“Bond didn't defend the practice. He simply maintained that the more effort and ingenuity you put into gambling, the more you took out.”
Ian Fleming, Casino Royale
Recently, I went to Vegas for a long weekend. I had two key goals for that weekend. The first was to wrap up the code for this very website, to meet our ambitious launch schedule. The second goal was more capitalistic: to place some bets on the NBA.
The comments on this morning's post include lots of people telling us that if we were really so confident in our projections, we should be rich. We need only put our money where our mouth is.
Funny you should mention that. Recently, I was talking to other writers at the Wages of Wins network and we thought it would make an interesting exercise to track my bets over the course of the season; consider it a portfolio, if you will. Furthermore, it's kind of fun to "put my money where Arturo's mouth is." I wanted to do this last year as well, but I didn't make it to Vegas in time for the opener. For those curious, I'd have placed 6 over/under bets last year, and 5 of them would have paid -- the 6th didn't pay because of knuckle pushups.
This year I decided to diversify a bit. I placed a few longshot bets on some division winners, and 9 over/under bets. Here's a breakdown of the "portfolio":
| Team | Bet | Probability | Bet | Payout | EV |
|---|---|---|---|---|---|
| Knicks | Under 50 | 98.6% | $1,000 | 10:11 | $1,882.36 |
| Hawks | Over 40 | 85.6% | $100 | 10:11 | $163.42 |
| Pelicans | Under 40.5 | 86.8% | $300 | 10:11 | $497.13 |
| Celtics | Over 28 | 94.5% | $500 | 10:11 | $902.05 |
| Pacers | Under 55 | 91.4% | $600 | 10:11 | $1,046.95 |
| 76ers | Over 17 | 98% | $500 | 10:11 | $935.45 |
| Jazz | Over 25 | 99.1% | $800 | 10:11 | $1,513.53 |
| Warriors | Under 51.5 | 90.1% | $600 | 10:11 | $1,032.05 |
| Trailblazers | Under 38.5 | 91.3% | $400 | 10:11 | $697.20 |
| Celtics | Win Division | 19.8% | $40 | 60:1 | $483.12 |
| Jazz | Win Division | 8.7% | $40 | 100:1 | $351.48 |
| Grizzlies | Win Division | 26.6% | $60 | 7:1 | $127.68 |
| Pistons | Win Division | 24.3% | $20 | 17:2 | $46.17 |
| Cavaliers | Win Division | 15.6% | $20 | 16:1 | $53.04 |
| 76ers | Win Division | 12.9% | $20 | 500:1 | $1,295.16 |
| Totals | $5,000 | $11,026.79 | |||
The Probability column comes straight out of our preview articles, where we listed the odds that a team would hit the over, the under, and win the division. The EV column is the expected value of the bet. This function is: probability * (bet + (payout * bet)). Another note: you might look at some of the high percentages and wonder why I didn't play any parleys. That's simple: one can't play a parley on the over/unders. Or at least, at the Las Vegas Hotel there was no way to do so.
As some of you know, I had a brief stint as a "professional" poker player. I didn't earn earth-shattering money but it paid a lot of bills for a little more than a year. It's one area of life where my love for number-crunching paid off. A couple of lessons that I took away from poker include: 1) don't be afraid of pushing small profit edges (this is where bets like the Jazz or the Celtics to win their divisions come in), and 2) the risk of ruin carries a large opportunity cost. To understand the second point, imagine that you had a magic coin that could flip 60/40 for heads, and you had a person willing to bet on tails against you, and he'd never catch on. In this scenario, you'd be an idiot to wager your entire fortune on one flip -- even though the bet has a positive expectation, you will lose 40% of the time, and losing that bet means that you lose the opportunity to keep flipping the coin. You will make far more money in the long run by only flipping a portion of your bankroll at a time, to avoid the risk of ruin. That's where diversification comes in.
With this in mind, I bet more on things that I thought had higher probabilities of paying, but I still diversified. For instance, even though all of us at Boxscore Geeks think that the "surest" bet is the Knicks under, I didn't put all the eggs in that basket. The risk of ruin isn't worth it. Having said that, I should have put more on the 76ers.
The division winner bets are all longshots, so they don't warrant a big percentage of the portfolio. By the way, for these, the EV calculations are not exact; since some bets are exclusive of others (i.e. the Cavs and Pistions cannot both win the central, and the 76ers and Celtics can't both win the Atlantic, etc), the probabilities (and therefore the expected values) are not completely accurate, but the impact of this factor is low enough that I didn't bother with the math. (Editor Arturo's note: They actually are. I ran a full season sim 10,000 times and ranked all conferences and divisions for each sim and that's how the division odds were made. So there!)
For those curious about an individual breakdown of all the bets, almost everything you need to know is captured in our season previews, but I will add a few thoughts:
Yes, I bet on the 76ers to win the Atlantic. No, I don't think it's going to happen. Again, I'm pushing a small edge here. 500:1 is a ridiculous payout when the Nets are the only team in that division that I'm truly confident will have a better record. So consider this basically a longshot bet that a couple of Nets go down with injuries, which would create a situation where a .500 team can win that division. I grabbed the Celtics for the same reason. The payouts here seem way out of line with the odds.
Note that the Jazz will be a better team than the 76ers, but they are far less likely to win their division. It's interesting that the vegas line doesn't consider things like that the Jazz would have to beat both OKC and Denver. In other words, if I were making the odds, the Jazz division win would pay out bigger than the 76ers.
The Grizzlies' over was one of the better bets in our projections, but on the day I was in Vegas it went up 3 wins and I decided to pass. I debated placing $100 on them just to make a statement (i.e. that I believe everyone is sleeping on the Grizzlies), but in the end the money seemed better spent elsewhere, and the division win bet already makes that statement.
If there were any bets here that I'd be "worried" about, it's the Pacers and the Celtics. The Pacers because I worry about 2011-12 Hibbert rearing his head, and the Celtics because I worry about minute allocation. I worry about things like Danny Ainge trying to lose on purpose by keeping Rondo out for the whole year.
So what are your thoughts on the bets? Did any of you make it to Vegas and put money down? What were your bets?