Speaker 1: Pushkin.
Speaker 2: Oh yay, oh yay, oh yay.
Speaker 1: May twenty eighteen, the United States Supreme Court strikes down
Speaker 1: the federal law that has effectively banned sports gambling in
Speaker 1: nearly every state. What happens next happens faster than anyone imagined,
Speaker 1: and happens in so many places at once that it's
Speaker 1: basically impossible to follow it all in real time.
Speaker 3: I ended up picking Mississippi and Kansas as the two
Speaker 3: states that I really decided to focus on, and nearly
Speaker 3: was just there, becoming a part of the furniture as
Speaker 3: the lobbyists were working their magic.
Speaker 1: That's Eric Lipton, New York Times reporter, who with his
Speaker 1: colleague Ken Vogel, just sat and watched as lobbyists created
Speaker 1: the conditions for a new industry to emerge overnight sports.
Speaker 3: Gambling and you know, buttonholing various legislators, getting them to
Speaker 3: introduce language that they wanted into the gambling bills and
Speaker 3: changing the tax rates, getting you know, provisions included that
Speaker 3: would allow them to entice betters with free bets that
Speaker 3: they wouldn't have to pay taxes on.
Speaker 1: Derek knows that state capitols where the action is. He
Speaker 1: started his career covering state governments for local papers. When
Speaker 1: he returns to his old beat, he sees right away
Speaker 1: how much lonelier state capitals are because his old job,
Speaker 1: state house reporter, now barely exists.
Speaker 3: There were times when I was in the state capitol
Speaker 3: where I was pretty much the only reporter there while
Speaker 3: they were debating you know, sports betting, and I would
Speaker 3: stay until they wrapped up two in the morning, as
Speaker 3: the session was closing and they were trying to get
Speaker 3: the bill passed, and there were no other reporters present.
Speaker 1: It's like, if you do something at the federal level,
Speaker 1: there are going to be a lot of people watching,
Speaker 1: still a lot of reporters who will cover national politics.
Speaker 1: But if you push things down to the states, you're
Speaker 1: more likely to just operate in the shadows.
Speaker 3: Yeah, and I think the lobbyists know that, and it's
Speaker 3: actually a lot easier to get things done in state capitals.
Speaker 3: You can build a national strategy through a collection of states.
Speaker 1: Eric and his colleague at the Times wrote about Kansas
Speaker 1: back in twenty twenty two, but he could have written
Speaker 1: the same piece almost anywhere in the United States. Thirty
Speaker 1: eight states plus Washington, DC were rushing to legalize sports
Speaker 1: betting and rolling over for the new sports bookies, who
Speaker 1: were pushing to minimize just how much of a cut
Speaker 1: the States took. They cut the tax rate almost in half.
Speaker 3: They gave them the ability to give out free bets
Speaker 3: as a promotion to sign people up and not have
Speaker 3: to pay taxes on that. So essentially the state becomes
Speaker 3: a lost leader promoter of getting people into gambling by
Speaker 3: giving them tax free promotions.
Speaker 1: And without a whole lot of pushback from anyone.
Speaker 3: Oftentimes, the legislators weren't even aware that they were passing
Speaker 3: these things, or they were it was sent, it was
Speaker 3: you know, given to them in the last minute, just
Speaker 3: before they were asked to vote on it, and they
Speaker 3: weren't even fully informed us of what they were voting on.
Speaker 1: Overnight, the States have gone from the bookies cop to
Speaker 1: the bookies' partner. So of all the pro sports leagues,
Speaker 1: the NFL, the NBA, and Major League Baseball, the entire
Speaker 1: sports industrial complex now has a stake in the revenues
Speaker 1: that flow into sports gambling companies like DraftKings and fan Duel.
Speaker 1: There's now a vast new machine with one clear purpose
Speaker 1: to maximize those revenues. By maximizing the number of bets
Speaker 1: that Americans make on sports.
Speaker 4: Any sports sequina zus coming for sports one day, one
Speaker 4: contest that street to the sports cons freely.
Speaker 1: Con It's as if when prohibition ended, there were these
Speaker 1: two massive liquor companies sitting there with databases on individual
Speaker 1: Americans and their tastes for alcohol, and the government ordered
Speaker 1: them to go wave a glass of whiskey under the
Speaker 1: nose of every alcoholic to persuade as many as possible
Speaker 1: to start drinking again. Of course, there are some restraints,
Speaker 1: some rules. No state has allowed small children to gamble
Speaker 1: on sports. Eight have declined to allow people to gamble
Speaker 1: on their phones. And the taxes that the new industry
Speaker 1: pays varies a lot from state to state. New York
Speaker 1: takes fifty one percent of all sportsbook revenues. Indiana takes
Speaker 1: only nine and a half percent. In twenty seventeen, the
Speaker 1: year before the Supreme Court struck down a federal lag
Speaker 1: in sports betting, legal sports bookies in the United States
Speaker 1: generated roughly three hundred million dollars in revenues in twenty
Speaker 1: twenty three. They took in eleven billion in twenty seventeen.
