November 21, 2024 • 52 mins
Michael Lewis, host of Against the Rules and author of Moneyball, The Big Short, Liar’s Poker, and Going Infinite, joins Malcolm to talk about the wild world of sports betting. Then, a preview of Against the Rules season 4, which is legal in New Jersey (listen to find out why), or wherever you get your podcasts.
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Episode Transcript
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Speaker 1 (00:15):
Pushkin. Hello, Hello, Revisionist History listeners. Malcolm here, I'm stopping
by near the end of my book tour because I
have a special guest in the house, Michael Lewis. You
may know him as the author of Moneyball, The Big Short,
Liar's Poker, and most recently Going Infinite, which just came
out in paperback, by the way, or you may know
(00:37):
him by his alter identity as a Pushkin SuperHost. Michael's
show Against the Rules is now in the middle of
a fantastic new season. It's all about the insane rise
and the consequences of sports betting in the US. You're
going to get a chance to hear one of the
latest episodes in just a moment, But first I thought
we would chat with the man himself. Michael Lewis. Welcome
(01:01):
to Revisionist History.
Speaker 2 (01:02):
It's been too long. Yes, I haven't seen you in ages.
Speaker 1 (01:06):
I know, I know we need to write that wrong.
So you've done this show about uh, sports betting, and
this comes after what your first droom was about referees
and then coaching right experts.
Speaker 2 (01:20):
We sort of set them off into the sports arena
and this is yeah, you know, we frame this as
fans and it's sort of like the fracking of the
fan how the sports leagues have decided to squeeze ever
more juice out of the fan base. And and and
you know, six years ago, the Supreme Court uh uh
(01:40):
repealed a federal ban on sports gambling. And at that time,
the NFL, the NBA, Major League Baseball, the nc DOUABA,
we're all saying sports betting is evil. You know that,
it's just like it will it will destroy the integrity
of sports, et cetera, et cetera. And there's long been
this taboo in the sports world about gambling. I mean,
not even gambling on your own sport. If you've caught
(02:02):
sports gambling, people have been tossed out of sports and
they flipped on a dime. And and essentially when into
business with the sports gambling industry, and particularly Fan Duel
and DraftKings, the two sort of big companies at the
center of this world. And there's this kind of sports
gambling industrial complex that has arisen in the last few years.
(02:24):
And it's really interesting. It's like, so the past seasons,
I love doing the podcast. You are responsible for me
doing the podcast, So I mean, you kind of talked
me into this and I love that. I love the
way it works kind of different muscles, and when you're
writing these scripts, it's a different thing than writing the books,
and I like it for all kinds of reasons. But
(02:44):
up to up till now, we've taken themes. This season
is whatever seven episodes, and it's it's it's variations on
a theme, but it isn't one story. And in this case,
this could be a book. It's like almost plotted like
a book, and it's it's about this vast social experiment
that's going on that's largely invisible because the consequences are
(03:05):
sort of you know, you don't see it the way
you see on an opioid addiction or alcohol addition. You're
seeing this thing that historically regarded as a vice, understood
to be kind of risky behavior, being foisted upon the
American people, especially young American males, in a way that
would have been unthinkable a decade ago. And so like
(03:26):
how this is happening, how the industry works, with the
economics of the industry, are where this is going and
the effects it's having on We're talking to everybody from
athletes to high school students who are creating sports gambling
rings in their high school and like, ultimately, how to
defend yourself because the industry's coming for you or your children.
(03:47):
It's sort of finally calibrated to exploit all of your
mental weaknesses, finally calibrated to get you do the stupidest
things you could possibly do in a casino.
Speaker 1 (04:01):
I'm just curious about how you settled on this particular topic.
When did you when was sports gambling did you start
buzzing around your head?
Speaker 2 (04:12):
Well, completely honest, it was buzzing around my head because
you can't avoid it. Right, Even in California, sports gainly
is still illegal. It's legal in thirty nine states. California's
not one of them. Soon will be one of them probably.
But even in spite of that, living in California, four
years ago, I started getting bombarded with ads by from
Draft Kings and vendor telling me to bet on sports.
