WEBVTT - Episode 4: A Hard Way to Make an Easy Living 0:00:15.356 --> 0:00:15.796 Pushkin. 0:00:20.556 --> 0:00:24.076 Oh yay, oh yay, oh yay. 0:00:24.916 --> 0:00:29.156 May twenty eighteen, the United States Supreme Court strikes down 0:00:29.196 --> 0:00:32.316 the federal law that has effectively banned sports gambling in 0:00:32.396 --> 0:00:38.196 nearly every state. What happens next happens faster than anyone imagined, 0:00:39.236 --> 0:00:41.796 and happens in so many places at once that it's 0:00:41.836 --> 0:00:44.316 basically impossible to follow it all in real time. 0:00:45.636 --> 0:00:48.716 I ended up picking Mississippi and Kansas as the two 0:00:48.756 --> 0:00:52.036 states that I really decided to focus on, and nearly 0:00:52.196 --> 0:00:55.276 was just there, becoming a part of the furniture as 0:00:55.276 --> 0:00:56.916 the lobbyists were working their magic. 0:00:57.956 --> 0:01:01.316 That's Eric Lipton, New York Times reporter, who with his 0:01:01.396 --> 0:01:05.516 colleague Ken Vogel, just sat and watched as lobbyists created 0:01:05.516 --> 0:01:09.756 the conditions for a new industry to emerge overnight sports. 0:01:09.436 --> 0:01:15.076 Gambling and you know, buttonholing various legislators, getting them to 0:01:15.196 --> 0:01:19.236 introduce language that they wanted into the gambling bills and 0:01:19.356 --> 0:01:23.756 changing the tax rates, getting you know, provisions included that 0:01:23.796 --> 0:01:27.596 would allow them to entice betters with free bets that 0:01:27.596 --> 0:01:29.036 they wouldn't have to pay taxes on. 0:01:29.836 --> 0:01:33.036 Derek knows that state capitols where the action is. He 0:01:33.116 --> 0:01:37.076 started his career covering state governments for local papers. When 0:01:37.076 --> 0:01:39.236 he returns to his old beat, he sees right away 0:01:39.236 --> 0:01:42.716 how much lonelier state capitals are because his old job, 0:01:43.076 --> 0:01:45.796 state house reporter, now barely exists. 0:01:46.316 --> 0:01:48.396 There were times when I was in the state capitol 0:01:48.396 --> 0:01:51.076 where I was pretty much the only reporter there while 0:01:51.076 --> 0:01:54.596 they were debating you know, sports betting, and I would 0:01:54.596 --> 0:01:57.716 stay until they wrapped up two in the morning, as 0:01:57.756 --> 0:02:00.076 the session was closing and they were trying to get 0:02:00.116 --> 0:02:03.116 the bill passed, and there were no other reporters present. 0:02:03.276 --> 0:02:05.876 It's like, if you do something at the federal level, 0:02:06.516 --> 0:02:07.996 there are going to be a lot of people watching, 0:02:08.556 --> 0:02:11.916 still a lot of reporters who will cover national politics. 0:02:12.636 --> 0:02:16.436 But if you push things down to the states, you're 0:02:16.436 --> 0:02:18.316 more likely to just operate in the shadows. 0:02:18.916 --> 0:02:21.556 Yeah, and I think the lobbyists know that, and it's 0:02:21.596 --> 0:02:24.996 actually a lot easier to get things done in state capitals. 0:02:25.236 --> 0:02:28.036 You can build a national strategy through a collection of states. 0:02:29.316 --> 0:02:31.756 Eric and his colleague at the Times wrote about Kansas 0:02:31.796 --> 0:02:34.636 back in twenty twenty two, but he could have written 0:02:34.676 --> 0:02:38.156 the same piece almost anywhere in the United States. Thirty 0:02:38.156 --> 0:02:42.396 eight states plus Washington, DC were rushing to legalize sports 0:02:42.436 --> 0:02:46.236 betting and rolling over for the new sports bookies, who 0:02:46.316 --> 0:02:48.716 were pushing to minimize just how much of a cut 0:02:48.756 --> 0:02:52.756 the States took. They cut the tax rate almost in half. 0:02:53.836 --> 0:02:58.116 They gave them the ability to give out free bets 0:02:58.276 --> 0:03:01.036 as a promotion to sign people up and not have 0:03:01.076 --> 0:03:04.356 to pay taxes on that. So essentially the state becomes 0:03:04.476 --> 0:03:10.276 a lost leader promoter of getting people into gambling by 0:03:10.596 --> 0:03:13.236 giving them tax free promotions. 