WEBVTT - Gambling with Michael Lewis 0:00:15.356 --> 0:00:24.276 Pushkin. Hello, Hello, Revisionist History listeners. Malcolm here, I'm stopping 0:00:24.276 --> 0:00:25.916 by near the end of my book tour because I 0:00:25.956 --> 0:00:28.956 have a special guest in the house, Michael Lewis. You 0:00:29.036 --> 0:00:31.276 may know him as the author of Moneyball, The Big Short, 0:00:31.596 --> 0:00:34.836 Liar's Poker, and most recently Going Infinite, which just came 0:00:34.876 --> 0:00:37.796 out in paperback, by the way, or you may know 0:00:37.916 --> 0:00:42.116 him by his alter identity as a Pushkin SuperHost. Michael's 0:00:42.116 --> 0:00:44.596 show Against the Rules is now in the middle of 0:00:44.636 --> 0:00:48.356 a fantastic new season. It's all about the insane rise 0:00:48.476 --> 0:00:52.396 and the consequences of sports betting in the US. You're 0:00:52.436 --> 0:00:53.836 going to get a chance to hear one of the 0:00:53.876 --> 0:00:57.316 latest episodes in just a moment, But first I thought 0:00:57.316 --> 0:01:01.076 we would chat with the man himself. Michael Lewis. Welcome 0:01:01.156 --> 0:01:02.156 to Revisionist History. 0:01:02.356 --> 0:01:05.996 It's been too long. Yes, I haven't seen you in ages. 0:01:06.396 --> 0:01:08.076 I know, I know we need to write that wrong. 0:01:09.676 --> 0:01:14.116 So you've done this show about uh, sports betting, and 0:01:14.156 --> 0:01:17.636 this comes after what your first one was about referees 0:01:17.676 --> 0:01:20.796 and then coaching right experts. 0:01:20.836 --> 0:01:22.836 We sort of set them all into the sports arena 0:01:22.956 --> 0:01:24.836 and this is yeah, you know, we frame this as 0:01:24.956 --> 0:01:28.756 fans and it's sort of like the fracking of the 0:01:28.756 --> 0:01:32.956 fan how the sports leagues have decided to squeeze ever 0:01:33.076 --> 0:01:36.396 more juice out of the fan base. And and and 0:01:36.596 --> 0:01:41.396 you know, six years ago, the Supreme Court UH repealed 0:01:41.396 --> 0:01:45.316 a federal ban on sports gambling. And at that time, 0:01:46.036 --> 0:01:49.796 the NFL, the NBA, Major League Baseball, the NC double A, 0:01:49.916 --> 0:01:52.796 We're all saying sports betting is evil. You know that, 0:01:52.916 --> 0:01:55.396 it's just like it will it will destroy the integery 0:01:55.396 --> 0:01:57.316 of sports, et cetera, et cetera. And there's long be 0:01:57.396 --> 0:02:00.116 this taboo in the sports world about gambling. I mean, 0:02:00.116 --> 0:02:02.116 not even gambling on your own sport. If you've caught 0:02:02.156 --> 0:02:05.756 sports gambling, people have been tossed out of sports and 0:02:05.796 --> 0:02:09.396 they flipped on a dime. And and essentially when into 0:02:09.436 --> 0:02:14.156 business with the sports gambling industry, and particularly fan duel 0:02:14.196 --> 0:02:17.716 and DraftKings to the two sort of big companies at 0:02:17.716 --> 0:02:20.556 the center of this world. And there's this kind of 0:02:20.596 --> 0:02:23.796 sports gambling industrial complex that has arisen in the last 0:02:23.796 --> 0:02:28.356 few years. And it's really interesting. It's like, so past 0:02:28.716 --> 0:02:31.116 the past seasons, I've loved doing the podcast. You are 0:02:31.196 --> 0:02:33.556 responsible for me doing the podcast, So I mean, you 0:02:33.636 --> 0:02:36.116 kind of talked me into this, and I love that. 0:02:36.316 --> 0:02:38.796 I love the way it works kind of different muscles, 0:02:38.836 --> 0:02:41.076 and when you're writing these scripts, it's a different thing 0:02:41.156 --> 0:02:42.996 than writing the books, and I like it for all 0:02:43.276 --> 0:02:46.436 kinds of reasons. But up to up till now, we've 0:02:46.476 --> 0:02:50.156 taken themes. This season is whatever, seven episodes, and it's 0:02:50.196 --> 0:02:53.756 it's it's variations on a theme, but it isn't one story. 0:02:54.316 --> 0:02:56.156 And in this case, this could be a book. 0:02:56.236 --> 0:02:59.676 It's like almost plotted like a book, and it's it's 0:02:59.676 --> 0:03:03.956 about this vast social experiment that's going on that's largely 0:03:03.956 --> 0:03:06.436 invisible because the consequences are sort of you know, you 0:03:06.476 --> 0:03:08.436 don't see it the way you see on an opioid 0:03:08.436 --> 0:03:13.956 addiction or alcohol addiction. You're seeing this thing that historically 0:03:13.996 --> 0:03:17.596 regarded as a vice, understood to be kind of risky behavior, 0:03:17.956 --> 0:03:22.556 being foisted upon the American people, especially young American males, 0:03:22.956 --> 0:03:23.716 in a way that would have. 0:03:23.676 --> 0:03:25.516 Been unthinkable a decade ago. 0:03:25.876 --> 0:03:29.236 And so like how this is happening, how the industry works, 0:03:29.676 --> 0:03:31.996 with the economics of the industry, are where this is 0:03:32.036 --> 0:03:33.956 going and the effects it's having on We're talking to 0:03:33.996 --> 0:03:37.436 everybody from athletes to high school students who are creating 0:03:37.556 --> 0:03:41.516 sports gambling rings in their high school and like, ultimately, 0:03:41.516 --> 0:03:45.556 how to defend yourself because the industry's coming for you 0:03:45.796 --> 0:03:46.596 or your children. 0:03:47.116 --> 0:03:48.316 It's sort of. 0:03:49.036 --> 0:03:54.756 Finally calibrated to exploit all of your mental weaknesses, finally 0:03:54.836 --> 0:03:57.636 calibrated to get you do the stupidest things you could 0:03:57.676 --> 0:03:58.716 possibly do. 0:04:00.356 --> 0:04:01.036 In a casino. 0:04:01.556 --> 0:04:06.236 I'm just curious about how you settled on this particular topic. 0:04:06.276 --> 0:04:09.516 When did you when was sports gambling? So w did 0:04:09.556 --> 0:04:10.836 you start buzzing around your head? 0:04:12.116 --> 0:04:14.716 Well? Completely honest, it was buzzing around my head because 0:04:14.716 --> 0:04:17.476 you can't avoid it. Right, even in California, sports gain 0:04:17.596 --> 0:04:21.476 is still illegal. It's legal in thirty nine states. California's 0:04:21.476 --> 0:04:23.636 not one of them. Soon will be one of them probably. 0:04:23.876 --> 0:04:27.596 But even in spite of that, living in California, four 0:04:27.676 --> 0:04:31.596 years ago, I started getting bombarded with ads by from 0:04:31.676 --> 0:04:34.236 DraftKings and Fando telling me to bet on sports and 0:04:34.236 --> 0:04:35.796 they'll commentary around sports. 0:04:35.916 --> 0:04:38.756 It completely changed. So it caught my attention then. 0:04:39.356 --> 0:04:43.276 But it was our brilliant producers who came and said, 0:04:43.316 --> 0:04:45.356 you know, what do you think about this as a subject, 0:04:45.756 --> 0:04:49.956 and instily went yes, yes, like yes that it just 0:04:50.036 --> 0:04:53.036 hasn't quite been done sometimes the best stories are things 0:04:53.076 --> 0:04:54.796 that no one ever thought about. 0:04:54.876 --> 0:04:56.276 Some of the best stories is just like what's under 0:04:56.316 --> 0:05:00.996 your nose that no one's really noticed and sight hiding 0:05:00.996 --> 0:05:01.676 in plain sight. 0:05:02.036 --> 0:05:06.276 The more we dug into it, the more shocking it was. 0:05:06.676 --> 0:05:10.116 Just how predatory it is, how the as a business. 0:05:10.476 --> 0:05:12.756 FanDuel and DraftKings, the two companies at the center of 0:05:12.796 --> 0:05:17.156 the of the industry. They're they're framed in the public 0:05:17.236 --> 0:05:19.556 mind it's always just fun, it's gaming or whatever. It's 0:05:20.156 --> 0:05:23.436 maybe like a casino. It's not at all like a casino. 0:05:23.876 --> 0:05:26.316 These are businesses that really haven't ever existed before. It's 0:05:26.316 --> 0:05:32.716 casinos with unbelievable amounts of data about the gamblers, an 0:05:32.716 --> 0:05:35.996 incredible ability to nudge the gamblers into ever and ever. 0:05:35.956 --> 0:05:38.716 Stupid things, and it's in your pocket. It was a 0:05:38.716 --> 0:05:40.836 combination of that that. 0:05:40.956 --> 0:05:42.716 Kind of dragged me into it, and it was also 0:05:42.836 --> 0:05:47.716 just like the whole sports gambling is as an activity, 0:05:48.556 --> 0:05:53.716 It's more interesting to me than casino gambling or even blackjack. 0:05:53.836 --> 0:05:57.436 We spent the time with sports gamblers, pro the very 0:05:57.436 --> 0:06:01.116 best sports gamblers who beat the house, and they're doing 0:06:01.156 --> 0:06:03.636 stuff very like what the Oakland A's front office did 0:06:03.716 --> 0:06:06.036 back in the late nineties and early two thousands where 0:06:06.036 --> 0:06:09.996 they were they're doing an fresh analysis of this sports 0:06:09.996 --> 0:06:14.436 to glean fresh insights that the market, you know, is 0:06:14.476 --> 0:06:16.916 sort of oblivious to, so that they get an edge. 0:06:17.356 --> 0:06:22.756 And that's interesting to me. It's like, at the same time, 0:06:23.756 --> 0:06:26.756 the corporate side of it is kind of dark and gross, 0:06:27.796 --> 0:06:30.076 the gambling side of it is kind of fun and 0:06:30.116 --> 0:06:31.876 interesting for the people who know what they're doing. 0:06:32.676 --> 0:06:36.276 I've been struck by how much the sports gambling has 0:06:36.796 --> 0:06:40.676 has infected our world podcasting. I mean, sports podcasts have 0:06:40.796 --> 0:06:42.916 turned into sports gambling podcasts. 