(04:34):
And the commentary around sports had completely changed. So it
caught my attention then. But it was our brilliant producers
who came and said, you know, what do you think
about this as a subject, and it instily went yes, yes,
like yes that it just hasn't quite been done. Sometimes
the best stories are things that no one ever thought about.
(04:54):
Some of the best stories is just like what's under
your nose that no one's really noticed and sight hiding
in plain sight. The more we dug into it that
the more shocking it was. Just how predatory it is,
how the as a business fan, Duel and DraftKings the
two companies at the center of the of the industry.
They're they're framed in the public mind it's always just fun,
(05:18):
it's gaming or whatever. It's maybe like a casino. It's
not at all like a casino. These are businesses that
really haven't ever existed before. It's casinos with unbelievable amounts
of data about the gamblers, an incredible ability to nudge
the gamblers into ever and ever stupid things, and it's
in your pocket. It was a combination of that that
(05:40):
kind of dragged me into it, and it was also
just like the whole sports gambling is as an activity,
it's more interesting to me than casino gambling or even blackjack.
We spent the time with sports gamblers, pro the very
best sports gamblers who beat the house, and they're doing
(06:01):
stuff very like what the Oakland A's front office did
back in the late nineties and early two thousands where
they were. They're doing a fresh analysis of this sports
to glean fresh insights that the market, you know, is
sort of oblivious to so that they get an edge.
And that's interesting to me. It's like, at the same
(06:22):
time the corporate side of it is kind of dark
and gross, the gambling side of it is kind of
fun and interesting for the people who know what they're doing.
Speaker 1 (06:32):
I've been struck by how much the sports gambling has
has infected our world podcasting. I mean, sports podcasts have
turned into sports gambling podcasts.
Speaker 2 (06:43):
You got it.
Speaker 1 (06:43):
I mean I've listened. I spent many, many hours of
my life listening to Bill Simmons. But it's like all
he mentions FanDuel in every second paragraph.
Speaker 2 (06:53):
They've rained so much money on media that there's just
not much blowback. There's a huge financial disincentive to doing
the story. Like first question your business people ask me
is can we take fan duel and draftings money? And
very much not in your spirit? I said no, Now, I.
Speaker 3 (07:14):
Know you very much not in spirit because you were
so because you are so good at plowing right through
the ordinary ethical objections in getting that and getting to
the cash.
Speaker 2 (07:27):
It's so true.
Speaker 1 (07:28):
It's so true, isn't true? You know, we got mouths
to feed to hear at Bush kind you do.
Speaker 2 (07:35):
You're a responsible parent and you're generating the income for
the family. But I'm kind of off to I'm just
I'm winging that off to the side of your operation,
and I just said, no, it's pretty clear that we've
got to be completely free of the taint of their money.
These two companies in the last five years have spent
something like two billion dollars each on marketing, and a
(07:58):
lot it ends up in the pockets of sports work.
Speaker 1 (08:00):
Yes, brillion two billion, Yes, that's like General Motors level.
Speaker 2 (08:05):
They We had someone who I think is the trust
is or us tell us that they're the biggest advertisers
in America. They're bigger than the beer They're bigger than
the car companies. And that isn't actually surprising anybody who
watches sports. It's like every other ad is an afrogambling
and and and beyond beyond that, Like the announcers, not
(08:28):
just Bill Simmons, the announcers during the games are framing
all their commentary around their bets, and their bets that
they make are are encouraging or sort of suggesting to
the audience they might make. Two are are precisely the
stupidest bets you can make, and the bets that maximize
the profits of the companies Like it's it's it's long
(08:53):
shot bets, it's parlay bets. Uh yes, and when it's
taking advantage of we haven't quite got to this the last.
I don't want to burn the season on your podcast.
But the human mind makes all kinds of mistake when
it's placed in conditions of uncertainty, and one routine mistake
it makes is that when it's given long odds, it
(09:14):
starts to cease to make distinctions. So if someone offers
you forty to one odds on some parlay bet or
twenty to one odds, you think, wow, I get twenty
dollars for everyone I put up, and you don't stop
and to realize that actually the true odds or something
like one hundred to one.
