1 00:00:15,356 --> 00:00:15,796 Speaker 1: Pushkin. 2 00:00:20,556 --> 00:00:24,076 Speaker 2: Oh yay, oh yay, oh yay. 3 00:00:24,916 --> 00:00:29,156 Speaker 1: May twenty eighteen, the United States Supreme Court strikes down 4 00:00:29,196 --> 00:00:32,316 Speaker 1: the federal law that has effectively banned sports gambling in 5 00:00:32,396 --> 00:00:38,196 Speaker 1: nearly every state. What happens next happens faster than anyone imagined, 6 00:00:39,236 --> 00:00:41,796 Speaker 1: and happens in so many places at once that it's 7 00:00:41,836 --> 00:00:44,316 Speaker 1: basically impossible to follow it all in real time. 8 00:00:45,636 --> 00:00:48,716 Speaker 3: I ended up picking Mississippi and Kansas as the two 9 00:00:48,756 --> 00:00:52,036 Speaker 3: states that I really decided to focus on, and nearly 10 00:00:52,196 --> 00:00:55,276 Speaker 3: was just there, becoming a part of the furniture as 11 00:00:55,276 --> 00:00:56,916 Speaker 3: the lobbyists were working their magic. 12 00:00:57,956 --> 00:01:01,316 Speaker 1: That's Eric Lipton, New York Times reporter, who with his 13 00:01:01,396 --> 00:01:05,516 Speaker 1: colleague Ken Vogel, just sat and watched as lobbyists created 14 00:01:05,516 --> 00:01:09,756 Speaker 1: the conditions for a new industry to emerge overnight sports. 15 00:01:09,436 --> 00:01:15,076 Speaker 3: Gambling and you know, buttonholing various legislators, getting them to 16 00:01:15,196 --> 00:01:19,236 Speaker 3: introduce language that they wanted into the gambling bills and 17 00:01:19,356 --> 00:01:23,756 Speaker 3: changing the tax rates, getting you know, provisions included that 18 00:01:23,796 --> 00:01:27,596 Speaker 3: would allow them to entice betters with free bets that 19 00:01:27,596 --> 00:01:29,036 Speaker 3: they wouldn't have to pay taxes on. 20 00:01:29,836 --> 00:01:33,036 Speaker 1: Derek knows that state capitols where the action is. He 21 00:01:33,116 --> 00:01:37,076 Speaker 1: started his career covering state governments for local papers. When 22 00:01:37,076 --> 00:01:39,236 Speaker 1: he returns to his old beat, he sees right away 23 00:01:39,236 --> 00:01:42,716 Speaker 1: how much lonelier state capitals are because his old job, 24 00:01:43,076 --> 00:01:45,796 Speaker 1: state house reporter, now barely exists. 25 00:01:46,316 --> 00:01:48,396 Speaker 3: There were times when I was in the state capitol 26 00:01:48,396 --> 00:01:51,076 Speaker 3: where I was pretty much the only reporter there while 27 00:01:51,076 --> 00:01:54,596 Speaker 3: they were debating you know, sports betting, and I would 28 00:01:54,596 --> 00:01:57,716 Speaker 3: stay until they wrapped up two in the morning, as 29 00:01:57,756 --> 00:02:00,076 Speaker 3: the session was closing and they were trying to get 30 00:02:00,116 --> 00:02:03,116 Speaker 3: the bill passed, and there were no other reporters present. 31 00:02:03,276 --> 00:02:05,876 Speaker 1: It's like, if you do something at the federal level, 32 00:02:06,516 --> 00:02:07,996 Speaker 1: there are going to be a lot of people watching, 33 00:02:08,556 --> 00:02:11,916 Speaker 1: still a lot of reporters who will cover national politics. 34 00:02:12,636 --> 00:02:16,436 Speaker 1: But if you push things down to the states, you're 35 00:02:16,436 --> 00:02:18,316 Speaker 1: more likely to just operate in the shadows. 36 00:02:18,916 --> 00:02:21,556 Speaker 3: Yeah, and I think the lobbyists know that, and it's 37 00:02:21,596 --> 00:02:24,996 Speaker 3: actually a lot easier to get things done in state capitals. 38 00:02:25,236 --> 00:02:28,036 Speaker 3: You can build a national strategy through a collection of states. 39 00:02:29,316 --> 00:02:31,756 Speaker 1: Eric and his colleague at the Times wrote about Kansas 40 00:02:31,796 --> 00:02:34,636 Speaker 1: back in twenty twenty two, but he could have written 41 00:02:34,676 --> 00:02:38,156 Speaker 1: the same piece almost anywhere in the United States. Thirty 42 00:02:38,156 --> 00:02:42,396 Speaker 1: eight states plus Washington, DC were rushing to legalize sports 43 00:02:42,436 --> 00:02:46,236 Speaker 1: betting and rolling over for the new sports bookies, who 44 00:02:46,316 --> 00:02:48,716 Speaker 1: were pushing to minimize just how much of a cut 45 00:02:48,756 --> 00:02:52,756 Speaker 1: the States took. They cut the tax rate almost in half. 46 00:02:53,836 --> 00:02:58,116 Speaker 3: They gave them the ability to give out free bets 47 00:02:58,276 --> 00:03:01,036 Speaker 3: as a promotion to sign people up and not have 48 00:03:01,076 --> 00:03:04,356 Speaker 3: to pay taxes on that. So essentially the state becomes 49 00:03:04,476 --> 00:03:10,276 Speaker 3: a lost leader promoter of getting people into gambling by 50 00:03:10,596 --> 00:03:13,236 Speaker 3: giving them tax free promotions. 51 00:03:12,956 --> 00:03:15,676 Speaker 1: And without a whole lot of pushback from anyone. 52 00:03:16,276 --> 00:03:19,196 Speaker 3: Oftentimes, the legislators weren't even aware that they were passing 53 00:03:19,236 --> 00:03:21,796 Speaker 3: these things, or they were it was sent, it was 54 00:03:21,956 --> 00:03:23,996 Speaker 3: you know, given to them in the last minute, just 55 00:03:23,996 --> 00:03:25,516 Speaker 3: before they were asked to vote on it, and they 56 00:03:25,516 --> 00:03:28,156 Speaker 3: weren't even fully informed us of what they were voting on. 57 00:03:29,396 --> 00:03:32,156 Speaker 1: Overnight, the States have gone from the bookies cop to 58 00:03:32,236 --> 00:03:35,836 Speaker 1: the bookies' partner. So of all the pro sports leagues, 59 00:03:35,916 --> 00:03:39,996 Speaker 1: the NFL, the NBA, and Major League Baseball, the entire 60 00:03:40,076 --> 00:03:43,596 Speaker 1: sports industrial complex now has a stake in the revenues 61 00:03:43,596 --> 00:03:46,916 Speaker 1: that flow into sports gambling companies like DraftKings and fan Duel. 62 00:03:47,676 --> 00:03:50,516 Speaker 1: There's now a vast new machine with one clear purpose 63 00:03:51,036 --> 00:03:55,236 Speaker 1: to maximize those revenues. By maximizing the number of bets 64 00:03:55,276 --> 00:03:56,756 Speaker 1: that Americans make on sports. 65 00:03:57,676 --> 00:04:05,396 Speaker 4: Any sports sequina zus coming for sports one day, one 66 00:04:05,636 --> 00:04:10,596 Speaker 4: contest that street to the sports cons freely. 67 00:04:10,356 --> 00:04:12,636 Speaker 1: Con It's as if when prohibition ended, there were these 68 00:04:12,716 --> 00:04:16,236 Speaker 1: two massive liquor companies sitting there with databases on individual 69 00:04:16,276 --> 00:04:20,396 Speaker 1: Americans and their tastes for alcohol, and the government ordered 70 00:04:20,396 --> 00:04:22,396 Speaker 1: them to go wave a glass of whiskey under the 71 00:04:22,436 --> 00:04:25,796 Speaker 1: nose of every alcoholic to persuade as many as possible 72 00:04:25,996 --> 00:04:29,876 Speaker 1: to start drinking again. Of course, there are some restraints, 73 00:04:30,396 --> 00:04:34,356 Speaker 1: some rules. No state has allowed small children to gamble 74 00:04:34,396 --> 00:04:37,796 Speaker 1: on sports. Eight have declined to allow people to gamble 75 00:04:37,836 --> 00:04:40,996 Speaker 1: on their phones. And the taxes that the new industry 76 00:04:41,036 --> 00:04:44,316 Speaker 1: pays varies a lot from state to state. New York 77 00:04:44,356 --> 00:04:48,236 Speaker 1: takes fifty one percent of all sportsbook revenues. Indiana takes 78 00:04:48,236 --> 00:04:52,196 Speaker 1: only nine and a half percent. In twenty seventeen, the 79 00:04:52,316 --> 00:04:54,796 Speaker 1: year before the Supreme Court struck down a federal lag 80 00:04:54,876 --> 00:04:58,556 Speaker 1: in sports betting, legal sports bookies in the United States 81 00:04:58,796 --> 00:05:03,276 Speaker 1: generated roughly three hundred million dollars in revenues in twenty 82 00:05:03,476 --> 00:05:08,476 Speaker 1: twenty three. They took in eleven billion in twenty seventeen. 