0:03:12.956 --> 0:03:15.676 And without a whole lot of pushback from anyone. 0:03:16.276 --> 0:03:19.196 Oftentimes, the legislators weren't even aware that they were passing 0:03:19.236 --> 0:03:21.796 these things, or they were it was sent, it was 0:03:21.956 --> 0:03:23.996 you know, given to them in the last minute, just 0:03:23.996 --> 0:03:25.516 before they were asked to vote on it, and they 0:03:25.516 --> 0:03:28.156 weren't even fully informed us of what they were voting on. 0:03:29.396 --> 0:03:32.156 Overnight, the States have gone from the bookies cop to 0:03:32.236 --> 0:03:35.836 the bookies' partner. So of all the pro sports leagues, 0:03:35.916 --> 0:03:39.996 the NFL, the NBA, and Major League Baseball, the entire 0:03:40.076 --> 0:03:43.596 sports industrial complex now has a stake in the revenues 0:03:43.596 --> 0:03:46.916 that flow into sports gambling companies like DraftKings and fan Duel. 0:03:47.676 --> 0:03:50.516 There's now a vast new machine with one clear purpose 0:03:51.036 --> 0:03:55.236 to maximize those revenues. By maximizing the number of bets 0:03:55.276 --> 0:03:56.756 that Americans make on sports. 0:03:57.676 --> 0:04:05.396 Any sports sequina zus coming for sports one day, one 0:04:05.636 --> 0:04:10.596 contest that street to the sports cons freely. 0:04:10.356 --> 0:04:12.636 Con It's as if when prohibition ended, there were these 0:04:12.716 --> 0:04:16.236 two massive liquor companies sitting there with databases on individual 0:04:16.276 --> 0:04:20.396 Americans and their tastes for alcohol, and the government ordered 0:04:20.396 --> 0:04:22.396 them to go wave a glass of whiskey under the 0:04:22.436 --> 0:04:25.796 nose of every alcoholic to persuade as many as possible 0:04:25.996 --> 0:04:29.876 to start drinking again. Of course, there are some restraints, 0:04:30.396 --> 0:04:34.356 some rules. No state has allowed small children to gamble 0:04:34.396 --> 0:04:37.796 on sports. Eight have declined to allow people to gamble 0:04:37.836 --> 0:04:40.996 on their phones. And the taxes that the new industry 0:04:41.036 --> 0:04:44.316 pays varies a lot from state to state. New York 0:04:44.356 --> 0:04:48.236 takes fifty one percent of all sportsbook revenues. Indiana takes 0:04:48.236 --> 0:04:52.196 only nine and a half percent. In twenty seventeen, the 0:04:52.316 --> 0:04:54.796 year before the Supreme Court struck down a federal lag 0:04:54.876 --> 0:04:58.556 in sports betting, legal sports bookies in the United States 0:04:58.796 --> 0:05:03.276 generated roughly three hundred million dollars in revenues in twenty 0:05:03.476 --> 0:05:08.476 twenty three. They took in eleven billion in twenty seventeen. 0:05:09.156 --> 0:05:12.476 Mericans made roughly five billion dollars in legal sports bets. 0:05:13.436 --> 0:05:16.076 Last year, they laid down more than one hundred and 0:05:16.196 --> 0:05:21.156 twenty billion. The numbers are crazy, the consequences are even 0:05:21.196 --> 0:05:23.676 more so, and we'll be exploring them for the rest 0:05:23.716 --> 0:05:25.716 of the season. Take your shot at more than two 0:05:25.756 --> 0:05:27.716 hundred and seventy thousand dollars in payouts. 0:05:27.876 --> 0:05:30.156 That's a lot of money. 