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Gambling with Michael Lewis · Revisionist History

0:15
Speaker 1: Pushkin. Hello, Hello, Revisionist History listeners. Malcolm here, I'm stopping
0:24
Speaker 1: by near the end of my book tour because I
0:25
Speaker 1: have a special guest in the house, Michael Lewis. You
0:29
Speaker 1: may know him as the author of Moneyball, The Big Short,
0:31
Speaker 1: Liar's Poker, and most recently Going Infinite, which just came
0:34
Speaker 1: out in paperback, by the way, or you may know
0:37
Speaker 1: him by his alter identity as a Pushkin SuperHost. Michael's
0:42
Speaker 1: show Against the Rules is now in the middle of
0:44
Speaker 1: a fantastic new season. It's all about the insane rise
0:48
Speaker 1: and the consequences of sports betting in the US. You're
0:52
Speaker 1: going to get a chance to hear one of the
0:53
Speaker 1: latest episodes in just a moment, But first I thought
0:57
Speaker 1: we would chat with the man himself. Michael Lewis. Welcome
1:01
Speaker 1: to Revisionist History.
1:02
Speaker 2: It's been too long. Yes, I haven't seen you in ages.
1:06
Speaker 1: I know, I know we need to write that wrong.
1:09
Speaker 1: So you've done this show about uh, sports betting, and
1:14
Speaker 1: this comes after what your first one was about referees
1:17
Speaker 1: and then coaching right experts.
1:20
Speaker 3: We sort of set them all into the sports arena
1:22
Speaker 3: and this is yeah, you know, we frame this as
1:24
Speaker 3: fans and it's sort of like the fracking of the
1:28
Speaker 3: fan how the sports leagues have decided to squeeze ever
1:33
Speaker 3: more juice out of the fan base. And and and
1:36
Speaker 3: you know, six years ago, the Supreme Court UH repealed
1:41
Speaker 3: a federal ban on sports gambling. And at that time,
1:46
Speaker 3: the NFL, the NBA, Major League Baseball, the NC double A,
1:49
Speaker 3: We're all saying sports betting is evil. You know that,
1:52
Speaker 3: it's just like it will it will destroy the integery
1:55
Speaker 3: of sports, et cetera, et cetera. And there's long be
1:57
Speaker 3: this taboo in the sports world about gambling. I mean,
2:00
Speaker 3: not even gambling on your own sport. If you've caught
2:02
Speaker 3: sports gambling, people have been tossed out of sports and
2:05
Speaker 3: they flipped on a dime. And and essentially when into
2:09
Speaker 3: business with the sports gambling industry, and particularly fan duel
2:14
Speaker 3: and DraftKings to the two sort of big companies at
2:17
Speaker 3: the center of this world. And there's this kind of
2:20
Speaker 3: sports gambling industrial complex that has arisen in the last
2:23
Speaker 3: few years. And it's really interesting. It's like, so past
2:28
Speaker 3: the past seasons, I've loved doing the podcast. You are
2:31
Speaker 3: responsible for me doing the podcast, So I mean, you
2:33
Speaker 3: kind of talked me into this, and I love that.
2:36
Speaker 3: I love the way it works kind of different muscles,
2:38
Speaker 3: and when you're writing these scripts, it's a different thing
2:41
Speaker 3: than writing the books, and I like it for all
2:43
Speaker 3: kinds of reasons. But up to up till now, we've
2:46
Speaker 3: taken themes. This season is whatever, seven episodes, and it's
2:50
Speaker 3: it's it's variations on a theme, but it isn't one story.
2:54
Speaker 2: And in this case, this could be a book.
2:56
Speaker 3: It's like almost plotted like a book, and it's it's
2:59
Speaker 3: about this vast social experiment that's going on that's largely
3:03
Speaker 3: invisible because the consequences are sort of you know, you
3:06
Speaker 3: don't see it the way you see on an opioid
3:08
Speaker 3: addiction or alcohol addiction. You're seeing this thing that historically
3:13
Speaker 3: regarded as a vice, understood to be kind of risky behavior,
3:17
Speaker 3: being foisted upon the American people, especially young American males,
3:22
Speaker 3: in a way that would have.
3:23
Speaker 2: Been unthinkable a decade ago.
3:25
Speaker 3: And so like how this is happening, how the industry works,
3:29
Speaker 3: with the economics of the industry, are where this is
3:32
Speaker 3: going and the effects it's having on We're talking to
3:33
Speaker 3: everybody from athletes to high school students who are creating
3:37
Speaker 3: sports gambling rings in their high school and like, ultimately,
3:41
Speaker 3: how to defend yourself because the industry's coming for you
3:45
Speaker 3: or your children.
3:47
Speaker 2: It's sort of.
3:49
Speaker 3: Finally calibrated to exploit all of your mental weaknesses, finally
3:54
Speaker 3: calibrated to get you do the stupidest things you could
3:57
Speaker 3: possibly do.
4:00
Speaker 2: In a casino.
4:01
Speaker 1: I'm just curious about how you settled on this particular topic.
4:06
Speaker 1: When did you when was sports gambling? So w did
4:09
Speaker 1: you start buzzing around your head?
4:12
Speaker 3: Well? Completely honest, it was buzzing around my head because
4:14
Speaker 3: you can't avoid it. Right, even in California, sports gain
4:17
Speaker 3: is still illegal. It's legal in thirty nine states. California's
4:21
Speaker 3: not one of them. Soon will be one of them probably.
4:23
Speaker 3: But even in spite of that, living in California, four
4:27
Speaker 3: years ago, I started getting bombarded with ads by from
4:31
Speaker 3: DraftKings and Fando telling me to bet on sports and
4:34
Speaker 3: they'll commentary around sports.
4:35
Speaker 2: It completely changed. So it caught my attention then.
4:39
Speaker 3: But it was our brilliant producers who came and said,
4:43
Speaker 3: you know, what do you think about this as a subject,
4:45
Speaker 3: and instily went yes, yes, like yes that it just
4:50
Speaker 3: hasn't quite been done sometimes the best stories are things
4:53
Speaker 3: that no one ever thought about.
4:54
Speaker 2: Some of the best stories is just like what's under
4:56
Speaker 2: your nose that no one's really noticed and sight hiding
5:00
Speaker 2: in plain sight.
5:02
Speaker 3: The more we dug into it, the more shocking it was.
5:06
Speaker 3: Just how predatory it is, how the as a business.
5:10
Speaker 3: FanDuel and DraftKings, the two companies at the center of
5:12
Speaker 3: the of the industry. They're they're framed in the public
5:17
Speaker 3: mind it's always just fun, it's gaming or whatever. It's
5:20
Speaker 3: maybe like a casino. It's not at all like a casino.
5:23
Speaker 3: These are businesses that really haven't ever existed before. It's
5:26
Speaker 3: casinos with unbelievable amounts of data about the gamblers, an
5:32
Speaker 3: incredible ability to nudge the gamblers into ever and ever.
5:35
Speaker 2: Stupid things, and it's in your pocket. It was a
5:38
Speaker 2: combination of that that.
5:40
Speaker 3: Kind of dragged me into it, and it was also
5:42
Speaker 3: just like the whole sports gambling is as an activity,
5:48
Speaker 3: It's more interesting to me than casino gambling or even blackjack.
5:53
Speaker 3: We spent the time with sports gamblers, pro the very
5:57
Speaker 3: best sports gamblers who beat the house, and they're doing
6:01
Speaker 3: stuff very like what the Oakland A's front office did
6:03
Speaker 3: back in the late nineties and early two thousands where
6:06
Speaker 3: they were they're doing an fresh analysis of this sports
6:09
Speaker 3: to glean fresh insights that the market, you know, is
6:14
Speaker 3: sort of oblivious to, so that they get an edge.
6:17
Speaker 3: And that's interesting to me. It's like, at the same time,
6:23
Speaker 3: the corporate side of it is kind of dark and gross,
6:27
Speaker 3: the gambling side of it is kind of fun and
6:30
Speaker 3: interesting for the people who know what they're doing.
6:32
Speaker 1: I've been struck by how much the sports gambling has
6:36
Speaker 1: has infected our world podcasting. I mean, sports podcasts have
6:40
Speaker 1: turned into sports gambling podcasts.