Speaker 1 (09:29):
You mean, because you're betting on a series of long
shots and you're feeling multiply out. Yes, the odds well
don't get right.
Speaker 2 (09:35):
Yes, people don't do exponentials very well, and the mind
is sloppy when when you're starting to present people with
long shot bets. That's why people play the lottery. They've
been kind of grooming the American gambler to move away
from oh, just betting on the taking the chiefs and
giving up the points to these bets where the house
(09:58):
take is multiples of what a casino takes for its
for casino games. As a result, the two companies that
they're both listed companies, DraftKings has listed DraftKings, and FanDuel
was owned by what's holy companies called flutter All of
Wall Street basically got them wrong the minute they ran
(10:19):
up as companies. The stocks ran up in the wake
of the legalization of sports gaming, and everybody came up
and said, oh, they're inflated short them, and they crashed temporarily.
It's like the Land of twenty twenty one because everyone's
sort of looking at them as standard casino businesses, and
they knew what the take was for standard casinos, and
they could kind of guess with the handle was going
(10:39):
to be, with the betting volume was going to be,
and they did the casino Mathew, they said, this doesn't
justify the stock price. In fact, the take is multiples
of what casinos and is growing the margins, and a
way to think about it is it's sort of like
exploiting their ability to get people to do dumber and
dumber things. And I think, I think it's going to happen.
(11:02):
Our podcast is going to be a part of this.
The way to address this is to make it clear
that anybody who is a VIP of fan Duel or
DraftKings or one of these fourths gaming apps, or anybody
who even kind of does it a lot, is like
someone who's who's almost certainly making dumb bets because they
(11:26):
are on the other side of this. The gaming apps
are really good at figuring out who's a smart better
and kicking them out. If you know what you're doing,
if you're the equivalent of the card counter, if you
actually figured out something about football that nobody has realized before,
and you've got a systematic edge, very very quickly, they
figure it out and they get rid of you.
Speaker 1 (11:47):
So you know what they could do that I never
understood this. They you not allowed if I walk into
a store, they can't kick me out. You know, there's
isn't it a whole kind.
Speaker 2 (11:58):
Of you would think you would think their analogy that
they want to draw it is. It's like the card
counter coming into the casino. We can throw out that
we don't we don't have to service the card counter
at the blackjack table. I don't want to rule the
whole show. But our producer took an enormous pile of
cash with smart betting ideas, and it took her moments
to get chucked out. Poor lidiagen Cott has been banned
(12:19):
by every sports betting or so. Yeah, because and the way,
it's a very simple way how they identify that you
are smart. If the line moves in your favor after
you've made the bet systematically you knew something is basically
were saying the odds, the odds will drift to the
(12:41):
true odds, and if you were ahead of the market,
they don't want you. And so, but the part of
part is that, and I send this to an audience
of money managers not that long ago. They're asking me like,
do you have any tips to how to identify a
good money manager? And I said, well, there's a new
one now available. Before you let someone manage your money,
you got to ask them if they if they have
accouncil Fando and DraftKings and their sports betters and like,
(13:03):
what's their relationship with those enterprises And if they say, man,
I'm like a VIP or I do it all the time,
or I don't give them your money to invest, like
they are identifying people who should not be professional investors.
Speaker 1 (13:18):
Michael, can you describe the the Tell me a little
bit about the episode we're about to hear.
Speaker 2 (13:22):
So this is the episode where we're the main character
is Rufus Peabody, who is one of America's great sports betters.
Speaker 1 (13:29):
And by the way, did you make up that name?
Speaker 2 (13:33):
No? No, I don't.
Speaker 1 (13:34):
It's like that is like if I had to imagine
the name that Michael Lewis would make up for his
lead character, it would be Rufus Peabody.
Speaker 2 (13:40):
I told Rufus Peabody when I met him that if
my name was Rufus Peabody and Michael Lewis, I'd be
worth three times when I'm worth that It's are you
kidding me? Yeah? It would be totally. It's wasted on
a sports better It should it should be. It should
be an author. Rufus was in he's still young Yale
class of two thousand and nine or whatever. He is
(14:02):
the leading kind of smart edge of gambling, but he
was present before legalization. He was present in the markets
back when Vegas was the market. We traveled with him
to the point where his bets are no longer accepted.
