How Take Out Really Works

[mjellish]

I think just about everyone on this board gets how a parimutuel take out system works.  But here is a dumbed down version that explains the math in case anyone is interested.

Let\'s say two people play heads up against each other, $100 a crack, once a day for year.  We each pick a horse.  Who ever picks the horse that finishes better takes the whole $200 for the day but has to donate a specific percentage to charity, say %17 or $34.

If we each win equally the math would look like this for each of us:

Total Wagered $36,500 ($100 per day x 365 days)
Total Collected winnings $36,500 ($200 per win, win half bets or 182.5 times)
Total Donated to Charity $6205 ($36,500 collected x 17% donated to charity)
Net Profit -$6205 (Total collected $36,500 minus total wagered $36,500 minus total donated to charity $6205)

So at a 50/50 split both players will lose $6205, or the exact same amount as the takeout.

Now say you win 60% of the time and the other person wins 40%.  Now the math would look like this for you

Total Wagered $36500
Total Collected $43800
Total Donated to Charity $7446
Net Profit -$146

And for the other guy it would look like this
Total Wagered $36500
Total Collected $29200
Total Donated to Charity $4964
Net Profit -$12,264

So that means that even under the adverse conditions of a 17% takeout, if you are 10% better than your opponent you will wind up pretty close to even.

If you are 15% better you will make $2884
20% better you make $5913
30% better $11,972
and so on and so on...

As the take out rises, you are therefore required to be even better than your opponent to win.  A 20% take out requires you to win about 63% of the time to break even, or in other words you have to be about 13% better than your opponent.

A 25% takeout requires you to be about 17% better.

So that is what we are really up against as horse players over the long haul.  Figure out a way to be about 20% better than the crowd and you should be a winner or at least be able to cover the costs to go to the track, buy a few essentials and entertain yourself for free.

[Boscar Obarra]

Assuming your figures are correct, that 20% must lie way out on the bell curve, since so few accomplish it.

[mjellish]

Actually, I think more people accomplish it than you think.  The thing is they accomplish it recreationally, not professionally.  Let\'s face it, if you need to make $100K a year to pay your bills, you are going to have be betting some serious money in order to get there.  You are also going to have to have a large bankroll, at least 6x that behind you in order to cover your losing streaks.  And in a lot of ways having that bankroll be 10x makes even more sense.

Most people just aren\'t going to pull a half a million or more together and put it in a horse racing pool.  Also, most people don\'t keep track of their bets so they probably couldn\'t tell you if they are up or down over the course of their life.

It also take a certain amount of moxy to say the hell with my job, I\'m playing the ponies.  I think that and the bankroll requirements, more than the take out, is what keeps people from playing for a living.

[smithkent]

If I have half a million to invest, it sure as hell isn\'t going into a racetrack window...

[nyc1347]

You also have to add the money spent on programs, thorographs, etc correct?  This puts you at even MORE of a disadvantage cause its more money spent each racing day and automatic loss/overhead per day.  You cant start making money until you start the wagering AND hit races.   Rebate offers can help out huge over time cause it can actually allow you to receive free information giving you more money back as people have mentioned here.  Some people do not get rebates though! and those people are at a much bigger disadvantage over a period of time.

[Ian Meyers]

There are no full-time horseplayers beating the game without rebates.  The best of them are about 95-98% ROI before rebates.  I\'ve spoken to most of the biggest players, and the one thing they all agree on is if they had to win playing into a 20% take (i.e. no rebates), their wagering volume would fall by 75% or more, and at that level the compensation isn\'t worth the enormous amount of time they put in.

There\'s just not enough square money in the pools anymore to survive the 20%+ chop.

[TreadHead]

Something else to consider is the professional poker world.  Cash game players face a similar dilema that those playing horses do, they need to be better enough than the rest of the players on a consistent basis to defeat the disadvantage they are being put at by the rake/takeout.

The rake in poker games is usually much less % wise than it is in horseracing, so it is somewhat easier to be a poker pro.  That said, general rumor in the poker world is that only 10-20% of people who attempt to be grind-it-out cash game pros are actually able to sustain this over time.

I think mjellish is pressing the right conclusion, but going about it in the wrong way.  Anecdotal evidence from a day, week, month, or even a year does not prove consistent enough results to say one could do it as a living.  And making one-on-one comparisons on who is a better player is completely irrelevant, the point is that you have to consistently be 15-20% better THAN THE ENTIRE FIELD of players you are playing against.  IMO, for anyone to be thinking they are 20% better than everyone else out there without documented records that they have over the span of a few years is quite egotistical.  But if you are and can back it up, more power to you.