83 00:05:09,156 --> 00:05:12,476 Speaker 1: Mericans made roughly five billion dollars in legal sports bets. 84 00:05:13,436 --> 00:05:16,076 Speaker 1: Last year, they laid down more than one hundred and 85 00:05:16,196 --> 00:05:21,156 Speaker 1: twenty billion. The numbers are crazy, the consequences are even 86 00:05:21,196 --> 00:05:23,676 Speaker 1: more so, and we'll be exploring them for the rest 87 00:05:23,716 --> 00:05:25,716 Speaker 1: of the season. Take your shot at more than two 88 00:05:25,756 --> 00:05:27,716 Speaker 1: hundred and seventy thousand dollars in payouts. 89 00:05:27,876 --> 00:05:30,156 Speaker 4: That's a lot of money. 90 00:05:34,756 --> 00:05:38,396 Speaker 1: I'm Michael Lewis, and this is Against the Rules, a 91 00:05:38,436 --> 00:05:40,996 Speaker 1: show where we look at specific roles in American life 92 00:05:41,196 --> 00:05:45,716 Speaker 1: and how they're changing. The fans. Roles changing because a 93 00:05:45,756 --> 00:05:48,396 Speaker 1: powerful new machine has sprung up to encourage the fan 94 00:05:48,476 --> 00:05:52,076 Speaker 1: to gamble on sports. Sports gambling has never been just 95 00:05:52,116 --> 00:05:55,436 Speaker 1: a simple and straightforward marketplace. It's more like a jungle 96 00:05:56,156 --> 00:05:59,516 Speaker 1: and DraftKings and FanDuel are like this invasive species that's 97 00:05:59,556 --> 00:06:03,316 Speaker 1: been dropped into it by accident. They've disrupted the food 98 00:06:03,396 --> 00:06:07,276 Speaker 1: chain and overrun the habitat because they feed so efficiently 99 00:06:07,316 --> 00:06:11,316 Speaker 1: on fan emotion, and fan emotion is the jungle's greatest 100 00:06:11,356 --> 00:06:15,796 Speaker 1: food source. But they're also vulnerable to a creature that 101 00:06:15,836 --> 00:06:31,436 Speaker 1: feeds on them. Let's recall for a minute what sports 102 00:06:31,436 --> 00:06:34,396 Speaker 1: gambling once was in America. By listening to just a 103 00:06:34,436 --> 00:06:37,076 Speaker 1: snippet of a press conference held back in nineteen sixty 104 00:06:37,116 --> 00:06:39,956 Speaker 1: one by then Attorney General Robert F. Kennedy. 105 00:06:40,356 --> 00:06:42,756 Speaker 2: The report has been since the passage of the legislation, 106 00:06:42,836 --> 00:06:47,716 Speaker 2: and that's big time gambling by the big time operators 107 00:06:47,756 --> 00:06:51,196 Speaker 2: has been materially decreased since the passage of. 108 00:06:51,196 --> 00:06:55,436 Speaker 1: The legislation, Kennedy celebrating a new law called the Federal 109 00:06:55,476 --> 00:06:58,316 Speaker 1: Wire Act. The point of the law was to cut 110 00:06:58,316 --> 00:07:00,756 Speaker 1: the legs from under the mafia by shutting down at 111 00:07:00,796 --> 00:07:04,596 Speaker 1: sports gambling operations, by giving the federal government the power 112 00:07:04,636 --> 00:07:07,716 Speaker 1: to arrest and prosecute anyone who booked a sports bet 113 00:07:07,796 --> 00:07:11,076 Speaker 1: over any phone or telegraph wire that crossed state lines. 114 00:07:11,956 --> 00:07:15,436 Speaker 2: And in fact, head of the Royal mount of Police 115 00:07:15,476 --> 00:07:18,916 Speaker 2: in Canada said in the speech last week that Canada 116 00:07:19,036 --> 00:07:21,636 Speaker 2: will now have to pass legislation and take new steps 117 00:07:21,676 --> 00:07:27,476 Speaker 2: because many of the big time gangsters and hudlums of 118 00:07:27,516 --> 00:07:29,876 Speaker 2: the United States are now moving to Canada because of 119 00:07:29,876 --> 00:07:31,556 Speaker 2: the drive that is being made against them here in 120 00:07:31,556 --> 00:07:32,076 Speaker 2: this country. 121 00:07:32,996 --> 00:07:34,876 Speaker 1: When you think of Canada, this isn't the first thing 122 00:07:34,876 --> 00:07:37,836 Speaker 1: that pops into your head, happy refuge for big time 123 00:07:37,876 --> 00:07:41,076 Speaker 1: gangsters and sports gamblers. But I don't know, it was 124 00:07:41,156 --> 00:07:41,756 Speaker 1: a different era. 125 00:07:42,556 --> 00:07:45,756 Speaker 5: I always had an interest in sports. My father coached 126 00:07:45,796 --> 00:07:49,596 Speaker 5: me in swimming and coached me in tennis. But my 127 00:07:49,676 --> 00:07:52,276 Speaker 5: world changed when I found out you could gamble on it. 128 00:07:52,916 --> 00:07:54,516 Speaker 1: I became no longer a fan. 129 00:07:54,676 --> 00:07:56,316 Speaker 5: I became interested in gambling. 130 00:07:57,556 --> 00:08:02,396 Speaker 1: That's Michael Roxborough. Everyone just calls him Roxy now. He 131 00:08:02,436 --> 00:08:05,476 Speaker 1: grew up in the nineteen fifties in Canada in a nice, 132 00:08:05,556 --> 00:08:08,596 Speaker 1: upper middle class family. He's now zooming with me from 133 00:08:08,596 --> 00:08:11,076 Speaker 1: a home and rural Thailand, with the ac blasting in 134 00:08:11,116 --> 00:08:14,716 Speaker 1: the background and a straw fedora on his head and 135 00:08:14,756 --> 00:08:18,156 Speaker 1: the emotional feel of a man in a witness protection program, 136 00:08:18,196 --> 00:08:21,356 Speaker 1: a placeless man. But he really did grow up in Canada. 137 00:08:22,196 --> 00:08:24,716 Speaker 1: When Roxy was a kid, there was a sports gambling market. 138 00:08:25,316 --> 00:08:27,596 Speaker 1: It was smaller and more constrained than it is now, 139 00:08:27,636 --> 00:08:31,356 Speaker 1: but very real, and its center was the pool halls 140 00:08:31,396 --> 00:08:33,156 Speaker 1: of Vancouver, British Columbia. 141 00:08:34,036 --> 00:08:36,796 Speaker 5: If you envision in the movie The Hustler, if you 142 00:08:36,836 --> 00:08:39,636 Speaker 5: take a look at the pool rooms of that day, 143 00:08:39,916 --> 00:08:40,916 Speaker 5: those were the room. 144 00:08:40,996 --> 00:08:45,236 Speaker 6: Those were the pool rooms of my day. It was 145 00:08:45,436 --> 00:08:46,516 Speaker 6: just full of. 146 00:08:46,596 --> 00:08:56,556 Speaker 5: Wannabees, desperadoes, hustlers, drug dealers, bookmakers, everybody that was operating 147 00:08:56,596 --> 00:08:57,636 Speaker 5: outside the law. 148 00:08:57,996 --> 00:09:00,796 Speaker 1: When you got the bug. What's your parents think about it? 149 00:09:01,556 --> 00:09:06,156 Speaker 5: Not too happy. My father was a Harvard MBA and 150 00:09:06,276 --> 00:09:10,476 Speaker 5: my mother was a high school balvictorian, and I think 151 00:09:10,516 --> 00:09:12,076 Speaker 5: they had higher aspirations. 152 00:09:13,196 --> 00:09:15,636 Speaker 1: Roxy's dad wanted him to go to Dartmouth and he 153 00:09:15,716 --> 00:09:18,716 Speaker 1: got in, but he went to American University in DC 154 00:09:19,356 --> 00:09:21,316 Speaker 1: because he sensed the action was better there. 155 00:09:22,196 --> 00:09:27,156 Speaker 5: I ran a blackjack game in the American University dorm 156 00:09:27,316 --> 00:09:30,236 Speaker 5: at night, and that's what's the source of most of 157 00:09:30,276 --> 00:09:33,636 Speaker 5: my profits. But then I got kicked out for what 158 00:09:34,796 --> 00:09:36,196 Speaker 5: for ready that blackjack game. 159 00:09:37,596 --> 00:09:40,636 Speaker 1: Roxy never did finish college. Instead, he went back to Canada, 160 00:09:41,076 --> 00:09:44,516 Speaker 1: cycled in and out of boring jobs, but never stopped gambling. 161 00:09:45,196 --> 00:09:47,596 Speaker 1: And then he finally caught a big break by reading 162 00:09:47,596 --> 00:09:47,996 Speaker 1: a book. 163 00:09:48,836 --> 00:09:51,836 Speaker 5: I was in a Reno airport flying back to Vancouver 164 00:09:53,156 --> 00:09:56,556 Speaker 5: and I picked up a copy of Ed Thorpe's Beat 165 00:09:56,596 --> 00:09:57,116 Speaker 5: the Dealer. 