0:05:34.756 --> 0:05:38.396 I'm Michael Lewis, and this is Against the Rules, a 0:05:38.436 --> 0:05:40.996 show where we look at specific roles in American life 0:05:41.196 --> 0:05:45.716 and how they're changing. The fans. Roles changing because a 0:05:45.756 --> 0:05:48.396 powerful new machine has sprung up to encourage the fan 0:05:48.476 --> 0:05:52.076 to gamble on sports. Sports gambling has never been just 0:05:52.116 --> 0:05:55.436 a simple and straightforward marketplace. It's more like a jungle 0:05:56.156 --> 0:05:59.516 and DraftKings and FanDuel are like this invasive species that's 0:05:59.556 --> 0:06:03.316 been dropped into it by accident. They've disrupted the food 0:06:03.396 --> 0:06:07.276 chain and overrun the habitat because they feed so efficiently 0:06:07.316 --> 0:06:11.316 on fan emotion, and fan emotion is the jungle's greatest 0:06:11.356 --> 0:06:15.796 food source. But they're also vulnerable to a creature that 0:06:15.836 --> 0:06:31.436 feeds on them. Let's recall for a minute what sports 0:06:31.436 --> 0:06:34.396 gambling once was in America. By listening to just a 0:06:34.436 --> 0:06:37.076 snippet of a press conference held back in nineteen sixty 0:06:37.116 --> 0:06:39.956 one by then Attorney General Robert F. Kennedy. 0:06:40.356 --> 0:06:42.756 The report has been since the passage of the legislation, 0:06:42.836 --> 0:06:47.716 and that's big time gambling by the big time operators 0:06:47.756 --> 0:06:51.196 has been materially decreased since the passage of. 0:06:51.196 --> 0:06:55.436 The legislation, Kennedy celebrating a new law called the Federal 0:06:55.476 --> 0:06:58.316 Wire Act. The point of the law was to cut 0:06:58.316 --> 0:07:00.756 the legs from under the mafia by shutting down at 0:07:00.796 --> 0:07:04.596 sports gambling operations, by giving the federal government the power 0:07:04.636 --> 0:07:07.716 to arrest and prosecute anyone who booked a sports bet 0:07:07.796 --> 0:07:11.076 over any phone or telegraph wire that crossed state lines. 0:07:11.956 --> 0:07:15.436 And in fact, head of the Royal mount of Police 0:07:15.476 --> 0:07:18.916 in Canada said in the speech last week that Canada 0:07:19.036 --> 0:07:21.636 will now have to pass legislation and take new steps 0:07:21.676 --> 0:07:27.476 because many of the big time gangsters and hudlums of 0:07:27.516 --> 0:07:29.876 the United States are now moving to Canada because of 0:07:29.876 --> 0:07:31.556 the drive that is being made against them here in 0:07:31.556 --> 0:07:32.076 this country. 0:07:32.996 --> 0:07:34.876 When you think of Canada, this isn't the first thing 0:07:34.876 --> 0:07:37.836 that pops into your head, happy refuge for big time 0:07:37.876 --> 0:07:41.076 gangsters and sports gamblers. But I don't know, it was 0:07:41.156 --> 0:07:41.756 a different era. 0:07:42.556 --> 0:07:45.756 I always had an interest in sports. My father coached 0:07:45.796 --> 0:07:49.596 me in swimming and coached me in tennis. But my 0:07:49.676 --> 0:07:52.276 world changed when I found out you could gamble on it. 0:07:52.916 --> 0:07:54.516 I became no longer a fan. 0:07:54.676 --> 0:07:56.316 I became interested in gambling. 0:07:57.556 --> 0:08:02.396 That's Michael Roxborough. Everyone just calls him Roxy now. He 0:08:02.436 --> 0:08:05.476 grew up in the nineteen fifties in Canada in a nice, 0:08:05.556 --> 0:08:08.596 upper middle class family. He's now zooming with me from 0:08:08.596 --> 0:08:11.076 a home and rural Thailand, with the ac blasting in 0:08:11.116 --> 0:08:14.716 the background and a straw fedora on his head and 0:08:14.756 --> 0:08:18.156 the emotional feel of a man in a witness protection program, 0:08:18.196 --> 0:08:21.356 a placeless man. But he really did grow up in Canada. 0:08:22.196 --> 0:08:24.716 When Roxy was a kid, there was a sports gambling market. 0:08:25.316 --> 0:08:27.596 It was smaller and more constrained than it is now, 0:08:27.636 --> 0:08:31.356 but very real, and its center was the pool halls 0:08:31.396 --> 0:08:33.156 of Vancouver, British Columbia. 0:08:34.036 --> 0:08:36.796 If you envision in the movie The Hustler, if you 0:08:36.836 --> 0:08:39.636 take a look at the pool rooms of that day, 0:08:39.916 --> 0:08:40.916 those were the room. 0:08:40.996 --> 0:08:45.236 Those were the pool rooms of my day. It was 0:08:45.436 --> 0:08:46.516 just full of. 0:08:46.596 --> 0:08:56.556 Wannabees, desperadoes, hustlers, drug dealers, bookmakers, everybody that was operating 0:08:56.596 --> 0:08:57.636 outside the law. 0:08:57.996 --> 0:09:00.796 When you got the bug. What's your parents think about it? 0:09:01.556 --> 0:09:06.156 Not too happy. My father was a Harvard MBA and 0:09:06.276 --> 0:09:10.476 my mother was a high school balvictorian, and I think 0:09:10.516 --> 0:09:12.076 they had higher aspirations. 