6:43
Speaker 2: You got it.
6:43
Speaker 1: I mean I listened. I spent many, many hours of
6:46
Speaker 1: my life listening to Bill Simmons. But it's like all
6:49
Speaker 1: he mentions FanDuel in every second paragraph.
6:53
Speaker 3: They've rained so much money on media that there's just
6:57
Speaker 3: not much blowback. There's a huge financial disincentive to doing
7:01
Speaker 3: the story. Like first question your business people ask me
7:05
Speaker 3: is can we take fan Duel and DraftKings money and
7:09
Speaker 3: very much not in your spirit? I said no, Now, I.
7:14
Speaker 4: Know you need very much not in spirit because you
7:16
Speaker 4: were so because you were so good at plowing right
7:20
Speaker 4: through the ordinary ethical objections in getting that and getting
7:24
Speaker 4: to the cash.
7:27
Speaker 2: It's so true.
7:28
Speaker 1: It's so true, isn't true? You know we got mouse
7:34
Speaker 1: safe to hear at Pushkin you do.
7:35
Speaker 3: You're a responsible parent and you're generating the income for
7:38
Speaker 3: the family. But I'm kind of off to I'm just
7:41
Speaker 3: I'm winging that off to the side of your operation.
7:43
Speaker 3: And I just said, no, it's pretty clear that we've
7:47
Speaker 3: got to be completely free of the taint of their money.
7:51
Speaker 3: These two companies in the last five years have spent
7:54
Speaker 3: something like two billion dollars each on marketing, and a
7:58
Speaker 3: lot it ends up in the pockets of sports work.
8:00
Speaker 1: Yes, they're billion two billion. Yes, that's like General Motors level.
8:05
Speaker 3: They We had someone who I think is the trust
8:08
Speaker 3: is Ors tell us that they're the biggest advertisers in America.
8:12
Speaker 2: They're bigger than the beer They're bigger than the car companies.
8:15
Speaker 3: And that isn't actually surprising anybody who watches sports.
8:19
Speaker 2: It's like every other ad is.
8:20
Speaker 3: An afrodamblin and and and beyond beyond that. Like the announcers,
8:28
Speaker 3: not just Bill Simmons, the announcers during the games are
8:32
Speaker 3: framing all their commentary around their bets, and their bets
8:37
Speaker 3: that they make are are encouraging or sort of suggesting
8:40
Speaker 3: to the audience they might make. Two are are precisely
8:45
Speaker 3: the stupidest bets you can make, and the bets that
8:47
Speaker 3: maximize the profits of the companies, like it's it's it's
8:52
Speaker 3: long shot bets, it's parlay bets. Uh yes, and what
8:57
Speaker 3: it's taking advantage of We haven't quite got to this
9:00
Speaker 3: the last.
9:00
Speaker 2: I don't want to burn the season on your podcast.
9:03
Speaker 3: But the human mind makes all kinds of mistake, that's
9:06
Speaker 3: when it's placed in conditions of uncertainty. And one routine
9:10
Speaker 3: mistake it makes is that when it's given long odds,
9:13
Speaker 3: it starts to cease to make distinctions. So if someone
9:16
Speaker 3: offers you forty to one odds on some parlay bet
9:19
Speaker 3: or twenty to one odds, you think, wow, I get
9:21
Speaker 3: twenty dollars for everyone I put up, and you don't
9:24
Speaker 3: stop and to realize that actually the true odds or
9:27
Speaker 3: something like one hundred to one.
9:29
Speaker 1: You mean, because you're betting on a series of long
9:31
Speaker 1: shots and you have to multiply out, yes, the odds.
9:34
Speaker 2: Well don't get right.
9:35
Speaker 3: Yes, people don't do exponentials very well, and the mind
9:39
Speaker 3: is sloppy when when you're starting to present people with
9:42
Speaker 3: long shot bets.
9:43
Speaker 2: That's why people play the lottery.
9:45
Speaker 3: They've been kind of grooming the American gambler to move
9:50
Speaker 3: away from oh, just betting on the taking the chiefs
9:53
Speaker 3: and giving up the points to these bets where the
9:57
Speaker 3: house take is multiples of what a casino takes for
10:01
Speaker 3: its for casino games. As a result, the two companies
10:05
Speaker 3: that they're both listed companies, well DraftKings has listed DraftKings
10:09
Speaker 3: FanDuel is owned by what's holy companies.
10:11
Speaker 2: Called flutter.
10:13
Speaker 3: All of Wall Street basically got them wrong the minute
10:18
Speaker 3: they ran up as companies. The stocks ran up in
10:21
Speaker 3: the wake of the legalization of sports gaming, and everybody
10:25
Speaker 3: came up and said, oh, they're inflated short them, and
10:28
Speaker 3: they crashed temporarily. It's like the Land of twenty twenty
10:31
Speaker 3: one because everyone's sort of looking at them as standard
10:33
Speaker 3: casino businesses, and they knew what the take was for
10:36
Speaker 3: standard casinos, and they could kind of guess with the
10:39
Speaker 3: handle was going to be, what the betting volume was
10:41
Speaker 3: going to be, and they did the casino math and
10:43
Speaker 3: they said, this doesn't justify the stock price. In fact,
10:47
Speaker 3: the take is multiples of what casinos and is growing
10:51
Speaker 3: the margins.
10:52
Speaker 2: And a way to think about it is it's sort
10:54
Speaker 2: of like.
10:55
Speaker 3: Exploiting their ability to get people to do dumber and
10:58
Speaker 3: dumber things. And I think I think it's going to happen.
11:02
Speaker 3: Our podcast is going to be a part of this.
11:04
Speaker 3: The way to address this is to make it clear
11:08
Speaker 3: that anybody who is a VIP of Fan Duel or
11:14
Speaker 3: DraftKings or one of these fourths gaming apps, or anybody
11:17
Speaker 3: who even kind of does it a lot, is like
11:20
Speaker 3: someone who's who's almost certainly making dumb bets because they
11:26
Speaker 3: are on the other side of this. The gaming apps
11:28
Speaker 3: are really good at figuring out who's a smart better
11:32
Speaker 3: and kicking them out. If you know what you're doing,
11:35
Speaker 3: if you're the equivalent of the card counter, if you
11:38
Speaker 3: actually figured out something about football that nobody has realized before,
11:42
Speaker 3: and you've got a systematic edge, very very quickly, they
11:46
Speaker 3: figure it out and they get rid of you.
11:47
Speaker 1: So in a way they could do that. I never
11:51
Speaker 1: understood this. You know a lot, if I walk into
11:53
Speaker 1: a store, they can't kick me out. You know, there's
11:57
Speaker 1: isn't there a whole kind.
11:58
Speaker 3: Of you would think you would think their analogy that
12:01
Speaker 3: they want to draw it is it's like the card
12:02
Speaker 3: counter coming into the casino. We can throw out that
12:05
Speaker 3: we don't We don't have to service the card counter
12:07
Speaker 3: at the blackjack table.
12:08
Speaker 2: I don't want to ruin the whole show.
12:09
Speaker 3: But our producer took an enormous pile of cash with
12:13
Speaker 3: smart betting ideas and it took her moments to get
12:17
Speaker 3: chucked out. A poor lidiageing cot has been banned by
12:20
Speaker 3: every sports betting So yeah, because and the way, it's
12:27
Speaker 3: a very simple way how they identify that you are smart.
12:31
Speaker 3: If the line moves in your favor after you've made
12:35
Speaker 3: the bet systematically you knew something is basically were saying
12:39
Speaker 3: the odds, the odds will drift to the true odds,
12:41
Speaker 3: and if you were ahead.
12:42
Speaker 2: Of the market, they don't want you.
12:44
Speaker 3: And so, but the part of parint is that And
12:47
Speaker 3: I said this to an audience of money managers not
12:49
Speaker 3: that long ago. They're asking me like, do you have
12:52
Speaker 3: any tips to how to identify a good money manager?
12:55
Speaker 3: And I said, well, there's a new one now available.
12:57
Speaker 3: Before you let someone manage your money, you had to
12:59
Speaker 3: ask them if they if they have ac council fando
13:01
Speaker 3: and DraftKings and their sports betters, and like what's their
13:04
Speaker 3: relationship with those enterprises And if they say.
