Sir Tim Rice found a moment during the gripping final hours of the third Ashes Test at Headingley last weekend to tweet about the latest betting on the outcome. “Just phoned my bookie (a rare occurrence of course),” he said, “to see what odds they were offering against an England win. They quoted 6-1! Ludicrous. Should be 500-1. At 100-1 I might have invested a fiver. Having said that I am still rooting for England. Nothing is impossible.”
My first reaction on reading his complaint was a wave of nostalgia. A quarter of a century after the internet turned gambling, and so much else, into a much more remote and impersonal business, there is still at least one punter – and a knight of the realm, no less – who actually phones his bookie. Had he referred instead to his “turf accountant”, the sudden rewind to betting’s golden age would have been complete.
The second, almost instinctive, reaction was to check the latest odds on Betfair, where a couple of Ben Stokes boundaries in the intervening 10 minutes had already seen England’s price drop to 9-2. Sir Tim’s bookie, no doubt, was down to around 4-1, 496 points adrift of his initial estimate of their odds and 96 points shy of a price where he might be tempted to part with a fiver.
But then, he is only human. Individuals are notoriously bad at estimating the true odds of events, a trait that has been educating the children of bookmakers at some of our better public schools for more than 200 years. When someone has a strong emotional investment in a particular outcome, they find it more difficult still to judge the probabilities, not least when their team are in a hole as big as the one that England had dug for themselves before Stokes somehow found a way to clamber out.
Betfair was not around in 1981, during the extraordinary Ashes Test, also at Headingley, when Ian Botham and Bob Willis engineered the first Test victory for a team that had followed on for 87 years. In their on-site betting tent Ladbrokes famously offered 500-1 about an England victory when all hope seemed lost, and promptly laid it to Dennis Lillee and Rod Marsh. “Two of the lads gambled,” Kim Hughes, the Australia captain, said at the time. “Not because they want to bet against their team but because the odds were too good to miss.”
Lillee and Marsh picked up £7,500 between them – around £28,000 in today’s money. But, of course, it could not happen today, in part because no player would be stupid enough to set foot in the betting tent but mainly because England would not be 500-1 in the first place. As insiders looking out, Lillee and Marsh knew that the price was wrong. For individual spectators looking in, it is still more difficult, even when, like Sir Tim, you have been a devoted fan of a sport for decades.
But while individuals often struggle to assess the odds with any accuracy, a crowd is uncannily good at estimating chances – and the bigger the crowd, the better the estimate. Which is where Betfair comes in, and also why 500-1 about either team in a cricket match when there is still plenty of juice left in the game is as much a thing of the past as phoning your bookie. That is for most of us at any rate.
Betfair was founded in May 1999 and matched its first bet in June 2000 but even now there are probably still plenty of sports fans with only a peripheral interest in gambling who think that it is just another bookie and thus just another way to do your dough. In fact, it was, and remains, the most significant challenge to the old-fashioned way of doing business since bookmakers emerged in the late 1700s.
The basic innovation in exchange betting was simple but profound. Where gamblers had, for practical purposes, only ever been able to back an outcome, Betfair allowed them to lay it too. You could buy and sell, instantaneously turning punters into traders. Betfair was in its infancy when James Surowiecki wrote about The Wisdom of Crowds. Now it might get a chapter all to itself. Its most vibrant and liquid markets condense the experience, knowledge, instincts and opinions of hundreds of thousands of individual gamblers into a single number that represents the chance of every horse, team or player with pinpoint accuracy. Betting odds had always been a decent guide to likely outcomes but Betfair fine-tunes the process to a remarkable degree.
In Britain last year, for instance, there were 336 horses that set off at even money and 149 – or 44.35% – were winners. Betfair’s starting prices are more precise, so fewer horses start at exactly 2 – the exchange equivalent of evens – but in 2018 the strike-rate was precisely 50%, and over the five seasons from 2014 it is 51.4%. Bookies’ odds are close. Betfair’s, in the most liquid markets at least, are spot-on.
For a species with the unique gift of self-awareness, speculation about what the future might hold comes as naturally as breathing. Everyone wakes up wondering about what the day might bring. Betfair cannot tell you what is going to happen but, when it comes to horse races, football matches and many other sporting events, it puts a more accurate number on what might happen than anything yet devised by human intelligence. And it is all there, for free, online, whether you are actually interested in betting or just a spectator seeking a little insight into what might unfold.
Nor is the wisdom of crowds restricted to sport. When Boris Johnson suggested that a no-deal Brexit was “a million-to-one chance”, Betfair put the odds at 5-2. Last week it was down to 11-8. In this instance the exchange not only warns you what to worry about. It also tells you just how worried you should be. Liverpool are a bigger price to win the Premier League so, for anyone considering a chunky bet on Jürgen Klopp’s side for the title, it might be worth splitting the stake. Put half of it on Liverpool. Use the other half to buy gold.
