September 6, 2009

Do statheads tend to be betting men?

When I was a freshman in college, a high school friend whose dad was one of the top bookies in LA gave me a free subscription to his dad's football betting newsletter, the Gold Sheet, which I see has now been in business for 50 years, so it's time-tested. It's modus operandi is to barter inside information on injuries and the like, so these guys aren't just selling their opinions.

Each week, I'd look through the Gold Sheet's predictions for college football games looking for ones I disagreed with. I'd pick one to five games per week where I thought the Gold Sheet was wrong on its point spread prediction. I believe my cumulative record for the year was 19-7 against the Gold Sheet's point spread predictions (not against the Las Vegas line, by the way).

I recount that because that's the last time I took an active interest in gambling. And, keep in mind, that I didn't actually bet any money. I just kept track to see how I would do if I had bet against the Gold Sheet's line.

Since then, despite being a classic stathead, I can recall buying two one dollar lottery tickets (when the jackpot was over $100,000,000, because it's fun to think about what you'd do with, what, $2.5 million per year pretax for 20 years -- in contrast, when the jackpot's only $1,000,000 it's depressing to think about what you'd with an extra $30k per year, because you quickly realize that you really need an extra $30k per year just to stay afloat, so why spend a buck to be remind of that?).

In other words, I'm not at all interested in gambling. Learning probability just taught the lesson that the odds are rigged against you, so why play?

On the other hand, the late stathead journalist Dan Seligman, who probably was about as similar to me in general turn of mind as anybody, was a devoted gambler. (Here's his 1997 article about his weekly poker game, straight out of a Billy Wilder movie, that had been a fixture in Manhattan business and journalism circles since 1954.)

So, here's the question: does being a stathead tend to make you more or less likely to be a gambler?

My published articles are archived at iSteve.com -- Steve Sailer

29 comments:

Nanonymous said...

So, here's the question: does being a stathead tend to make you more or less likely to be a gambler?

That's the strangest question from you, Steve. I'd have thought that you, of all people, understand that the thrill of gambling is not rational. This is like asking if people who study ethanol metabolism and its effects on CNS are more or less likely to be alcoholics.

Goose said...

i dunno. isn't betting, risk taking, financial risk taking correlated with testosterone? the statheads i've come across in my life have been generally very bright guys but not the most aggressive or test-fueled types.

Thrasymachus said...

I used to know a guy with a Ph.D. in statistics, who was a big gambler. I'm pretty good at doing math in my head and I think if I put in some effort I could make a few bucks playing cards, but spending hours at a card table doing math in my head to make what, certainly not more than $50 an hour, probably a lot less, sounds a lot like a crappy job to me.

I think that high IQ guys who love gambling may study statistics to become better gamblers; but I do not think high IQ guys who like statistics develop an interest in gambling as a result. In other words I think the interest in gambling comes first.

James B. Shearer said...

So, here's the question: does being a stathead tend to make you more or less likely to be a gambler?

This is equivalent to asking if being a gambler makes you more or less likely to be a stathead. I think the answer is yes.

CP said...

I would say probably less likely. But it is the sine qua non of successful gambling (speculation). So the people you see who are good at it will be statheads.

Anonymous said...

This is mostly OT and I've got nothing new to say. I was dragged into a casino by a friend the other day. I refused to gamble (not my thing), but I understand the lure of it. Barring real gambling acumen, there's a good probability of winning if you play for a short period of time, but it's slightly lower than the probability of losing. If someone unskilled plays for half an hour and comes out ahead the gambler's fallacy kicks in at a subconcious level. After one has lost a large proportion of one's money, one will then have an urge to gamble oneself out of the hole because the willingness to take risks grows with desperation.

At the casino I noticed a lot of old retirees (many of them female) burning their money. For me as a non-gambler watching it all it was very, very boring. I will never watch celebrity poker.

hcl said...

"In other words, I'm not at all interested in gambling. Learning probability just taught the lesson that the odds are rigged against you, so why play?"

True of "dumb gambling" against a house which has done the math homework, e.g. the State Lottery, or a casino slot machine. But not true the "rational markets hypothesis" of ordinary gamblers, whom you can outsmart on an otherwise level playing field.

Although I myself don't gamble due to a) opportunity cost of time; b)the enforcement cost of collecting - I'm not looking to break body parts; c) of ruining friendships, a few "professional" gamblers do seem to do a good job of identifying the suckers whom they can asset-strip.

James B. Shearer said...

That is I think the answer is more.

JoeShipman said...