Speaker 1: Mericans made roughly five billion dollars in legal sports bets.
Speaker 1: Last year, they laid down more than one hundred and
Speaker 1: twenty billion. The numbers are crazy, the consequences are even
Speaker 1: more so, and we'll be exploring them for the rest
Speaker 1: of the season. Take your shot at more than two
Speaker 1: hundred and seventy thousand dollars in payouts.
Speaker 4: That's a lot of money.
Speaker 1: I'm Michael Lewis, and this is Against the Rules, a
Speaker 1: show where we look at specific roles in American life
Speaker 1: and how they're changing. The fans. Roles changing because a
Speaker 1: powerful new machine has sprung up to encourage the fan
Speaker 1: to gamble on sports. Sports gambling has never been just
Speaker 1: a simple and straightforward marketplace. It's more like a jungle
Speaker 1: and DraftKings and FanDuel are like this invasive species that's
Speaker 1: been dropped into it by accident. They've disrupted the food
Speaker 1: chain and overrun the habitat because they feed so efficiently
Speaker 1: on fan emotion, and fan emotion is the jungle's greatest
Speaker 1: food source. But they're also vulnerable to a creature that
Speaker 1: feeds on them. Let's recall for a minute what sports
Speaker 1: gambling once was in America. By listening to just a
Speaker 1: snippet of a press conference held back in nineteen sixty
Speaker 1: one by then Attorney General Robert F. Kennedy.
Speaker 2: The report has been since the passage of the legislation,
Speaker 2: and that's big time gambling by the big time operators
Speaker 2: has been materially decreased since the passage of.
Speaker 1: The legislation, Kennedy celebrating a new law called the Federal
Speaker 1: Wire Act. The point of the law was to cut
Speaker 1: the legs from under the mafia by shutting down at
Speaker 1: sports gambling operations, by giving the federal government the power
Speaker 1: to arrest and prosecute anyone who booked a sports bet
Speaker 1: over any phone or telegraph wire that crossed state lines.
Speaker 2: And in fact, head of the Royal mount of Police
Speaker 2: in Canada said in the speech last week that Canada
Speaker 2: will now have to pass legislation and take new steps
Speaker 2: because many of the big time gangsters and hudlums of
Speaker 2: the United States are now moving to Canada because of
Speaker 2: the drive that is being made against them here in
Speaker 2: this country.
Speaker 1: When you think of Canada, this isn't the first thing
Speaker 1: that pops into your head, happy refuge for big time
Speaker 1: gangsters and sports gamblers. But I don't know, it was
Speaker 1: a different era.
Speaker 5: I always had an interest in sports. My father coached
Speaker 5: me in swimming and coached me in tennis. But my
Speaker 5: world changed when I found out you could gamble on it.
Speaker 1: I became no longer a fan.
Speaker 5: I became interested in gambling.
Speaker 1: That's Michael Roxborough. Everyone just calls him Roxy now. He
Speaker 1: grew up in the nineteen fifties in Canada in a nice,
Speaker 1: upper middle class family. He's now zooming with me from
Speaker 1: a home and rural Thailand, with the ac blasting in
Speaker 1: the background and a straw fedora on his head and
Speaker 1: the emotional feel of a man in a witness protection program,
Speaker 1: a placeless man. But he really did grow up in Canada.
Speaker 1: When Roxy was a kid, there was a sports gambling market.
Speaker 1: It was smaller and more constrained than it is now,
Speaker 1: but very real, and its center was the pool halls
Speaker 1: of Vancouver, British Columbia.
Speaker 5: If you envision in the movie The Hustler, if you
Speaker 5: take a look at the pool rooms of that day,
Speaker 5: those were the room.
Speaker 6: Those were the pool rooms of my day. It was
Speaker 6: just full of.
Speaker 5: Wannabees, desperadoes, hustlers, drug dealers, bookmakers, everybody that was operating
Speaker 5: outside the law.
Speaker 1: When you got the bug. What's your parents think about it?
Speaker 5: Not too happy. My father was a Harvard MBA and
Speaker 5: my mother was a high school balvictorian, and I think
Speaker 5: they had higher aspirations.
Speaker 1: Roxy's dad wanted him to go to Dartmouth and he
Speaker 1: got in, but he went to American University in DC
Speaker 1: because he sensed the action was better there.
Speaker 5: I ran a blackjack game in the American University dorm
Speaker 5: at night, and that's what's the source of most of
Speaker 5: my profits. But then I got kicked out for what
Speaker 5: for ready that blackjack game.
Speaker 1: Roxy never did finish college. Instead, he went back to Canada,
Speaker 1: cycled in and out of boring jobs, but never stopped gambling.
Speaker 1: And then he finally caught a big break by reading
Speaker 1: a book.
Speaker 5: I was in a Reno airport flying back to Vancouver
Speaker 5: and I picked up a copy of Ed Thorpe's Beat
Speaker 5: the Dealer.