0:09:13.196 --> 0:09:15.636 Roxy's dad wanted him to go to Dartmouth and he 0:09:15.716 --> 0:09:18.716 got in, but he went to American University in DC 0:09:19.356 --> 0:09:21.316 because he sensed the action was better there. 0:09:22.196 --> 0:09:27.156 I ran a blackjack game in the American University dorm 0:09:27.316 --> 0:09:30.236 at night, and that's what's the source of most of 0:09:30.276 --> 0:09:33.636 my profits. But then I got kicked out for what 0:09:34.796 --> 0:09:36.196 for ready that blackjack game. 0:09:37.596 --> 0:09:40.636 Roxy never did finish college. Instead, he went back to Canada, 0:09:41.076 --> 0:09:44.516 cycled in and out of boring jobs, but never stopped gambling. 0:09:45.196 --> 0:09:47.596 And then he finally caught a big break by reading 0:09:47.596 --> 0:09:47.996 a book. 0:09:48.836 --> 0:09:51.836 I was in a Reno airport flying back to Vancouver 0:09:53.156 --> 0:09:56.556 and I picked up a copy of Ed Thorpe's Beat 0:09:56.596 --> 0:09:57.116 the Dealer. 0:09:57.956 --> 0:10:00.036 Beat the Dealer was the first book to show how 0:10:00.076 --> 0:10:03.396 a gambler inside a casino could have a systematic edge 0:10:04.036 --> 0:10:07.876 by counting cards in blackjack. The other casino games, like 0:10:07.916 --> 0:10:10.796 slots and roulette, were more or less perfectly rigged against 0:10:10.836 --> 0:10:13.756 the gambler. Anyone who played them for long enough was 0:10:13.796 --> 0:10:18.196 sure to lose. Blackjack was an exception. Played blackjack for 0:10:18.276 --> 0:10:20.996 long enough, at least the way Ed Thorpe taught people 0:10:21.036 --> 0:10:24.716 to play, and you were sure to win. Betthorpe published 0:10:24.716 --> 0:10:27.876 his book in nineteen sixty six. A few years later 0:10:27.996 --> 0:10:30.356 Roxy read it, and it gave him the idea that 0:10:30.436 --> 0:10:31.956 changed his life. 0:10:32.076 --> 0:10:34.836 I decided that if I'm going to look at sports betting, 0:10:34.876 --> 0:10:38.636 I need to look at it statistically driven, data driven, 0:10:39.676 --> 0:10:43.596 not by not visual or instinct or just watching a 0:10:43.676 --> 0:10:44.716 lot of games. 0:10:45.476 --> 0:10:48.636 Outcomes in sports were obviously far less regular and predictable 0:10:48.676 --> 0:10:52.476 than outcomes inside slot machines or even at blackjack tables. 0:10:53.596 --> 0:10:55.716 But that didn't mean you couldn't learn stuff about sports 0:10:55.716 --> 0:10:59.076 that would allow you to make better predictions. Not perfect predictions, 0:10:59.116 --> 0:11:01.596 but better predictions than everyone else betting on games. In 0:11:01.596 --> 0:11:07.036 the nineteen seventies, Roxy had baseball in mind. The guys 0:11:07.076 --> 0:11:12.156 who booked baseball legally and illegally everywhere else. Rford Gambler 0:11:12.236 --> 0:11:13.796 is the chance to bet on not just who would 0:11:13.796 --> 0:11:16.956 win the game, but how many runs both teams would score. 0:11:17.996 --> 0:11:21.436 Roxy had an insight that seems obvious now. The number 0:11:21.476 --> 0:11:24.436 of runs scored in any baseball game dependent on factors 0:11:24.516 --> 0:11:26.876 like the weather at game time and the size of 0:11:26.876 --> 0:11:30.116 the fields. San Diego's was a good example. 0:11:31.036 --> 0:11:32.756 You just could not hit the ball out of there, 0:11:33.316 --> 0:11:36.076 and then the padres went and spent like an outrageous 0:11:36.156 --> 0:11:38.556 contract to sign a guy like Oscar Gamble. All he 0:11:38.596 --> 0:11:41.156 did is hit fly balls, and that park was a 0:11:41.236 --> 0:11:44.436 place where fly balls went to die. So you've soon 0:11:44.556 --> 0:11:47.436 found out that general managers really didn't know anything about 0:11:47.476 --> 0:11:48.676 their own ballparks either. 