13:06
Speaker 2: Man, I'm like a VIP or I do it all
13:08
Speaker 2: the time, or I.
13:11
Speaker 3: Don't give them your money to invest, like they are
13:14
Speaker 3: identifying people who should not be professional investors.
13:18
Speaker 1: Michael, can you describe the the tell me a little
13:20
Speaker 1: bit about the episode we're about to hear it.
13:22
Speaker 2: So this is the episode where we're the main character
13:25
Speaker 2: is Rufus Peabody, who is one of America's great sports betters.
13:29
Speaker 1: And by the way, did you make up that name?
13:33
Speaker 2: No? No, I don't.
13:34
Speaker 1: It's like that is like if I had to imagine
13:36
Speaker 1: the name that Michael Lewis would make up for his
13:38
Speaker 1: lead character, it would be Rufus Peabody.
13:40
Speaker 3: I told Rufus Peabody when I met him that if
13:42
Speaker 3: my name was Rufus Peabody and Michael Lewis, I'd be
13:44
Speaker 3: worth three times when I'm worth that.
13:46
Speaker 2: It's are you kidding me? Yeah, it would be totally.
13:50
Speaker 3: It's wasted on sports better it should it should be
13:53
Speaker 3: it should be an author. Rufus was in he's still
13:57
Speaker 3: young Yale class of two thousand and nine or whatever.
14:02
Speaker 3: He is the leading kind of smart edge of gambling.
14:04
Speaker 3: But he was present before legalization. He was present in
14:09
Speaker 3: the markets back when Vegas was the market. We traveled
14:13
Speaker 3: with him to the point where his bets are no
14:15
Speaker 3: longer accepted. What interested me about him and his mentor
14:19
Speaker 3: is also a big character in the in the episode
14:23
Speaker 3: Roxy Roxboro a legend in the old Vegas sport.
14:27
Speaker 2: I know, I know, I know. And what your love
14:28
Speaker 2: about Roxy is? He's Canadian? He's can Michael.
14:33
Speaker 1: Did we know we have two Improbably we now have
14:35
Speaker 1: a parlay of improbably perfect names.
14:39
Speaker 3: You're gonna love listening to them. They're wonderful, they have
14:41
Speaker 3: a lot to say. They're very smart people. I just thought,
14:43
Speaker 3: what is the most interesting point of view on this market?
14:48
Speaker 3: And it was, obviously it was the point of view
14:50
Speaker 3: of the sharp the edge player, the person who's beaten
14:53
Speaker 3: the market. It's like, who's the most interesting person to
14:55
Speaker 3: talk to about a casino? Either the person actually running
14:59
Speaker 3: the casino or is the card counter, or the person
15:01
Speaker 3: who's figured out how the slots are rigged, or who's
15:04
Speaker 3: seen that the roulette wheel is slightly off. It's someone
15:06
Speaker 3: who is looking at the market from a superior kind
15:10
Speaker 3: of vantage point. So it's walking us into this new
15:14
Speaker 3: market through the eyes of an edge player.
15:18
Speaker 1: You have the one thing that has distinguished you throughout
15:20
Speaker 1: your career is I feel like no one has his
15:24
Speaker 1: finger closer to the pulse than you. You've done it repeatedly,
15:28
Speaker 1: and it sounds like you've done it again.
15:30
Speaker 2: It's a gas of a season.
15:32
Speaker 1: Michael Lewis is host of Against the Rules right here
15:35
Speaker 1: at Pushkin. Here's his latest episode, A Hard Way to
15:38
Speaker 1: Make an Easy Living. Give it a listen and head
15:41
Speaker 1: over to Against the Rules and subscribe to hear more.
15:44
Speaker 1: Thank you, Michael, Thank you, Malcolm.
15:48
Speaker 5: Oh yay, oh yay, oh yay.
15:52
Speaker 3: May twenty eighteen, the United States Supreme Court strikes down
15:57
Speaker 3: the federal law that has effectively banned sports gambling in
16:00
Speaker 3: nearly every state. What happens next happens faster than anyone imagined.
16:07
Speaker 3: It happens in so many places at once that it's
16:09
Speaker 3: basically impossible to follow it.
16:11
Speaker 2: All in real time.
16:13
Speaker 6: I ended up picking Mississippi and Kansas as the two
16:16
Speaker 6: states that I really decided to focus on and merely
16:20
Speaker 6: was just there becoming a part of the furniture. As
16:23
Speaker 6: the lobbyists were working their magic.
16:25
Speaker 3: That's Eric Lipton, New York Times reporter, who with his
16:29
Speaker 3: colleague Ken Vogel, just sat and watched as lobbyists created
16:33
Speaker 3: the conditions for a new industry to emerge overnight sports.
16:37
Speaker 6: Gambling and buttonholing various legislators, getting them to introduce language
16:43
Speaker 6: that they wanted into the gambling bills and changing the
16:48
Speaker 6: tax rates, getting provisions included that would allow them to
16:53
Speaker 6: entice betters with free bets that they wouldn't have to
16:56
Speaker 6: pay taxes on.
16:57
Speaker 3: Derek knows that state capitals where the action is. He
17:00
Speaker 3: started his career covering state governments for local papers. When
17:04
Speaker 3: he returns to his old beat, he sees right away
17:07
Speaker 3: how much lonelier state capitals are because his old job,
17:10
Speaker 3: state House reporter, now barely exists.
17:14
Speaker 6: There were times when I was in the state capitol
17:16
Speaker 6: where I was pretty much the only reporter there while
17:18
Speaker 6: they were debating sports betting, and I would stay until
17:23
Speaker 6: they wrapped up two in the morning, as the session
17:26
Speaker 6: was closing and they were trying to get the bill
17:28
Speaker 6: passed and there were no other reporters present.
17:31
Speaker 3: It's like, if you do something at the federal level,
17:34
Speaker 3: there'res going to be a lot of people watching, still
17:37
Speaker 3: a lot of reporters who will cover national politics. But
17:41
Speaker 3: if you push things down to the states, you're more
17:44
Speaker 3: likely to just operate in the shadows.
17:46
Speaker 2: Yeah, and I think the lobbyists know that.
17:48
Speaker 6: And it's actually a lot easier to get things done
17:51
Speaker 6: in state capitals. You can build a national strategy through
17:55
Speaker 6: a collection of states.
17:57
Speaker 3: Eric and his colleague at the Times wrote about Kansas
17:59
Speaker 3: back in twenty twenty two, but he could have written
18:02
Speaker 3: the same piece almost anywhere. In the United States. Thirty
18:06
Speaker 3: eight states plus Washington, d c. Were rushed to legalize
18:09
Speaker 3: sports betting and rolling over for the new sports bookies
18:13
Speaker 3: who were pushing to minimize just how much of a
18:16
Speaker 3: cut the states took.
18:18
Speaker 2: They cut the tax rate almost in a half.
18:21
Speaker 6: They gave them the ability to give out free bets
18:26
Speaker 6: as a promotion to sign people up and not have
18:28
Speaker 6: to pay taxes on that. So essentially the state becomes
18:32
Speaker 6: a lost leader promoter of getting people into gambling by
18:38
Speaker 6: giving them tax free promotions.
18:40
Speaker 3: And without a whole lot of pushback from anyone.
18:44
Speaker 6: Oftentimes the legislators weren't even aware that they were passing
18:47
Speaker 6: these things, or they were it was sent it was
18:50
Speaker 6: given to them at the last minute, just before they
18:52
Speaker 6: were asked to vote on it, and they weren't even
18:54
Speaker 6: fully informed as to what they were voting on.
18:57
Speaker 3: Overnight, the States have gone from the bookies cop to
19:00
Speaker 3: the bookies' partner. So of all the pro sports leagues,
19:03
Speaker 3: the NFL, the NBA, and Major League Baseball, the entire
19:07
Speaker 3: sports industrial complex now has a stake in the revenues
19:11
Speaker 3: that flow into sports gambling companies like DraftKings and Fan Duel.