166 00:09:57,956 --> 00:10:00,036 Speaker 1: Beat the Dealer was the first book to show how 167 00:10:00,076 --> 00:10:03,396 Speaker 1: a gambler inside a casino could have a systematic edge 168 00:10:04,036 --> 00:10:07,876 Speaker 1: by counting cards in blackjack. The other casino games, like 169 00:10:07,916 --> 00:10:10,796 Speaker 1: slots and roulette, were more or less perfectly rigged against 170 00:10:10,836 --> 00:10:13,756 Speaker 1: the gambler. Anyone who played them for long enough was 171 00:10:13,796 --> 00:10:18,196 Speaker 1: sure to lose. Blackjack was an exception. Played blackjack for 172 00:10:18,276 --> 00:10:20,996 Speaker 1: long enough, at least the way Ed Thorpe taught people 173 00:10:21,036 --> 00:10:24,716 Speaker 1: to play, and you were sure to win. Betthorpe published 174 00:10:24,716 --> 00:10:27,876 Speaker 1: his book in nineteen sixty six. A few years later 175 00:10:27,996 --> 00:10:30,356 Speaker 1: Roxy read it, and it gave him the idea that 176 00:10:30,436 --> 00:10:31,956 Speaker 1: changed his life. 177 00:10:32,076 --> 00:10:34,836 Speaker 5: I decided that if I'm going to look at sports betting, 178 00:10:34,876 --> 00:10:38,636 Speaker 5: I need to look at it statistically driven, data driven, 179 00:10:39,676 --> 00:10:43,596 Speaker 5: not by not visual or instinct or just watching a 180 00:10:43,676 --> 00:10:44,716 Speaker 5: lot of games. 181 00:10:45,476 --> 00:10:48,636 Speaker 1: Outcomes in sports were obviously far less regular and predictable 182 00:10:48,676 --> 00:10:52,476 Speaker 1: than outcomes inside slot machines or even at blackjack tables. 183 00:10:53,596 --> 00:10:55,716 Speaker 1: But that didn't mean you couldn't learn stuff about sports 184 00:10:55,716 --> 00:10:59,076 Speaker 1: that would allow you to make better predictions. Not perfect predictions, 185 00:10:59,116 --> 00:11:01,596 Speaker 1: but better predictions than everyone else betting on games. In 186 00:11:01,596 --> 00:11:07,036 Speaker 1: the nineteen seventies, Roxy had baseball in mind. The guys 187 00:11:07,076 --> 00:11:12,156 Speaker 1: who booked baseball legally and illegally everywhere else. Rford Gambler 188 00:11:12,236 --> 00:11:13,796 Speaker 1: is the chance to bet on not just who would 189 00:11:13,796 --> 00:11:16,956 Speaker 1: win the game, but how many runs both teams would score. 190 00:11:17,996 --> 00:11:21,436 Speaker 1: Roxy had an insight that seems obvious now. The number 191 00:11:21,476 --> 00:11:24,436 Speaker 1: of runs scored in any baseball game dependent on factors 192 00:11:24,516 --> 00:11:26,876 Speaker 1: like the weather at game time and the size of 193 00:11:26,876 --> 00:11:30,116 Speaker 1: the fields. San Diego's was a good example. 194 00:11:31,036 --> 00:11:32,756 Speaker 5: You just could not hit the ball out of there, 195 00:11:33,316 --> 00:11:36,076 Speaker 5: and then the padres went and spent like an outrageous 196 00:11:36,156 --> 00:11:38,556 Speaker 5: contract to sign a guy like Oscar Gamble. All he 197 00:11:38,596 --> 00:11:41,156 Speaker 5: did is hit fly balls, and that park was a 198 00:11:41,236 --> 00:11:44,436 Speaker 5: place where fly balls went to die. So you've soon 199 00:11:44,556 --> 00:11:47,436 Speaker 5: found out that general managers really didn't know anything about 200 00:11:47,476 --> 00:11:48,676 Speaker 5: their own ballparks either. 201 00:11:49,956 --> 00:11:52,276 Speaker 1: The idea that the people who run sports teams don't 202 00:11:52,316 --> 00:11:54,876 Speaker 1: know what they're doing has probably never been a new idea. 203 00:11:55,596 --> 00:11:58,716 Speaker 1: Fans have always thought that they know better. What was 204 00:11:58,796 --> 00:12:01,196 Speaker 1: new is that someone in the stands was actually figuring 205 00:12:01,236 --> 00:12:04,596 Speaker 1: something out the effects of the wind and the humidity 206 00:12:04,756 --> 00:12:07,196 Speaker 1: and the barometric pressure on a ball that was flying 207 00:12:07,236 --> 00:12:07,796 Speaker 1: through the air. 208 00:12:08,676 --> 00:12:12,116 Speaker 5: We started to start getting weather reports from all the cities, 209 00:12:12,156 --> 00:12:15,796 Speaker 5: the parts out in which ones helped scoring or hindred scoring. 210 00:12:15,916 --> 00:12:17,996 Speaker 1: And dimensions right, I mean just the length of the 211 00:12:18,076 --> 00:12:19,156 Speaker 1: left field fence. 212 00:12:19,596 --> 00:12:22,996 Speaker 5: Dimensions were important, and we found out a couple of 213 00:12:23,036 --> 00:12:27,876 Speaker 5: the ballpark dimensional drawings were wrong. They had the north 214 00:12:27,956 --> 00:12:31,916 Speaker 5: pole raw well pointed north. Because we went out and 215 00:12:31,916 --> 00:12:33,316 Speaker 5: did to ourselves. 216 00:12:35,196 --> 00:12:38,116 Speaker 1: Roxy moves to Vegas full time in nineteen seventy five 217 00:12:38,556 --> 00:12:42,036 Speaker 1: to bet on sports, and just by taking into account 218 00:12:42,116 --> 00:12:44,876 Speaker 1: the weather and the size of ballparks, he's able to 219 00:12:44,876 --> 00:12:47,796 Speaker 1: make a killing while trying to avoid the people who 220 00:12:47,876 --> 00:12:51,196 Speaker 1: know a thing or two about actual killing. For the 221 00:12:51,236 --> 00:12:54,076 Speaker 1: Nevada legal bookmakers detectively run by the mob. 222 00:12:55,036 --> 00:12:58,076 Speaker 5: They'd have LOWITDA had a hand in till about right 223 00:12:58,716 --> 00:13:00,436 Speaker 5: till well age seventy twelve. 224 00:13:00,556 --> 00:13:04,436 Speaker 1: Yeah, I just wonder in that environment was it dangerous. 225 00:13:04,076 --> 00:13:06,236 Speaker 6: To win too much now? 226 00:13:06,796 --> 00:13:09,676 Speaker 5: Because actually what they would do is they could find 227 00:13:09,716 --> 00:13:12,156 Speaker 5: somebody else who could take your bet and they can 228 00:13:12,236 --> 00:13:17,556 Speaker 5: move it for more money someplace else in the country. 229 00:13:18,036 --> 00:13:21,076 Speaker 1: The old sports gambling market inside the United States was shady, 230 00:13:21,436 --> 00:13:24,276 Speaker 1: but it had its unwritten rules, and one was that 231 00:13:24,316 --> 00:13:27,236 Speaker 1: they always took your bets if you bet a lot. 232 00:13:27,476 --> 00:13:31,596 Speaker 1: They eventually moved the lines. These betting lines were all 233 00:13:31,596 --> 00:13:34,196 Speaker 1: set in Vegas for a very long stretch. They were 234 00:13:34,236 --> 00:13:39,276 Speaker 1: actually set in a single Vegas casino, the Stardust. The 235 00:13:39,316 --> 00:13:41,916 Speaker 1: bookie at the Stardust set the odds and everyone else 236 00:13:41,996 --> 00:13:46,116 Speaker 1: just followed his lead. There was a bank of payphones 237 00:13:46,116 --> 00:13:48,156 Speaker 1: outside the stardusts that were said to be the most 238 00:13:48,156 --> 00:13:51,036 Speaker 1: profitable in the country for the phone company because sports 239 00:13:51,076 --> 00:13:53,396 Speaker 1: gamblers used them to relay the odds to the illegal 240 00:13:53,436 --> 00:13:55,356 Speaker 1: bookies and betters across the country. 241 00:13:56,196 --> 00:13:59,756 Speaker 5: Communications back then it was just with a phone call. 242 00:14:00,036 --> 00:14:02,036 Speaker 5: That was the only communications there were. 243 00:14:04,356 --> 00:14:07,356 Speaker 1: In the late nineteen seventies, the Nevada Gaming Control Board 244 00:14:07,436 --> 00:14:10,356 Speaker 1: tossed the mob out of Vegas, out of sports gambling, 245 00:14:10,916 --> 00:14:14,476 Speaker 1: and pretty soon Roxy became old news. By the early 246 00:14:14,556 --> 00:14:16,916 Speaker 1: nineteen eighties, everyone knew that the weather and the size 247 00:14:16,956 --> 00:14:20,596 Speaker 1: of ballparks had big effects on baseball scores, and Roxy 248 00:14:20,676 --> 00:14:24,716 Speaker 1: never found another systematic edge, and his life became a 249 00:14:24,756 --> 00:14:28,236 Speaker 1: bit of a mess. He'd been arrested for violating rfk's 250 00:14:28,236 --> 00:14:31,556 Speaker 1: Wire Act, he'd taken crazy risks as an illegal book maker, 251 00:14:31,756 --> 00:14:35,436 Speaker 1: and he'd run through two marriages. Is a gambling business 252 00:14:35,436 --> 00:14:39,196 Speaker 1: hard out of relationships. 