The Pequod Review:
This esoteric book on horse-racing betting strategies will probably only be of value to hard-core fans, but a few of the chapters have much wider applicability -- to more general subjects like investing and probability. One of the best such chapters is by Steven Crist (the legendary editor of Daily Racing Form):
The point of this... is to illustrate that even a horse with a very high likelihood of winning can be either a very good or a very bad bet, and the difference between the two is determined by only one thing: the odds. A horseplayer cannot remind himself of this simple truth too often, and it can be reduced to the following equation:
Value = Probability x Price
This equation applies to every type of horse and bet you will ever make. A horse with a 50 percent probability of victory is a good bet at better than even money (also known as an overlay) and a bad bet at less (a.k.a. an underlay). A 10-1 shot to whom you take a fancy is a wonderful overlay if he has a 15 percent chance of victory and a horrendous underlay if his true chance is only 5 percent. There are winning $50 exacta payoffs that are generous gifts and $50 exacta payouts where you made a terrible bet.
Now ask yourself honestly: Do you really think this way when you're handicapping? Or do you find horses you "like" and hope for the best on price? Most honest players will admit they follow the latter path.
This is the way we all have been conditioned to think: Find the winner, then bet. Know your horses and the money will take care of itself. Stare at the past performances long enough and the winner will jump off the page.
The problem is that we're asking the wrong question. The issue is not which horse in the race is the most likely winner, but which horse or horses are offering odds that exceed their actual chances of victory.
This may sound elementary, and many players may think they are following this principle, but few actually do. Under this mindset, everything but the odds fades from view. There is no such thing as "liking" a horse to win a race, only an attractive discrepancy between his chances and his price. It is not enough to lose enthusiasm when the horse you liked is odds-on or to get excited if his price drifts up. You must have a clear sense of what price every horse should be, and be prepared to discard your plans and seize new opportunities depending solely on the tote board.
If you begin espousing this approach, you are sure to suffer abuse from your fellow horseplayers. When one of them asks you who you like in a race and you say, "I think the 4 is a bigger price than he should be," the likely response is, "So what? Who do you like?" Your cronies are apt to tell you that you should be betting on horses, not on prices, and after an inevitable stretch of watching some of their underlays win, you will begin to doubt yourself.
Sticking to your guns is easier said than done, but it is the only way to win in the long run. The horseplayer who wants to show a profit must adopt a cold-blooded and unsentimental approach to the game that is at variance with both the "sporting" impulse to be loyal to your favorite horses and the egotistical impulse to stick with your initial selection at any price. This approach requires the confidence and Zen-like temperament to endure watching victories at unacceptably low prices by such horses.