19:15
Speaker 3: There's now a vast new machine with one clear purpose
19:18
Speaker 3: to maximize those revenues by maximizing the number of bets
19:23
Speaker 3: that Americans make on sports. A sports sequinox is coming
19:29
Speaker 3: for sports one one contest that's free to the FANDUS
19:37
Speaker 3: sports econts frequently comtes. It's as if when prohibition ended,
19:40
Speaker 3: there were these two massive liquor companies sitting there with
19:42
Speaker 3: databases on individual Americans and their tastes for alcohol, and
19:47
Speaker 3: the government ordered them to go wave a glass of
19:49
Speaker 3: whiskey under the nose of every alcoholic to persuade as
19:52
Speaker 3: many as possible to start drinking again. Of course, there
19:56
Speaker 3: are some restraints, some rules. No state has allowed small
20:01
Speaker 3: children to gamble on sports. Eight have declined to allow
20:04
Speaker 3: people to gamble on their phones, and the taxes that
20:08
Speaker 3: the new industry pays varies a lot from state to state.
20:11
Speaker 3: New York takes fifty one percent of all sportsbook revenues.
20:15
Speaker 3: Indiana takes only nine and a half percent. In twenty seventeen,
20:20
Speaker 3: the year before the Supreme Court struck down a federal
20:22
Speaker 3: log inst sports betting, legal sports bookies in the United
20:25
Speaker 3: States generated roughly three hundred million dollars in revenues. In
20:30
Speaker 3: twenty twenty three, they took in eleven billion. In twenty seventeen,
20:36
Speaker 3: Americans made roughly five billion dollars in legal sports bets.
20:41
Speaker 3: Last year, they laid down more than one hundred and
20:44
Speaker 3: twenty billion. The numbers are crazy, the consequences are even
20:49
Speaker 3: more so, and will be exploring them for the rest
20:51
Speaker 3: of the season. Take your shot at more than two
20:53
Speaker 3: hundred and seventy thousand dollars in payouts. That's a lot
20:56
Speaker 3: of money. I'm Michael Lewis, and this is Against the Rules,
21:06
Speaker 3: a show where we look at specific roles in American
21:08
Speaker 3: life and how they're changing.
21:11
Speaker 2: The fans.
21:11
Speaker 3: Roles changing because a powerful new machine has sprung up
21:15
Speaker 3: to encourage the fan to gamble on sports. Sports gambling
21:19
Speaker 3: has never been just a simple and straightforward marketplace. It's
21:22
Speaker 3: more like a jungle, and DraftKings and fandueler are like
21:25
Speaker 3: this invasive species that's been dropped into it by accident.
21:30
Speaker 3: They've disrupted the food chain and overrun the habitat because
21:33
Speaker 3: they feed so efficiently on fan emotion, and fan emotion
21:38
Speaker 3: is the jungle's greatest food source. But they're also vulnerable
21:42
Speaker 3: to a creature that feeds on them. Let's recall for
21:58
Speaker 3: a minute what sports gambling once was in America by
22:01
Speaker 3: listening to just a snippet of a press conference held
22:03
Speaker 3: back in nineteen sixty one by then Attorney General Robert F.
22:07
Speaker 2: Kennedy.
22:08
Speaker 5: The report has been since the passage of the legislation,
22:10
Speaker 5: and that's big time gambling by the big time operators
22:15
Speaker 5: has been materially decreased since the passage of the legislation.
22:20
Speaker 3: Kennedy celebrating a new law called the Federal Wire Act.
22:24
Speaker 3: The point of the law was to cut the legs
22:26
Speaker 3: from under the mafia by shutting down it's sports gambling operations.
22:30
Speaker 3: By giving the federal government the power to arrest and
22:33
Speaker 3: prosecute anyone who booked a sports bet over any phone
22:36
Speaker 3: or telegraph wire that crossed state lines.
22:39
Speaker 5: And in fact, the head of the Royal Mounted Police
22:43
Speaker 5: in Canada said in the speech last week that Canada
22:46
Speaker 5: will now have to pass legislation and take new steps
22:49
Speaker 5: because many of the big time gangsters and ulums of
22:55
Speaker 5: the United States are now moving to Canada because of
22:57
Speaker 5: the drive that has been made against them here in
22:59
Speaker 5: this country.
23:00
Speaker 3: When you think of Canada, this isn't the first thing
23:02
Speaker 3: that pops into your head, happy refuge for big time
23:05
Speaker 3: gangsters and sports gamblers. But I don't know a different era.
23:10
Speaker 7: I always had an interest in sports. My father coached
23:13
Speaker 7: me in swimming and coached me in tennis. But my
23:17
Speaker 7: world changed when I found out you could gamble on it.
23:20
Speaker 7: I became no longer a fan, and I became interested
23:23
Speaker 7: in gambling.
23:25
Speaker 3: That's Michael Roxborough. Everyone just calls him Roxy now. He
23:30
Speaker 3: grew up in the nineteen fifties in Canada in a nice,
23:33
Speaker 3: upper middle class family. He's now zooming with me from
23:36
Speaker 3: a home in rural Thailand with the ac blasting in
23:39
Speaker 3: the background and a straw fedora on his head, and
23:42
Speaker 3: the emotional feel of a man in a witness protection program,
23:46
Speaker 3: a placeless man. But he really did grow up in Canada.
23:50
Speaker 3: When Roxy was a kid, there was a sports gambling market.
23:53
Speaker 3: It was smaller and more constrained than it is now,
23:55
Speaker 3: but very real, and its center was the pool halls
23:59
Speaker 3: of Vancouver, British Columbia.
24:01
Speaker 7: If you envision in the movie The Hustler, if you
24:04
Speaker 7: take a look at the pool rooms of that day.
24:07
Speaker 2: Those were the poolroom. Those were the pool rooms of
24:10
Speaker 2: my day.
24:12
Speaker 8: It was just full.
24:14
Speaker 9: Of wannabes, desperadoes, hustlers, drug dealers, bookmakers, everybody that was
24:23
Speaker 9: operating outside the law.
24:25
Speaker 3: When you got the bug. What's your parents think about it?
24:29
Speaker 7: Not too happy. My father was a Harvard MBA and
24:34
Speaker 7: my mother was a high school valedictorian, and I think
24:38
Speaker 7: they had higher aspirations.
24:41
Speaker 3: Roxy's dad wanted him to go to Dartmouth and he
24:43
Speaker 3: got in, but he went to American University in DC
24:47
Speaker 3: because he sensed the action was better there.
24:50
Speaker 7: I ran a blackjack game in the American University dorm
24:55
Speaker 7: at night, and that's what's the source of most of
24:58
Speaker 7: my profits. But then I got kicked out for what
25:02
Speaker 7: for running that blackjack game.
25:05
Speaker 3: Roxy never did finish college. Instead, he went back to Canada,
25:09
Speaker 3: caled in and out of boring jobs, but never stopped gambling.
25:13
Speaker 3: And then he finally caught a big break by reading
25:15
Speaker 3: a book.
25:16
Speaker 7: I was in a Reno airport flying back to Vancouver
25:21
Speaker 7: and I picked up a copy of Ed Thorpe's Beat
25:24
Speaker 7: the Dealer.
25:25
Speaker 3: Beat the Dealer was the first book to show how
25:27
Speaker 3: a gambler inside a casino could have a systematic edge
25:31
Speaker 3: by counting cards in blackjack. The other casino games, like
25:35
Speaker 3: slots and roulette, were more or less perfectly rigged against
25:38
Speaker 3: the gambler. Anyone who played them for long enough was
25:41
Speaker 3: sure to lose. Blackjack was an exception. Played blackjack for
25:46
Speaker 3: long enough, at least the way Ed Thorpe taught people
25:48
Speaker 3: to play, and you were sure to win Betthorpe published
25:52
Speaker 3: his book in nineteen sixty six. A few years later
25:55
Speaker 3: Roxy read it and it gave him the idea that
25:58
Speaker 3: changed his life.
25:59
Speaker 7: I decided that if I'm going to look at sports betting,
26:02
Speaker 7: I need to look at it statistically driven, data driven,
26:07
Speaker 7: not by not visual or instinct or just watching a
26:11
Speaker 7: lot of games.
26:13
Speaker 3: Outcomes in sports were obviously far less regular and predictable
26:16
Speaker 3: than outcomes inside slot machines or even at blackjack tables.