Not only am I a stathead, I work full-time in the gaming industry calculating the odds for new games, making sure the numbers in state lotteries are random, etc. I get great satisfaction from gambling when the odds are in my favor, but it's hard to find such games. I've counted cards at Blackjack, but the edge there is so small it's no way to make a living unless you already have a$100,000 bankroll just for gambling (otherwise the fluctuations will force you to play for such low stakes you might as well get a real job). The odds in the financial markets are theoretically favorable, but casinos are paragons of honesty and predictability compared to Wall Street. I have zero temptation to play games where the odds are against me. Occasionally I will notice a sports bet that seems to me to be very mispriced and I will take a flyer on it, but it's really hard to make a living on that kind of thing. My biggest regret is that I had a chance to bet a few thousand on Holyfield against Tyson at about 8:1 odds for their first fight - I estimated the true odds at 2:1 in Tyson's favor so I knew I would probably lose, but it was still a really good bet. Unfortunately, spouses don't have much tolerance for the excuse "it was a really good opportunity even though it was probably going to lose".

Anonymous said...

I think so. The Internet era provides far more opportunities to translate this expertise into money.

Anyone who plays Internet poker at the lower levels -- under $20 a hand -- sees stupid, irrational play all the time.

I bet there are thousands of statheads who supplement their income by taking advantage of these low-stakes bettors.

Anonymous said...

being a stathead makes you a better gambler. statheads count cards and play poker and don't gamble much elsewhere.

being chinese, on the other, makes it more likely that someone would be a gambler.

meep said...

I've seen the gamut.

A lot of the actuaries I know like playing casino/online poker, play fantasy football, etc.

I like figuring out stats and probability, but I gamble very little, and usually just for social purposes [friendly poker game, for example]

I know =lots= of these guys to play the markets, though. I don't have the time or attention to do that.

Dennis Mangan said...

David Einhorn is a famous, relatively young investor - he called the Lehman bankruptcy and handsomely profited - and he's a big-time poker player. So he must know the odds.

By the way, I believe that courts have ruled that poker is a game of skill, unlike the lottery.

Edward said...

Obama's a gambler - Poker, IIRC. I doubt he's a stathead. I think Poker is a social game played by jerks.

Pat Shuff said...

Two recent papers investigate the genetics of individual investing. The September 2009 paper "Nature or Nurture: What Determines Investor Behavior?" by Amir Barnea, Henrik Cronqvist and Stephan Siegel examines the degree to which genetic makeup influences individual investing behavior. The July 2009 paper "IQ and Stock Market Participation" by Mark Grinblatt, Matti Keloharju and Juhani Linnainmaa explores the relationship between intelligence and individual investing.

The following chart, taken from the paper, compares Pearson correlations between identical and non-identical twins with respect to stock market participation (Stock Market Participant), asset allocation (Share in Equities) and portfolio risk choices (Volatility). Correlations between twins and randomly selected age-matched individuals provide benchmarks. For all three measures, correlations are substantially higher between identical twins than between non-identical twins and between twins and randomly selected individuals.

The following chart, taken from the paper, summarizes the variation of stock market participation by both IQ and net worth. It shows that IQ relates positively to stock market participation for all levels of wealth.

http://tinyurl.com/ntp4ly

The IQ/stock market study--

http://tinyurl.com/kj7jrb

dearieme said...

I never gamble but I did run a book on my school athletics championship once. I found that there were gamblers so stupid that they would bet on a boy winning the championship who was so far behind the leaders that he couldn't have become champion if he'd won every remaining contest.

Anonymous said...

I have a strong math background, and I bet exactly the way you do: I buy a lottery ticket when the pot is over 100 million, so I can fantasize about what I would do with the money (which I would, however, take in a lump sum). The people who play the low stakes games seem kind of pathetic to me, since they don't seem to understand how much worse are the odds of making enough money to actually make a difference in their lives.

To answer your question, I think that if your initial inclination towards gambling is not strong, then being a stathead tends to reduce it further, but that if you start out strongly inclined to gamble you use your math as best you can to try to maximize your winnings.

OneSTDV said...

I wrote this post awhile back:

Gambling is Irrational

RF Interference said...

I spend a good deal of time reading and messing around with baseball statistics. I don't gamble a lot, but I always make several long term bets before each season (over-under on team wins, pennant winners and such). Hit on the Rays winning the AL last year at 30/1. Have the same bet at 35/1 for the Rangers this season, who are still within striking distance of the wild card.

What I've noticed about Vegas is that they do not credit young talent enough. If there's a club with a lot of talent in or just up from the high minors, Vegas usually underestimates their projected number of wins on the season.

Fred said...

What about Edward Thorp? Isn't he the classic example?

TW Andrews said...

I think mathematical aptitude probably isn't correlated with like/dislike of gambling (which I suspect is much more strongly correlated with testosterone levels), but I bet it does play a significant factor in which games one plays.