0:11:49.956 --> 0:11:52.276 The idea that the people who run sports teams don't 0:11:52.316 --> 0:11:54.876 know what they're doing has probably never been a new idea. 0:11:55.596 --> 0:11:58.716 Fans have always thought that they know better. What was 0:11:58.796 --> 0:12:01.196 new is that someone in the stands was actually figuring 0:12:01.236 --> 0:12:04.596 something out the effects of the wind and the humidity 0:12:04.756 --> 0:12:07.196 and the barometric pressure on a ball that was flying 0:12:07.236 --> 0:12:07.796 through the air. 0:12:08.676 --> 0:12:12.116 We started to start getting weather reports from all the cities, 0:12:12.156 --> 0:12:15.796 the parts out in which ones helped scoring or hindred scoring. 0:12:15.916 --> 0:12:17.996 And dimensions right, I mean just the length of the 0:12:18.076 --> 0:12:19.156 left field fence. 0:12:19.596 --> 0:12:22.996 Dimensions were important, and we found out a couple of 0:12:23.036 --> 0:12:27.876 the ballpark dimensional drawings were wrong. They had the north 0:12:27.956 --> 0:12:31.916 pole raw well pointed north. Because we went out and 0:12:31.916 --> 0:12:33.316 did to ourselves. 0:12:35.196 --> 0:12:38.116 Roxy moves to Vegas full time in nineteen seventy five 0:12:38.556 --> 0:12:42.036 to bet on sports, and just by taking into account 0:12:42.116 --> 0:12:44.876 the weather and the size of ballparks, he's able to 0:12:44.876 --> 0:12:47.796 make a killing while trying to avoid the people who 0:12:47.876 --> 0:12:51.196 know a thing or two about actual killing. For the 0:12:51.236 --> 0:12:54.076 Nevada legal bookmakers detectively run by the mob. 0:12:55.036 --> 0:12:58.076 They'd have LOWITDA had a hand in till about right 0:12:58.716 --> 0:13:00.436 till well age seventy twelve. 0:13:00.556 --> 0:13:04.436 Yeah, I just wonder in that environment was it dangerous. 0:13:04.076 --> 0:13:06.236 To win too much now? 0:13:06.796 --> 0:13:09.676 Because actually what they would do is they could find 0:13:09.716 --> 0:13:12.156 somebody else who could take your bet and they can 0:13:12.236 --> 0:13:17.556 move it for more money someplace else in the country. 0:13:18.036 --> 0:13:21.076 The old sports gambling market inside the United States was shady, 0:13:21.436 --> 0:13:24.276 but it had its unwritten rules, and one was that 0:13:24.316 --> 0:13:27.236 they always took your bets if you bet a lot. 0:13:27.476 --> 0:13:31.596 They eventually moved the lines. These betting lines were all 0:13:31.596 --> 0:13:34.196 set in Vegas for a very long stretch. They were 0:13:34.236 --> 0:13:39.276 actually set in a single Vegas casino, the Stardust. The 0:13:39.316 --> 0:13:41.916 bookie at the Stardust set the odds and everyone else 0:13:41.996 --> 0:13:46.116 just followed his lead. There was a bank of payphones 0:13:46.116 --> 0:13:48.156 outside the stardusts that were said to be the most 0:13:48.156 --> 0:13:51.036 profitable in the country for the phone company because sports 0:13:51.076 --> 0:13:53.396 gamblers used them to relay the odds to the illegal 0:13:53.436 --> 0:13:55.356 bookies and betters across the country. 0:13:56.196 --> 0:13:59.756 Communications back then it was just with a phone call. 0:14:00.036 --> 0:14:02.036 That was the only communications there were. 0:14:04.356 --> 0:14:07.356 In the late nineteen seventies, the Nevada Gaming Control Board 0:14:07.436 --> 0:14:10.356 tossed the mob out of Vegas, out of sports gambling, 0:14:10.916 --> 0:14:14.476 and pretty soon Roxy became old news. By the early 0:14:14.556 --> 0:14:16.916 nineteen eighties, everyone knew that the weather and the size 0:14:16.956 --> 0:14:20.596 of ballparks had big effects on baseball scores, and Roxy 0:14:20.676 --> 0:14:24.716 never found another systematic edge, and his life became a 0:14:24.756 --> 0:14:28.236 bit of a mess. He'd been arrested for violating rfk's 0:14:28.236 --> 0:14:31.556 Wire Act, he'd taken crazy risks as an illegal book maker, 0:14:31.756 --> 0:14:35.436 and he'd run through two marriages. Is a gambling business 0:14:35.436 --> 0:14:39.196 hard out of relationships. 