What interested me about him and his mentor is also
a big character in the in the episode Roxy Roxborough
(14:25):
a legend in the old Vegas spoiling I know, I know,
I know. And what your love about Roxy is?
Speaker 1 (14:29):
He's Canadian, He's Canelo Michael, did we know we have
two Improbably we now have a parlay of improbably perfect names.
Speaker 2 (14:39):
You're gonna love listening to them. They're wonderful, they have
a lot to say. They're very smart people. I just thought,
what is the most interesting point of view on this market?
And it was obviously it was the point of view
of the sharp, the edge player, the person who's beaten
the market. It's like, who's the most interesting person to
talk to about a casino? Either the person actually running
the casino or is the card counter, or the person
(15:01):
who's figured out how the slots are rigged, or who's
seen that the roulette wheel is slightly off. It's someone
who is looking at the market from a superior kind
of vantage point. So it's walking us into this new
market through the eyes of an edge player.
Speaker 1 (15:18):
You have the one thing that has distinguished you throughout
your career is I feel like you. No one has
his finger closer to the pulse than you. You've done
it repeatedly, and it sounds like you've done it again.
Speaker 2 (15:30):
It's a gas of the season.
Speaker 1 (15:32):
Michael Lewis is host of Against the Rules right here
at Pushkin. Here's his latest episode, A Hard Way to
Make an Easy Living. Give it a listen and head
over to Against the Rules and subscribe to hear more.
Thank you, Michael, Thank you, Malcolm.
Speaker 4 (15:48):
Oh yay, oh yay, oh yay.
Speaker 5 (15:52):
May twenty eighteen, the United States Supreme Court strikes down
the federal law that has effectively banned sports gambling in
nearly every state. What happens next happens faster than anyone imagined.
It happens in so many places at once that it's
basically impossible to follow it all in real time.
Speaker 6 (16:13):
I ended up picking Mississippi and Kansas as the two
states that I really decided to focus on and merely
was just there, becoming a part of the furniture as
the lobbyists were working their magic.
Speaker 5 (16:25):
That's Eric Lipton, New York Times reporter, who with his
colleague Ken Vogel, just sat and watched as lobbyists created
the conditions for a new industry to emerge overnight sports.
Speaker 6 (16:37):
Gambling and buttonholing various legislators, getting them to introduce language
that they wanted into the gambling bills and changing the
tax rates, getting provisions included that would allow them to
entice betters with free bets that they wouldn't have to
pay taxes on.
Speaker 5 (16:57):
Derek knows that state capitols or where the action is.
He started his career covering state governments for local papers.
When he returns to his old beat, he sees right
away how.
Speaker 2 (17:07):
Much lonelier state capitals are because his old job, state
House reporter, now barely exists.
Speaker 6 (17:14):
There were times when I was in the state capitol
where I was pretty much the only reporter there while
they were debating sports betting, and I would stay until
they wrapped up two in the morning, as the session
was closing and they were trying to get the bill
passed and there were no other reporters present.
Speaker 2 (17:31):
It's like, if you do something at the federal level,
there's going to be a lot of people watching. Still
a lot of reporters who will cover national politics. But
if you push things down to the states, you're more
likely to just operate in the shadows.
Speaker 6 (17:46):
Yeah, and I think the lobbyists know that. And it's
actually a lot easier to get things done in state capitals.
You can build a national strategy through a collection of states.
Speaker 5 (17:57):
Eric and his colleague at the Times wrote about Kansas
back in twenty twenty two, but he could have written
the same piece almost anywhere. In the United States. Thirty
eight states plus Washington, d c.
Speaker 2 (18:08):
Were rushed to legalize sports betting and rolling over for
the new sports bookies who were pushing to minimize just
how much of a cut the states took.
Speaker 5 (18:18):
They cut the tax rate almost in a half.
Speaker 6 (18:21):
They gave them the ability to give out free bets
as a promotion to sign people up and not have
to pay taxes on that. So essentially the state becomes
a lost leader promoter of getting people into gambling by
giving them tax free promotions.