Speaker 1: Beat the Dealer was the first book to show how
Speaker 1: a gambler inside a casino could have a systematic edge
Speaker 1: by counting cards in blackjack. The other casino games, like
Speaker 1: slots and roulette, were more or less perfectly rigged against
Speaker 1: the gambler. Anyone who played them for long enough was
Speaker 1: sure to lose. Blackjack was an exception. Played blackjack for
Speaker 1: long enough, at least the way Ed Thorpe taught people
Speaker 1: to play, and you were sure to win. Betthorpe published
Speaker 1: his book in nineteen sixty six. A few years later
Speaker 1: Roxy read it, and it gave him the idea that
Speaker 1: changed his life.
Speaker 5: I decided that if I'm going to look at sports betting,
Speaker 5: I need to look at it statistically driven, data driven,
Speaker 5: not by not visual or instinct or just watching a
Speaker 5: lot of games.
Speaker 1: Outcomes in sports were obviously far less regular and predictable
Speaker 1: than outcomes inside slot machines or even at blackjack tables.
Speaker 1: But that didn't mean you couldn't learn stuff about sports
Speaker 1: that would allow you to make better predictions. Not perfect predictions,
Speaker 1: but better predictions than everyone else betting on games. In
Speaker 1: the nineteen seventies, Roxy had baseball in mind. The guys
Speaker 1: who booked baseball legally and illegally everywhere else. Rford Gambler
Speaker 1: is the chance to bet on not just who would
Speaker 1: win the game, but how many runs both teams would score.
Speaker 1: Roxy had an insight that seems obvious now. The number
Speaker 1: of runs scored in any baseball game dependent on factors
Speaker 1: like the weather at game time and the size of
Speaker 1: the fields. San Diego's was a good example.
Speaker 5: You just could not hit the ball out of there,
Speaker 5: and then the padres went and spent like an outrageous
Speaker 5: contract to sign a guy like Oscar Gamble. All he
Speaker 5: did is hit fly balls, and that park was a
Speaker 5: place where fly balls went to die. So you've soon
Speaker 5: found out that general managers really didn't know anything about
Speaker 5: their own ballparks either.
Speaker 1: The idea that the people who run sports teams don't
Speaker 1: know what they're doing has probably never been a new idea.
Speaker 1: Fans have always thought that they know better. What was
Speaker 1: new is that someone in the stands was actually figuring
Speaker 1: something out the effects of the wind and the humidity
Speaker 1: and the barometric pressure on a ball that was flying
Speaker 1: through the air.
Speaker 5: We started to start getting weather reports from all the cities,
Speaker 5: the parts out in which ones helped scoring or hindred scoring.
Speaker 1: And dimensions right, I mean just the length of the
Speaker 1: left field fence.
Speaker 5: Dimensions were important, and we found out a couple of
Speaker 5: the ballpark dimensional drawings were wrong. They had the north
Speaker 5: pole raw well pointed north. Because we went out and
Speaker 5: did to ourselves.
Speaker 1: Roxy moves to Vegas full time in nineteen seventy five
Speaker 1: to bet on sports, and just by taking into account
Speaker 1: the weather and the size of ballparks, he's able to
Speaker 1: make a killing while trying to avoid the people who
Speaker 1: know a thing or two about actual killing. For the
Speaker 1: Nevada legal bookmakers detectively run by the mob.
Speaker 5: They'd have LOWITDA had a hand in till about right
Speaker 5: till well age seventy twelve.
Speaker 1: Yeah, I just wonder in that environment was it dangerous.
Speaker 6: To win too much now?
Speaker 5: Because actually what they would do is they could find
Speaker 5: somebody else who could take your bet and they can
Speaker 5: move it for more money someplace else in the country.
Speaker 1: The old sports gambling market inside the United States was shady,
Speaker 1: but it had its unwritten rules, and one was that
Speaker 1: they always took your bets if you bet a lot.
Speaker 1: They eventually moved the lines. These betting lines were all
Speaker 1: set in Vegas for a very long stretch. They were
Speaker 1: actually set in a single Vegas casino, the Stardust. The
Speaker 1: bookie at the Stardust set the odds and everyone else
Speaker 1: just followed his lead. There was a bank of payphones
Speaker 1: outside the stardusts that were said to be the most
Speaker 1: profitable in the country for the phone company because sports
Speaker 1: gamblers used them to relay the odds to the illegal
Speaker 1: bookies and betters across the country.
Speaker 5: Communications back then it was just with a phone call.
Speaker 5: That was the only communications there were.
Speaker 1: In the late nineteen seventies, the Nevada Gaming Control Board
Speaker 1: tossed the mob out of Vegas, out of sports gambling,
Speaker 1: and pretty soon Roxy became old news. By the early
Speaker 1: nineteen eighties, everyone knew that the weather and the size
Speaker 1: of ballparks had big effects on baseball scores, and Roxy
Speaker 1: never found another systematic edge, and his life became a
Speaker 1: bit of a mess. He'd been arrested for violating rfk's
Speaker 1: Wire Act, he'd taken crazy risks as an illegal book maker,
Speaker 1: and he'd run through two marriages. Is a gambling business
Speaker 1: hard out of relationships.