0:06:43.396 --> 0:06:43.876 You got it. 0:06:43.916 --> 0:06:46.396 I mean I listened. I spent many, many hours of 0:06:46.436 --> 0:06:49.356 my life listening to Bill Simmons. But it's like all 0:06:49.636 --> 0:06:53.316 he mentions FanDuel in every second paragraph. 0:06:53.636 --> 0:06:57.316 They've rained so much money on media that there's just 0:06:57.476 --> 0:07:01.796 not much blowback. There's a huge financial disincentive to doing 0:07:01.876 --> 0:07:05.756 the story. Like first question your business people ask me 0:07:05.876 --> 0:07:09.396 is can we take fan Duel and DraftKings money and 0:07:09.916 --> 0:07:14.316 very much not in your spirit? I said no, Now, I. 0:07:14.276 --> 0:07:16.756 Know you need very much not in spirit because you 0:07:16.796 --> 0:07:20.956 were so because you were so good at plowing right 0:07:20.996 --> 0:07:24.916 through the ordinary ethical objections in getting that and getting 0:07:24.916 --> 0:07:27.196 to the cash. 0:07:27.436 --> 0:07:28.236 It's so true. 0:07:28.516 --> 0:07:34.036 It's so true, isn't true? You know we got mouse 0:07:34.036 --> 0:07:35.476 safe to hear at Pushkin you do. 0:07:35.556 --> 0:07:38.556 You're a responsible parent and you're generating the income for 0:07:38.636 --> 0:07:40.996 the family. But I'm kind of off to I'm just 0:07:41.116 --> 0:07:43.196 I'm winging that off to the side of your operation. 0:07:43.516 --> 0:07:47.316 And I just said, no, it's pretty clear that we've 0:07:47.316 --> 0:07:50.676 got to be completely free of the taint of their money. 0:07:51.156 --> 0:07:54.316 These two companies in the last five years have spent 0:07:54.556 --> 0:07:58.156 something like two billion dollars each on marketing, and a 0:07:58.196 --> 0:08:00.076 lot it ends up in the pockets of sports work. 0:08:00.236 --> 0:08:04.956 Yes, they're billion two billion. Yes, that's like General Motors level. 0:08:05.516 --> 0:08:08.876 They We had someone who I think is the trust 0:08:08.916 --> 0:08:12.076 is Ors tell us that they're the biggest advertisers in America. 0:08:12.316 --> 0:08:15.036 They're bigger than the beer They're bigger than the car companies. 0:08:15.556 --> 0:08:18.756 And that isn't actually surprising anybody who watches sports. 0:08:19.236 --> 0:08:20.636 It's like every other ad is. 0:08:20.556 --> 0:08:28.636 An afrodamblin and and and beyond beyond that. Like the announcers, 0:08:28.636 --> 0:08:32.156 not just Bill Simmons, the announcers during the games are 0:08:32.196 --> 0:08:36.396 framing all their commentary around their bets, and their bets 0:08:37.516 --> 0:08:40.756 that they make are are encouraging or sort of suggesting 0:08:40.796 --> 0:08:44.956 to the audience they might make. Two are are precisely 0:08:45.036 --> 0:08:47.916 the stupidest bets you can make, and the bets that 0:08:47.996 --> 0:08:52.796 maximize the profits of the companies, like it's it's it's 0:08:52.836 --> 0:08:57.396 long shot bets, it's parlay bets. Uh yes, and what 0:08:57.796 --> 0:08:59.956 it's taking advantage of We haven't quite got to this 0:09:00.076 --> 0:09:00.476 the last. 0:09:00.676 --> 0:09:03.556 I don't want to burn the season on your podcast. 0:09:03.636 --> 0:09:06.636 But the human mind makes all kinds of mistake, that's 0:09:06.716 --> 0:09:10.676 when it's placed in conditions of uncertainty. And one routine 0:09:10.716 --> 0:09:13.436 mistake it makes is that when it's given long odds, 0:09:13.876 --> 0:09:16.916 it starts to cease to make distinctions. So if someone 0:09:16.956 --> 0:09:19.356 offers you forty to one odds on some parlay bet 0:09:19.436 --> 0:09:21.036 or twenty to one odds, you think, wow, I get 0:09:21.036 --> 0:09:24.636 twenty dollars for everyone I put up, and you don't 0:09:24.636 --> 0:09:27.316 stop and to realize that actually the true odds or 0:09:27.356 --> 0:09:28.716 something like one hundred to one. 0:09:29.036 --> 0:09:31.156 You mean, because you're betting on a series of long 0:09:31.196 --> 0:09:34.596 shots and you have to multiply out, yes, the odds. 0:09:34.356 --> 0:09:35.276 Well don't get right. 0:09:35.476 --> 0:09:39.796 Yes, people don't do exponentials very well, and the mind 0:09:39.996 --> 0:09:42.916 is sloppy when when you're starting to present people with 0:09:42.996 --> 0:09:43.876 long shot bets. 0:09:43.956 --> 0:09:45.356 That's why people play the lottery. 0:09:45.716 --> 0:09:50.676 They've been kind of grooming the American gambler to move 0:09:50.716 --> 0:09:53.156 away from oh, just betting on the taking the chiefs 0:09:53.156 --> 0:09:57.596 and giving up the points to these bets where the 0:09:57.636 --> 0:10:01.756 house take is multiples of what a casino takes for 0:10:01.836 --> 0:10:05.556 its for casino games. As a result, the two companies 0:10:05.596 --> 0:10:09.116 that they're both listed companies, well DraftKings has listed DraftKings 0:10:09.276 --> 0:10:11.596 FanDuel is owned by what's holy companies. 0:10:11.316 --> 0:10:12.196 Called flutter. 0:10:13.356 --> 0:10:18.436 All of Wall Street basically got them wrong the minute 0:10:18.676 --> 0:10:21.836 they ran up as companies. The stocks ran up in 0:10:21.876 --> 0:10:25.636 the wake of the legalization of sports gaming, and everybody 0:10:25.676 --> 0:10:28.476 came up and said, oh, they're inflated short them, and 0:10:28.516 --> 0:10:31.476 they crashed temporarily. It's like the Land of twenty twenty 0:10:31.516 --> 0:10:33.796 one because everyone's sort of looking at them as standard 0:10:33.796 --> 0:10:36.556 casino businesses, and they knew what the take was for 0:10:36.596 --> 0:10:38.596 standard casinos, and they could kind of guess with the 0:10:39.236 --> 0:10:41.596 handle was going to be, what the betting volume was 0:10:41.596 --> 0:10:43.716 going to be, and they did the casino math and 0:10:43.756 --> 0:10:46.996 they said, this doesn't justify the stock price. In fact, 0:10:47.076 --> 0:10:50.356 the take is multiples of what casinos and is growing 0:10:51.196 --> 0:10:51.876 the margins. 0:10:52.196 --> 0:10:54.836 And a way to think about it is it's sort 0:10:54.876 --> 0:10:55.196 of like. 0:10:55.236 --> 0:10:58.676 Exploiting their ability to get people to do dumber and 0:10:58.756 --> 0:11:02.436 dumber things. And I think I think it's going to happen. 0:11:02.476 --> 0:11:03.796 Our podcast is going to be a part of this. 0:11:04.596 --> 0:11:07.076 The way to address this is to make it clear 0:11:08.036 --> 0:11:14.156 that anybody who is a VIP of Fan Duel or 0:11:14.236 --> 0:11:17.516 DraftKings or one of these fourths gaming apps, or anybody 0:11:17.556 --> 0:11:20.476 who even kind of does it a lot, is like 0:11:20.836 --> 0:11:25.636 someone who's who's almost certainly making dumb bets because they 0:11:26.076 --> 0:11:28.836 are on the other side of this. The gaming apps 0:11:28.836 --> 0:11:32.356 are really good at figuring out who's a smart better 0:11:32.756 --> 0:11:35.476 and kicking them out. If you know what you're doing, 0:11:35.676 --> 0:11:37.996 if you're the equivalent of the card counter, if you 0:11:38.076 --> 0:11:42.076 actually figured out something about football that nobody has realized before, 0:11:42.116 --> 0:11:45.996 and you've got a systematic edge, very very quickly, they 0:11:46.036 --> 0:11:47.316 figure it out and they get rid of you. 0:11:47.716 --> 0:11:51.116 So in a way they could do that. I never 0:11:51.156 --> 0:11:53.836 understood this. You know a lot, if I walk into 0:11:53.836 --> 0:11:57.436 a store, they can't kick me out. You know, there's 0:11:57.556 --> 0:11:58.596 isn't there a whole kind. 0:11:58.476 --> 0:12:01.396 Of you would think you would think their analogy that 0:12:01.436 --> 0:12:02.916 they want to draw it is it's like the card 0:12:02.996 --> 0:12:05.276 counter coming into the casino. We can throw out that 0:12:05.356 --> 0:12:07.316 we don't We don't have to service the card counter 0:12:07.356 --> 0:12:08.276 at the blackjack table. 0:12:08.316 --> 0:12:09.596 I don't want to ruin the whole show. 0:12:09.636 --> 0:12:13.556 But our producer took an enormous pile of cash with 0:12:13.756 --> 0:12:16.956 smart betting ideas and it took her moments to get 0:12:17.036 --> 0:12:20.036 chucked out. A poor lidiageing cot has been banned by 0:12:20.076 --> 0:12:27.676 every sports betting So yeah, because and the way, it's 0:12:27.716 --> 0:12:31.516 a very simple way how they identify that you are smart. 0:12:31.836 --> 0:12:35.116 If the line moves in your favor after you've made 0:12:35.156 --> 0:12:39.596 the bet systematically you knew something is basically were saying 0:12:39.676 --> 0:12:41.676 the odds, the odds will drift to the true odds, 0:12:41.716 --> 0:12:42.676 and if you were ahead. 0:12:42.396 --> 0:12:43.956 Of the market, they don't want you. 0:12:44.396 --> 0:12:47.156 And so, but the part of parint is that And 0:12:47.236 --> 0:12:49.556 I said this to an audience of money managers not 0:12:49.596 --> 0:12:52.076 that long ago. They're asking me like, do you have 0:12:52.076 --> 0:12:55.036 any tips to how to identify a good money manager? 0:12:55.076 --> 0:12:56.876 And I said, well, there's a new one now available. 