253 00:14:37,716 --> 00:14:38,836 Speaker 6: Charity why. 254 00:14:39,636 --> 00:14:43,276 Speaker 5: It just sort of takes over your mood and your personality. 255 00:14:45,476 --> 00:14:47,556 Speaker 5: I don't know anybody who's ever been in gambling thought 256 00:14:47,556 --> 00:14:49,236 Speaker 5: they were a better person for it. 257 00:14:49,236 --> 00:14:51,396 Speaker 1: It's interesting because when you think about why a person 258 00:14:51,436 --> 00:14:53,516 Speaker 1: would drift into gambling in the first place, it would 259 00:14:53,556 --> 00:14:55,076 Speaker 1: be because you think it might be an easy way 260 00:14:55,116 --> 00:14:57,996 Speaker 1: to make money. Yes, it ends up being a harder 261 00:14:57,996 --> 00:14:58,796 Speaker 1: way to make money. 262 00:14:59,996 --> 00:15:00,396 Speaker 6: It does. 263 00:15:00,956 --> 00:15:03,276 Speaker 5: What did they say, it's a hard way to make 264 00:15:03,316 --> 00:15:04,076 Speaker 5: an easy living. 265 00:15:05,876 --> 00:15:09,876 Speaker 1: People said that Roxy now knew itineteen eighty two, he 266 00:15:09,956 --> 00:15:14,956 Speaker 1: quits gambling. He creates a company called Las Vegas Sports Consultants. 267 00:15:16,076 --> 00:15:19,436 Speaker 1: This new company will effectively replace the Stardust Casino in 268 00:15:19,476 --> 00:15:23,516 Speaker 1: setting the odds for all major sports contests. Roxy's just 269 00:15:23,556 --> 00:15:27,156 Speaker 1: better at it, and pretty soon he's selling his odds 270 00:15:27,356 --> 00:15:31,756 Speaker 1: to all the sports bookies, including the Stardust. This makes 271 00:15:31,796 --> 00:15:35,556 Speaker 1: sense to everybody in Las Vegas. Hiring Roxy to set 272 00:15:35,596 --> 00:15:37,756 Speaker 1: the odds in sports is like hiring the first card 273 00:15:37,796 --> 00:15:39,836 Speaker 1: counter to guard the blackjack tables. 274 00:15:41,116 --> 00:15:42,476 Speaker 5: So I said, you know, I'm going to try this 275 00:15:42,516 --> 00:15:44,876 Speaker 5: for a couple of years, but I'm not sure if 276 00:15:44,876 --> 00:15:49,116 Speaker 5: it's going to work. Because it wasn't given that every 277 00:15:49,236 --> 00:15:51,316 Speaker 5: hotel was going to have a sportsbook. It was there 278 00:15:51,356 --> 00:15:55,196 Speaker 5: rather limited business. But that was one of my better 279 00:15:55,236 --> 00:15:57,836 Speaker 5: decisions because it turned out to be a massive business. 280 00:15:58,996 --> 00:16:02,116 Speaker 1: Sports gambling isn't exactly a financial market, but it rhymes 281 00:16:02,156 --> 00:16:05,516 Speaker 1: with financial markets. What happens on Wall Street, somehow eventually 282 00:16:05,636 --> 00:16:08,676 Speaker 1: also happens in sports gambling and Wall Street's about to 283 00:16:08,756 --> 00:16:12,716 Speaker 1: undergo dramatic change. First computers and then the Internet will 284 00:16:12,756 --> 00:16:15,396 Speaker 1: allow the markets to become a lot more complicated and 285 00:16:15,436 --> 00:16:19,156 Speaker 1: the bets a lot more complex. The world's about to 286 00:16:19,196 --> 00:16:21,636 Speaker 1: speed up, and a new kind of person with a 287 00:16:21,636 --> 00:16:25,276 Speaker 1: different kind of education is going to enter it. Old 288 00:16:25,276 --> 00:16:27,796 Speaker 1: school traders with high school degrees and lots of body 289 00:16:27,796 --> 00:16:30,476 Speaker 1: hair and names like Vinnie and Donnie are about to 290 00:16:30,516 --> 00:16:34,596 Speaker 1: be replaced by hairless PhDs from MIT with computer models 291 00:16:34,996 --> 00:16:37,276 Speaker 1: who as kids thought they grow up to be professors, 292 00:16:37,316 --> 00:16:41,276 Speaker 1: not traders. On Wall Street in the late nineteen eighties, 293 00:16:41,716 --> 00:16:45,076 Speaker 1: smart old school guys served as a kind of bridge 294 00:16:45,196 --> 00:16:50,556 Speaker 1: between the two cultures in sports gambling. Roxy was that bridge, 295 00:16:50,876 --> 00:16:52,716 Speaker 1: but it took a while for anyone to cross it. 296 00:17:09,196 --> 00:17:09,876 Speaker 2: We're here to. 297 00:17:09,836 --> 00:17:16,436 Speaker 1: See Rufus Peabody. We're in the right place. We're still 298 00:17:16,436 --> 00:17:18,756 Speaker 1: in Vegas, but far from the strip. 299 00:17:20,516 --> 00:17:21,156 Speaker 6: We're not gonna be la. 300 00:17:21,236 --> 00:17:22,716 Speaker 1: We're just gonna make a bunch of sports bets. He 301 00:17:22,756 --> 00:17:27,036 Speaker 1: runs into Lego game win option. I've never even knew 302 00:17:27,116 --> 00:17:35,996 Speaker 1: that any action. The real action is no longer on 303 00:17:36,116 --> 00:17:40,956 Speaker 1: the strip. The real action is basically invisible. But here 304 00:17:41,316 --> 00:17:44,116 Speaker 1: on the seventeenth floor with a sweeping view of the 305 00:17:44,156 --> 00:17:48,716 Speaker 1: distant casinos. Rufus Peabody lives and works. 306 00:17:49,316 --> 00:17:50,796 Speaker 5: We're here, We're here. 307 00:17:51,276 --> 00:17:54,196 Speaker 1: Rufus Peabody is who crossed Roxy's bridge. 308 00:17:54,796 --> 00:17:57,396 Speaker 7: I never was a better as a kid. I didn't 309 00:17:57,396 --> 00:17:58,596 Speaker 7: know anything about sports betting. 310 00:17:58,636 --> 00:18:01,196 Speaker 1: You need you feel a little little twinge of desire. 311 00:18:01,556 --> 00:18:05,116 Speaker 7: No, most people that got their start, they started losing 312 00:18:05,196 --> 00:18:06,156 Speaker 7: and they learned how to win. 313 00:18:06,236 --> 00:18:07,556 Speaker 6: But I was never better. 314 00:18:07,596 --> 00:18:10,676 Speaker 7: I never grew up betting like besides NCAA tournament pools, 315 00:18:10,716 --> 00:18:13,316 Speaker 7: I was always good at those, But for me, it 316 00:18:13,356 --> 00:18:17,196 Speaker 7: was a game, and I'm not I'm a risk taker, 317 00:18:17,196 --> 00:18:18,516 Speaker 7: but I'm not a gambler by nature. 318 00:18:19,356 --> 00:18:23,556 Speaker 1: Rufus grew up outside of Washington, DC. Always loved sports, 319 00:18:23,716 --> 00:18:25,956 Speaker 1: thought he might like to be a sports journalist. He 320 00:18:25,996 --> 00:18:28,916 Speaker 1: still reminds me a bit of a journalist. He's a watcher, 321 00:18:29,556 --> 00:18:32,876 Speaker 1: a person whose eyes moved more than his mouth. But 322 00:18:32,956 --> 00:18:34,876 Speaker 1: even when he was a kid, his mind took him 323 00:18:34,876 --> 00:18:36,676 Speaker 1: places that journalism usually doesn't. 324 00:18:37,196 --> 00:18:39,556 Speaker 6: So so it was this team one eighty two to 325 00:18:39,596 --> 00:18:40,116 Speaker 6: sixty four. 326 00:18:40,196 --> 00:18:41,036 Speaker 1: But why did they win? 327 00:18:41,196 --> 00:18:41,596 Speaker 6: Basically? 328 00:18:41,676 --> 00:18:44,556 Speaker 7: I kind of wanted to report on the why it happened, 329 00:18:44,676 --> 00:18:47,156 Speaker 7: rather than just this guy got eighteen points and twelve 330 00:18:47,156 --> 00:18:49,596 Speaker 7: rebounds and this team one right. 331 00:18:50,156 --> 00:18:52,636 Speaker 6: I kind of wanted the story of why right. 