Speaker 2 (18:40):
And without a whole lot of pushback from anyone.
Speaker 6 (18:44):
Oftentimes the legislators weren't even aware that they were passing
these things, or they were. It was sent, it was
given to them in the last minute, just before they
were asked to vote on it, and they weren't even
fully informed as to what they were voting on.
Speaker 5 (18:57):
Overnight, the States have gone from the bookies cop to
the bookies' partner. So of all the pro sports leagues,
the NFL.
Speaker 2 (19:04):
The NBA, and Major League Baseball, the entire sports industrial
complex now has a stake in the revenues that flow
into sports gambling companies like DraftKings and fan Duel. There's
now a vast new machine with one clear purpose to
maximize those revenues by maximizing the number of bets that
Americans make on sports. A sports sequinot zus coming for
(19:29):
sports one day one to contest that stream to sports
econts frequently contes.
Speaker 5 (19:38):
It's as if when prohibition ended, there were these two
massive liquor companies sitting there with databases on individual Americans
and their tastes for alcohol, and the government ordered them
to go wave a glass of whiskey under the nose
of every alcoholic to persuade as many as possible.
Speaker 2 (19:53):
To start drinking again. Of course, there are some restraints,
some rules. No state has allowed small children to gamble
on sports.
Speaker 5 (20:03):
Eight have declined to allow people to gamble on their phones,
and the taxes that the new industry pays varies a
lot from state to state. New York takes fifty one
percent of all sportsbook revenues. Indiana takes only nine and
a half percent. In twenty seventeen, the year before the
Supreme Court struck down a federal log in sports betting,
(20:24):
legal sports bookies in the United States generated roughly three
hundred million dollars in revenues. In twenty twenty three, they
took in eleven billion. In twenty seventeen, Americans made roughly
five billion dollars in legal sports bets. Last year, they
laid down more than one hundred and twenty billion. The
(20:46):
numbers are crazy, the consequences are even more so, and
we'll be exploring them for the rest of the season.
Speaker 2 (20:52):
Take your shot at more than two hundred and seventy
thousand dollars in payouts. That's a lot of money. I'm
Michael Lewis, and this is Against the Rules, a show
where we look at specific roles in American life and
how they're changing. The fans.
Speaker 5 (21:11):
Roles changing because a powerful new machine has sprung up
to encourage the fan to gamble on sports. Sports gambling
has never been just a simple and straightforward marketplace. It's
more like a jungle, and DraftKings and FanDuel are like
this invasive species that's been dropped into it by accident.
They've disrupted the food chain and overrun the habitat because
(21:33):
they feed so efficiently on fan emotion, and fan emotion
is the jungle's greatest food source. But they're also vulnerable
to a creature that feeds on them. Let's recall for
(21:58):
a minute what sports gambling once was in America by
listening to just a snippet of a press conference held
back in nineteen sixty one by then Attorney General Robert F.
Speaker 2 (22:07):
Kennedy.
Speaker 4 (22:08):
The record has since the passage of the legislation, and
that's big time gambling by the big time operators has
been materially decreased since the passage of the legislation.
Speaker 2 (22:20):
Kennedy celebrating a new law called the Federal Wire Act.
The point of the law was to cut the legs
from under the mafia by shutting down it's sports gambling operations.
By giving the federal government the power to arrest and
prosecute anyone who booked a sports bet over any phone
or telegraph wire that crossed state lines, and.
Speaker 4 (22:40):
In fact, head of the Royal Mounted Police in Canada
said in the speech last week that Canada will now
have to pass legislation and take new steps because many
of the big time gangsters and hudlums of the United
States are now moving to Canada because of the drive
that has been made against them here in this country.
Speaker 5 (23:00):
When you think of Canada, this isn't the first thing
that pops into your head. Happy refuge for big time
gangsters and sports gamblers. But I don't know a different era.
Speaker 7 (23:10):
I always had an interest in sports. My father coached
me in swimming and coached me in tennis. But my
world changed when I found out you could gamble on it.
I became no longer a fan. I became interested in gambling.