Speaker 6: Charity why.
Speaker 5: It just sort of takes over your mood and your personality.
Speaker 5: I don't know anybody who's ever been in gambling thought
Speaker 5: they were a better person for it.
Speaker 1: It's interesting because when you think about why a person
Speaker 1: would drift into gambling in the first place, it would
Speaker 1: be because you think it might be an easy way
Speaker 1: to make money. Yes, it ends up being a harder
Speaker 1: way to make money.
Speaker 6: It does.
Speaker 5: What did they say, it's a hard way to make
Speaker 5: an easy living.
Speaker 1: People said that Roxy now knew itineteen eighty two, he
Speaker 1: quits gambling. He creates a company called Las Vegas Sports Consultants.
Speaker 1: This new company will effectively replace the Stardust Casino in
Speaker 1: setting the odds for all major sports contests. Roxy's just
Speaker 1: better at it, and pretty soon he's selling his odds
Speaker 1: to all the sports bookies, including the Stardust. This makes
Speaker 1: sense to everybody in Las Vegas. Hiring Roxy to set
Speaker 1: the odds in sports is like hiring the first card
Speaker 1: counter to guard the blackjack tables.
Speaker 5: So I said, you know, I'm going to try this
Speaker 5: for a couple of years, but I'm not sure if
Speaker 5: it's going to work. Because it wasn't given that every
Speaker 5: hotel was going to have a sportsbook. It was there
Speaker 5: rather limited business. But that was one of my better
Speaker 5: decisions because it turned out to be a massive business.
Speaker 1: Sports gambling isn't exactly a financial market, but it rhymes
Speaker 1: with financial markets. What happens on Wall Street, somehow eventually
Speaker 1: also happens in sports gambling and Wall Street's about to
Speaker 1: undergo dramatic change. First computers and then the Internet will
Speaker 1: allow the markets to become a lot more complicated and
Speaker 1: the bets a lot more complex. The world's about to
Speaker 1: speed up, and a new kind of person with a
Speaker 1: different kind of education is going to enter it. Old
Speaker 1: school traders with high school degrees and lots of body
Speaker 1: hair and names like Vinnie and Donnie are about to
Speaker 1: be replaced by hairless PhDs from MIT with computer models
Speaker 1: who as kids thought they grow up to be professors,
Speaker 1: not traders. On Wall Street in the late nineteen eighties,
Speaker 1: smart old school guys served as a kind of bridge
Speaker 1: between the two cultures in sports gambling. Roxy was that bridge,
Speaker 1: but it took a while for anyone to cross it.
Speaker 2: We're here to.
Speaker 1: See Rufus Peabody. We're in the right place. We're still
Speaker 1: in Vegas, but far from the strip.
Speaker 6: We're not gonna be la.
Speaker 1: We're just gonna make a bunch of sports bets. He
Speaker 1: runs into Lego game win option. I've never even knew
Speaker 1: that any action. The real action is no longer on
Speaker 1: the strip. The real action is basically invisible. But here
Speaker 1: on the seventeenth floor with a sweeping view of the
Speaker 1: distant casinos. Rufus Peabody lives and works.
Speaker 5: We're here, We're here.
Speaker 1: Rufus Peabody is who crossed Roxy's bridge.
Speaker 7: I never was a better as a kid. I didn't
Speaker 7: know anything about sports betting.
Speaker 1: You need you feel a little little twinge of desire.
Speaker 7: No, most people that got their start, they started losing
Speaker 7: and they learned how to win.
Speaker 6: But I was never better.
Speaker 7: I never grew up betting like besides NCAA tournament pools,
Speaker 7: I was always good at those, But for me, it
Speaker 7: was a game, and I'm not I'm a risk taker,
Speaker 7: but I'm not a gambler by nature.
Speaker 1: Rufus grew up outside of Washington, DC. Always loved sports,
Speaker 1: thought he might like to be a sports journalist. He
Speaker 1: still reminds me a bit of a journalist. He's a watcher,
Speaker 1: a person whose eyes moved more than his mouth. But
Speaker 1: even when he was a kid, his mind took him
Speaker 1: places that journalism usually doesn't.
Speaker 6: So so it was this team one eighty two to
Speaker 6: sixty four.
Speaker 1: But why did they win?
Speaker 6: Basically?
Speaker 7: I kind of wanted to report on the why it happened,
Speaker 7: rather than just this guy got eighteen points and twelve
Speaker 7: rebounds and this team one right.
Speaker 6: I kind of wanted the story of why right.
Speaker 1: He want explanation, I want explanations. In two thousand and four,
Speaker 1: Rufus graduated from high school and went to Yale. He
Speaker 1: was still obsessed with figuring out why. He studied statistics
Speaker 1: and built models that predicted the performance of athletes and
Speaker 1: the outcomes of sport events, not because he wanted to
Speaker 1: gamble on them, just because it was cool to figure
Speaker 1: out stuff that even people who run sports teams don't know.