0:12:57.156 --> 0:12:59.516 Before you let someone manage your money, you had to 0:12:59.556 --> 0:13:01.516 ask them if they if they have ac council fando 0:13:01.596 --> 0:13:04.076 and DraftKings and their sports betters, and like what's their 0:13:04.156 --> 0:13:06.756 relationship with those enterprises And if they say. 0:13:06.596 --> 0:13:08.796 Man, I'm like a VIP or I do it all 0:13:08.796 --> 0:13:09.556 the time, or I. 0:13:11.036 --> 0:13:14.636 Don't give them your money to invest, like they are 0:13:14.676 --> 0:13:18.116 identifying people who should not be professional investors. 0:13:18.236 --> 0:13:20.516 Michael, can you describe the the tell me a little 0:13:20.516 --> 0:13:21.916 bit about the episode we're about to hear it. 0:13:22.716 --> 0:13:25.716 So this is the episode where we're the main character 0:13:25.756 --> 0:13:29.716 is Rufus Peabody, who is one of America's great sports betters. 0:13:29.916 --> 0:13:32.996 And by the way, did you make up that name? 0:13:33.396 --> 0:13:34.356 No? No, I don't. 0:13:34.356 --> 0:13:36.636 It's like that is like if I had to imagine 0:13:36.636 --> 0:13:38.556 the name that Michael Lewis would make up for his 0:13:38.636 --> 0:13:40.476 lead character, it would be Rufus Peabody. 0:13:40.556 --> 0:13:42.636 I told Rufus Peabody when I met him that if 0:13:42.636 --> 0:13:44.916 my name was Rufus Peabody and Michael Lewis, I'd be 0:13:44.956 --> 0:13:46.356 worth three times when I'm worth that. 0:13:46.516 --> 0:13:50.356 It's are you kidding me? Yeah, it would be totally. 0:13:50.396 --> 0:13:53.196 It's wasted on sports better it should it should be 0:13:53.436 --> 0:13:57.836 it should be an author. Rufus was in he's still 0:13:57.956 --> 0:14:01.756 young Yale class of two thousand and nine or whatever. 0:14:02.156 --> 0:14:04.636 He is the leading kind of smart edge of gambling. 0:14:04.676 --> 0:14:09.036 But he was present before legalization. He was present in 0:14:09.316 --> 0:14:13.316 the markets back when Vegas was the market. We traveled 0:14:13.316 --> 0:14:15.396 with him to the point where his bets are no 0:14:15.436 --> 0:14:19.596 longer accepted. What interested me about him and his mentor 0:14:19.676 --> 0:14:23.556 is also a big character in the in the episode 0:14:23.916 --> 0:14:26.916 Roxy Roxboro a legend in the old Vegas sport. 0:14:27.196 --> 0:14:28.956 I know, I know, I know. And what your love 0:14:28.956 --> 0:14:33.236 about Roxy is? He's Canadian? He's can Michael. 0:14:33.276 --> 0:14:35.956 Did we know we have two Improbably we now have 0:14:35.996 --> 0:14:39.236 a parlay of improbably perfect names. 0:14:39.316 --> 0:14:41.476 You're gonna love listening to them. They're wonderful, they have 0:14:41.516 --> 0:14:43.756 a lot to say. They're very smart people. I just thought, 0:14:43.876 --> 0:14:48.116 what is the most interesting point of view on this market? 0:14:48.476 --> 0:14:50.356 And it was, obviously it was the point of view 0:14:50.396 --> 0:14:52.916 of the sharp the edge player, the person who's beaten 0:14:53.036 --> 0:14:55.316 the market. It's like, who's the most interesting person to 0:14:55.396 --> 0:14:59.196 talk to about a casino? Either the person actually running 0:14:59.196 --> 0:15:01.316 the casino or is the card counter, or the person 0:15:01.316 --> 0:15:04.436 who's figured out how the slots are rigged, or who's 0:15:04.436 --> 0:15:06.916 seen that the roulette wheel is slightly off. It's someone 0:15:06.956 --> 0:15:10.956 who is looking at the market from a superior kind 0:15:10.996 --> 0:15:14.716 of vantage point. So it's walking us into this new 0:15:14.756 --> 0:15:17.516 market through the eyes of an edge player. 0:15:18.356 --> 0:15:20.716 You have the one thing that has distinguished you throughout 0:15:20.756 --> 0:15:23.476 your career is I feel like no one has his 0:15:24.156 --> 0:15:28.916 finger closer to the pulse than you. You've done it repeatedly, 0:15:28.956 --> 0:15:30.236 and it sounds like you've done it again. 0:15:30.556 --> 0:15:31.796 It's a gas of a season. 0:15:32.156 --> 0:15:35.156 Michael Lewis is host of Against the Rules right here 0:15:35.156 --> 0:15:38.756 at Pushkin. Here's his latest episode, A Hard Way to 0:15:38.836 --> 0:15:41.316 Make an Easy Living. Give it a listen and head 0:15:41.356 --> 0:15:44.436 over to Against the Rules and subscribe to hear more. 0:15:44.876 --> 0:15:46.836 Thank you, Michael, Thank you, Malcolm. 0:15:48.436 --> 0:15:51.876 Oh yay, oh yay, oh yay. 0:15:52.796 --> 0:15:57.036 May twenty eighteen, the United States Supreme Court strikes down 0:15:57.076 --> 0:16:00.196 the federal law that has effectively banned sports gambling in 0:16:00.276 --> 0:16:06.076 nearly every state. What happens next happens faster than anyone imagined. 0:16:07.116 --> 0:16:09.676 It happens in so many places at once that it's 0:16:09.716 --> 0:16:11.396 basically impossible to follow it. 0:16:11.356 --> 0:16:12.196 All in real time. 0:16:13.556 --> 0:16:16.556 I ended up picking Mississippi and Kansas as the two 0:16:16.636 --> 0:16:19.956 states that I really decided to focus on and merely 0:16:20.076 --> 0:16:23.156 was just there becoming a part of the furniture. As 0:16:23.196 --> 0:16:24.796 the lobbyists were working their magic. 0:16:25.836 --> 0:16:29.196 That's Eric Lipton, New York Times reporter, who with his 0:16:29.276 --> 0:16:33.396 colleague Ken Vogel, just sat and watched as lobbyists created 0:16:33.436 --> 0:16:37.676 the conditions for a new industry to emerge overnight sports. 0:16:37.316 --> 0:16:43.996 Gambling and buttonholing various legislators, getting them to introduce language 0:16:43.996 --> 0:16:47.876 that they wanted into the gambling bills and changing the 0:16:48.596 --> 0:16:52.436 tax rates, getting provisions included that would allow them to 0:16:53.476 --> 0:16:56.156 entice betters with free bets that they wouldn't have to 0:16:56.156 --> 0:16:56.916 pay taxes on. 0:16:57.756 --> 0:17:00.916 Derek knows that state capitals where the action is. He 0:17:00.996 --> 0:17:04.956 started his career covering state governments for local papers. When 0:17:04.996 --> 0:17:07.116 he returns to his old beat, he sees right away 0:17:07.116 --> 0:17:10.636 how much lonelier state capitals are because his old job, 0:17:10.956 --> 0:17:13.756 state House reporter, now barely exists. 0:17:14.196 --> 0:17:16.276 There were times when I was in the state capitol 0:17:16.276 --> 0:17:18.956 where I was pretty much the only reporter there while 0:17:18.956 --> 0:17:23.076 they were debating sports betting, and I would stay until 0:17:23.116 --> 0:17:26.196 they wrapped up two in the morning, as the session 0:17:26.396 --> 0:17:28.276 was closing and they were trying to get the bill 0:17:28.396 --> 0:17:30.996 passed and there were no other reporters present. 0:17:31.156 --> 0:17:33.796 It's like, if you do something at the federal level, 0:17:34.396 --> 0:17:36.796 there'res going to be a lot of people watching, still 0:17:37.276 --> 0:17:40.636 a lot of reporters who will cover national politics. But 0:17:41.156 --> 0:17:44.516 if you push things down to the states, you're more 0:17:44.596 --> 0:17:46.196 likely to just operate in the shadows. 0:17:46.796 --> 0:17:48.636 Yeah, and I think the lobbyists know that. 0:17:48.876 --> 0:17:51.556 And it's actually a lot easier to get things done 0:17:51.596 --> 0:17:54.996 in state capitals. You can build a national strategy through 0:17:55.036 --> 0:17:55.996 a collection of states. 0:17:57.196 --> 0:17:59.636 Eric and his colleague at the Times wrote about Kansas 0:17:59.676 --> 0:18:02.556 back in twenty twenty two, but he could have written 0:18:02.556 --> 0:18:06.036 the same piece almost anywhere. In the United States. Thirty 0:18:06.076 --> 0:18:09.956 eight states plus Washington, d c. Were rushed to legalize 0:18:09.956 --> 0:18:13.756 sports betting and rolling over for the new sports bookies 0:18:13.996 --> 0:18:16.276 who were pushing to minimize just how much of a 0:18:16.316 --> 0:18:17.436 cut the states took. 0:18:18.196 --> 0:18:20.636 They cut the tax rate almost in a half. 0:18:21.716 --> 0:18:25.956 They gave them the ability to give out free bets 0:18:26.156 --> 0:18:28.876 as a promotion to sign people up and not have 0:18:28.956 --> 0:18:32.236 to pay taxes on that. So essentially the state becomes 0:18:32.396 --> 0:18:38.156 a lost leader promoter of getting people into gambling by 0:18:38.476 --> 0:18:42.636 giving them tax free promotions. 0:18:40.836 --> 0:18:43.556 And without a whole lot of pushback from anyone. 