Poker is a game in which the ability to do math quickly provides an edge. Roulette or craps don't offer a similar opportunity for mathematically inclined.

albertosaurus said...

I know the answer to this one.

I taught statistics for many years. I once played a slot machine about forty years ago. I lost four nickles in a row. I quit and haven't bet on anything since.

I was a luncheon for county and state financial officers in Sacramento shortly after the state lottery was created. It was a big table. There were some who had had some input into setting up the lottery bureau structure. We had a discussion on the topic, "Is a lottery an appropriate activity for government"? Most of the financial officials thought it was fine. However none had ever bought a lottery ticket and couldn't imagine ever doing so. Lotteries were for the proles.

Anonymous said...

A discussion about gambling on a mostly political blog and no one mentioned intrade.com? Unreal.

Melykin said...

I know one stats prof who bets on horse races. But he only bets about $30. a month, or so he told me. I think it was his interest in gambling that led him to statistics. I teach in a math dept., and at one point we had a pool going to buy lottery tickets. We each put in $5. to start, then any winnings were used to buy more tickets. This went on until the money was all gone. We all knew it was stupid.

When I teach stats or probability I make a point of having lessons about how all casino games and lotteries are rigged to favour the house. It is disgusting that governments are in the disgraceful business of corrupting vulnerable people by luring them into casinos.

OhioStater said...

Well, let's define the terms. Gambling is the lottery, and gambling is poker. In general gambling involves unlikely outcomes (straight flush is unlikely) whereas betting involves likely but doubtful outcomes.

Since poker relies so much on probability (I have King, I need another King, there are 5 players, so there are this many unseen cards, and my likelihood of finding that one card is X, so I can afford this raise to force out 3 players), I can see gambling attracting a large number of stat heads.

Betting on the other hand is more qualitative. To be a good bettor on sports, you need to understand people. If I show you a 5-9 wide receiver, hardworking on every play, and a svelte 6-5 track star that's lazy, betting is knowing which situation to take the lazy guy or the hardworking guy.

Serena Williams is a good example. She frequently loses in normal tournaments but plays well in the big ones like the US Open. By the stats, she's always 4th or 5th ranked, but destroys the field. Betting is knowing and handling these tendencies in people.

Marc B said...

Would using a world almanac for reading material by a middle school kid be an indication of being a stathead? When I was in 7th grade I won the weekly NFL betting pools 9 weeks out of the entire season and I didn't get into the action until week 3. Tuesdays were a thrill when my mom would bring home that envelope brimming with cash.

I would have won the Superbowl but instead chose not to bet against the Eagles, my favorite team until this year. The following season I was barred from the pool. I do have that mix of being an analytical and a risk taker/ gambler.

Felix said...

My dad was a math teacher, and his throwaway comments convinced me early on that gambling is just stoopid.

But I bet on elections. Because you can always find people who back their candidate, regardless of the polls.

And it’s not education or general intelligence. I remember a fruitless hour trying to explain the basic probability of coin tossing to a young attorney.

NeameShepherd said...

"If someone unskilled plays for half an hour and comes out ahead the gambler's fallacy kicks in at a subconcious level. After one has lost a large proportion of one's money, one will then have an urge to gamble oneself out of the hole because the willingness to take risks grows with desperation."

That is the reason why prop traders at a bank have a a sort of loss limit, if they lose a certain ammount then they cease trading and close their positions and take the hit rather than risk further losses.

A smart gambler will usually set a similar limit for losses.

I think lotteries and fruit machines make a lot of money from fools who are terrified that someone else will win. People who buy a lottery ticket with the same numbers every week have to buy it because 'what if my numbers come up'. People who play the machines are worried that if they step away from the machine some geezer on his way back to the bar after a piss will drop in some spare change and win the jackpot in one. The second is probably more likely, but still not exactly a common occurence. By the way if you are the bloke who wins on the machine watch out the professional machine botherer will accuse you of theft!

"Serena Williams is a good example. She frequently loses in normal tournaments but plays well in the big ones like the US Open. By the stats, she's always 4th or 5th ranked, but destroys the field. Betting is knowing and handling these tendencies in people."

So she's like the opposite of New Zealand's national Rugby Union side?

dave2 said...

At age 20 I knew the odds so instead of betting I started a football pool. It got pretty big and I was making good money. Good enough that I thought I could make a living out of taking bets. The FBI thought otherwise and I ended up on probation and with a programming career.
That was 30 years ago. It still irks me that some people can run casinos etc. legally but I got arrested. I rarely gamble except on some sports games when I think the line is off.
Alot of gamblers don't have a clue.