332 00:18:52,756 --> 00:18:56,796 Speaker 1: He want explanation, I want explanations. In two thousand and four, 333 00:18:57,036 --> 00:19:00,436 Speaker 1: Rufus graduated from high school and went to Yale. He 334 00:19:00,556 --> 00:19:05,116 Speaker 1: was still obsessed with figuring out why. He studied statistics 335 00:19:05,236 --> 00:19:08,036 Speaker 1: and built models that predicted the performance of athletes and 336 00:19:08,076 --> 00:19:11,156 Speaker 1: the outcomes of sport events, not because he wanted to 337 00:19:11,196 --> 00:19:13,876 Speaker 1: gamble on them, just because it was cool to figure 338 00:19:13,876 --> 00:19:16,956 Speaker 1: out stuff that even people who run sports teams don't know. 339 00:19:17,956 --> 00:19:20,516 Speaker 1: He wanders around Yale looking for someone to teach him more. 340 00:19:21,276 --> 00:19:25,036 Speaker 8: Rufus wants to do a thesis on, if I remember correctly, 341 00:19:25,796 --> 00:19:28,836 Speaker 8: behavioral biases and the baseball betting market. 342 00:19:29,636 --> 00:19:32,676 Speaker 1: He's who rufe has found. His name is Cade Massey. 343 00:19:33,596 --> 00:19:37,596 Speaker 1: He's a professor of organizational behavior. Was it interesting? 344 00:19:38,236 --> 00:19:41,596 Speaker 8: Oh yeah, absolutely? I mean what's not interesting about trying 345 00:19:41,636 --> 00:19:44,996 Speaker 8: to find psychological mistakes that people make with like, you know, 346 00:19:45,356 --> 00:19:48,556 Speaker 8: hundreds of thousands of observations of real money. 347 00:19:48,276 --> 00:19:50,036 Speaker 1: Being bet and he found mistakes. 348 00:19:50,196 --> 00:19:53,156 Speaker 8: I mean, he was finding profitable strategies right off the bet. 349 00:19:54,156 --> 00:19:58,036 Speaker 1: Rufus just kept asking questions about the behavior of sports gamblers. 350 00:19:58,596 --> 00:20:02,116 Speaker 1: He still wasn't placing bets himself. He was just working 351 00:20:02,156 --> 00:20:04,716 Speaker 1: with this professor to build a model to predict college 352 00:20:04,716 --> 00:20:08,036 Speaker 1: football scores. They pitched it to the Wall Street Journal, 353 00:20:08,076 --> 00:20:10,596 Speaker 1: and the journal agreed to publish their college football picks 354 00:20:10,636 --> 00:20:13,236 Speaker 1: of the week. It was just how they would bet, 355 00:20:13,356 --> 00:20:15,156 Speaker 1: were they to bet on college football. 356 00:20:16,676 --> 00:20:19,276 Speaker 8: And he would then post our picks of the week. 357 00:20:19,316 --> 00:20:21,036 Speaker 8: We were just posting them because we were working with 358 00:20:21,036 --> 00:20:23,556 Speaker 8: the Wall Streeter journals, so post him on Tuesday on Wednesday, 359 00:20:23,756 --> 00:20:26,436 Speaker 8: and then he would watch as the prices started moving 360 00:20:26,476 --> 00:20:27,076 Speaker 8: on his screen. 361 00:20:27,156 --> 00:20:30,156 Speaker 1: Oh my god, which is to say the sports gambling 362 00:20:30,156 --> 00:20:34,276 Speaker 1: market would see their picks and move in response, because 363 00:20:34,276 --> 00:20:36,796 Speaker 1: the market figured out that their picks were that good. 364 00:20:37,156 --> 00:20:40,196 Speaker 8: Within a year or so, we quit posting college picks 365 00:20:40,196 --> 00:20:42,156 Speaker 8: because it was getting too much in the way of 366 00:20:42,196 --> 00:20:42,956 Speaker 8: what he was trying to. 367 00:20:42,876 --> 00:20:45,036 Speaker 1: Do, because he wanted to bet it himself. 368 00:20:45,956 --> 00:20:46,956 Speaker 8: Because he wanted to bet it. 369 00:20:47,116 --> 00:20:48,796 Speaker 1: And if they're so good, you would bet them, you 370 00:20:48,796 --> 00:20:52,036 Speaker 1: wouldn't sell them, right. I mean, it was bound to 371 00:20:52,076 --> 00:20:54,156 Speaker 1: eventually occur to Rufus that if he could predict the 372 00:20:54,236 --> 00:20:57,156 Speaker 1: scores of college football games, then he should just bet 373 00:20:57,196 --> 00:21:00,396 Speaker 1: on them. Himself, but it's funny how he got there. 374 00:21:00,396 --> 00:21:04,516 Speaker 1: In his head, Roxy Roxboro had started as a gambler 375 00:21:05,196 --> 00:21:07,556 Speaker 1: who then set out to find some kind of edge 376 00:21:07,596 --> 00:21:12,076 Speaker 1: to bet. Rufus Peabody started by finding these edges and 377 00:21:12,196 --> 00:21:18,196 Speaker 1: kind of stumbled into gambling and then found Roxy. During 378 00:21:18,276 --> 00:21:21,196 Speaker 1: Rufus's junior year at Yale, he read an article in 379 00:21:21,476 --> 00:21:27,076 Speaker 1: ESPN about Roxy's sports analytics company, Las Vegas Sports Consultants. 380 00:21:27,436 --> 00:21:30,676 Speaker 1: Roxy's company wasn't used to getting resumes from Yale juniors, 381 00:21:31,436 --> 00:21:34,316 Speaker 1: but they gave him a summer internship anyway and showed 382 00:21:34,396 --> 00:21:36,916 Speaker 1: him their world. From their offices right next to the 383 00:21:36,996 --> 00:21:38,436 Speaker 1: Las Vegas Airport. 384 00:21:39,316 --> 00:21:41,596 Speaker 7: They would bet on what plane was most likely to 385 00:21:41,996 --> 00:21:43,796 Speaker 7: land next right, and this is like sort of pre 386 00:21:43,916 --> 00:21:46,316 Speaker 7: internet days or pretty like being able to see flight 387 00:21:46,356 --> 00:21:49,236 Speaker 7: plans and stuff like that, and so it was like, okay, 388 00:21:49,276 --> 00:21:52,356 Speaker 7: American Airlines is like six to one, like you know, 389 00:21:52,676 --> 00:21:57,436 Speaker 7: Southwest is two to one whatever. What people didn't realize, though, 390 00:21:57,476 --> 00:22:01,036 Speaker 7: was Roxy actually had a contact in the control tower, 391 00:22:01,916 --> 00:22:07,156 Speaker 7: and so Roxy won. He made money off of these bets, 392 00:22:07,636 --> 00:22:11,236 Speaker 7: but he didn't make enough to try a suspicion that 393 00:22:11,396 --> 00:22:14,796 Speaker 7: was the key. But he would occasionally hit the Japan 394 00:22:14,876 --> 00:22:16,876 Speaker 7: Air at three hundred to one, right or whatever. 395 00:22:21,556 --> 00:22:24,996 Speaker 1: Roxy screw would bet on everything. Rufus wasn't like that. 396 00:22:26,196 --> 00:22:27,916 Speaker 1: He didn't even think of what he wanted to do 397 00:22:28,036 --> 00:22:32,236 Speaker 1: as gambling, But he did want to understand this other world, 398 00:22:32,636 --> 00:22:35,636 Speaker 1: this world where people bet on anything that moved. 399 00:22:36,276 --> 00:22:39,516 Speaker 7: They shared the building with American Wagering, so with LeRoy's, 400 00:22:39,556 --> 00:22:45,476 Speaker 7: which was a sort of third party sportsbook operator. Lerois 401 00:22:45,516 --> 00:22:48,596 Speaker 7: didn't have a casino, but they were in casinos like 402 00:22:48,676 --> 00:22:49,596 Speaker 7: Hooters or. 403 00:22:51,236 --> 00:22:52,236 Speaker 6: Terrible herbst. 404 00:22:52,436 --> 00:22:54,116 Speaker 1: Right, Hooters has a casino. 405 00:22:54,556 --> 00:22:57,636 Speaker 6: Yeah, Hooters casino. It's on the strip. It's right Tropic 406 00:22:57,636 --> 00:22:58,236 Speaker 6: Cano basically. 407 00:22:58,316 --> 00:22:58,516 Speaker 1: Right. 408 00:22:59,076 --> 00:23:02,356 Speaker 7: Yeah, So I met, I meet this the head trader there, right, 409 00:23:02,636 --> 00:23:05,636 Speaker 7: and I have all these questions. A bookmaker can make 410 00:23:05,676 --> 00:23:08,796 Speaker 7: more money, Let's say, if they know the public's bias. 411 00:23:08,836 --> 00:23:11,356 Speaker 7: They can make more money setting a line somewhere between 412 00:23:11,396 --> 00:23:13,756 Speaker 7: the true price and the price the public thinks that's 413 00:23:13,796 --> 00:23:18,036 Speaker 7: the way to maximize. 