0:18:44.156 --> 0:18:47.076 Oftentimes the legislators weren't even aware that they were passing 0:18:47.116 --> 0:18:49.676 these things, or they were it was sent it was 0:18:50.076 --> 0:18:52.236 given to them at the last minute, just before they 0:18:52.236 --> 0:18:53.996 were asked to vote on it, and they weren't even 0:18:54.196 --> 0:18:56.036 fully informed as to what they were voting on. 0:18:57.276 --> 0:19:00.076 Overnight, the States have gone from the bookies cop to 0:19:00.116 --> 0:19:03.716 the bookies' partner. So of all the pro sports leagues, 0:19:03.796 --> 0:19:07.916 the NFL, the NBA, and Major League Baseball, the entire 0:19:07.956 --> 0:19:11.476 sports industrial complex now has a stake in the revenues 0:19:11.476 --> 0:19:14.796 that flow into sports gambling companies like DraftKings and Fan Duel. 0:19:15.556 --> 0:19:18.396 There's now a vast new machine with one clear purpose 0:19:18.956 --> 0:19:23.116 to maximize those revenues by maximizing the number of bets 0:19:23.156 --> 0:19:28.276 that Americans make on sports. A sports sequinox is coming 0:19:29.476 --> 0:19:37.196 for sports one one contest that's free to the FANDUS 0:19:37.196 --> 0:19:39.996 sports econts frequently comtes. It's as if when prohibition ended, 0:19:40.036 --> 0:19:42.796 there were these two massive liquor companies sitting there with 0:19:42.916 --> 0:19:47.196 databases on individual Americans and their tastes for alcohol, and 0:19:47.236 --> 0:19:49.556 the government ordered them to go wave a glass of 0:19:49.556 --> 0:19:52.756 whiskey under the nose of every alcoholic to persuade as 0:19:52.796 --> 0:19:56.556 many as possible to start drinking again. Of course, there 0:19:56.596 --> 0:20:01.196 are some restraints, some rules. No state has allowed small 0:20:01.276 --> 0:20:04.996 children to gamble on sports. Eight have declined to allow 0:20:04.996 --> 0:20:08.196 people to gamble on their phones, and the taxes that 0:20:08.236 --> 0:20:10.876 the new industry pays varies a lot from state to state. 0:20:11.836 --> 0:20:14.716 New York takes fifty one percent of all sportsbook revenues. 0:20:15.356 --> 0:20:19.636 Indiana takes only nine and a half percent. In twenty seventeen, 0:20:20.036 --> 0:20:22.436 the year before the Supreme Court struck down a federal 0:20:22.516 --> 0:20:25.956 log inst sports betting, legal sports bookies in the United 0:20:25.996 --> 0:20:30.636 States generated roughly three hundred million dollars in revenues. In 0:20:30.636 --> 0:20:36.316 twenty twenty three, they took in eleven billion. In twenty seventeen, 0:20:36.756 --> 0:20:40.356 Americans made roughly five billion dollars in legal sports bets. 0:20:41.316 --> 0:20:43.956 Last year, they laid down more than one hundred and 0:20:44.076 --> 0:20:49.036 twenty billion. The numbers are crazy, the consequences are even 0:20:49.076 --> 0:20:51.596 more so, and will be exploring them for the rest 0:20:51.596 --> 0:20:53.596 of the season. Take your shot at more than two 0:20:53.636 --> 0:20:56.956 hundred and seventy thousand dollars in payouts. That's a lot 0:20:56.996 --> 0:21:05.716 of money. I'm Michael Lewis, and this is Against the Rules, 0:21:06.236 --> 0:21:08.556 a show where we look at specific roles in American 0:21:08.596 --> 0:21:10.196 life and how they're changing. 0:21:11.236 --> 0:21:11.636 The fans. 0:21:11.756 --> 0:21:15.356 Roles changing because a powerful new machine has sprung up 0:21:15.396 --> 0:21:19.236 to encourage the fan to gamble on sports. Sports gambling 0:21:19.236 --> 0:21:22.316 has never been just a simple and straightforward marketplace. It's 0:21:22.316 --> 0:21:25.636 more like a jungle, and DraftKings and fandueler are like 0:21:25.636 --> 0:21:28.916 this invasive species that's been dropped into it by accident. 0:21:30.036 --> 0:21:33.996 They've disrupted the food chain and overrun the habitat because 0:21:33.996 --> 0:21:37.956 they feed so efficiently on fan emotion, and fan emotion 0:21:38.156 --> 0:21:42.196 is the jungle's greatest food source. But they're also vulnerable 0:21:42.876 --> 0:21:58.436 to a creature that feeds on them. Let's recall for 0:21:58.436 --> 0:22:01.556 a minute what sports gambling once was in America by 0:22:01.596 --> 0:22:03.916 listening to just a snippet of a press conference held 0:22:03.916 --> 0:22:07.396 back in nineteen sixty one by then Attorney General Robert F. 0:22:07.476 --> 0:22:07.836 Kennedy. 0:22:08.236 --> 0:22:10.636 The report has been since the passage of the legislation, 0:22:10.716 --> 0:22:15.596 and that's big time gambling by the big time operators 0:22:15.636 --> 0:22:19.676 has been materially decreased since the passage of the legislation. 0:22:20.836 --> 0:22:24.396 Kennedy celebrating a new law called the Federal Wire Act. 0:22:24.876 --> 0:22:26.676 The point of the law was to cut the legs 0:22:26.676 --> 0:22:30.156 from under the mafia by shutting down it's sports gambling operations. 0:22:30.756 --> 0:22:33.156 By giving the federal government the power to arrest and 0:22:33.236 --> 0:22:36.476 prosecute anyone who booked a sports bet over any phone 0:22:36.556 --> 0:22:38.996 or telegraph wire that crossed state lines. 0:22:39.836 --> 0:22:43.316 And in fact, the head of the Royal Mounted Police 0:22:43.356 --> 0:22:46.836 in Canada said in the speech last week that Canada 0:22:46.916 --> 0:22:49.476 will now have to pass legislation and take new steps 0:22:49.556 --> 0:22:55.356 because many of the big time gangsters and ulums of 0:22:55.396 --> 0:22:57.756 the United States are now moving to Canada because of 0:22:57.756 --> 0:22:59.436 the drive that has been made against them here in 0:22:59.436 --> 0:23:00.036 this country. 0:23:00.876 --> 0:23:02.756 When you think of Canada, this isn't the first thing 0:23:02.756 --> 0:23:05.716 that pops into your head, happy refuge for big time 0:23:05.756 --> 0:23:09.676 gangsters and sports gamblers. But I don't know a different era. 0:23:10.396 --> 0:23:13.676 I always had an interest in sports. My father coached 0:23:13.676 --> 0:23:17.476 me in swimming and coached me in tennis. But my 0:23:17.556 --> 0:23:20.196 world changed when I found out you could gamble on it. 0:23:20.836 --> 0:23:23.556 I became no longer a fan, and I became interested 0:23:23.596 --> 0:23:24.236 in gambling. 0:23:25.436 --> 0:23:30.316 That's Michael Roxborough. Everyone just calls him Roxy now. He 0:23:30.356 --> 0:23:33.356 grew up in the nineteen fifties in Canada in a nice, 0:23:33.436 --> 0:23:36.516 upper middle class family. He's now zooming with me from 0:23:36.516 --> 0:23:38.996 a home in rural Thailand with the ac blasting in 0:23:39.036 --> 0:23:42.596 the background and a straw fedora on his head, and 0:23:42.636 --> 0:23:46.076 the emotional feel of a man in a witness protection program, 0:23:46.116 --> 0:23:49.276 a placeless man. But he really did grow up in Canada. 0:23:50.076 --> 0:23:52.596 When Roxy was a kid, there was a sports gambling market. 0:23:53.236 --> 0:23:55.516 It was smaller and more constrained than it is now, 0:23:55.556 --> 0:23:59.236 but very real, and its center was the pool halls 0:23:59.276 --> 0:24:01.036 of Vancouver, British Columbia. 0:24:01.916 --> 0:24:04.676 If you envision in the movie The Hustler, if you 0:24:04.716 --> 0:24:07.756 take a look at the pool rooms of that day. 0:24:07.796 --> 0:24:10.116 Those were the poolroom. Those were the pool rooms of 0:24:10.156 --> 0:24:10.596 my day. 0:24:12.796 --> 0:24:14.356 It was just full. 0:24:14.156 --> 0:24:22.796 Of wannabes, desperadoes, hustlers, drug dealers, bookmakers, everybody that was 0:24:23.956 --> 0:24:25.476 operating outside the law. 0:24:25.876 --> 0:24:28.676 When you got the bug. What's your parents think about it? 0:24:29.436 --> 0:24:34.036 Not too happy. My father was a Harvard MBA and 0:24:34.156 --> 0:24:38.396 my mother was a high school valedictorian, and I think 0:24:38.396 --> 0:24:39.956 they had higher aspirations. 0:24:41.116 --> 0:24:43.516 Roxy's dad wanted him to go to Dartmouth and he 0:24:43.596 --> 0:24:46.596 got in, but he went to American University in DC 0:24:47.236 --> 0:24:49.236 because he sensed the action was better there. 0:24:50.076 --> 0:24:55.036 I ran a blackjack game in the American University dorm 0:24:55.196 --> 0:24:58.116 at night, and that's what's the source of most of 0:24:58.156 --> 0:25:01.516 my profits. But then I got kicked out for what 0:25:02.676 --> 0:25:04.076 for running that blackjack game. 0:25:05.476 --> 0:25:08.436 Roxy never did finish college. Instead, he went back to Canada, 0:25:09.116 --> 0:25:12.396 caled in and out of boring jobs, but never stopped gambling. 0:25:13.076 --> 0:25:15.476 And then he finally caught a big break by reading 0:25:15.476 --> 0:25:15.876 a book. 0:25:16.716 --> 0:25:19.716 I was in a Reno airport flying back to Vancouver 0:25:21.036 --> 0:25:24.436 and I picked up a copy of Ed Thorpe's Beat 0:25:24.476 --> 0:25:24.996 the Dealer. 0:25:25.836 --> 0:25:27.956 Beat the Dealer was the first book to show how 0:25:27.956 --> 0:25:31.316 a gambler inside a casino could have a systematic edge 0:25:31.916 --> 0:25:35.756 by counting cards in blackjack. The other casino games, like 0:25:35.796 --> 0:25:38.716 slots and roulette, were more or less perfectly rigged against 0:25:38.716 --> 0:25:41.636 the gambler. Anyone who played them for long enough was 0:25:41.676 --> 0:25:46.116 sure to lose. Blackjack was an exception. Played blackjack for 0:25:46.156 --> 0:25:48.876 long enough, at least the way Ed Thorpe taught people 0:25:48.916 --> 0:25:52.596 to play, and you were sure to win Betthorpe published 0:25:52.636 --> 0:25:55.756 his book in nineteen sixty six. A few years later 0:25:55.876 --> 0:25:58.236 Roxy read it and it gave him the idea that 0:25:58.356 --> 0:25:59.876 changed his life. 0:25:59.956 --> 0:26:02.716 I decided that if I'm going to look at sports betting, 0:26:02.756 --> 0:26:06.556 I need to look at it statistically driven, data driven, 0:26:07.596 --> 0:26:11.556 not by not visual or instinct or just watching a 0:26:11.556 --> 0:26:12.276 lot of games. 0:26:13.356 --> 0:26:16.516 Outcomes in sports were obviously far less regular and predictable 0:26:16.556 --> 0:26:20.356 than outcomes inside slot machines or even at blackjack tables. 