Speaker 5 (23:25):
That's Michael Roxborough. Everyone just calls him Roxy now. He
grew up in the nineteen fifties in Canada in a nice,
upper middle class family. He's now zooming with me from
a home in rural Thailand, with the ac blasting in
the background and a straw fedora on his head, and
the emotional feel of a man in a Witness Protection Program,
(23:46):
a placeless man, but he really did grow up in Canada.
When Roxy was a kid, there was a sports gambling market.
It was smaller and more constrained than it is now,
but very real, and its center was the pool halls
of Vancouver, British Columbia.
Speaker 7 (24:01):
If you envision in the movie to Hustler, if you
take a look at the pool rooms of that day,
those were the pomo were the full rooms of my day.
It was just full of wannabees, desperados, hustlers, drug dealers, bookmakers,
everybody that was operating outside the law.
Speaker 2 (24:25):
When you got the bug. What's your parents think about it?
Not too happy.
Speaker 7 (24:31):
My father was a Harvard MBA and my mother was
a high school valedictorian, and I think they had higher aspirations.
Speaker 5 (24:41):
Roxy's dad wanted him to go to Dartmouth and he
got in, but he went to American University in DC
because he sensed the action was better there.
Speaker 1 (24:50):
I ran a blackjack game in the.
Speaker 7 (24:53):
American University dorm at night, and that's what's the source
of most of my profits.
Speaker 2 (24:58):
But then I got kicked out for what for ready
that blackjack game. Roxy never did finish college.
Speaker 5 (25:07):
Instead, he went back to Canada, in and out of
boring jobs, but never stopped gambling.
Speaker 2 (25:13):
And then he finally caught a big break by reading
a book.
Speaker 7 (25:16):
I was in a Reno airport flying back to Vancouver,
and I picked up a copy of Ed Thorpe's Beat
the Dealer.
Speaker 5 (25:25):
Beat the Dealer was the first book to show how
a gambler inside a casino could have a systematic edge
by counting cards in blackjack. The other casino games, like
slots and roulette, were more or less perfectly rigged against
the gambler. Anyone who played them for long enough was
sure to lose. Blackjack was an exception. Played blacksjack for
(25:46):
long enough, at least the way Ed Thorpe taught people
to play, and you were sure to win Betthorpe published
his book in nineteen sixty six. A few years later
Roxy read it and it gave him the idea that
changed his life.
Speaker 7 (25:59):
I decided that if I'm going to look at sports betting,
I need to look at it statistically driven, data driven
not by not visual or instinct or just watching a
lot of games.
Speaker 5 (26:13):
Outcomes in sports were obviously far less regular and predictable
than outcomes inside slot machines or even at blackjack tables.
But that didn't mean you couldn't learn stuff about sports
that would allow you to make better predictions. Not perfect predictions,
but better predictions than everyone else betting on games. In
the nineteen seventies, Roxy had baseball in mind. The guys
(26:34):
who booked baseball legally in Nevada and illegally everywhere else
AREFRED gamblers. The chance to bet on not just who
would win the game, but how many runs both teams
would score. Roxy had an insight that seems obvious now.
The number of runs scored in any baseball game depended
on factors like the weather at game time and the
size of the fields. San Diego's was a good example.
Speaker 7 (26:58):
You just could not hit the ball out of there,
And then the Padres went and spent like an outrageous
contract to sign a guy like Oscar Gamble. All he
had is hit fly balls, and that park was a
place where flyballs went to die. So you've soon found
out that general managers really didn't know anything about their
own ballparks either.
Speaker 2 (27:17):
The idea that the people who run sports teams don't
know what they're doing has probably never been a new idea.
Speaker 5 (27:23):
Fans have always thought that they know better. What was
new is that someone in the stands was actually figuring
something out the effects of the wind and the humidity
and the barometric pressure on a ball that was flying
through the air.
Speaker 7 (27:36):
We started to start getting weather reports from all the cities,
the parts out in which ones helped scoring or hindred scoring.
Speaker 2 (27:43):
And dimensions right, I mean just the length of the
left field fence.
Speaker 7 (27:47):
Dimensions were important, and we found out a couple of
the ballpark dimensional drawings were wrong. They had the north
pole raw well pointed north. Because we went out and
did to ourselves.