414 00:23:18,196 --> 00:23:20,276 Speaker 1: There's no reason you should understand what rufe has just 415 00:23:20,316 --> 00:23:22,796 Speaker 1: said there, but let me try to explain it, because 416 00:23:22,796 --> 00:23:24,716 Speaker 1: it tells you a bit about how this old school 417 00:23:24,756 --> 00:23:28,996 Speaker 1: sports gambling world works. The line is just the odds 418 00:23:29,236 --> 00:23:32,636 Speaker 1: or the point spread, the true price is what the 419 00:23:32,676 --> 00:23:36,516 Speaker 1: odds would be if you somehow knew every possible relevant 420 00:23:36,556 --> 00:23:40,636 Speaker 1: bit of information about some upcoming game. Of course, no 421 00:23:40,676 --> 00:23:44,076 Speaker 1: one ever knows everything, so there is in reality, never 422 00:23:44,156 --> 00:23:48,036 Speaker 1: a perfect true price, just some number that the smartest 423 00:23:48,036 --> 00:23:51,876 Speaker 1: and best informed betters agree on. Say, they agree that 424 00:23:51,916 --> 00:23:54,916 Speaker 1: the Packers should be eight point favorites over the Cowboys, 425 00:23:56,076 --> 00:23:59,116 Speaker 1: but most of the gamblers are Cowboys fans, and the 426 00:23:59,156 --> 00:24:02,556 Speaker 1: Cowboys fans think the Cowboys are only three point underdogs. 427 00:24:03,516 --> 00:24:05,836 Speaker 1: Rufus was asking the bookie if he thought he could 428 00:24:05,956 --> 00:24:08,876 Speaker 1: entice the public to make more stupid bets if he 429 00:24:08,916 --> 00:24:11,476 Speaker 1: said the line not at the true price of eight points, 430 00:24:11,636 --> 00:24:15,556 Speaker 1: but it's say five points, because Cowboys fans will think 431 00:24:15,596 --> 00:24:18,516 Speaker 1: the Cowboys are better than they actually are and bet 432 00:24:18,556 --> 00:24:19,076 Speaker 1: even more. 433 00:24:20,316 --> 00:24:22,396 Speaker 7: I said, theoretically, you can make more money setting a 434 00:24:22,436 --> 00:24:25,036 Speaker 7: line like somewhere between the true price and where the 435 00:24:25,036 --> 00:24:25,956 Speaker 7: public thinks the price is. 436 00:24:25,956 --> 00:24:30,636 Speaker 6: And he says, theory theory, and theory dick don't fit 437 00:24:30,676 --> 00:24:39,636 Speaker 6: in an asshole. And this guy, yeah, he was. 438 00:24:39,836 --> 00:24:44,236 Speaker 7: He was probably three hundred pounds five to eight, smoking 439 00:24:44,236 --> 00:24:46,316 Speaker 7: a cigar in a dark room, looking at a bunch 440 00:24:46,356 --> 00:24:47,036 Speaker 7: of numbers on. 441 00:24:46,956 --> 00:24:50,356 Speaker 1: A screen, in just a flash. There, you've changed our 442 00:24:50,396 --> 00:24:51,236 Speaker 1: podcast rating. 443 00:24:51,596 --> 00:24:56,516 Speaker 6: Sorry. 444 00:25:02,476 --> 00:25:06,076 Speaker 1: Rufus Peabody recently of Yale is no one's idea of 445 00:25:06,076 --> 00:25:10,036 Speaker 1: a hustler. He's too sweet natured and even and way 446 00:25:10,076 --> 00:25:12,556 Speaker 1: too open to telling other people about the stuff he's learned. 447 00:25:13,796 --> 00:25:16,036 Speaker 1: He finishes up at Yale and moves back to Vegas 448 00:25:16,116 --> 00:25:20,396 Speaker 1: to work full time at Las Vegas Sports Consultants. But 449 00:25:20,516 --> 00:25:23,956 Speaker 1: now Rufus thinks he might have an edge, and people 450 00:25:23,996 --> 00:25:26,876 Speaker 1: in and around Roxy's firm think that maybe he's right. 451 00:25:27,916 --> 00:25:30,156 Speaker 6: The Super Bowl was my first big break. Super Bowl 452 00:25:30,156 --> 00:25:30,996 Speaker 6: two thousand and nine. 453 00:25:31,236 --> 00:25:34,476 Speaker 7: Okay, I had made a friend with a professional sports 454 00:25:34,516 --> 00:25:40,036 Speaker 7: better guy that bet baseball, and he loaned me ten 455 00:25:40,036 --> 00:25:43,036 Speaker 7: thousand dollars to bet. I had my own ten to 456 00:25:43,076 --> 00:25:48,396 Speaker 7: twelve thousand dollars. My boss, Kenny, unbeknownst to everybody else, 457 00:25:49,076 --> 00:25:52,396 Speaker 7: invested forty thousand dollars in me and gave me a 458 00:25:52,396 --> 00:25:53,636 Speaker 7: twenty percent free roll on. 459 00:25:53,636 --> 00:25:57,596 Speaker 1: It, meaning that if it wins, you take twenty percent 460 00:25:57,596 --> 00:26:00,396 Speaker 1: of the rance, but you've suffered another losses correct. 461 00:26:01,436 --> 00:26:04,956 Speaker 7: And so I ended up with close to sixty thousand 462 00:26:04,996 --> 00:26:07,116 Speaker 7: dollars bet on the Super Bowl, and so I basically 463 00:26:07,236 --> 00:26:10,636 Speaker 7: was pretty leveraged. Yeah, and I remember being like, this 464 00:26:10,916 --> 00:26:13,956 Speaker 7: game doesn't work out, you know, I gave it a shot. 465 00:26:13,676 --> 00:26:15,636 Speaker 1: All right? And what is causing you to have such 466 00:26:15,716 --> 00:26:17,076 Speaker 1: conviction about a game? 467 00:26:17,396 --> 00:26:17,556 Speaker 5: Oh? 468 00:26:17,596 --> 00:26:20,116 Speaker 6: Nothing. It wasn't conviction about the game. It was betting 469 00:26:20,116 --> 00:26:20,596 Speaker 6: the props. 470 00:26:21,596 --> 00:26:26,196 Speaker 1: The props short for proposition bets, not on the whole game, 471 00:26:26,276 --> 00:26:29,756 Speaker 1: but pieces of the game. The standard story, which is 472 00:26:29,796 --> 00:26:32,556 Speaker 1: almost certainly not true, was that the prop bet was 473 00:26:32,556 --> 00:26:35,316 Speaker 1: invented for the nineteen eighty six Super Bowl between the 474 00:26:35,396 --> 00:26:38,836 Speaker 1: Chicago Bears and the New England Patriots. The Bears were 475 00:26:38,836 --> 00:26:41,476 Speaker 1: such heavy favorites that Vegas had trouble gitting up interest 476 00:26:41,516 --> 00:26:44,996 Speaker 1: in the game, so a Vegas bookie created a side 477 00:26:45,036 --> 00:26:49,476 Speaker 1: bet the odds that a Bear's defensive tackle named William 478 00:26:49,516 --> 00:26:53,476 Speaker 1: the Refrigerator Perry would score a touchdown. It was a 479 00:26:53,476 --> 00:26:56,356 Speaker 1: long shot bet, and the betting public loved it, and 480 00:26:56,436 --> 00:27:00,316 Speaker 1: Vegas bookies lost a fortune when the fridge did indeed score. 481 00:27:01,316 --> 00:27:04,076 Speaker 1: But back to Rufus and forward to the Super Bowl 482 00:27:04,156 --> 00:27:07,796 Speaker 1: of two thousand and nine, the Pittsburgh Steelers played the 483 00:27:07,836 --> 00:27:11,876 Speaker 1: Arizona Cardinals. Rufus wasn't betting the whole game, but pieces 484 00:27:11,916 --> 00:27:14,996 Speaker 1: of the game. His pro football model spits out odds 485 00:27:15,036 --> 00:27:17,556 Speaker 1: for all this weird stuff that Vegas bookies are now 486 00:27:17,596 --> 00:27:21,356 Speaker 1: offering bets on the odds that Steeler's running back Gary 487 00:27:21,436 --> 00:27:25,876 Speaker 1: Russell will score the game's first touchdown. For example, Rufus 488 00:27:25,916 --> 00:27:29,836 Speaker 1: has vast troves of data to mine. He can do 489 00:27:29,916 --> 00:27:33,196 Speaker 1: stuff with it that roxy would never imagine. He could 490 00:27:33,236 --> 00:27:35,436 Speaker 1: do stuff that even the people who run the Pittsburgh 491 00:27:35,476 --> 00:27:39,676 Speaker 1: Steelers would never imagine doing. I mean, even Gary Russell 492 00:27:39,836 --> 00:27:42,876 Speaker 1: likely has no idea that you can calculate the odds 493 00:27:42,876 --> 00:27:46,316 Speaker 1: that he will score the game's first touchdown. But Rufus can. 494 00:27:47,276 --> 00:27:50,116 Speaker 1: His model puts those odds much higher than the bookies' odds, 495 00:27:50,796 --> 00:27:54,236 Speaker 1: So in Rufus's mind, it's a great bet. He makes 496 00:27:54,356 --> 00:27:57,636 Speaker 1: dozens of similar bets, bets where his model tells him 497 00:27:57,676 --> 00:28:00,116 Speaker 1: that the bookies are giving him better odds than they should. 