0:26:21.476 --> 0:26:23.596 But that didn't mean you couldn't learn stuff about sports 0:26:23.596 --> 0:26:26.956 that would allow you to make better predictions. Not perfect predictions, 0:26:26.996 --> 0:26:29.476 but better predictions than everyone else betting on games. In 0:26:29.516 --> 0:26:34.916 the nineteen seventies, Roxy had baseball in mind. The guys 0:26:34.956 --> 0:26:38.796 who booked baseball legally in Nevada and illegally everywhere else. 0:26:39.316 --> 0:26:41.276 Ofrford Gambler is the chance to bet on not just 0:26:41.276 --> 0:26:43.916 who would win the game, but how many runs both 0:26:43.956 --> 0:26:48.196 teams would score. Roxy had an insight that seems obvious now. 0:26:48.956 --> 0:26:51.676 The number of runs scored in any baseball game dependent 0:26:51.716 --> 0:26:54.316 on factors like the weather at game time and the 0:26:54.356 --> 0:26:58.036 size of the fields. San Diego's was a good example. 0:26:58.916 --> 0:27:00.636 You just could not hit the ball out of there, 0:27:01.196 --> 0:27:03.996 And then the Padres went and spent like an outrageous 0:27:04.036 --> 0:27:06.436 contract to sign a guy like Oscar Gamble. All he 0:27:06.516 --> 0:27:08.956 had is hit fly balls, and that park was a 0:27:09.156 --> 0:27:11.156 place where flyballs went to die. 0:27:11.516 --> 0:27:13.116 So you soon found out that. 0:27:13.236 --> 0:27:16.556 General managers really didn't know anything about their own ballparks either. 0:27:17.836 --> 0:27:20.196 The idea that the people who run sports teams don't 0:27:20.196 --> 0:27:22.756 know what they're doing has probably never been a new idea. 0:27:23.476 --> 0:27:26.596 Fans have always thought that they know better. What was 0:27:26.676 --> 0:27:29.076 new is that someone in the stands was actually figuring 0:27:29.116 --> 0:27:32.476 something out the effects of the wind and the humidity 0:27:32.636 --> 0:27:35.116 and the barometric pressure on a ball that was flying 0:27:35.116 --> 0:27:35.676 through the air. 0:27:36.636 --> 0:27:39.956 We started to start getting weather reports from all the cities, 0:27:40.036 --> 0:27:43.276 the parts out in which ones helped scoring or hindered scoring. 0:27:43.836 --> 0:27:45.876 And dimensions right, I mean just the length of the 0:27:45.956 --> 0:27:47.076 left field fence. 0:27:47.516 --> 0:27:50.876 Dimensions were important, and we found out a couple of 0:27:50.916 --> 0:27:55.756 the ballpark dimensional drawings were wrong. They had the north 0:27:55.836 --> 0:27:59.796 pole raw well pointed north because we went out and 0:27:59.796 --> 0:28:00.716 did them ourselves. 0:28:03.076 --> 0:28:06.036 Roxy moves to Vegas full time in nineteen seventy five 0:28:06.436 --> 0:28:09.956 to bet on sports, and just by taking into account 0:28:09.996 --> 0:28:12.756 the weather and the size of ballparks, he's able to 0:28:12.796 --> 0:28:15.676 make a killing while trying to avoid the people who 0:28:15.756 --> 0:28:19.076 know a thing or two about actual killing. For the 0:28:19.116 --> 0:28:21.996 Nevada legal bookmakers detectively run by the mob. 0:28:22.916 --> 0:28:27.236 They'd have they had a hand in till about right well, 0:28:27.236 --> 0:28:27.756 age seven. 0:28:28.436 --> 0:28:31.916 Yeah, I just wonder in that environment was it dangerous 0:28:31.956 --> 0:28:34.156 to win too much now? 0:28:34.716 --> 0:28:37.556 Because actually what they would do is they could find 0:28:37.596 --> 0:28:40.156 somebody else who could take your bet and they can. 0:28:40.156 --> 0:28:42.556 Move it for more money someplace else in the country. 0:28:45.916 --> 0:28:48.956 The old sports gambling market inside the United States was shady, 0:28:49.316 --> 0:28:52.156 but it had its unwritten rules, and one was that 0:28:52.196 --> 0:28:55.076 they always took your bets if you bet a lot. 0:28:55.356 --> 0:28:59.476 They eventually moved the lines. These betting lines were all 0:28:59.476 --> 0:29:02.116 set in Vegas for a very long stretch. They were 0:29:02.116 --> 0:29:07.156 actually set in a single Vegas casino, the Stardust. The 0:29:07.196 --> 0:29:09.836 bookie at the Stardust set the odds and everyone else 0:29:09.876 --> 0:29:13.996 just followed his lead. There was a bank of payphones 0:29:14.036 --> 0:29:16.036 outside the Stardos that were said to be the most 0:29:16.036 --> 0:29:18.956 profitable in the country for the phone company because sports 0:29:18.996 --> 0:29:21.276 gamblers used them to relay the odds to the illegal 0:29:21.316 --> 0:29:23.236 bookies and betters across the country. 0:29:24.076 --> 0:29:27.956 Communications back then was just with a phone call. That 0:29:28.396 --> 0:29:30.116 was the only communicationshit were. 0:29:32.236 --> 0:29:35.316 In the late nineteen seventies, the Nevada Gaming Control Board 0:29:35.316 --> 0:29:38.196 tossed the mob out of Vegas and out of sports gambling, 0:29:38.796 --> 0:29:42.356 and pretty soon ROXY became old news. By the early 0:29:42.436 --> 0:29:44.836 nineteen eighties, everyone knew that the weather and the size 0:29:44.836 --> 0:29:48.476 of ballparks had big effects on baseball scores, and ROXY 0:29:48.556 --> 0:29:52.636 never found another systematic edge, and his life became a 0:29:52.636 --> 0:29:56.116 bit of a mess. He'd been arrested for violating rfk's 0:29:56.156 --> 0:29:59.436 Wire Act, he'd taken crazy risks as an illegal book maker, 0:29:59.636 --> 0:30:03.276 and he'd run through two marriages. Is a gambling business 0:30:03.316 --> 0:30:06.716 hard outter relationships, chargon why. 0:30:07.516 --> 0:30:12.116 It just sort of takes over your mood and your personality. 0:30:13.356 --> 0:30:15.396 I don't know anybody who's ever been in gambling thought 0:30:15.436 --> 0:30:17.116 they were a better person for it. 0:30:17.116 --> 0:30:19.276 It's interesting because when you think about why a person 0:30:19.316 --> 0:30:21.436 would drift into gambling in the first place, it would 0:30:21.436 --> 0:30:22.996 be because you think it might be an easy way 0:30:22.996 --> 0:30:25.876 to make money, Yes, and it ends up being a harder 0:30:25.876 --> 0:30:26.676 way to make money. 0:30:27.876 --> 0:30:29.516 It does what did they say? 0:30:29.556 --> 0:30:31.956 It's a hard way to make an easy living. 0:30:33.756 --> 0:30:37.236 People said that Roxy now knew it. So in nineteen 0:30:37.276 --> 0:30:41.036 eighty two, he quits gambling. He creates a company called 0:30:41.156 --> 0:30:46.036 Las Vegas Sports Consultants. This new company will effectively replace 0:30:46.116 --> 0:30:48.996 the Stardust Casino in setting the odds for all major 0:30:49.036 --> 0:30:53.836 sports contests. Roxy's just better at it, and pretty soon 0:30:53.876 --> 0:30:57.596 he's selling his odds to all the sports bookies, including 0:30:57.636 --> 0:31:01.876 the Stardust. This makes sense to everybody in Las Vegas 0:31:02.436 --> 0:31:04.596 hiring Roxy to set the odds in sports is like 0:31:04.676 --> 0:31:08.316 hiring the first card counter to guard the blackjack tables. 0:31:09.116 --> 0:31:10.356 So I said, you know, I'm going to try this 0:31:10.436 --> 0:31:12.756 for a couple of years, but I'm not sure if 0:31:12.756 --> 0:31:16.996 it's going to work, because it wasn't given that every 0:31:17.116 --> 0:31:19.436 hotel was going to have a sportsbook. Was there rather 0:31:19.396 --> 0:31:23.076 a limited business. But that was one of my better 0:31:23.156 --> 0:31:25.716 decisions because it turned out to be a massive business. 0:31:26.876 --> 0:31:29.996 Sports gambling isn't exactly a financial market, but it rhymes 0:31:30.036 --> 0:31:33.476 with financial markets. What happens on Wall Street, somehow eventually 0:31:33.516 --> 0:31:36.596 also happens in sports gambling. And Wall Street's about to 0:31:36.676 --> 0:31:40.636 undergo dramatic change. First computers and then the Internet will 0:31:40.636 --> 0:31:43.316 allow the markets to become a lot more complicated, and 0:31:43.356 --> 0:31:47.076 the BET's a lot more complex. The world's about to 0:31:47.076 --> 0:31:49.516 speed up, and a new kind of person with a 0:31:49.516 --> 0:31:53.156 different kind of education is going to enter it. Old 0:31:53.156 --> 0:31:55.676 school traders with high school degrees and lots of body 0:31:55.676 --> 0:31:58.396 hair and names like Vinnie and Donnie are about to 0:31:58.396 --> 0:32:02.476 be replaced by hairless PhDs from MIT with computer models 0:32:02.876 --> 0:32:05.076 who as kids thought they grow up to be professors, 0:32:05.196 --> 0:32:09.116 not traders. On Wall Street in the late nineteen eighties, 0:32:09.596 --> 0:32:12.956 smart old school guys served as a kind of bridge 0:32:13.116 --> 0:32:18.436 between the two cultures in sports gambling. Roxy was that bridge, 0:32:18.756 --> 0:32:20.596 but it took a while for anyone to cross it. 0:32:37.036 --> 0:32:41.076 We're here to see Rufus pebo. We're in the right place. 0:32:43.876 --> 0:32:46.636 We're still in Vegas, but far from the strip. 0:32:48.436 --> 0:32:49.116 We're not gona the law. 0:32:49.116 --> 0:32:50.596 We're just gonna make a bunch of sports bets. He 0:32:50.636 --> 0:32:54.956 runs into League of Gambre option. I never even knew 0:32:55.036 --> 0:32:56.396 that you want any action. 