There are some other factors in the poker world, the tournament circuit can line the pockets of a player with one huge short term score, so that the player is \"profitable\" for a year, or maybe even enough to last a couple years.  But many of these players sit down at cash games and end up giving much or all of this money back.  It is really only the Phil Ivey\'s of the world who truly are about 10-20% better than everyone else and will be every time they sit down at the table.  

I\'m not sure who the corresponding Phil Iveys in the horseracing world are, but much like poker I\'m sure the number of people who egotistically think they are as good as Phil Ivey far outweighs the number of people who actually are.  And much like poker, money management plays just as great a factor in your overall success as  the actual ability to play the game does.  BOL to all.

[Leamas57]

This is great stuff, thanks to all contributors--Kent, too, for dropping the gauntlet.

One simple way to look at, based on a few books I\'ve seen, is that you merely assess your own line and when the track odds are 25%-30% out of whack with yours, bet. This is not unlike the investment community that creates its own valuation model and buys when the market is below that.

There is even a formula to beat the underlay favorite where you bet the other horses in varying amounts.

Leamas

[Leamas57]

Not having qualified for rebates, how does that work? Does the player approach the track or casino or website and promise or demonstrate a level of activity, then strike an agreement to meet some performance level with regard to total dollars wagered?

[P-Dub]

TreadHead Wrote:
-------------------------------------------------------
> Something else to consider is the professional
> poker world.  Cash game players face a similar
> dilema that those playing horses do, they need to
> be better enough than the rest of the players on a
> consistent basis to defeat the disadvantage they
> are being put at by the rake/takeout.


>
> The rake in poker games is usually much less %
> wise than it is in horseracing, so it is somewhat
> easier to be a poker pro.  That said, general
> rumor in the poker world is that only 10-20% of
> people who attempt to be grind-it-out cash game
> pros are actually able to sustain this over time.
>
> I think mjellish is pressing the right conclusion,
> but going about it in the wrong way.  Anecdotal
> evidence from a day, week, month, or even a year
> does not prove consistent enough results to say
> one could do it as a living.  And making
> one-on-one comparisons on who is a better player
> is completely irrelevant, the point is that you
> have to consistently be 15-20% better THAN THE
> ENTIRE FIELD of players you are playing against.
> IMO, for anyone to be thinking they are 20% better
> than everyone else out there without documented
> records that they have over the span of a few
> years is quite egotistical.  But if you are and
> can back it up, more power to you.
>
> There are some other factors in the poker world,
> the tournament circuit can line the pockets of a
> player with one huge short term score, so that the
> player is \"profitable\" for a year, or maybe even
> enough to last a couple years.  But many of these
> players sit down at cash games and end up giving
> much or all of this money back.  It is really only
> the Phil Ivey\'s of the world who truly are about
> 10-20% better than everyone else and will be every
> time they sit down at the table.  
>
> I\'m not sure who the corresponding Phil Iveys in
> the horseracing world are, but much like poker I\'m
> sure the number of people who egotistically think
> they are as good as Phil Ivey far outweighs the
> number of people who actually are.  And much like
> poker, money management plays just as great a
> factor in your overall success as  the actual
> ability to play the game does.  BOL to all.


Ivey earns a ton by being a partner in Full Tilt. He earns millions every month, its the reason he can lose a million plus in any one session and grind you down....he has income coming in all of the time.

Many pros you see on television have endorsement contracts with major online sites. They make a ton. Guys like Ivey, Hellmuth etc,, who got in from the start and are partners in online sites have an advantage. If they had to rely ONLY on poker earnings, they could still do it, but having that cash flow constantly come in makes their job much easier. Kinda like rebates but on a much larger scale.

What is a \"professional\"?  Guys you see on television, guys who play tournaments, or guys that grind away at bigger Limit games?

Some players make a huge tournament score, similar to PK6 players that count on large scores to sustain them. Others grind away with win bets/exactas etc..similar to daily players at the tables. And to say that tournament players lose in cash games, I\'m sure some do, but to make a blanket statement that they lose in cash games is just not true.  There are MANY skilled poker players out there, you don\'t need to be an Ivey to be successful.

There are all types of professionals. I know several players in my room that are \"professionals\", they play higher Limit games and grind away daily. Its a tough gig, subject to the inevitable wins/losses that come with the variance of the game. These guys ARE better, but are subjected to the same randomness and chance that horseplayers deal with. But they will beat the game because overall they are more skilled than their competiton.

Same thing with horseplayers, yes the takeout hurts, but if players stick to their principals, look for value bets and getting the best of it oddswise, they will beat the game.

Nobody ever said it was easy.