498 00:28:01,196 --> 00:28:08,876 Speaker 7: I still remember going it was like Harrah's Caesar's the Rio. 499 00:28:09,396 --> 00:28:11,796 Speaker 7: I ended up getting down like two hundred dollars at 500 00:28:11,836 --> 00:28:15,116 Speaker 7: a time like five thousand dollars. Positions on a few 501 00:28:15,116 --> 00:28:19,676 Speaker 7: things like that were really good, and so I was. 502 00:28:19,596 --> 00:28:22,036 Speaker 1: Diversified within the game. 503 00:28:22,396 --> 00:28:24,116 Speaker 7: Within the game, I wasn't betting on the outcome of 504 00:28:24,156 --> 00:28:25,836 Speaker 7: the game, but I was still I still to this day, 505 00:28:25,876 --> 00:28:27,036 Speaker 7: have never watched that game. 506 00:28:27,236 --> 00:28:28,036 Speaker 6: I was too nervous. 507 00:28:28,476 --> 00:28:30,876 Speaker 1: How did you experience the game if you didn't watch it. 508 00:28:31,636 --> 00:28:34,516 Speaker 7: I went to this little Part three course that's open 509 00:28:34,556 --> 00:28:38,276 Speaker 7: at night, right south of the airport, and I played 510 00:28:39,356 --> 00:28:43,236 Speaker 7: the Part three course twice until I felt like the 511 00:28:43,236 --> 00:28:46,276 Speaker 7: game would definitely be over. And then I went grocery shopping. 512 00:28:47,236 --> 00:28:49,916 Speaker 7: And I didn't have a smart this is pretty smartphone. 513 00:28:50,156 --> 00:28:52,036 Speaker 7: I went grocery shopping, and then I went home and 514 00:28:52,076 --> 00:28:52,956 Speaker 7: cooked myself dinner. 515 00:28:53,156 --> 00:28:53,436 Speaker 1: Huh. 516 00:28:54,076 --> 00:28:56,596 Speaker 7: And then and only then did I open my computer 517 00:28:57,316 --> 00:28:58,796 Speaker 7: and check and see how the game went. 518 00:28:59,156 --> 00:29:00,956 Speaker 1: And were you just going through your prop bets seeing 519 00:29:00,996 --> 00:29:02,036 Speaker 1: what happened? First? 520 00:29:02,036 --> 00:29:03,876 Speaker 7: I went to the boss score and I saw the 521 00:29:03,916 --> 00:29:06,436 Speaker 7: first score was Gary Russell one yard touchdown run. 522 00:29:07,476 --> 00:29:09,196 Speaker 6: I was like, ah. 523 00:29:08,836 --> 00:29:11,876 Speaker 7: Right, And it turned out out of like fifty six 524 00:29:11,916 --> 00:29:15,516 Speaker 7: thousand dollars bet like I profited like twenty three thousand 525 00:29:15,596 --> 00:29:15,876 Speaker 7: on it. 526 00:29:17,316 --> 00:29:20,556 Speaker 1: Rufus figures out how much he's won. Then he physically 527 00:29:20,556 --> 00:29:23,596 Speaker 1: retraces his steps to the many casinos that had taken 528 00:29:23,676 --> 00:29:27,556 Speaker 1: his many bets, still driving an old Honda Civic. You 529 00:29:27,636 --> 00:29:28,596 Speaker 1: aren't all these little. 530 00:29:28,356 --> 00:29:30,476 Speaker 6: Tickets you have to write, you go cash. 531 00:29:30,396 --> 00:29:32,596 Speaker 1: Each one individually. So you had it. You must have 532 00:29:32,636 --> 00:29:33,716 Speaker 1: had one hundred tickets. 533 00:29:33,836 --> 00:29:34,836 Speaker 6: Oh yeah, probably. 534 00:29:35,836 --> 00:29:40,676 Speaker 1: He just drives around Las Vegas and the money piles up, and. 535 00:29:40,636 --> 00:29:43,196 Speaker 7: I remember having like thirty thousand dollars on that front 536 00:29:43,236 --> 00:29:45,996 Speaker 7: seat and being like, oh my god, so much money 537 00:29:46,676 --> 00:29:52,556 Speaker 7: in cash, in cash. 538 00:29:52,596 --> 00:29:55,396 Speaker 1: After that, lots of people in Vegas wanted to lend 539 00:29:55,436 --> 00:29:59,036 Speaker 1: money to Rufus and take a cut of his bets. Rufus, 540 00:29:59,036 --> 00:30:01,156 Speaker 1: for his part, was still sitting in his office in 541 00:30:01,236 --> 00:30:05,156 Speaker 1: Las Vegas Sports Consultants, but pretty soon he was directing 542 00:30:05,196 --> 00:30:07,676 Speaker 1: an army of people to lay bets in sports books 543 00:30:07,676 --> 00:30:11,516 Speaker 1: across the city, sports books that got their odds from 544 00:30:11,596 --> 00:30:15,756 Speaker 1: Las Vegas Sports Consultants. Rufus was in effect betting against 545 00:30:15,796 --> 00:30:20,276 Speaker 1: the lines created by Roxy's firm. Roxy himself had moved 546 00:30:20,316 --> 00:30:22,876 Speaker 1: on at this point, but he watched what Rufus was 547 00:30:22,916 --> 00:30:24,596 Speaker 1: doing and he admired it. 548 00:30:25,476 --> 00:30:27,876 Speaker 5: He came to Bootcat once I met him, even after 549 00:30:27,956 --> 00:30:31,476 Speaker 5: one line. She said, this guy's thinking at a higher 550 00:30:31,596 --> 00:30:35,756 Speaker 5: level than other people. And I learned a lot for 551 00:30:35,836 --> 00:30:39,636 Speaker 5: a moment, not because he was divulging your secrets, but 552 00:30:39,796 --> 00:30:41,276 Speaker 5: he was just thinking at a higher. 553 00:30:41,116 --> 00:30:44,956 Speaker 1: Level to get his edge. Roxy had used weather reports, 554 00:30:45,876 --> 00:30:48,836 Speaker 1: Rufus was using the spin rates on pitcher's curveballs. 555 00:30:49,276 --> 00:30:53,116 Speaker 7: I try to drill things down to their root. Cause 556 00:30:53,316 --> 00:30:56,316 Speaker 7: it's kind of what you do when you write books. 557 00:30:56,356 --> 00:30:58,996 Speaker 7: You try to figure out the person, what makes them tick, 558 00:30:59,436 --> 00:31:01,836 Speaker 7: what's the story. I try to figure out why things 559 00:31:01,916 --> 00:31:04,556 Speaker 7: happen in a baseball game or a golf tournament. What 560 00:31:04,676 --> 00:31:07,796 Speaker 7: makes the player good? It's not just their score, Like 561 00:31:07,836 --> 00:31:10,316 Speaker 7: what are the things that are driving the score, which 562 00:31:10,356 --> 00:31:14,156 Speaker 7: of those are repeatable, which aren't? And right now you 563 00:31:14,236 --> 00:31:16,756 Speaker 7: have all this like computer vision, that type of data 564 00:31:16,756 --> 00:31:18,796 Speaker 7: available now, and with a lot of these sports, I 565 00:31:18,796 --> 00:31:21,836 Speaker 7: mean we're now talking about bat speed, measuring bat speed 566 00:31:21,876 --> 00:31:24,596 Speaker 7: and looking at like aging curves for bat speed. 567 00:31:25,396 --> 00:31:27,836 Speaker 1: The whole point of Rufus is that he never lets 568 00:31:27,876 --> 00:31:31,476 Speaker 1: emotion interfere with his process. But that doesn't mean he 569 00:31:31,476 --> 00:31:36,196 Speaker 1: doesn't feel emotion. He does. He feels it for his process. 570 00:31:36,676 --> 00:31:40,356 Speaker 7: We're using bat speed to then predict exit velocity, and 571 00:31:40,356 --> 00:31:43,356 Speaker 7: we're using exit velocity to then predict like weighted on 572 00:31:43,436 --> 00:31:46,556 Speaker 7: base average and basically whether a ball will be hit 573 00:31:46,636 --> 00:31:48,236 Speaker 7: or not, and what kind of damage it will be 574 00:31:48,236 --> 00:31:51,516 Speaker 7: if it is and then you know, use that to 575 00:31:51,556 --> 00:31:52,196 Speaker 7: predict wins. 576 00:31:52,236 --> 00:31:53,076 Speaker 1: And how did it work? 577 00:31:53,756 --> 00:31:54,276 Speaker 6: How did it work? 578 00:31:54,316 --> 00:31:57,516 Speaker 7: It worked well, we made one hundred and twenty five 579 00:31:57,556 --> 00:31:59,236 Speaker 7: thousand in the first month. I don't know what our 580 00:31:59,276 --> 00:32:02,356 Speaker 7: volume was overall, and I got twenty percent of it, 581 00:32:03,436 --> 00:32:08,956 Speaker 7: which was great because my yearly salary was twenty five thousands. 582 00:32:09,276 --> 00:32:12,116 Speaker 1: Come the card counter at the blackjack table, only it 583 00:32:12,196 --> 00:32:16,076 Speaker 1: was richer than that. He was generating new insight about 584 00:32:16,116 --> 00:32:19,996 Speaker 1: why things happened in sports. A blackjack dealer knows where 585 00:32:19,996 --> 00:32:22,516 Speaker 1: the card counter gets his edge. The sports book he 586 00:32:22,556 --> 00:32:26,316 Speaker 1: couldn't really tell where Rufus was getting his, which made 587 00:32:26,396 --> 00:32:29,916 Speaker 1: Rufus and what he was doing even more unsettling. And 588 00:32:30,196 --> 00:32:33,156 Speaker 1: did the M at any point say we're now taking 589 00:32:33,196 --> 00:32:36,116 Speaker 1: your bets. The M Casino was one of Rufus's favorite 590 00:32:36,116 --> 00:32:39,476 Speaker 1: sports books. Now they had their whole thing was we're 591 00:32:39,476 --> 00:32:42,876 Speaker 1: going to take all comers. We want to be we 592 00:32:42,916 --> 00:32:45,196 Speaker 1: want a lot of volume. We think we're better than people. 