0:14:37.716 --> 0:14:38.836 Charity why. 0:14:39.636 --> 0:14:43.276 It just sort of takes over your mood and your personality. 0:14:45.476 --> 0:14:47.556 I don't know anybody who's ever been in gambling thought 0:14:47.556 --> 0:14:49.236 they were a better person for it. 0:14:49.236 --> 0:14:51.396 It's interesting because when you think about why a person 0:14:51.436 --> 0:14:53.516 would drift into gambling in the first place, it would 0:14:53.556 --> 0:14:55.076 be because you think it might be an easy way 0:14:55.116 --> 0:14:57.996 to make money. Yes, it ends up being a harder 0:14:57.996 --> 0:14:58.796 way to make money. 0:14:59.996 --> 0:15:00.396 It does. 0:15:00.956 --> 0:15:03.276 What did they say, it's a hard way to make 0:15:03.316 --> 0:15:04.076 an easy living. 0:15:05.876 --> 0:15:09.876 People said that Roxy now knew itineteen eighty two, he 0:15:09.956 --> 0:15:14.956 quits gambling. He creates a company called Las Vegas Sports Consultants. 0:15:16.076 --> 0:15:19.436 This new company will effectively replace the Stardust Casino in 0:15:19.476 --> 0:15:23.516 setting the odds for all major sports contests. Roxy's just 0:15:23.556 --> 0:15:27.156 better at it, and pretty soon he's selling his odds 0:15:27.356 --> 0:15:31.756 to all the sports bookies, including the Stardust. This makes 0:15:31.796 --> 0:15:35.556 sense to everybody in Las Vegas. Hiring Roxy to set 0:15:35.596 --> 0:15:37.756 the odds in sports is like hiring the first card 0:15:37.796 --> 0:15:39.836 counter to guard the blackjack tables. 0:15:41.116 --> 0:15:42.476 So I said, you know, I'm going to try this 0:15:42.516 --> 0:15:44.876 for a couple of years, but I'm not sure if 0:15:44.876 --> 0:15:49.116 it's going to work. Because it wasn't given that every 0:15:49.236 --> 0:15:51.316 hotel was going to have a sportsbook. It was there 0:15:51.356 --> 0:15:55.196 rather limited business. But that was one of my better 0:15:55.236 --> 0:15:57.836 decisions because it turned out to be a massive business. 0:15:58.996 --> 0:16:02.116 Sports gambling isn't exactly a financial market, but it rhymes 0:16:02.156 --> 0:16:05.516 with financial markets. What happens on Wall Street, somehow eventually 0:16:05.636 --> 0:16:08.676 also happens in sports gambling and Wall Street's about to 0:16:08.756 --> 0:16:12.716 undergo dramatic change. First computers and then the Internet will 0:16:12.756 --> 0:16:15.396 allow the markets to become a lot more complicated and 0:16:15.436 --> 0:16:19.156 the bets a lot more complex. The world's about to 0:16:19.196 --> 0:16:21.636 speed up, and a new kind of person with a 0:16:21.636 --> 0:16:25.276 different kind of education is going to enter it. Old 0:16:25.276 --> 0:16:27.796 school traders with high school degrees and lots of body 0:16:27.796 --> 0:16:30.476 hair and names like Vinnie and Donnie are about to 0:16:30.516 --> 0:16:34.596 be replaced by hairless PhDs from MIT with computer models 0:16:34.996 --> 0:16:37.276 who as kids thought they grow up to be professors, 0:16:37.316 --> 0:16:41.276 not traders. On Wall Street in the late nineteen eighties, 0:16:41.716 --> 0:16:45.076 smart old school guys served as a kind of bridge 0:16:45.196 --> 0:16:50.556 between the two cultures in sports gambling. Roxy was that bridge, 0:16:50.876 --> 0:16:52.716 but it took a while for anyone to cross it. 0:17:09.196 --> 0:17:09.876 We're here to. 0:17:09.836 --> 0:17:16.436 See Rufus Peabody. We're in the right place. We're still 0:17:16.436 --> 0:17:18.756 in Vegas, but far from the strip. 