0:33:02.276 --> 0:33:05.156 The real action is no longer on the strip. The 0:33:05.276 --> 0:33:10.276 real action is basically invisible. But here on the seventeenth floor, 0:33:10.796 --> 0:33:14.596 with a sweeping view of the distant casinos, Rufus Peabody 0:33:14.716 --> 0:33:15.516 lives and works. 0:33:16.076 --> 0:33:17.596 Rufus We're here. 0:33:18.276 --> 0:33:18.676 We're here. 0:33:19.156 --> 0:33:21.956 Rufus Peabody is who crossed Roxy's bridge. 0:33:22.676 --> 0:33:25.236 I never was a better as a kid. I didn't 0:33:25.276 --> 0:33:26.476 know anything about sports betting. 0:33:26.516 --> 0:33:29.036 You need to feel a little twinge of desire. 0:33:29.796 --> 0:33:30.036 None. 0:33:30.396 --> 0:33:33.076 Most people that got their start, they started losing and 0:33:33.156 --> 0:33:35.436 they learned how to win. But I was never better. 0:33:35.476 --> 0:33:38.556 I never grew up betting like besides NCAA tournament pools, 0:33:38.596 --> 0:33:41.156 I was always good at those, but for me, it 0:33:41.236 --> 0:33:45.036 was a game, and I'm not. I'm a risk taker, 0:33:45.116 --> 0:33:46.396 but I'm not a gambler by nature. 0:33:47.276 --> 0:33:51.396 Rufus grew up outside of Washington, DC, always loved sports, 0:33:51.596 --> 0:33:53.796 thought he might like to be a sports journalist. He 0:33:53.876 --> 0:33:56.756 still reminds me a bit of a journalist. He's a watcher, 0:33:57.476 --> 0:34:00.716 a person whose eyes move more than his mouth. But 0:34:00.836 --> 0:34:02.756 even when he was a kid, his mind took him 0:34:02.756 --> 0:34:04.596 places that journalism usually doesn't. 0:34:05.076 --> 0:34:07.396 So so it was this team one eighty two to 0:34:07.476 --> 0:34:10.636 sixty four, but why did they win? Basically, I kind 0:34:10.636 --> 0:34:12.716 of wanted to report on the why it happened rather 0:34:12.796 --> 0:34:15.556 than just this guy got eighteen points and twelve rebounds 0:34:15.636 --> 0:34:18.796 and this team one right. I kind of wanted the 0:34:19.436 --> 0:34:20.116 story of why. 0:34:20.636 --> 0:34:22.476 He wanted explanation. I want explanations. 0:34:23.636 --> 0:34:26.516 In two thousand and four, Rufus graduated from high school 0:34:26.756 --> 0:34:29.756 and went to Yale. He was still obsessed with figuring 0:34:29.836 --> 0:34:34.476 out why. He studied statistics and built models that predicted 0:34:34.516 --> 0:34:37.476 the performance of athletes and the outcomes of sporting events, 0:34:38.196 --> 0:34:40.676 not because he wanted to gamble on them, just because 0:34:40.676 --> 0:34:43.236 it was cool to figure out stuff that even people 0:34:43.236 --> 0:34:46.916 who run sports teams don't know. He wanders around Yale 0:34:46.956 --> 0:34:48.316 looking for someone to teach him more. 0:34:49.196 --> 0:34:52.876 Rufus wants to do a thesis on, if I remember correctly, 0:34:53.676 --> 0:34:56.716 behavioral biases and the baseball betting market. 0:34:57.516 --> 0:35:00.516 He's who rufe has found. His name is Cade Massey. 0:35:01.476 --> 0:35:05.436 He's a professor of organizational behavior. Was it interesting? 0:35:06.116 --> 0:35:09.476 Oh yeah, absolutely, I mean what's not interesting about trying 0:35:09.516 --> 0:35:12.756 to find psychological mistakes that people make with like, you know, 0:35:13.236 --> 0:35:16.516 hundreds of thousands of observations of real money being bet 0:35:16.796 --> 0:35:19.716 and he found mistakes. I mean, he was finding profitable 0:35:19.756 --> 0:35:20.996 strategies right off the bet. 0:35:22.036 --> 0:35:25.876 Rufus just kept asking questions about the behavior of sports gamblers. 0:35:26.516 --> 0:35:29.996 He still wasn't placing bets himself. He was just working 0:35:30.036 --> 0:35:32.596 with this professor to build a model to predict college 0:35:32.636 --> 0:35:35.956 football scores. They pitched it to the Wall Street Journal, 0:35:35.956 --> 0:35:38.476 and the journal agreed to publish their college football picks 0:35:38.556 --> 0:35:41.036 of the week. It was just how they would bet, 0:35:41.236 --> 0:35:42.956 were they to bet on college football. 0:35:44.556 --> 0:35:47.156 And he would then post our picks of the week. 0:35:47.196 --> 0:35:48.876 We were just posting them because we were working with 0:35:48.916 --> 0:35:51.396 the Wall Street Journal, So post him on Tuesday or Wednesday, 0:35:51.636 --> 0:35:54.276 and then he would watch as the prices started moving 0:35:54.356 --> 0:35:54.916 on his screen. 0:35:55.036 --> 0:35:57.996 Oh my god, which is to say, the sports gambling 0:35:58.036 --> 0:36:02.156 market would see their picks and move in response because 0:36:02.196 --> 0:36:04.356 the market figured out that their picks were that good. 0:36:05.036 --> 0:36:08.036 Within a year or so, we quit posting college picks 0:36:08.076 --> 0:36:09.996 because it was getting too much in the way of 0:36:10.076 --> 0:36:10.756 what he was trying to. 0:36:10.756 --> 0:36:14.156 Do, because he wanted to bet it himself, because he 0:36:14.236 --> 0:36:15.996 wanted to bet it, and if they're so good you 0:36:15.996 --> 0:36:19.276 would bet them, you wouldn't sell them, right. I mean, 0:36:19.316 --> 0:36:21.396 it was bound to eventually occur to Rufus that if 0:36:21.396 --> 0:36:24.196 he could predict the scores of college football games, then 0:36:24.236 --> 0:36:27.596 he should just bet on them himself. But it's funny 0:36:27.636 --> 0:36:31.236 how he got there. In his head, Roxy Roxboro had 0:36:31.276 --> 0:36:34.356 started as a gambler who then set out to find 0:36:34.476 --> 0:36:38.356 some kind of edge to bet. Rufus Peabody started by 0:36:38.396 --> 0:36:42.716 finding these edges and kind of stumbled into gambling and 0:36:42.836 --> 0:36:48.116 then found Roxy. During Rufus's junior year at Yale, he 0:36:48.236 --> 0:36:51.916 read an article in ESPN about Roxy's sports analytics company, 0:36:52.516 --> 0:36:56.916 Las Vegas Sports Consultants. Roxy's company wasn't used to getting 0:36:56.956 --> 0:37:00.276 resumes from Yale juniors, but they gave him a summary 0:37:00.316 --> 0:37:04.116 internship anyway and showed him their world from their offices 0:37:04.236 --> 0:37:05.916 right next to the Las Vegas Airport. 0:37:07.196 --> 0:37:09.716 They would bet on what plane was most likely to 0:37:09.876 --> 0:37:11.636 land next right, And this is like sort of pre 0:37:11.796 --> 0:37:14.196 internet days or pre like being able to see flight 0:37:14.236 --> 0:37:17.116 plans and stuff like that, and so it was like, okay, 0:37:17.116 --> 0:37:20.076 American Airlines is like six to one, like you know, 0:37:20.556 --> 0:37:25.276 Southwest is two to one whatever. What people didn't realize though, 0:37:25.356 --> 0:37:28.876 was Roxy actually had a contact in the control tower, 0:37:29.796 --> 0:37:34.036 and so Roxy won. He made money off of these bets, 0:37:35.556 --> 0:37:39.316 but he didn't make enough to draw suspicion. That was 0:37:39.396 --> 0:37:42.876 the key. But he would occasionally hit the japan Air 0:37:42.916 --> 0:37:44.676 at three hundred to one, right or whatever. 0:37:49.436 --> 0:37:52.836 Roxy screw would bet on everything. Rufus wasn't like that. 0:37:54.116 --> 0:37:55.716 He didn't even think of what he wanted to do 0:37:55.916 --> 0:37:59.716 as gambling, but he did want to understand this other world, 0:38:00.516 --> 0:38:02.756 this world where people bet on anything that moved. 0:38:04.156 --> 0:38:07.396 They shared the building with American Wagering, so with LeRoy's, 0:38:07.396 --> 0:38:13.076 which was a sort of third party sportsbook operator. Le 0:38:13.196 --> 0:38:16.316 Ros didn't have a casino, but they were in casinos 0:38:16.436 --> 0:38:19.956 like Hooters or Terrible Herbst. 0:38:20.356 --> 0:38:21.996 Right, Hooters has a casino. 0:38:22.436 --> 0:38:25.476 Yeah, Hooters casino. It's on the strip. It's right, tropic 0:38:25.516 --> 0:38:28.716 cannot basically right. Yeah, so I met, I meet this 0:38:29.036 --> 0:38:32.036 the head trader there, right, and I have all these questions. 0:38:32.476 --> 0:38:35.636 A book maker can make more money. Let's say, if 0:38:35.676 --> 0:38:37.596 they know the public's bias, they can make more money 0:38:37.876 --> 0:38:40.196 setting a line somewhere between the true price and the 0:38:40.276 --> 0:38:42.596 price the public thinks that's the way to maximize. 0:38:46.076 --> 0:38:48.116 There's no reason you should understand what rufe has just 0:38:48.196 --> 0:38:50.676 said there, but let me try to explain it, because 0:38:50.676 --> 0:38:52.556 it tells you a bit about how this old school 0:38:52.636 --> 0:38:56.836 sports gambling world works. The line is just the odds 0:38:57.116 --> 0:39:00.476 or the points spread. The true price is what the 0:39:00.556 --> 0:39:04.396 odds would be if you somehow knew every possible relevant 0:39:04.436 --> 0:39:08.476 bit of information about some upcoming game. Of course, no 0:39:08.556 --> 0:39:11.916 one ever knew everything, so there is in reality, never 0:39:12.036 --> 0:39:15.876 a perfect true price, just some number that the smartest 0:39:15.916 --> 0:39:19.636 and best informed better is agree on. Say they agreed 0:39:19.676 --> 0:39:22.756 that the Packers should be eight point favorites over the Cowboys, 0:39:23.956 --> 0:39:26.956 but most of the gamblers are Cowboys fans, and the 0:39:27.036 --> 0:39:30.396 Cowboys fans think the Cowboys are only three point underdogs. 