26:21
Speaker 3: But that didn't mean you couldn't learn stuff about sports
26:23
Speaker 3: that would allow you to make better predictions. Not perfect predictions,
26:26
Speaker 3: but better predictions than everyone else betting on games. In
26:29
Speaker 3: the nineteen seventies, Roxy had baseball in mind. The guys
26:34
Speaker 3: who booked baseball legally in Nevada and illegally everywhere else.
26:39
Speaker 3: Ofrford Gambler is the chance to bet on not just
26:41
Speaker 3: who would win the game, but how many runs both
26:43
Speaker 3: teams would score. Roxy had an insight that seems obvious now.
26:48
Speaker 3: The number of runs scored in any baseball game dependent
26:51
Speaker 3: on factors like the weather at game time and the
26:54
Speaker 3: size of the fields. San Diego's was a good example.
26:58
Speaker 7: You just could not hit the ball out of there,
27:01
Speaker 7: And then the Padres went and spent like an outrageous
27:04
Speaker 7: contract to sign a guy like Oscar Gamble. All he
27:06
Speaker 7: had is hit fly balls, and that park was a
27:09
Speaker 7: place where flyballs went to die.
27:11
Speaker 8: So you soon found out that.
27:13
Speaker 7: General managers really didn't know anything about their own ballparks either.
27:17
Speaker 3: The idea that the people who run sports teams don't
27:20
Speaker 3: know what they're doing has probably never been a new idea.
27:23
Speaker 3: Fans have always thought that they know better. What was
27:26
Speaker 3: new is that someone in the stands was actually figuring
27:29
Speaker 3: something out the effects of the wind and the humidity
27:32
Speaker 3: and the barometric pressure on a ball that was flying
27:35
Speaker 3: through the air.
27:36
Speaker 7: We started to start getting weather reports from all the cities,
27:40
Speaker 7: the parts out in which ones helped scoring or hindered scoring.
27:43
Speaker 3: And dimensions right, I mean just the length of the
27:45
Speaker 3: left field fence.
27:47
Speaker 7: Dimensions were important, and we found out a couple of
27:50
Speaker 7: the ballpark dimensional drawings were wrong. They had the north
27:55
Speaker 7: pole raw well pointed north because we went out and
27:59
Speaker 7: did them ourselves.
28:03
Speaker 3: Roxy moves to Vegas full time in nineteen seventy five
28:06
Speaker 3: to bet on sports, and just by taking into account
28:09
Speaker 3: the weather and the size of ballparks, he's able to
28:12
Speaker 3: make a killing while trying to avoid the people who
28:15
Speaker 3: know a thing or two about actual killing. For the
28:19
Speaker 3: Nevada legal bookmakers detectively run by the mob.
28:22
Speaker 7: They'd have they had a hand in till about right well,
28:27
Speaker 7: age seven.
28:28
Speaker 2: Yeah, I just wonder in that environment was it dangerous
28:31
Speaker 2: to win too much now?
28:34
Speaker 7: Because actually what they would do is they could find
28:37
Speaker 7: somebody else who could take your bet and they can.
28:40
Speaker 2: Move it for more money someplace else in the country.
28:45
Speaker 3: The old sports gambling market inside the United States was shady,
28:49
Speaker 3: but it had its unwritten rules, and one was that
28:52
Speaker 3: they always took your bets if you bet a lot.
28:55
Speaker 3: They eventually moved the lines. These betting lines were all
28:59
Speaker 3: set in Vegas for a very long stretch. They were
29:02
Speaker 3: actually set in a single Vegas casino, the Stardust. The
29:07
Speaker 3: bookie at the Stardust set the odds and everyone else
29:09
Speaker 3: just followed his lead. There was a bank of payphones
29:14
Speaker 3: outside the Stardos that were said to be the most
29:16
Speaker 3: profitable in the country for the phone company because sports
29:18
Speaker 3: gamblers used them to relay the odds to the illegal
29:21
Speaker 3: bookies and betters across the country.
29:24
Speaker 7: Communications back then was just with a phone call. That
29:28
Speaker 7: was the only communicationshit were.
29:32
Speaker 3: In the late nineteen seventies, the Nevada Gaming Control Board
29:35
Speaker 3: tossed the mob out of Vegas and out of sports gambling,
29:38
Speaker 3: and pretty soon ROXY became old news. By the early
29:42
Speaker 3: nineteen eighties, everyone knew that the weather and the size
29:44
Speaker 3: of ballparks had big effects on baseball scores, and ROXY
29:48
Speaker 3: never found another systematic edge, and his life became a
29:52
Speaker 3: bit of a mess. He'd been arrested for violating rfk's
29:56
Speaker 3: Wire Act, he'd taken crazy risks as an illegal book maker,
29:59
Speaker 3: and he'd run through two marriages. Is a gambling business
30:03
Speaker 3: hard outter relationships, chargon why.
30:07
Speaker 7: It just sort of takes over your mood and your personality.
30:13
Speaker 7: I don't know anybody who's ever been in gambling thought
30:15
Speaker 7: they were a better person for it.
30:17
Speaker 3: It's interesting because when you think about why a person
30:19
Speaker 3: would drift into gambling in the first place, it would
30:21
Speaker 3: be because you think it might be an easy way
30:22
Speaker 3: to make money, Yes, and it ends up being a harder
30:25
Speaker 3: way to make money.
30:27
Speaker 8: It does what did they say?
30:29
Speaker 7: It's a hard way to make an easy living.
30:33
Speaker 3: People said that Roxy now knew it. So in nineteen
30:37
Speaker 3: eighty two, he quits gambling. He creates a company called
30:41
Speaker 3: Las Vegas Sports Consultants. This new company will effectively replace
30:46
Speaker 3: the Stardust Casino in setting the odds for all major
30:49
Speaker 3: sports contests. Roxy's just better at it, and pretty soon
30:53
Speaker 3: he's selling his odds to all the sports bookies, including
30:57
Speaker 3: the Stardust. This makes sense to everybody in Las Vegas
31:02
Speaker 3: hiring Roxy to set the odds in sports is like
31:04
Speaker 3: hiring the first card counter to guard the blackjack tables.
31:09
Speaker 7: So I said, you know, I'm going to try this
31:10
Speaker 7: for a couple of years, but I'm not sure if
31:12
Speaker 7: it's going to work, because it wasn't given that every
31:17
Speaker 7: hotel was going to have a sportsbook. Was there rather
31:19
Speaker 7: a limited business. But that was one of my better
31:23
Speaker 7: decisions because it turned out to be a massive business.
31:26
Speaker 3: Sports gambling isn't exactly a financial market, but it rhymes
31:30
Speaker 3: with financial markets. What happens on Wall Street, somehow eventually
31:33
Speaker 3: also happens in sports gambling. And Wall Street's about to
31:36
Speaker 3: undergo dramatic change. First computers and then the Internet will
31:40
Speaker 3: allow the markets to become a lot more complicated, and
31:43
Speaker 3: the BET's a lot more complex. The world's about to
31:47
Speaker 3: speed up, and a new kind of person with a
31:49
Speaker 3: different kind of education is going to enter it. Old
31:53
Speaker 3: school traders with high school degrees and lots of body
31:55
Speaker 3: hair and names like Vinnie and Donnie are about to
31:58
Speaker 3: be replaced by hairless PhDs from MIT with computer models
32:02
Speaker 3: who as kids thought they grow up to be professors,
32:05
Speaker 3: not traders. On Wall Street in the late nineteen eighties,
32:09
Speaker 3: smart old school guys served as a kind of bridge
32:13
Speaker 3: between the two cultures in sports gambling. Roxy was that bridge,
32:18
Speaker 3: but it took a while for anyone to cross it.
32:37
Speaker 2: We're here to see Rufus pebo. We're in the right place.
32:43
Speaker 3: We're still in Vegas, but far from the strip.
32:48
Speaker 8: We're not gona the law.
32:49
Speaker 2: We're just gonna make a bunch of sports bets. He
32:50
Speaker 2: runs into League of Gambre option. I never even knew
32:55
Speaker 2: that you want any action.
33:02
Speaker 3: The real action is no longer on the strip. The
33:05
Speaker 3: real action is basically invisible. But here on the seventeenth floor,
33:10
Speaker 3: with a sweeping view of the distant casinos, Rufus Peabody
33:14
Speaker 3: lives and works.