Speaker 1: He wanders around Yale looking for someone to teach him more.
Speaker 8: Rufus wants to do a thesis on, if I remember correctly,
Speaker 8: behavioral biases and the baseball betting market.
Speaker 1: He's who rufe has found. His name is Cade Massey.
Speaker 1: He's a professor of organizational behavior. Was it interesting?
Speaker 8: Oh yeah, absolutely? I mean what's not interesting about trying
Speaker 8: to find psychological mistakes that people make with like, you know,
Speaker 8: hundreds of thousands of observations of real money.
Speaker 1: Being bet and he found mistakes.
Speaker 8: I mean, he was finding profitable strategies right off the bet.
Speaker 1: Rufus just kept asking questions about the behavior of sports gamblers.
Speaker 1: He still wasn't placing bets himself. He was just working
Speaker 1: with this professor to build a model to predict college
Speaker 1: football scores. They pitched it to the Wall Street Journal,
Speaker 1: and the journal agreed to publish their college football picks
Speaker 1: of the week. It was just how they would bet,
Speaker 1: were they to bet on college football.
Speaker 8: And he would then post our picks of the week.
Speaker 8: We were just posting them because we were working with
Speaker 8: the Wall Streeter journals, so post him on Tuesday on Wednesday,
Speaker 8: and then he would watch as the prices started moving
Speaker 8: on his screen.
Speaker 1: Oh my god, which is to say the sports gambling
Speaker 1: market would see their picks and move in response, because
Speaker 1: the market figured out that their picks were that good.
Speaker 8: Within a year or so, we quit posting college picks
Speaker 8: because it was getting too much in the way of
Speaker 8: what he was trying to.
Speaker 1: Do, because he wanted to bet it himself.
Speaker 8: Because he wanted to bet it.
Speaker 1: And if they're so good, you would bet them, you
Speaker 1: wouldn't sell them, right. I mean, it was bound to
Speaker 1: eventually occur to Rufus that if he could predict the
Speaker 1: scores of college football games, then he should just bet
Speaker 1: on them. Himself, but it's funny how he got there.
Speaker 1: In his head, Roxy Roxboro had started as a gambler
Speaker 1: who then set out to find some kind of edge
Speaker 1: to bet. Rufus Peabody started by finding these edges and
Speaker 1: kind of stumbled into gambling and then found Roxy. During
Speaker 1: Rufus's junior year at Yale, he read an article in
Speaker 1: ESPN about Roxy's sports analytics company, Las Vegas Sports Consultants.
Speaker 1: Roxy's company wasn't used to getting resumes from Yale juniors,
Speaker 1: but they gave him a summer internship anyway and showed
Speaker 1: him their world. From their offices right next to the
Speaker 1: Las Vegas Airport.
Speaker 7: They would bet on what plane was most likely to
Speaker 7: land next right, and this is like sort of pre
Speaker 7: internet days or pretty like being able to see flight
Speaker 7: plans and stuff like that, and so it was like, okay,
Speaker 7: American Airlines is like six to one, like you know,
Speaker 7: Southwest is two to one whatever. What people didn't realize, though,
Speaker 7: was Roxy actually had a contact in the control tower,
Speaker 7: and so Roxy won. He made money off of these bets,
Speaker 7: but he didn't make enough to try a suspicion that
Speaker 7: was the key. But he would occasionally hit the Japan
Speaker 7: Air at three hundred to one, right or whatever.
Speaker 1: Roxy screw would bet on everything. Rufus wasn't like that.
Speaker 1: He didn't even think of what he wanted to do
Speaker 1: as gambling, But he did want to understand this other world,
Speaker 1: this world where people bet on anything that moved.
Speaker 7: They shared the building with American Wagering, so with LeRoy's,
Speaker 7: which was a sort of third party sportsbook operator. Lerois
Speaker 7: didn't have a casino, but they were in casinos like
Speaker 7: Hooters or.
Speaker 6: Terrible herbst.
Speaker 1: Right, Hooters has a casino.
Speaker 6: Yeah, Hooters casino. It's on the strip. It's right Tropic
Speaker 6: Cano basically.
Speaker 1: Right.
Speaker 7: Yeah, So I met, I meet this the head trader there, right,
Speaker 7: and I have all these questions. A bookmaker can make
Speaker 7: more money, Let's say, if they know the public's bias.
Speaker 7: They can make more money setting a line somewhere between
Speaker 7: the true price and the price the public thinks that's
Speaker 7: the way to maximize.
Speaker 1: There's no reason you should understand what rufe has just
Speaker 1: said there, but let me try to explain it, because
Speaker 1: it tells you a bit about how this old school
Speaker 1: sports gambling world works. The line is just the odds
Speaker 1: or the point spread, the true price is what the
Speaker 1: odds would be if you somehow knew every possible relevant
Speaker 1: bit of information about some upcoming game. Of course, no
Speaker 1: one ever knows everything, so there is in reality, never
Speaker 1: a perfect true price, just some number that the smartest
Speaker 1: and best informed betters agree on. Say, they agree that
Speaker 1: the Packers should be eight point favorites over the Cowboys,
Speaker 1: but most of the gamblers are Cowboys fans, and the
Speaker 1: Cowboys fans think the Cowboys are only three point underdogs.