0:39:31.396 --> 0:39:33.676 Rufus was asking the bookie if he thought he could 0:39:33.876 --> 0:39:36.796 entice the public to make more stupid bets if he 0:39:36.876 --> 0:39:39.316 set the line not at the true price of eight points, 0:39:39.516 --> 0:39:43.436 but it's say five points, because Cowboys fans will think 0:39:43.476 --> 0:39:46.316 the cowboys are better than they actually are and bet 0:39:46.436 --> 0:39:46.916 even more. 0:39:48.196 --> 0:39:50.236 I said, theoretically, you can make more money setting a 0:39:50.316 --> 0:39:53.156 line somewhere between the true price and where the public 0:39:53.196 --> 0:39:57.796 thinks the price is. And he says, theory, theory and theory. 0:39:57.956 --> 0:40:07.116 Dick don't fit in an asshole. And this guy, yeah, 0:40:07.276 --> 0:40:12.076 he was probably three hundred pounds five to eight, smoking 0:40:12.116 --> 0:40:14.196 a cigar in a dark room, looking at a bunch 0:40:14.236 --> 0:40:15.236 of numbers on a screen. 0:40:15.676 --> 0:40:19.076 In just a flash, there, you've changed our podcast rating. 0:40:19.476 --> 0:40:19.756 Sorry. 0:40:30.356 --> 0:40:33.916 Rufus Peabody recently of Yale is no one's idea of 0:40:33.996 --> 0:40:37.636 a hustler. He's too sweet natured and even tempered, and 0:40:37.756 --> 0:40:39.876 way too open to telling other people about the stuff 0:40:39.916 --> 0:40:43.396 he's learned. He finishes up at Yale and moves back 0:40:43.436 --> 0:40:46.716 to Vegas to work full time at Las Vegas Sports Consultants. 0:40:48.196 --> 0:40:51.356 But now Rufus thinks he might have an edge, and 0:40:51.476 --> 0:40:54.716 people in and around Roxy's firm think that maybe he's right. 0:40:55.796 --> 0:40:58.036 The Super Bowl was my first big break. Super Bowl 0:40:58.036 --> 0:41:01.196 two thousand and nine. Okay, I had made a friend 0:41:01.316 --> 0:41:05.676 with a professional sports better guy that bet baseball, and 0:41:07.076 --> 0:41:10.116 he loaned me ten thousand dollars to bet. I had 0:41:10.196 --> 0:41:13.596 my own ten to twelve thousand dollars. My boss, Kenny, 0:41:14.596 --> 0:41:19.636 unbeknownst to everybody else, invested forty thousand dollars in me 0:41:19.796 --> 0:41:21.476 and gave me a twenty percent free roll. 0:41:21.396 --> 0:41:25.236 On it, meaning that if it wins, you take twenty 0:41:25.236 --> 0:41:28.196 percent of rance, but you've suffered another losses correct. 0:41:29.316 --> 0:41:32.836 And so I ended up with close to sixty thousand 0:41:32.876 --> 0:41:35.036 dollars bet on the Super Bowl, and so I basically 0:41:35.116 --> 0:41:38.476 was pretty leveraged. Yeah, and I remember being like, this 0:41:38.796 --> 0:41:41.516 game doesn't work out, you know, I gave it a shot. 0:41:41.556 --> 0:41:43.516 All right, And what is causing you to have such 0:41:43.596 --> 0:41:44.916 conviction about a game? 0:41:45.276 --> 0:41:45.396 Oh? 0:41:45.476 --> 0:41:45.756 Nothing. 0:41:46.076 --> 0:41:48.476 It wasn't conviction about the game. It was betting the props. 0:41:49.476 --> 0:41:54.036 The props short for proposition bets not on the whole game, 0:41:54.156 --> 0:41:57.516 but pieces of the game. But the standard story, which 0:41:57.596 --> 0:42:00.236 is almost certainly not true, was that the prop bet 0:42:00.356 --> 0:42:03.156 was invented for the nineteen eighty six Super Bowl between 0:42:03.156 --> 0:42:06.556 the Chicago Bears and the New England Patriots. The Bears 0:42:06.596 --> 0:42:08.956 were such heavy favorites that Vegas had trouble jitting up 0:42:08.956 --> 0:42:12.476 in in the game, so a Vegas bookie created a 0:42:12.596 --> 0:42:16.836 side bet the odds that a Bear's defensive tackle named 0:42:16.916 --> 0:42:21.196 William the Refrigerator Perry would score a touchdown. It was 0:42:21.236 --> 0:42:23.756 a long shot bet, and the betting public loved it, 0:42:24.156 --> 0:42:27.356 and Vegas bookies lost a fortune when the fridge did 0:42:27.436 --> 0:42:31.436 indeed score. But back to Rufus and forward to the 0:42:31.476 --> 0:42:35.276 Super Bowl of two thousand and nine, the Pittsburgh Steelers 0:42:35.356 --> 0:42:39.196 played the Arizona Cardinals. Rufus wasn't betting the whole game, 0:42:39.236 --> 0:42:42.236 but pieces of the game. His pro Football model spits 0:42:42.276 --> 0:42:45.116 out odds for all this weird stuff that Vegas bookies 0:42:45.156 --> 0:42:48.676 are now offering bets on the odds that Steeler's running 0:42:48.716 --> 0:42:52.356 back Gary Russell will score the game's first touchdown. For example, 0:42:53.436 --> 0:42:57.476 Rufus has vast troves of data to mine. He can 0:42:57.596 --> 0:43:00.796 do stuff with it that Roxy would never imagine. He 0:43:00.876 --> 0:43:02.756 could do stuff that even the people who run the 0:43:02.796 --> 0:43:07.116 Pittsburgh Steelers would never imagine doing. I mean, even Gary 0:43:07.236 --> 0:43:10.316 Russell likely has no idea that you can calculate the 0:43:10.396 --> 0:43:13.396 odds that he will score the game's first touchdown. But 0:43:13.556 --> 0:43:17.116 Rufus can his model puts those odds much higher than 0:43:17.156 --> 0:43:20.956 the bookies' odds, so in Rufus's mind, it's a great bet. 0:43:21.676 --> 0:43:25.036 He makes dozens of similar bets BET's where his model 0:43:25.076 --> 0:43:27.316 tells him that the bookies are giving him better odds 0:43:27.396 --> 0:43:27.916 than they should. 0:43:29.076 --> 0:43:36.436 I still remember going. It was like Hara's Caesar's the Rio. 0:43:37.276 --> 0:43:39.676 I ended up getting down like two hundred dollars at 0:43:39.716 --> 0:43:42.956 a time, like five thousand dollars. Positions on a few 0:43:42.996 --> 0:43:47.396 things like that were really good, and so I was 0:43:47.516 --> 0:43:51.476 diversified within the game. Within the game, I wasn't betting 0:43:51.516 --> 0:43:52.756 on the outcome of the game, but I was still 0:43:52.916 --> 0:43:54.876 I still to this day, have never watched that game. 0:43:55.116 --> 0:43:57.836 I was too nervous. How did you experience the game 0:43:57.876 --> 0:43:58.676 if you didn't watch it. 0:43:59.956 --> 0:44:02.396 I went to this little par three course that's open 0:44:02.436 --> 0:44:06.116 at night, right south of the airport, and I played 0:44:07.236 --> 0:44:11.076 the part three course twice until I felt like the 0:44:11.156 --> 0:44:14.116 game would definitely be over. And then I went grocery shopping. 0:44:15.116 --> 0:44:17.636 And I didn't have a smart this is pretty smartphone. 0:44:18.036 --> 0:44:19.916 I went grocery shopping, and then I went home and 0:44:19.956 --> 0:44:20.796 cooked myself dinner. 0:44:21.036 --> 0:44:21.236 Huh. 0:44:21.956 --> 0:44:24.436 And then and only then did I open my computer 0:44:25.196 --> 0:44:27.316 and check and see how the game went, and were 0:44:27.316 --> 0:44:29.396 you just going through your prop bets seeing what happened. 0:44:29.676 --> 0:44:31.196 First I went to the boss score and I saw 0:44:31.676 --> 0:44:34.236 the first score was Gary Russell one yard touchdown run. 0:44:35.356 --> 0:44:39.036 I was like, ah right, And it turned out out 0:44:39.076 --> 0:44:42.276 of like fifty six thousand dollars bet like, I profited 0:44:42.356 --> 0:44:43.636 like twenty three thousand on it. 0:44:45.236 --> 0:44:48.356 Rufus figures out how much he's won. Then he physically 0:44:48.476 --> 0:44:51.516 retraces his steps to the many casinos that had taken 0:44:51.556 --> 0:44:55.436 his many bets, still driving an old Honda Civic. You 0:44:55.516 --> 0:44:57.716 aren't all these little tickets you have to write, You 0:44:57.756 --> 0:45:00.396 go cash each one individually. So you had you must 0:45:00.396 --> 0:45:01.556 have had one hundred tickets? 0:45:01.756 --> 0:45:02.676 Oh yeah, probably. 0:45:03.716 --> 0:45:08.476 He just drives around Las Vegas and the money piles up, and. 0:45:08.516 --> 0:45:11.076 I remember having like thirty thousand dollars on the front 0:45:11.116 --> 0:45:13.796 seat and being like, oh my god, so much money 0:45:14.556 --> 0:45:15.676 in cash in cash. 0:45:20.516 --> 0:45:23.276 After that, lots of people in Vegas wanted to lend 0:45:23.316 --> 0:45:26.876 money to Rufus and take a cut of his bets. Rufus, 0:45:26.916 --> 0:45:28.996 for his part, was still sitting in his office in 0:45:29.116 --> 0:45:33.036 Las Vegas Sports Consultants, but pretty soon he was directing 0:45:33.076 --> 0:45:35.516 an army of people to lay bets in sports books 0:45:35.556 --> 0:45:39.396 across the city, sports books that got their odds from 0:45:39.516 --> 0:45:43.636 Las Vegas sports consultants. Rufus was in effect betting against 0:45:43.676 --> 0:45:48.156 the lines created by Roxy's firm. Roxy himself had moved 0:45:48.196 --> 0:45:50.716 on at this point, but he watched what Rufus was 0:45:50.796 --> 0:45:52.396 doing and he admired it. 0:45:53.396 --> 0:45:55.476 He came to Bouquet once. Then I met him, even 0:45:55.556 --> 0:45:59.036 after one lunch. I said, this guy's thinking at a 0:45:59.116 --> 0:46:03.556 higher level than other people. And I learned a lot 0:46:03.596 --> 0:46:07.036 for a moment, not because he was divulging his secrets, 0:46:07.436 --> 0:46:09.236 but he was just thinking at a higher level. 