33:16
Speaker 2: Rufus We're here.
33:18
Speaker 5: We're here.
33:19
Speaker 3: Rufus Peabody is who crossed Roxy's bridge.
33:22
Speaker 8: I never was a better as a kid. I didn't
33:25
Speaker 8: know anything about sports betting.
33:26
Speaker 3: You need to feel a little twinge of desire.
33:29
Speaker 2: None.
33:30
Speaker 8: Most people that got their start, they started losing and
33:33
Speaker 8: they learned how to win. But I was never better.
33:35
Speaker 8: I never grew up betting like besides NCAA tournament pools,
33:38
Speaker 8: I was always good at those, but for me, it
33:41
Speaker 8: was a game, and I'm not. I'm a risk taker,
33:45
Speaker 8: but I'm not a gambler by nature.
33:47
Speaker 3: Rufus grew up outside of Washington, DC, always loved sports,
33:51
Speaker 3: thought he might like to be a sports journalist. He
33:53
Speaker 3: still reminds me a bit of a journalist. He's a watcher,
33:57
Speaker 3: a person whose eyes move more than his mouth. But
34:00
Speaker 3: even when he was a kid, his mind took him
34:02
Speaker 3: places that journalism usually doesn't.
34:05
Speaker 8: So so it was this team one eighty two to
34:07
Speaker 8: sixty four, but why did they win? Basically, I kind
34:10
Speaker 8: of wanted to report on the why it happened rather
34:12
Speaker 8: than just this guy got eighteen points and twelve rebounds
34:15
Speaker 8: and this team one right. I kind of wanted the
34:19
Speaker 8: story of why.
34:20
Speaker 2: He wanted explanation. I want explanations.
34:23
Speaker 3: In two thousand and four, Rufus graduated from high school
34:26
Speaker 3: and went to Yale. He was still obsessed with figuring
34:29
Speaker 3: out why. He studied statistics and built models that predicted
34:34
Speaker 3: the performance of athletes and the outcomes of sporting events,
34:38
Speaker 3: not because he wanted to gamble on them, just because
34:40
Speaker 3: it was cool to figure out stuff that even people
34:43
Speaker 3: who run sports teams don't know. He wanders around Yale
34:46
Speaker 3: looking for someone to teach him more.
34:49
Speaker 10: Rufus wants to do a thesis on, if I remember correctly,
34:53
Speaker 10: behavioral biases and the baseball betting market.
34:57
Speaker 3: He's who rufe has found. His name is Cade Massey.
35:01
Speaker 3: He's a professor of organizational behavior. Was it interesting?
35:06
Speaker 10: Oh yeah, absolutely, I mean what's not interesting about trying
35:09
Speaker 10: to find psychological mistakes that people make with like, you know,
35:13
Speaker 10: hundreds of thousands of observations of real money being bet
35:16
Speaker 10: and he found mistakes. I mean, he was finding profitable
35:19
Speaker 10: strategies right off the bet.
35:22
Speaker 3: Rufus just kept asking questions about the behavior of sports gamblers.
35:26
Speaker 3: He still wasn't placing bets himself. He was just working
35:30
Speaker 3: with this professor to build a model to predict college
35:32
Speaker 3: football scores. They pitched it to the Wall Street Journal,
35:35
Speaker 3: and the journal agreed to publish their college football picks
35:38
Speaker 3: of the week. It was just how they would bet,
35:41
Speaker 3: were they to bet on college football.
35:44
Speaker 10: And he would then post our picks of the week.
35:47
Speaker 10: We were just posting them because we were working with
35:48
Speaker 10: the Wall Street Journal, So post him on Tuesday or Wednesday,
35:51
Speaker 10: and then he would watch as the prices started moving
35:54
Speaker 10: on his screen.
35:55
Speaker 3: Oh my god, which is to say, the sports gambling
35:58
Speaker 3: market would see their picks and move in response because
36:02
Speaker 3: the market figured out that their picks were that good.
36:05
Speaker 10: Within a year or so, we quit posting college picks
36:08
Speaker 10: because it was getting too much in the way of
36:10
Speaker 10: what he was trying to.
36:10
Speaker 3: Do, because he wanted to bet it himself, because he
36:14
Speaker 3: wanted to bet it, and if they're so good you
36:15
Speaker 3: would bet them, you wouldn't sell them, right. I mean,
36:19
Speaker 3: it was bound to eventually occur to Rufus that if
36:21
Speaker 3: he could predict the scores of college football games, then
36:24
Speaker 3: he should just bet on them himself. But it's funny
36:27
Speaker 3: how he got there. In his head, Roxy Roxboro had
36:31
Speaker 3: started as a gambler who then set out to find
36:34
Speaker 3: some kind of edge to bet. Rufus Peabody started by
36:38
Speaker 3: finding these edges and kind of stumbled into gambling and
36:42
Speaker 3: then found Roxy. During Rufus's junior year at Yale, he
36:48
Speaker 3: read an article in ESPN about Roxy's sports analytics company,
36:52
Speaker 3: Las Vegas Sports Consultants. Roxy's company wasn't used to getting
36:56
Speaker 3: resumes from Yale juniors, but they gave him a summary
37:00
Speaker 3: internship anyway and showed him their world from their offices
37:04
Speaker 3: right next to the Las Vegas Airport.
37:07
Speaker 8: They would bet on what plane was most likely to
37:09
Speaker 8: land next right, And this is like sort of pre
37:11
Speaker 8: internet days or pre like being able to see flight
37:14
Speaker 8: plans and stuff like that, and so it was like, okay,
37:17
Speaker 8: American Airlines is like six to one, like you know,
37:20
Speaker 8: Southwest is two to one whatever. What people didn't realize though,
37:25
Speaker 8: was Roxy actually had a contact in the control tower,
37:29
Speaker 8: and so Roxy won. He made money off of these bets,
37:35
Speaker 8: but he didn't make enough to draw suspicion. That was
37:39
Speaker 8: the key. But he would occasionally hit the japan Air
37:42
Speaker 8: at three hundred to one, right or whatever.
37:49
Speaker 3: Roxy screw would bet on everything. Rufus wasn't like that.
37:54
Speaker 3: He didn't even think of what he wanted to do
37:55
Speaker 3: as gambling, but he did want to understand this other world,
38:00
Speaker 3: this world where people bet on anything that moved.
38:04
Speaker 8: They shared the building with American Wagering, so with LeRoy's,
38:07
Speaker 8: which was a sort of third party sportsbook operator. Le
38:13
Speaker 8: Ros didn't have a casino, but they were in casinos
38:16
Speaker 8: like Hooters or Terrible Herbst.
38:20
Speaker 2: Right, Hooters has a casino.
38:22
Speaker 8: Yeah, Hooters casino. It's on the strip. It's right, tropic
38:25
Speaker 8: cannot basically right. Yeah, so I met, I meet this
38:29
Speaker 8: the head trader there, right, and I have all these questions.
38:32
Speaker 8: A book maker can make more money. Let's say, if
38:35
Speaker 8: they know the public's bias, they can make more money
38:37
Speaker 8: setting a line somewhere between the true price and the
38:40
Speaker 8: price the public thinks that's the way to maximize.
38:46
Speaker 3: There's no reason you should understand what rufe has just
38:48
Speaker 3: said there, but let me try to explain it, because
38:50
Speaker 3: it tells you a bit about how this old school
38:52
Speaker 3: sports gambling world works. The line is just the odds
38:57
Speaker 3: or the points spread. The true price is what the
39:00
Speaker 3: odds would be if you somehow knew every possible relevant
39:04
Speaker 3: bit of information about some upcoming game. Of course, no
39:08
Speaker 3: one ever knew everything, so there is in reality, never
39:12
Speaker 3: a perfect true price, just some number that the smartest
39:15
Speaker 3: and best informed better is agree on. Say they agreed
39:19
Speaker 3: that the Packers should be eight point favorites over the Cowboys,
39:23
Speaker 3: but most of the gamblers are Cowboys fans, and the
39:27
Speaker 3: Cowboys fans think the Cowboys are only three point underdogs.