0:17:20.516 --> 0:17:21.156 We're not gonna be la. 0:17:21.236 --> 0:17:22.716 We're just gonna make a bunch of sports bets. He 0:17:22.756 --> 0:17:27.036 runs into Lego game win option. I've never even knew 0:17:27.116 --> 0:17:35.996 that any action. The real action is no longer on 0:17:36.116 --> 0:17:40.956 the strip. The real action is basically invisible. But here 0:17:41.316 --> 0:17:44.116 on the seventeenth floor with a sweeping view of the 0:17:44.156 --> 0:17:48.716 distant casinos. Rufus Peabody lives and works. 0:17:49.316 --> 0:17:50.796 We're here, We're here. 0:17:51.276 --> 0:17:54.196 Rufus Peabody is who crossed Roxy's bridge. 0:17:54.796 --> 0:17:57.396 I never was a better as a kid. I didn't 0:17:57.396 --> 0:17:58.596 know anything about sports betting. 0:17:58.636 --> 0:18:01.196 You need you feel a little little twinge of desire. 0:18:01.556 --> 0:18:05.116 No, most people that got their start, they started losing 0:18:05.196 --> 0:18:06.156 and they learned how to win. 0:18:06.236 --> 0:18:07.556 But I was never better. 0:18:07.596 --> 0:18:10.676 I never grew up betting like besides NCAA tournament pools, 0:18:10.716 --> 0:18:13.316 I was always good at those, But for me, it 0:18:13.356 --> 0:18:17.196 was a game, and I'm not I'm a risk taker, 0:18:17.196 --> 0:18:18.516 but I'm not a gambler by nature. 0:18:19.356 --> 0:18:23.556 Rufus grew up outside of Washington, DC. Always loved sports, 0:18:23.716 --> 0:18:25.956 thought he might like to be a sports journalist. He 0:18:25.996 --> 0:18:28.916 still reminds me a bit of a journalist. He's a watcher, 0:18:29.556 --> 0:18:32.876 a person whose eyes moved more than his mouth. But 0:18:32.956 --> 0:18:34.876 even when he was a kid, his mind took him 0:18:34.876 --> 0:18:36.676 places that journalism usually doesn't. 0:18:37.196 --> 0:18:39.556 So so it was this team one eighty two to 0:18:39.596 --> 0:18:40.116 sixty four. 0:18:40.196 --> 0:18:41.036 But why did they win? 0:18:41.196 --> 0:18:41.596 Basically? 0:18:41.676 --> 0:18:44.556 I kind of wanted to report on the why it happened, 0:18:44.676 --> 0:18:47.156 rather than just this guy got eighteen points and twelve 0:18:47.156 --> 0:18:49.596 rebounds and this team one right. 0:18:50.156 --> 0:18:52.636 I kind of wanted the story of why right. 0:18:52.756 --> 0:18:56.796 He want explanation, I want explanations. In two thousand and four, 0:18:57.036 --> 0:19:00.436 Rufus graduated from high school and went to Yale. He 0:19:00.556 --> 0:19:05.116 was still obsessed with figuring out why. He studied statistics 0:19:05.236 --> 0:19:08.036 and built models that predicted the performance of athletes and 0:19:08.076 --> 0:19:11.156 the outcomes of sport events, not because he wanted to 0:19:11.196 --> 0:19:13.876 gamble on them, just because it was cool to figure 0:19:13.876 --> 0:19:16.956 out stuff that even people who run sports teams don't know. 0:19:17.956 --> 0:19:20.516 He wanders around Yale looking for someone to teach him more. 0:19:21.276 --> 0:19:25.036 Rufus wants to do a thesis on, if I remember correctly, 0:19:25.796 --> 0:19:28.836 behavioral biases and the baseball betting market. 0:19:29.636 --> 0:19:32.676 He's who rufe has found. His name is Cade Massey. 0:19:33.596 --> 0:19:37.596 He's a professor of organizational behavior. Was it interesting? 0:19:38.236 --> 0:19:41.596 Oh yeah, absolutely? I mean what's not interesting about trying 0:19:41.636 --> 0:19:44.996 to find psychological mistakes that people make with like, you know, 0:19:45.356 --> 0:19:48.556 hundreds of thousands of observations of real money. 0:19:48.276 --> 0:19:50.036 Being bet and he found mistakes. 0:19:50.196 --> 0:19:53.156 I mean, he was finding profitable strategies right off the bet. 0:19:54.156 --> 0:19:58.036 Rufus just kept asking questions about the behavior of sports gamblers. 