Speaker 1: Rufus was asking the bookie if he thought he could
Speaker 1: entice the public to make more stupid bets if he
Speaker 1: said the line not at the true price of eight points,
Speaker 1: but it's say five points, because Cowboys fans will think
Speaker 1: the Cowboys are better than they actually are and bet
Speaker 1: even more.
Speaker 7: I said, theoretically, you can make more money setting a
Speaker 7: line like somewhere between the true price and where the
Speaker 7: public thinks the price is.
Speaker 6: And he says, theory theory, and theory dick don't fit
Speaker 6: in an asshole. And this guy, yeah, he was.
Speaker 7: He was probably three hundred pounds five to eight, smoking
Speaker 7: a cigar in a dark room, looking at a bunch
Speaker 7: of numbers on.
Speaker 1: A screen, in just a flash. There, you've changed our
Speaker 1: podcast rating.
Speaker 6: Sorry.
Speaker 1: Rufus Peabody recently of Yale is no one's idea of
Speaker 1: a hustler. He's too sweet natured and even and way
Speaker 1: too open to telling other people about the stuff he's learned.
Speaker 1: He finishes up at Yale and moves back to Vegas
Speaker 1: to work full time at Las Vegas Sports Consultants. But
Speaker 1: now Rufus thinks he might have an edge, and people
Speaker 1: in and around Roxy's firm think that maybe he's right.
Speaker 6: The Super Bowl was my first big break. Super Bowl
Speaker 6: two thousand and nine.
Speaker 7: Okay, I had made a friend with a professional sports
Speaker 7: better guy that bet baseball, and he loaned me ten
Speaker 7: thousand dollars to bet. I had my own ten to
Speaker 7: twelve thousand dollars. My boss, Kenny, unbeknownst to everybody else,
Speaker 7: invested forty thousand dollars in me and gave me a
Speaker 7: twenty percent free roll on.
Speaker 1: It, meaning that if it wins, you take twenty percent
Speaker 1: of the rance, but you've suffered another losses correct.
Speaker 7: And so I ended up with close to sixty thousand
Speaker 7: dollars bet on the Super Bowl, and so I basically
Speaker 7: was pretty leveraged. Yeah, and I remember being like, this
Speaker 7: game doesn't work out, you know, I gave it a shot.
Speaker 1: All right? And what is causing you to have such
Speaker 1: conviction about a game?
Speaker 5: Oh?
Speaker 6: Nothing. It wasn't conviction about the game. It was betting
Speaker 6: the props.
Speaker 1: The props short for proposition bets, not on the whole game,
Speaker 1: but pieces of the game. The standard story, which is
Speaker 1: almost certainly not true, was that the prop bet was
Speaker 1: invented for the nineteen eighty six Super Bowl between the
Speaker 1: Chicago Bears and the New England Patriots. The Bears were
Speaker 1: such heavy favorites that Vegas had trouble gitting up interest
Speaker 1: in the game, so a Vegas bookie created a side
Speaker 1: bet the odds that a Bear's defensive tackle named William
Speaker 1: the Refrigerator Perry would score a touchdown. It was a
Speaker 1: long shot bet, and the betting public loved it, and
Speaker 1: Vegas bookies lost a fortune when the fridge did indeed score.
Speaker 1: But back to Rufus and forward to the Super Bowl
Speaker 1: of two thousand and nine, the Pittsburgh Steelers played the
Speaker 1: Arizona Cardinals. Rufus wasn't betting the whole game, but pieces
Speaker 1: of the game. His pro football model spits out odds
Speaker 1: for all this weird stuff that Vegas bookies are now
Speaker 1: offering bets on the odds that Steeler's running back Gary
Speaker 1: Russell will score the game's first touchdown. For example, Rufus
Speaker 1: has vast troves of data to mine. He can do
Speaker 1: stuff with it that roxy would never imagine. He could
Speaker 1: do stuff that even the people who run the Pittsburgh
Speaker 1: Steelers would never imagine doing. I mean, even Gary Russell
Speaker 1: likely has no idea that you can calculate the odds
Speaker 1: that he will score the game's first touchdown. But Rufus can.
Speaker 1: His model puts those odds much higher than the bookies' odds,
Speaker 1: So in Rufus's mind, it's a great bet. He makes
Speaker 1: dozens of similar bets, bets where his model tells him
Speaker 1: that the bookies are giving him better odds than they should.
Speaker 7: I still remember going it was like Harrah's Caesar's the Rio.
Speaker 7: I ended up getting down like two hundred dollars at
Speaker 7: a time like five thousand dollars. Positions on a few
Speaker 7: things like that were really good, and so I was.
Speaker 1: Diversified within the game.