39:31
Speaker 3: Rufus was asking the bookie if he thought he could
39:33
Speaker 3: entice the public to make more stupid bets if he
39:36
Speaker 3: set the line not at the true price of eight points,
39:39
Speaker 3: but it's say five points, because Cowboys fans will think
39:43
Speaker 3: the cowboys are better than they actually are and bet
39:46
Speaker 3: even more.
39:48
Speaker 8: I said, theoretically, you can make more money setting a
39:50
Speaker 8: line somewhere between the true price and where the public
39:53
Speaker 8: thinks the price is. And he says, theory, theory and theory.
39:57
Speaker 8: Dick don't fit in an asshole. And this guy, yeah,
40:07
Speaker 8: he was probably three hundred pounds five to eight, smoking
40:12
Speaker 8: a cigar in a dark room, looking at a bunch
40:14
Speaker 8: of numbers on a screen.
40:15
Speaker 3: In just a flash, there, you've changed our podcast rating.
40:19
Speaker 8: Sorry.
40:30
Speaker 3: Rufus Peabody recently of Yale is no one's idea of
40:33
Speaker 3: a hustler. He's too sweet natured and even tempered, and
40:37
Speaker 3: way too open to telling other people about the stuff
40:39
Speaker 3: he's learned. He finishes up at Yale and moves back
40:43
Speaker 3: to Vegas to work full time at Las Vegas Sports Consultants.
40:48
Speaker 3: But now Rufus thinks he might have an edge, and
40:51
Speaker 3: people in and around Roxy's firm think that maybe he's right.
40:55
Speaker 8: The Super Bowl was my first big break. Super Bowl
40:58
Speaker 8: two thousand and nine. Okay, I had made a friend
41:01
Speaker 8: with a professional sports better guy that bet baseball, and
41:07
Speaker 8: he loaned me ten thousand dollars to bet. I had
41:10
Speaker 8: my own ten to twelve thousand dollars. My boss, Kenny,
41:14
Speaker 8: unbeknownst to everybody else, invested forty thousand dollars in me
41:19
Speaker 8: and gave me a twenty percent free roll.
41:21
Speaker 3: On it, meaning that if it wins, you take twenty
41:25
Speaker 3: percent of rance, but you've suffered another losses correct.
41:29
Speaker 8: And so I ended up with close to sixty thousand
41:32
Speaker 8: dollars bet on the Super Bowl, and so I basically
41:35
Speaker 8: was pretty leveraged. Yeah, and I remember being like, this
41:38
Speaker 8: game doesn't work out, you know, I gave it a shot.
41:41
Speaker 2: All right, And what is causing you to have such
41:43
Speaker 2: conviction about a game?
41:45
Speaker 11: Oh?
41:45
Speaker 2: Nothing.
41:46
Speaker 8: It wasn't conviction about the game. It was betting the props.
41:49
Speaker 3: The props short for proposition bets not on the whole game,
41:54
Speaker 3: but pieces of the game. But the standard story, which
41:57
Speaker 3: is almost certainly not true, was that the prop bet
42:00
Speaker 3: was invented for the nineteen eighty six Super Bowl between
42:03
Speaker 3: the Chicago Bears and the New England Patriots. The Bears
42:06
Speaker 3: were such heavy favorites that Vegas had trouble jitting up
42:08
Speaker 3: in in the game, so a Vegas bookie created a
42:12
Speaker 3: side bet the odds that a Bear's defensive tackle named
42:16
Speaker 3: William the Refrigerator Perry would score a touchdown. It was
42:21
Speaker 3: a long shot bet, and the betting public loved it,
42:24
Speaker 3: and Vegas bookies lost a fortune when the fridge did
42:27
Speaker 3: indeed score. But back to Rufus and forward to the
42:31
Speaker 3: Super Bowl of two thousand and nine, the Pittsburgh Steelers
42:35
Speaker 3: played the Arizona Cardinals. Rufus wasn't betting the whole game,
42:39
Speaker 3: but pieces of the game. His pro Football model spits
42:42
Speaker 3: out odds for all this weird stuff that Vegas bookies
42:45
Speaker 3: are now offering bets on the odds that Steeler's running
42:48
Speaker 3: back Gary Russell will score the game's first touchdown. For example,
42:53
Speaker 3: Rufus has vast troves of data to mine. He can
42:57
Speaker 3: do stuff with it that Roxy would never imagine. He
43:00
Speaker 3: could do stuff that even the people who run the
43:02
Speaker 3: Pittsburgh Steelers would never imagine doing. I mean, even Gary
43:07
Speaker 3: Russell likely has no idea that you can calculate the
43:10
Speaker 3: odds that he will score the game's first touchdown. But
43:13
Speaker 3: Rufus can his model puts those odds much higher than
43:17
Speaker 3: the bookies' odds, so in Rufus's mind, it's a great bet.
43:21
Speaker 3: He makes dozens of similar bets BET's where his model
43:25
Speaker 3: tells him that the bookies are giving him better odds
43:27
Speaker 3: than they should.
43:29
Speaker 8: I still remember going. It was like Hara's Caesar's the Rio.
43:37
Speaker 8: I ended up getting down like two hundred dollars at
43:39
Speaker 8: a time, like five thousand dollars. Positions on a few
43:42
Speaker 8: things like that were really good, and so I was
43:47
Speaker 8: diversified within the game. Within the game, I wasn't betting
43:51
Speaker 8: on the outcome of the game, but I was still
43:52
Speaker 8: I still to this day, have never watched that game.
43:55
Speaker 2: I was too nervous. How did you experience the game
43:57
Speaker 2: if you didn't watch it.
43:59
Speaker 8: I went to this little par three course that's open
44:02
Speaker 8: at night, right south of the airport, and I played
44:07
Speaker 8: the part three course twice until I felt like the
44:11
Speaker 8: game would definitely be over. And then I went grocery shopping.
44:15
Speaker 8: And I didn't have a smart this is pretty smartphone.
44:18
Speaker 8: I went grocery shopping, and then I went home and
44:19
Speaker 8: cooked myself dinner.
44:21
Speaker 3: Huh.
44:21
Speaker 8: And then and only then did I open my computer
44:25
Speaker 8: and check and see how the game went, and were
44:27
Speaker 8: you just going through your prop bets seeing what happened.
44:29
Speaker 8: First I went to the boss score and I saw
44:31
Speaker 8: the first score was Gary Russell one yard touchdown run.
44:35
Speaker 8: I was like, ah right, And it turned out out
44:39
Speaker 8: of like fifty six thousand dollars bet like, I profited
44:42
Speaker 8: like twenty three thousand on it.
44:45
Speaker 3: Rufus figures out how much he's won. Then he physically
44:48
Speaker 3: retraces his steps to the many casinos that had taken
44:51
Speaker 3: his many bets, still driving an old Honda Civic. You
44:55
Speaker 3: aren't all these little tickets you have to write, You
44:57
Speaker 3: go cash each one individually. So you had you must
45:00
Speaker 3: have had one hundred tickets?
45:01
Speaker 8: Oh yeah, probably.
45:03
Speaker 3: He just drives around Las Vegas and the money piles up, and.
45:08
Speaker 8: I remember having like thirty thousand dollars on the front
45:11
Speaker 8: seat and being like, oh my god, so much money
45:14
Speaker 8: in cash in cash.
45:20
Speaker 3: After that, lots of people in Vegas wanted to lend
45:23
Speaker 3: money to Rufus and take a cut of his bets. Rufus,
45:26
Speaker 3: for his part, was still sitting in his office in
45:29
Speaker 3: Las Vegas Sports Consultants, but pretty soon he was directing
45:33
Speaker 3: an army of people to lay bets in sports books
45:35
Speaker 3: across the city, sports books that got their odds from
45:39
Speaker 3: Las Vegas sports consultants. Rufus was in effect betting against
45:43
Speaker 3: the lines created by Roxy's firm. Roxy himself had moved
45:48
Speaker 3: on at this point, but he watched what Rufus was
45:50
Speaker 3: doing and he admired it.
45:53
Speaker 7: He came to Bouquet once. Then I met him, even
45:55
Speaker 7: after one lunch. I said, this guy's thinking at a
45:59
Speaker 7: higher level than other people. And I learned a lot
46:03
Speaker 7: for a moment, not because he was divulging his secrets,
46:07
Speaker 7: but he was just thinking at a higher level.
