an amount on the horse according to its chance for example, if it was a 6/4 chance and you were betting to take out $100 you would have $40 on at 6/4, but if you could obtain say 10/1 you would have $400 to $40. By adopting this approach, I would be controlling my betting; I would never be betting up to recover losses, neither would I be reducing. My betting would be controlled by my opinion of each horses chance and by the level-stakes nature of this form of wagering.
When I introduced this change to my betting there was a tremendous improvement in my percentage profit on turnover. Where I had previously been working on around 4% or 5% profit on turnover, I suddenly found myself up to 10% or 12%. In one year my profit was nearly 25% on turnover.
Warren: What kept you motivated (with respect to betting) over the last 30 years?
Don: It was mainly the challenge of continuing to win. I don't think it was the financial rewards, although one felt that for the effort involved one ought to get a reasonable financial return. And Im sure that I have been far better rewarded that I would have been in any other activity I might have undertaken. No, I do feel that the principal motivation had been the challenge of continuing to win and to develop new ways of winning and of improving and refining my techniques.
Warren: You must have dedicated yourself to the task. Just how dedicated were you and how did this dedication manifest itself?
Don: To win consistently you must be dedicated. One should strive to be a perfectionist. I probably went too far, but I like everything to be right, every detail to be exact. I kept working towards the goal of backing every winner in every race. This was never, of course, achieved except over a series of a few races.
Warren: All bettors seem to have a recurring nightmare the bad run. Despite all the hard work, all the extra care taken in making selections, the bad run occurs. Everything is the same as it was during the winning periods but for one thing the selections keep losing. Have you any explanation?
Don: I think its the very nature of the business. You might expect an even money chance to win one race in every two. Its conceivable, however, that it wont win for 10 or more races. I see nothing unusual about that. Its just part of the pattern of racing that chances are not evenly spread.
Warren: So, the bettor should accept that he is going to have his losing runs along with his winning runs, but if he is following a soundly based method of selection, he should continue to pursue that method of selection because eventually the good results will return.
Don: Yes, you must have confidence in your ratings and your prices. In racing, unlike roulette where the odds are mathematically determined, no one can say with complete accuracy that the odds about one horse quoted at 2/1 are really, say, 6/4. It is a matter of the bookmakers opinion, the opinion of bettors, and the weight of money. These elements determine the available odds.
If you can develop a keener judgement, a judgement which is based on facts and figures, the profits earned in your winning runs will more than compensate for any losses incurred in the losing runs.
Warren: Obviously, the ability to analyse form and set accurate prices has been fundamental to your success. However, what are the personal attributes you possess which, in your opinion, led to the extraordinary success you enjoyed?
Don: Bill Waterhouse, Australia's biggest bookmaker, who I have known for many years, talks of the bettor and the bookmaker in terms of discipline. He believes that the one with the most discipline will win.
By discipline, he does not mean religiously following some systematic form of betting. What he does mean is control in betting. I had my own prices and staking method which controlled my betting. I never bet to recover losses, for why should a 6/4 chance in the first race be worth a bet of $100, whilst a 6/4 chance in the last race be worth a bet of $2,000? I would have no more, and no less, on a horse than the assessed odds demanded.
I think Bill was right. A disciplined approach to selecting and betting is the key to profitable betting. It sums up the secret of my success pretty well.
Copyright 2023 Warren Block (All Rights Reserved)
A video worth watching:
Warren - Wiz-Ed
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