Speaker 7: Within the game, I wasn't betting on the outcome of
Speaker 7: the game, but I was still I still to this day,
Speaker 7: have never watched that game.
Speaker 6: I was too nervous.
Speaker 1: How did you experience the game if you didn't watch it.
Speaker 7: I went to this little Part three course that's open
Speaker 7: at night, right south of the airport, and I played
Speaker 7: the Part three course twice until I felt like the
Speaker 7: game would definitely be over. And then I went grocery shopping.
Speaker 7: And I didn't have a smart this is pretty smartphone.
Speaker 7: I went grocery shopping, and then I went home and
Speaker 7: cooked myself dinner.
Speaker 1: Huh.
Speaker 7: And then and only then did I open my computer
Speaker 7: and check and see how the game went.
Speaker 1: And were you just going through your prop bets seeing
Speaker 1: what happened? First?
Speaker 7: I went to the boss score and I saw the
Speaker 7: first score was Gary Russell one yard touchdown run.
Speaker 6: I was like, ah.
Speaker 7: Right, And it turned out out of like fifty six
Speaker 7: thousand dollars bet like I profited like twenty three thousand
Speaker 7: on it.
Speaker 1: Rufus figures out how much he's won. Then he physically
Speaker 1: retraces his steps to the many casinos that had taken
Speaker 1: his many bets, still driving an old Honda Civic. You
Speaker 1: aren't all these little.
Speaker 6: Tickets you have to write, you go cash.
Speaker 1: Each one individually. So you had it. You must have
Speaker 1: had one hundred tickets.
Speaker 6: Oh yeah, probably.
Speaker 1: He just drives around Las Vegas and the money piles up, and.
Speaker 7: I remember having like thirty thousand dollars on that front
Speaker 7: seat and being like, oh my god, so much money
Speaker 7: in cash, in cash.
Speaker 1: After that, lots of people in Vegas wanted to lend
Speaker 1: money to Rufus and take a cut of his bets. Rufus,
Speaker 1: for his part, was still sitting in his office in
Speaker 1: Las Vegas Sports Consultants, but pretty soon he was directing
Speaker 1: an army of people to lay bets in sports books
Speaker 1: across the city, sports books that got their odds from
Speaker 1: Las Vegas Sports Consultants. Rufus was in effect betting against
Speaker 1: the lines created by Roxy's firm. Roxy himself had moved
Speaker 1: on at this point, but he watched what Rufus was
Speaker 1: doing and he admired it.
Speaker 5: He came to Bootcat once I met him, even after
Speaker 5: one line. She said, this guy's thinking at a higher
Speaker 5: level than other people. And I learned a lot for
Speaker 5: a moment, not because he was divulging your secrets, but
Speaker 5: he was just thinking at a higher.
Speaker 1: Level to get his edge. Roxy had used weather reports,
Speaker 1: Rufus was using the spin rates on pitcher's curveballs.
Speaker 7: I try to drill things down to their root. Cause
Speaker 7: it's kind of what you do when you write books.
Speaker 7: You try to figure out the person, what makes them tick,
Speaker 7: what's the story. I try to figure out why things
Speaker 7: happen in a baseball game or a golf tournament. What
Speaker 7: makes the player good? It's not just their score, Like
Speaker 7: what are the things that are driving the score, which
Speaker 7: of those are repeatable, which aren't? And right now you
Speaker 7: have all this like computer vision, that type of data
Speaker 7: available now, and with a lot of these sports, I
Speaker 7: mean we're now talking about bat speed, measuring bat speed
Speaker 7: and looking at like aging curves for bat speed.
Speaker 1: The whole point of Rufus is that he never lets
Speaker 1: emotion interfere with his process. But that doesn't mean he
Speaker 1: doesn't feel emotion. He does. He feels it for his process.
Speaker 7: We're using bat speed to then predict exit velocity, and
Speaker 7: we're using exit velocity to then predict like weighted on
Speaker 7: base average and basically whether a ball will be hit
Speaker 7: or not, and what kind of damage it will be
Speaker 7: if it is and then you know, use that to
Speaker 7: predict wins.
Speaker 1: And how did it work?
Speaker 6: How did it work?
Speaker 7: It worked well, we made one hundred and twenty five
Speaker 7: thousand in the first month. I don't know what our
Speaker 7: volume was overall, and I got twenty percent of it,
Speaker 7: which was great because my yearly salary was twenty five thousands.
Speaker 1: Come the card counter at the blackjack table, only it
Speaker 1: was richer than that. He was generating new insight about
Speaker 1: why things happened in sports. A blackjack dealer knows where
Speaker 1: the card counter gets his edge. The sports book he
Speaker 1: couldn't really tell where Rufus was getting his, which made
Speaker 1: Rufus and what he was doing even more unsettling. And
Speaker 1: did the M at any point say we're now taking
Speaker 1: your bets. The M Casino was one of Rufus's favorite
Speaker 1: sports books. Now they had their whole thing was we're
Speaker 1: going to take all comers. We want to be we
Speaker 1: want a lot of volume. We think we're better than people.