46:10
Speaker 3: To get his edge. Roxy had used weather reports, Rufus
46:14
Speaker 3: was using the spin rates on pitcher's curveballs.
46:17
Speaker 8: I try to drill things down to their root, cause
46:21
Speaker 8: it's kind of what you do when you write books.
46:24
Speaker 8: You try to figure out the person, what makes them tick,
46:27
Speaker 8: what's the story. I try to figure out why things
46:29
Speaker 8: happen in a baseball game or a golf tournament, what
46:32
Speaker 8: makes the player good. It's not just their score, Like,
46:35
Speaker 8: what are the things that are driving their score? Which
46:38
Speaker 8: of those are repeatable, which aren't? And right now you
46:42
Speaker 8: have all this computer vision that type of data available
46:45
Speaker 8: now and with a lot of these sports. I mean,
46:47
Speaker 8: we're now talking about bat speed, measuring bat speed and
46:49
Speaker 8: looking at like aging curves for bat speed.
46:53
Speaker 3: The whole point of Rufus is that he never lets
46:55
Speaker 3: emotion interfere with his process. But that doesn't mean he
46:59
Speaker 3: doesn't feel emotion.
47:00
Speaker 2: He does.
47:02
Speaker 3: He feels it for his process.
47:04
Speaker 8: We're using bat speed to then predict exit velocity, and
47:08
Speaker 8: we're using exit ville to then predict, like weaited on
47:11
Speaker 8: base average and basically whether a ball will be hit
47:14
Speaker 8: or not, and what kind of damage it'll be if
47:16
Speaker 8: it is, and then you know, use that to predict wins.
47:20
Speaker 2: And how did it work?
47:21
Speaker 8: How did it work?
47:22
Speaker 2: It works?
47:22
Speaker 8: Well, we made one hundred and twenty five thousand in
47:25
Speaker 8: the first month. I don't know what our volume was overall,
47:28
Speaker 8: and I got twenty percent of it, which was great
47:33
Speaker 8: because my yearly salary was twenty five thousand.
47:36
Speaker 3: Rufus had become the card counter at the blackjack table,
47:39
Speaker 3: only it was richer than that. He was generating new
47:43
Speaker 3: insight about why things happened in sports. A blackjack dealer
47:47
Speaker 3: knows where the card counter gets his edge. The sports book.
47:50
Speaker 3: He couldn't really tell where Rufus was getting his which
47:53
Speaker 3: made Rufus and what he was doing even more unsettling.
47:57
Speaker 3: And did the M at any point say we're not
48:00
Speaker 3: taking your bets. The M Casino was one of Rufus's
48:03
Speaker 3: favorite sports books.
48:05
Speaker 8: Now they had their whole thing was we're going to
48:07
Speaker 8: take all comers. We want to be we want a
48:11
Speaker 8: lot of volume. We think we're better than people.
48:14
Speaker 3: Then comes the Supreme Court decision of twenty eighteen, twenty
48:17
Speaker 3: three states soon legalized sports gambling. Rufus now has the
48:21
Speaker 3: M Casino and a lot of others right in his pocket.
48:25
Speaker 12: Van Duel and the PGA Tour have teams up. Now
48:29
Speaker 12: you can get more action out of every stop on
48:31
Speaker 12: the tour, and.
48:32
Speaker 3: Rufus of course stands to make a killing. The bigger
48:35
Speaker 3: the markets, the more he can bet, bet.
48:37
Speaker 12: The PGA Tour and make every moment more with Fan
48:41
Speaker 12: Duel sports book.
48:43
Speaker 3: But as it turns out, that's not how it's going
48:46
Speaker 3: to go down. This ecosystem is going to change in
48:49
Speaker 3: ways Rufus didn't predict, and he began to sense it
48:53
Speaker 3: in late twenty twenty.
48:55
Speaker 8: So I would drive up to New Hampshire to bet
48:59
Speaker 8: at these kiosks initially, and then once there was mobile betting,
49:04
Speaker 8: I had an account on DraftKings.
49:07
Speaker 3: Rufus had a girlfriend in Masses. Massachusetts hadn't yet legalized
49:11
Speaker 3: sports betting, so he needed to cross state lines to
49:14
Speaker 3: use the betting app on his phone. The drive took
49:16
Speaker 3: him like forty five minutes, but it was actually easier
49:19
Speaker 3: than running all over Vegas trying to get cash down.
49:23
Speaker 3: He and his process were built for this new type
49:25
Speaker 3: of casino. He could bet on golf basically all day long,
49:29
Speaker 3: until one day he couldn't.
49:32
Speaker 8: One week, I lost thirty thousand dollars. I got a
49:35
Speaker 8: phone call to tell me that they were cutting my
49:37
Speaker 8: limits on golf.
49:39
Speaker 3: He'd lost thirty thousand dollars, and DraftKings stopped taking his
49:43
Speaker 3: big bets. By the way, we've reached out to DraftKings,
49:46
Speaker 3: and so far they have declined to talk with us. Anyway,
49:49
Speaker 3: it was clear to Rufus back in twenty twenty that
49:52
Speaker 3: this was definitely no longer his old sports gambling.
49:54
Speaker 8: World because I had bet enough it spurred them to
49:58
Speaker 8: actually go in and look at the stuff I'd been
50:01
Speaker 8: betting and how I'd been doing. Books are not limiting
50:04
Speaker 8: people just because they win. They're limiting them because they
50:08
Speaker 8: think they're going to win.
50:09
Speaker 2: Future.
50:10
Speaker 3: Rufus used data to predict what athletes were going to do.
50:14
Speaker 3: DraftKings was using data to predict what Rufus would do.
50:18
Speaker 3: When they looked at the data, they saw that after
50:20
Speaker 3: Rufus placed his bets, the odds nearly always moved in
50:24
Speaker 3: his favor. These were the bets of someone who knew
50:27
Speaker 3: things before the market knew them, and the new bookies
50:30
Speaker 3: were not like the old bookies. They only wanted to
50:33
Speaker 3: take certain kind of bets, Bets that were more like
50:36
Speaker 3: the bet you make when you press the buttons on
50:38
Speaker 3: a slot machine, Bets that if you made them often enough,
50:42
Speaker 3: you were sure to lose, the sort of bets a
50:45
Speaker 3: fan would make, the sort of bets Rufus Peabody never made.
50:50
Speaker 8: Refusing a bet wasn't a thing. It never was a
50:52
Speaker 8: thing here, huh. Like you if you got kicked out
50:56
Speaker 8: of a casino or if you couldn't get there, it
50:58
Speaker 8: was because you did something wrong, like you violated the
51:02
Speaker 8: sacred bookmaker better covenant.
51:05
Speaker 3: Being smarter than the market didn't used to get you
51:07
Speaker 3: kicked out of the market. But the market's changed. Sports
51:13
Speaker 3: gambling is still a hard way to make an easy living,
51:16
Speaker 3: but now it feels even less fair. Now it feels
51:20
Speaker 3: like someone should step in and help.
51:21
Speaker 2: Rufus okay cool.
51:24
Speaker 11: So I downloaded FanDuel, DraftKings, Fliff Fanatics, Caesar's Bet, MGM,
51:29
Speaker 11: and PayPal. So now everyone has all of my information
51:33
Speaker 11: and my social security number.
51:34
Speaker 8: Oh, your social security number.
51:35
Speaker 11: They all asked for it.
51:36
Speaker 3: Guess these new sports gambling apps, they all ask for it,
51:42
Speaker 3: and so we're going to give it to them in
51:43
Speaker 3: our next episode. Against the Rules is written and hosted
51:55
Speaker 3: by me Michael Lewis and produced by Lydia gene Kott,
51:57
Speaker 3: Catherine Gerardeau, and Ariela Markowitz. Our editor is Julia Barton.
52:02
Speaker 3: Our engineer is Jake Gorski. Our music was composed by
52:05
Speaker 3: Matthias Bossi and John Evans of stell Wagon Sepinett. Our
52:10
Speaker 3: fact checker is Lauren Vespoli. Against the Rules is a
52:13
Speaker 3: production of Pushkin Industries. To find more Pushkin podcasts, listen
52:18
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52:23
Speaker 3: to podcasts, and if you'd like to listen to ad
52:25
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