0:46:10.116 --> 0:46:14.116 To get his edge. Roxy had used weather reports, Rufus 0:46:14.236 --> 0:46:16.676 was using the spin rates on pitcher's curveballs. 0:46:17.156 --> 0:46:20.956 I try to drill things down to their root, cause 0:46:21.196 --> 0:46:24.196 it's kind of what you do when you write books. 0:46:24.236 --> 0:46:26.876 You try to figure out the person, what makes them tick, 0:46:27.316 --> 0:46:29.756 what's the story. I try to figure out why things 0:46:29.836 --> 0:46:32.396 happen in a baseball game or a golf tournament, what 0:46:32.556 --> 0:46:35.676 makes the player good. It's not just their score, Like, 0:46:35.716 --> 0:46:38.196 what are the things that are driving their score? Which 0:46:38.236 --> 0:46:41.996 of those are repeatable, which aren't? And right now you 0:46:42.116 --> 0:46:45.116 have all this computer vision that type of data available 0:46:45.196 --> 0:46:46.796 now and with a lot of these sports. I mean, 0:46:47.036 --> 0:46:49.796 we're now talking about bat speed, measuring bat speed and 0:46:49.916 --> 0:46:52.436 looking at like aging curves for bat speed. 0:46:53.276 --> 0:46:55.716 The whole point of Rufus is that he never lets 0:46:55.756 --> 0:46:59.316 emotion interfere with his process. But that doesn't mean he 0:46:59.356 --> 0:47:00.316 doesn't feel emotion. 0:47:00.916 --> 0:47:01.356 He does. 0:47:02.156 --> 0:47:03.516 He feels it for his process. 0:47:04.556 --> 0:47:08.196 We're using bat speed to then predict exit velocity, and 0:47:08.236 --> 0:47:11.236 we're using exit ville to then predict, like weaited on 0:47:11.316 --> 0:47:14.436 base average and basically whether a ball will be hit 0:47:14.556 --> 0:47:16.236 or not, and what kind of damage it'll be if 0:47:16.276 --> 0:47:20.036 it is, and then you know, use that to predict wins. 0:47:20.116 --> 0:47:20.876 And how did it work? 0:47:21.636 --> 0:47:22.156 How did it work? 0:47:22.196 --> 0:47:22.516 It works? 0:47:22.596 --> 0:47:25.796 Well, we made one hundred and twenty five thousand in 0:47:25.836 --> 0:47:28.036 the first month. I don't know what our volume was overall, 0:47:28.636 --> 0:47:33.156 and I got twenty percent of it, which was great 0:47:33.196 --> 0:47:35.316 because my yearly salary was twenty five thousand. 0:47:36.556 --> 0:47:39.156 Rufus had become the card counter at the blackjack table, 0:47:39.636 --> 0:47:42.956 only it was richer than that. He was generating new 0:47:43.076 --> 0:47:47.276 insight about why things happened in sports. A blackjack dealer 0:47:47.396 --> 0:47:50.356 knows where the card counter gets his edge. The sports book. 0:47:50.356 --> 0:47:53.916 He couldn't really tell where Rufus was getting his which 0:47:53.996 --> 0:47:56.716 made Rufus and what he was doing even more unsettling. 0:47:57.676 --> 0:48:00.716 And did the M at any point say we're not 0:48:00.836 --> 0:48:03.596 taking your bets. The M Casino was one of Rufus's 0:48:03.636 --> 0:48:04.676 favorite sports books. 0:48:05.236 --> 0:48:07.596 Now they had their whole thing was we're going to 0:48:07.636 --> 0:48:11.116 take all comers. We want to be we want a 0:48:11.196 --> 0:48:13.036 lot of volume. We think we're better than people. 0:48:14.116 --> 0:48:17.756 Then comes the Supreme Court decision of twenty eighteen, twenty 0:48:17.796 --> 0:48:21.556 three states soon legalized sports gambling. Rufus now has the 0:48:21.756 --> 0:48:24.916 M Casino and a lot of others right in his pocket. 0:48:25.636 --> 0:48:29.036 Van Duel and the PGA Tour have teams up. Now 0:48:29.156 --> 0:48:31.396 you can get more action out of every stop on 0:48:31.476 --> 0:48:32.476 the tour, and. 0:48:32.596 --> 0:48:35.436 Rufus of course stands to make a killing. The bigger 0:48:35.476 --> 0:48:37.956 the markets, the more he can bet, bet. 0:48:37.796 --> 0:48:40.996 The PGA Tour and make every moment more with Fan 0:48:41.116 --> 0:48:42.076 Duel sports book. 0:48:43.796 --> 0:48:46.116 But as it turns out, that's not how it's going 0:48:46.196 --> 0:48:49.036 to go down. This ecosystem is going to change in 0:48:49.156 --> 0:48:52.676 ways Rufus didn't predict, and he began to sense it 0:48:53.156 --> 0:48:54.556 in late twenty twenty. 0:48:55.516 --> 0:48:59.276 So I would drive up to New Hampshire to bet 0:48:59.356 --> 0:49:03.436 at these kiosks initially, and then once there was mobile betting, 0:49:04.356 --> 0:49:06.516 I had an account on DraftKings. 0:49:07.756 --> 0:49:11.276 Rufus had a girlfriend in Masses. Massachusetts hadn't yet legalized 0:49:11.276 --> 0:49:14.036 sports betting, so he needed to cross state lines to 0:49:14.156 --> 0:49:16.676 use the betting app on his phone. The drive took 0:49:16.716 --> 0:49:19.356 him like forty five minutes, but it was actually easier 0:49:19.396 --> 0:49:21.836 than running all over Vegas trying to get cash down. 0:49:23.076 --> 0:49:25.036 He and his process were built for this new type 0:49:25.036 --> 0:49:28.916 of casino. He could bet on golf basically all day long, 0:49:29.716 --> 0:49:31.396 until one day he couldn't. 0:49:32.476 --> 0:49:35.716 One week, I lost thirty thousand dollars. I got a 0:49:35.756 --> 0:49:37.836 phone call to tell me that they were cutting my 0:49:37.916 --> 0:49:38.676 limits on golf. 0:49:39.316 --> 0:49:42.996 He'd lost thirty thousand dollars, and DraftKings stopped taking his 0:49:43.116 --> 0:49:46.356 big bets. By the way, we've reached out to DraftKings, 0:49:46.396 --> 0:49:49.516 and so far they have declined to talk with us. Anyway, 0:49:49.716 --> 0:49:52.116 it was clear to Rufus back in twenty twenty that 0:49:52.276 --> 0:49:55.236 this was definitely no longer his old sports gambling. 0:49:54.916 --> 0:49:58.836 World because I had bet enough it spurred them to 0:49:58.916 --> 0:50:00.996 actually go in and look at the stuff I'd been 0:50:01.036 --> 0:50:04.716 betting and how I'd been doing. Books are not limiting 0:50:04.836 --> 0:50:08.156 people just because they win. They're limiting them because they 0:50:08.236 --> 0:50:08.916 think they're going to win. 0:50:09.196 --> 0:50:09.556 Future. 0:50:10.596 --> 0:50:13.156 Rufus used data to predict what athletes were going to do. 0:50:14.436 --> 0:50:17.396 DraftKings was using data to predict what Rufus would do. 0:50:18.316 --> 0:50:20.596 When they looked at the data, they saw that after 0:50:20.716 --> 0:50:23.956 Rufus placed his bets, the odds nearly always moved in 0:50:24.036 --> 0:50:27.036 his favor. These were the bets of someone who knew 0:50:27.076 --> 0:50:30.316 things before the market knew them, and the new bookies 0:50:30.356 --> 0:50:33.236 were not like the old bookies. They only wanted to 0:50:33.316 --> 0:50:36.676 take certain kind of bets, Bets that were more like 0:50:36.756 --> 0:50:38.716 the bet you make when you press the buttons on 0:50:38.756 --> 0:50:42.356 a slot machine, Bets that if you made them often enough, 0:50:42.556 --> 0:50:45.276 you were sure to lose, the sort of bets a 0:50:45.356 --> 0:50:49.636 fan would make, the sort of bets Rufus Peabody never made. 0:50:50.716 --> 0:50:52.796 Refusing a bet wasn't a thing. It never was a 0:50:52.876 --> 0:50:56.276 thing here, huh. Like you if you got kicked out 0:50:56.316 --> 0:50:58.316 of a casino or if you couldn't get there, it 0:50:58.436 --> 0:51:02.156 was because you did something wrong, like you violated the 0:51:02.596 --> 0:51:04.516 sacred bookmaker better covenant. 0:51:05.476 --> 0:51:07.396 Being smarter than the market didn't used to get you 0:51:07.556 --> 0:51:13.516 kicked out of the market. But the market's changed. Sports 0:51:13.556 --> 0:51:15.636 gambling is still a hard way to make an easy living, 0:51:16.796 --> 0:51:20.276 but now it feels even less fair. Now it feels 0:51:20.316 --> 0:51:21.876 like someone should step in and help. 0:51:21.956 --> 0:51:24.036 Rufus okay cool. 0:51:24.196 --> 0:51:29.516 So I downloaded FanDuel, DraftKings, Fliff Fanatics, Caesar's Bet, MGM, 0:51:29.796 --> 0:51:32.756 and PayPal. So now everyone has all of my information 0:51:33.076 --> 0:51:34.236 and my social security number. 0:51:34.516 --> 0:51:35.756 Oh, your social security number. 0:51:35.836 --> 0:51:36.516 They all asked for it. 0:51:36.596 --> 0:51:41.316 Guess these new sports gambling apps, they all ask for it, 0:51:42.076 --> 0:51:43.836 and so we're going to give it to them in 0:51:43.996 --> 0:51:55.116 our next episode. Against the Rules is written and hosted 0:51:55.156 --> 0:51:57.716 by me Michael Lewis and produced by Lydia gene Kott, 0:51:57.796 --> 0:52:01.956 Catherine Gerardeau, and Ariela Markowitz. Our editor is Julia Barton. 0:52:02.316 --> 0:52:05.596 Our engineer is Jake Gorski. Our music was composed by 0:52:05.676 --> 0:52:10.116 Matthias Bossi and John Evans of stell Wagon Sepinett. Our 0:52:10.156 --> 0:52:13.836 fact checker is Lauren Vespoli. Against the Rules is a 0:52:13.876 --> 0:52:18.876 production of Pushkin Industries. To find more Pushkin podcasts, listen 0:52:18.916 --> 0:52:23.036 on the iHeartRadio app, Apple Podcasts, or wherever you listen 0:52:23.076 --> 0:52:25.836 to podcasts, and if you'd like to listen to ad 0:52:25.996 --> 0:52:29.636 Free and learn about other exclusive offerings don't forget to 0:52:29.716 --> 0:52:33.476 sign up for a Pushkin Plus subscription at pushkin dot fm, 0:52:33.836 --> 0:52:36.716 slash Plus, or on our Apple Show page.