Speaker 1: Then comes the Supreme Court decision of twenty eighteen, twenty
Speaker 1: three states soon legalized sports gambling. Rufus now has the
Speaker 1: M Casino and a lot of others right in his pocket.
Speaker 9: Fan Duel and their PGA Tour have teams up. Now
Speaker 9: you can get more action out of every stop on the.
Speaker 1: Tour, and Rufus of course stands to make a killing.
Speaker 1: The bigger the markets, the more he can bet.
Speaker 9: The PGA Tour and make every moment more quit fan,
Speaker 9: duel sports book.
Speaker 1: But as it turns out, that's not how it's going
Speaker 1: to go down. This ecosystem is going to change in
Speaker 1: ways Rufus didn't predict, and he began to sense it
Speaker 1: in late twenty twenty.
Speaker 7: So I would drive up to New Hampshire to bet
Speaker 7: at these kiosks initially and then once there was mobile betting,
Speaker 7: I had an account on DraftKings.
Speaker 1: Rufus had a girlfriend in Massachusetts. Massachusetts hadn't yet legalized
Speaker 1: sports betting, so he needed to cross state lines to
Speaker 1: use the betting app on his phone. The drive took
Speaker 1: him like forty five minutes, but it was actually easier
Speaker 1: than running all over in Vegas trying to get cash down.
Speaker 1: He and his process were built for this new type
Speaker 1: of casino. He could bet on golf basically all day long,
Speaker 1: until one day he couldn't.
Speaker 7: One week, I lost thirty thousand dollars. I got a
Speaker 7: phone call to tell me that they were cutting my
Speaker 7: limits on golf.
Speaker 1: He'd lost thirty thousand dollars and DraftKings stopped taking his
Speaker 1: big bets. By the way, we've reached out to DraftKings
Speaker 1: and so far they have declined to talk with us. Anyway,
Speaker 1: it was clear to Rufus back in twenty twenty that
Speaker 1: this was definitely no longer his old sports gambling world.
Speaker 6: Because I had bet enough.
Speaker 7: It spurred them to actually go in and look at
Speaker 7: the stuff I'd been betting and how I'd been doing.
Speaker 7: Books are not limiting people just because they win. They're
Speaker 7: limiting them because they think they're going to win in
Speaker 7: the future.
Speaker 1: Rufus used data to predict what athletes were going to do.
Speaker 1: DraftKings was using data to predict what Rufus would do.
Speaker 1: When they looked at the data, they saw that after
Speaker 1: Rufus placed his bets, the odds nearly always moved in
Speaker 1: his favor. These were the bets of someone who knew
Speaker 1: things before the market knew them, and the new bookies
Speaker 1: were not like the old bookies. They only wanted to
Speaker 1: take certain kind of bets, bets that were more like
Speaker 1: the bets you make when you press the buttons on
Speaker 1: a slot machine, bets that if you made them often enough,
Speaker 1: you were sure to lose. The sort of bets a
Speaker 1: fan would make, the sort of bets Rufus Peabody never made.
Speaker 6: Refusing a bet wasn't a thing. It never was a
Speaker 6: thing here, huh.
Speaker 7: Like you, if you got kicked out of a casino,
Speaker 7: or if you couldn't get there, it was because you
Speaker 7: did something wrong, like you violated the sacred bookmaker better covenant.
Speaker 1: Being smarter than the market didn't used to get you
Speaker 1: kicked out of the market. But the market's changed. Sports
Speaker 1: gamling is still a hard way to make an easy living,
Speaker 1: but now it feels even less fair. Now it feels
Speaker 1: like someone should step in and help Rufus.
Speaker 10: Okay, cool, So I downloaded FanDuel, DraftKings, Fliff Fanatics, Caesar's Bet, MGM,
Speaker 10: and PayPal. So now everyone has all of my information
Speaker 10: and my social security number.
Speaker 6: Oh, your social security number they all asked for I guess.
Speaker 1: These new sports gambling apps, they all ask for it,
Speaker 1: and so we're going to give it to them. In
Speaker 1: our next episode. Against the Rules is written and hosted
Speaker 1: by me Michael Lewis and produced by Lydia gene Kott,
Speaker 1: Catherine Gerdeau, and Ariela Markowitz. Our editor is Julia Barton.
Speaker 1: Our engineer is Jake Gorski. Our music was composed by
Speaker 1: Matthias Bossi and John Evans of stell Wagon Sympinet. Our
Speaker 1: fact checker is Lauren Vespoli. Against the Rules is a
Speaker 1: production of Pushkin Industries. To find more Pushkin podcasts, listen
Speaker 1: on the iHeartRadio app, Apple Podcasts or wherever you listen
Speaker 1: to podcasts, and if you'd like to listen to ad
Speaker 1: free and learn about other exclusive offerings, don't forget to
Speaker 1: sign up for a Pushkin Plus subscription at pushkin dot fm,
Speaker 1: slash plus or on our Apple show
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