Bets, Data, and IBM Computers

| August 1, 2021

With the advent of the Internet, betting on various events has become popular, especially when it comes to horse racing. At the same time, the dev community was looking for ways to make the life of bettors easy and care-free. This is when Bill Benter came to the scene – a self-taught programmer who came up with an algorithm that allowed him to earn millions of dollars.

As you can see online betting on horse racing generates huge income, just like decent dating sites such as https://ladadate.com/russian-brides with Russian brides. But this is far from being the limit. In this review, you will learn about the entertaining story of a man who saw the potential in theory, took up statistical analysis, and began to develop an algorithm on a black and white PC.

Developers were looking for ways to make the life of bettors easy and care-free.

From Casino to Horse Racing: Developing an Algorithm for Predicting Races

The story of developing a winning tactic is quite long and messy. According to Benter, a horse’s victory or failure is due to a number of factors, and the likelihood of their influence can be calculated. To do this, it is enough to analyze the variables: for example, the speed of the horse on a straight line and its dimensions, previous results of races, and the skill of the jockey. The more relevant variables and the more rigorous the analysis are, the more accurate prediction you can count on.

With this in mind, Benter decided to develop a system that would account for this distribution. He bought all the racing books in Vegas and found that most were written by amateur players and journalists. He was also interested in obtaining accurate data. Then Benter went to the library of the University of Nevada, where he found a scientific article on positive returns on horse racing. While Benter studied theories and developed an algorithm, two assistants with three IBM computers entered data into the database. Development took nine months, and here is a winner – Bill Benter.

It took 3 computers and nine months to develop the betting system

Betting and First Failure

In September 1985, Benter and his friend Woods flew to Hong Kong, a thriving financial centre. Friends had clear responsibilities, Benter worked on the code, and Woods studied the racing program.

The races were held twice a week: friends placed bets on the phone, waited for the results on TV, and refined the algorithm. At first, the forecasts seemed dubious, so Woods corrected them. At the same time, Benter tried to account for the phenomenon of “player ruin,” which consists of the following: 

  • If a player with limited capital starts playing against an opponent with unlimited resources, he will eventually go bankrupt;
  • The opposite outcome is simply impossible even if the game is fair.

The solution was backed up by the theory of physicist John Kelly Jr. According to the statement, the amount of the bet should correlate with the player’s confidence in the prediction. If you bet a little, you risk missing out on an opportunity. And if there is too much at a stake, you risk losing all your money. This meant one thing: Benter would get the same profit anyway but with less risk. And the chance of losing can be reduced by a large number of bets.

Algorithm Refinement and Millions of Dollars

Benter strove to improve the mathematical model and was looking for some extra data. To improve performance, the man hired consultants: players, journalists, analysts, programmers, and mathematicians. Using the data already available as a starting point, in turn, helped him to refine the prediction sequence and increase revenue.

Conclusion

It took a lot of time and effort of different specialists to develop a winning algorithm for betting on horse racing. The amount that the winning strategy has brought is unknown. According to some estimates, this is about $100 million. Edward Thorpe, one of the founders of algorithmic trading, known as the “father of the wearable computer” claimed that Benter helped out a billion at the races. The betting “genius” admits that the activities probably brought him about a billion in total, but part of it went to partners. 

Category: Betting

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