593 00:32:46,236 --> 00:32:49,916 Speaker 1: Then comes the Supreme Court decision of twenty eighteen, twenty 594 00:32:49,916 --> 00:32:53,716 Speaker 1: three states soon legalized sports gambling. Rufus now has the 595 00:32:53,836 --> 00:32:57,076 Speaker 1: M Casino and a lot of others right in his pocket. 596 00:32:57,756 --> 00:33:01,196 Speaker 9: Fan Duel and their PGA Tour have teams up. Now 597 00:33:01,276 --> 00:33:03,756 Speaker 9: you can get more action out of every stop on the. 598 00:33:03,716 --> 00:33:06,716 Speaker 1: Tour, and Rufus of course stands to make a killing. 599 00:33:07,196 --> 00:33:10,556 Speaker 1: The bigger the markets, the more he can bet. 600 00:33:09,916 --> 00:33:13,116 Speaker 9: The PGA Tour and make every moment more quit fan, 601 00:33:13,236 --> 00:33:14,196 Speaker 9: duel sports book. 602 00:33:15,916 --> 00:33:18,236 Speaker 1: But as it turns out, that's not how it's going 603 00:33:18,316 --> 00:33:21,196 Speaker 1: to go down. This ecosystem is going to change in 604 00:33:21,276 --> 00:33:24,876 Speaker 1: ways Rufus didn't predict, and he began to sense it 605 00:33:25,276 --> 00:33:26,756 Speaker 1: in late twenty twenty. 606 00:33:27,636 --> 00:33:31,436 Speaker 7: So I would drive up to New Hampshire to bet 607 00:33:31,476 --> 00:33:35,636 Speaker 7: at these kiosks initially and then once there was mobile betting, 608 00:33:36,476 --> 00:33:38,676 Speaker 7: I had an account on DraftKings. 609 00:33:39,876 --> 00:33:43,396 Speaker 1: Rufus had a girlfriend in Massachusetts. Massachusetts hadn't yet legalized 610 00:33:43,396 --> 00:33:46,156 Speaker 1: sports betting, so he needed to cross state lines to 611 00:33:46,276 --> 00:33:48,796 Speaker 1: use the betting app on his phone. The drive took 612 00:33:48,836 --> 00:33:51,476 Speaker 1: him like forty five minutes, but it was actually easier 613 00:33:51,516 --> 00:33:53,996 Speaker 1: than running all over in Vegas trying to get cash down. 614 00:33:55,196 --> 00:33:57,156 Speaker 1: He and his process were built for this new type 615 00:33:57,156 --> 00:34:01,116 Speaker 1: of casino. He could bet on golf basically all day long, 616 00:34:01,836 --> 00:34:04,036 Speaker 1: until one day he couldn't. 617 00:34:04,596 --> 00:34:07,876 Speaker 7: One week, I lost thirty thousand dollars. I got a 618 00:34:07,876 --> 00:34:09,996 Speaker 7: phone call to tell me that they were cutting my 619 00:34:10,036 --> 00:34:10,876 Speaker 7: limits on golf. 620 00:34:11,436 --> 00:34:15,156 Speaker 1: He'd lost thirty thousand dollars and DraftKings stopped taking his 621 00:34:15,196 --> 00:34:18,476 Speaker 1: big bets. By the way, we've reached out to DraftKings 622 00:34:18,516 --> 00:34:21,676 Speaker 1: and so far they have declined to talk with us. Anyway, 623 00:34:21,796 --> 00:34:24,276 Speaker 1: it was clear to Rufus back in twenty twenty that 624 00:34:24,356 --> 00:34:27,356 Speaker 1: this was definitely no longer his old sports gambling world. 625 00:34:28,276 --> 00:34:29,436 Speaker 6: Because I had bet enough. 626 00:34:30,156 --> 00:34:32,516 Speaker 7: It spurred them to actually go in and look at 627 00:34:32,516 --> 00:34:34,396 Speaker 7: the stuff I'd been betting and how I'd been doing. 628 00:34:35,796 --> 00:34:39,156 Speaker 7: Books are not limiting people just because they win. They're 629 00:34:39,196 --> 00:34:41,196 Speaker 7: limiting them because they think they're going to win in 630 00:34:41,236 --> 00:34:41,716 Speaker 7: the future. 631 00:34:42,716 --> 00:34:45,396 Speaker 1: Rufus used data to predict what athletes were going to do. 632 00:34:46,556 --> 00:34:49,556 Speaker 1: DraftKings was using data to predict what Rufus would do. 633 00:34:50,436 --> 00:34:52,716 Speaker 1: When they looked at the data, they saw that after 634 00:34:52,796 --> 00:34:56,156 Speaker 1: Rufus placed his bets, the odds nearly always moved in 635 00:34:56,156 --> 00:34:59,196 Speaker 1: his favor. These were the bets of someone who knew 636 00:34:59,196 --> 00:35:02,436 Speaker 1: things before the market knew them, and the new bookies 637 00:35:02,476 --> 00:35:05,396 Speaker 1: were not like the old bookies. They only wanted to 638 00:35:05,436 --> 00:35:08,796 Speaker 1: take certain kind of bets, bets that were more like 639 00:35:08,796 --> 00:35:10,836 Speaker 1: the bets you make when you press the buttons on 640 00:35:10,876 --> 00:35:14,516 Speaker 1: a slot machine, bets that if you made them often enough, 641 00:35:14,676 --> 00:35:17,476 Speaker 1: you were sure to lose. The sort of bets a 642 00:35:17,476 --> 00:35:22,356 Speaker 1: fan would make, the sort of bets Rufus Peabody never made. 643 00:35:22,836 --> 00:35:24,956 Speaker 6: Refusing a bet wasn't a thing. It never was a 644 00:35:24,996 --> 00:35:25,876 Speaker 6: thing here, huh. 645 00:35:26,636 --> 00:35:28,956 Speaker 7: Like you, if you got kicked out of a casino, 646 00:35:29,236 --> 00:35:31,396 Speaker 7: or if you couldn't get there, it was because you 647 00:35:31,436 --> 00:35:36,676 Speaker 7: did something wrong, like you violated the sacred bookmaker better covenant. 648 00:35:37,556 --> 00:35:39,556 Speaker 1: Being smarter than the market didn't used to get you 649 00:35:39,676 --> 00:35:45,676 Speaker 1: kicked out of the market. But the market's changed. Sports 650 00:35:45,676 --> 00:35:47,836 Speaker 1: gamling is still a hard way to make an easy living, 651 00:35:48,916 --> 00:35:52,396 Speaker 1: but now it feels even less fair. Now it feels 652 00:35:52,436 --> 00:35:54,476 Speaker 1: like someone should step in and help Rufus. 653 00:35:55,596 --> 00:36:01,636 Speaker 10: Okay, cool, So I downloaded FanDuel, DraftKings, Fliff Fanatics, Caesar's Bet, MGM, 654 00:36:01,916 --> 00:36:04,916 Speaker 10: and PayPal. So now everyone has all of my information 655 00:36:05,196 --> 00:36:06,396 Speaker 10: and my social security number. 656 00:36:06,636 --> 00:36:09,116 Speaker 6: Oh, your social security number they all asked for I guess. 657 00:36:10,676 --> 00:36:13,556 Speaker 1: These new sports gambling apps, they all ask for it, 658 00:36:14,196 --> 00:36:16,036 Speaker 1: and so we're going to give it to them. In 659 00:36:16,076 --> 00:36:27,276 Speaker 1: our next episode. Against the Rules is written and hosted 660 00:36:27,276 --> 00:36:29,876 Speaker 1: by me Michael Lewis and produced by Lydia gene Kott, 661 00:36:29,916 --> 00:36:34,116 Speaker 1: Catherine Gerdeau, and Ariela Markowitz. Our editor is Julia Barton. 662 00:36:34,436 --> 00:36:37,796 Speaker 1: Our engineer is Jake Gorski. Our music was composed by 663 00:36:37,796 --> 00:36:42,236 Speaker 1: Matthias Bossi and John Evans of stell Wagon Sympinet. Our 664 00:36:42,276 --> 00:36:45,996 Speaker 1: fact checker is Lauren Vespoli. Against the Rules is a 665 00:36:45,996 --> 00:36:51,036 Speaker 1: production of Pushkin Industries. To find more Pushkin podcasts, listen 666 00:36:51,036 --> 00:36:55,156 Speaker 1: on the iHeartRadio app, Apple Podcasts or wherever you listen 667 00:36:55,196 --> 00:36:58,036 Speaker 1: to podcasts, and if you'd like to listen to ad 668 00:36:58,076 --> 00:37:01,796 Speaker 1: free and learn about other exclusive offerings, don't forget to 669 00:37:01,836 --> 00:37:05,796 Speaker 1: sign up for a Pushkin Plus subscription at pushkin dot fm, 670 00:37:05,916 --> 00:37:08,516 Speaker 1: slash plus or on our Apple show 671 00:37:08,516 --> 00:37:12,236 Speaker 6: Page twenty seven