0:19:58.596 --> 0:20:02.116 He still wasn't placing bets himself. He was just working 0:20:02.156 --> 0:20:04.716 with this professor to build a model to predict college 0:20:04.716 --> 0:20:08.036 football scores. They pitched it to the Wall Street Journal, 0:20:08.076 --> 0:20:10.596 and the journal agreed to publish their college football picks 0:20:10.636 --> 0:20:13.236 of the week. It was just how they would bet, 0:20:13.356 --> 0:20:15.156 were they to bet on college football. 0:20:16.676 --> 0:20:19.276 And he would then post our picks of the week. 0:20:19.316 --> 0:20:21.036 We were just posting them because we were working with 0:20:21.036 --> 0:20:23.556 the Wall Streeter journals, so post him on Tuesday on Wednesday, 0:20:23.756 --> 0:20:26.436 and then he would watch as the prices started moving 0:20:26.476 --> 0:20:27.076 on his screen. 0:20:27.156 --> 0:20:30.156 Oh my god, which is to say the sports gambling 0:20:30.156 --> 0:20:34.276 market would see their picks and move in response, because 0:20:34.276 --> 0:20:36.796 the market figured out that their picks were that good. 0:20:37.156 --> 0:20:40.196 Within a year or so, we quit posting college picks 0:20:40.196 --> 0:20:42.156 because it was getting too much in the way of 0:20:42.196 --> 0:20:42.956 what he was trying to. 0:20:42.876 --> 0:20:45.036 Do, because he wanted to bet it himself. 0:20:45.956 --> 0:20:46.956 Because he wanted to bet it. 0:20:47.116 --> 0:20:48.796 And if they're so good, you would bet them, you 0:20:48.796 --> 0:20:52.036 wouldn't sell them, right. I mean, it was bound to 0:20:52.076 --> 0:20:54.156 eventually occur to Rufus that if he could predict the 0:20:54.236 --> 0:20:57.156 scores of college football games, then he should just bet 0:20:57.196 --> 0:21:00.396 on them. Himself, but it's funny how he got there. 0:21:00.396 --> 0:21:04.516 In his head, Roxy Roxboro had started as a gambler 0:21:05.196 --> 0:21:07.556 who then set out to find some kind of edge 0:21:07.596 --> 0:21:12.076 to bet. Rufus Peabody started by finding these edges and 0:21:12.196 --> 0:21:18.196 kind of stumbled into gambling and then found Roxy. During 0:21:18.276 --> 0:21:21.196 Rufus's junior year at Yale, he read an article in 0:21:21.476 --> 0:21:27.076 ESPN about Roxy's sports analytics company, Las Vegas Sports Consultants. 0:21:27.436 --> 0:21:30.676 Roxy's company wasn't used to getting resumes from Yale juniors, 0:21:31.436 --> 0:21:34.316 but they gave him a summer internship anyway and showed 0:21:34.396 --> 0:21:36.916 him their world. From their offices right next to the 0:21:36.996 --> 0:21:38.436 Las Vegas Airport. 0:21:39.316 --> 0:21:41.596 They would bet on what plane was most likely to 0:21:41.996 --> 0:21:43.796 land next right, and this is like sort of pre 0:21:43.916 --> 0:21:46.316 internet days or pretty like being able to see flight 0:21:46.356 --> 0:21:49.236 plans and stuff like that, and so it was like, okay, 0:21:49.276 --> 0:21:52.356 American Airlines is like six to one, like you know, 0:21:52.676 --> 0:21:57.436 Southwest is two to one whatever. What people didn't realize, though, 0:21:57.476 --> 0:22:01.036 was Roxy actually had a contact in the control tower, 0:22:01.916 --> 0:22:07.156 and so Roxy won. He made money off of these bets, 0:22:07.636 --> 0:22:11.236 but he didn't make enough to try a suspicion that 0:22:11.396 --> 0:22:14.796 was the key. But he would occasionally hit the Japan 0:22:14.876 --> 0:22:16.876 Air at three hundred to one, right or whatever. 0:22:21.556 --> 0:22:24.996 Roxy screw would bet on everything. Rufus wasn't like that. 0:22:26.196 --> 0:22:27.916 He didn't even think of what he wanted to do 0:22:28.036 --> 0:22:32.236 as gambling, But he did want to understand this other world, 0:22:32.636 --> 0:22:35.636 this world where people bet on anything that moved. 0:22:36.276 --> 0:22:39.516 They shared the building with American Wagering, so with LeRoy's, 0:22:39.556 --> 0:22:45.476 which was a sort of third party sportsbook operator. Lerois 0:22:45.516 --> 0:22:48.596