Speaker 5 (28:03):
Roxy moves to Vegas full time in nineteen seventy five
to bet on sports, and just by taking into account
the weather and the size of ballparks, he's able to
make a killing while trying to avoid the people who
know a thing or two about actual killing. Where the
Nevada legal bookmakers detectively run by the mob.
Speaker 7 (28:22):
They'd have had a hand in till about right well,
aged seven.
Speaker 2 (28:28):
Yeah, I just wonder in that environment was it dangerous
to win too much now?
Speaker 7 (28:34):
Because actually what they would do is they could find somebody.
Speaker 1 (28:37):
Else who could take your bet, and they can move.
Speaker 7 (28:40):
It for more money someplace else in the country.
Speaker 5 (28:45):
The old sports gambling market inside the United States was shady,
but it had its unwritten rules, and one was that
they always took your bets if you bet a lot.
They eventually moved the lines. These betting lines were all
set in Vegas for a very long stretch. They were
actually set in a single Vegas casino, the Stardust. The
(29:07):
bookie at the Stardust set the odds and everyone else
just followed his lead. There was a bank of payphones
outside the Stardusts that were said to be the most
profitable in the country for the phone company because sports
gamblers used them to relay the odds to the illegal
bookies and betters across the country.
Speaker 7 (29:24):
Communications back then it was just with a phone call.
That was the only communications there were.
Speaker 5 (29:32):
In the late nineteen seventies, the Nevada Gaming Control Board
tossed the mob out of Vegas and out of sports gambling,
and pretty soon Roxy became old news. By the early
nineteen eighties, everyone knew that the weather and the size
of ballparks had big effects on baseball scores, and Roxy
never found another systematic edge, and his life became a
(29:52):
bit of a mess. He'd been arrested for violating rfk's
Wire Act, he'd taken crazy risks as an illegal book maker,
and he'd run through two marriages.
Speaker 2 (30:02):
Is a gambling business hard out of relationships, charity why?
Speaker 7 (30:07):
It just sort of takes over your mood and your personality.
I don't know anybody who's ever been in gambling thought
they were a better person for it.
Speaker 2 (30:17):
It's interesting because when you think about why a person
would drift into gambling in the first place, it would
be because you think it might be an easy way
to make money, Yes, and it ends up being a
harder way to make money.
Speaker 8 (30:27):
It does what did they say?
Speaker 2 (30:29):
It's a hard way to make an easy living.
Speaker 5 (30:33):
People said that Roxy now knew it. So in nineteen
eighty two, he quits gambling. He creates a company called
Las Vegas Sports Consultants. This new company will effectively replace
the Stardust Casino in setting the odds for all major
sports contests. Roxy's just better at it, and pretty soon
(30:53):
he's selling his odds to all the sports bookies, including
the Stardust. This makes sense to everybody in Las Vegas.
Hiring Roxy to set the odds in sports is like
hiring the first card counter to guard the blackjack tables.
Speaker 7 (31:09):
So I said, you know, I'm going to try this
for a couple of years, but I'm not sure if
it's going to work, because it wasn't given that every
hotel was going to have a sportsbook. Was there rather
limited business. But that was one of my better decisions
because it turned out to be a massive business.
Speaker 5 (31:26):
Sports gambling isn't exactly a financial market, but it rhymes
with financial markets. What happens on Wall Street, somehow eventually
also happens in sports gambling. And Wall Street's about to
undergo dramatic change. First computers and then the Internet will
allow the markets to become a lot more complicated, and
the BET's a lot more complex. The world's about to
(31:47):
speed up, and a new kind of person with a
different kind of education is going to enter it. Old
school traders with high school degrees and lots of body
hair and names like Vinnie and Donnie are about to
be replaced by hairless PhDs from MIT with computer models
who as kids thought they grow up to be professors,
not traders. On Wall Street in the late nineteen eighties,
(32:09):
smart old school guys served as a kind of bridge
between the two cultures in sports gambling. Roxy was that bridge,
but it took a while for anyone to cross it.
Speaker 2 (32:37):
We're here to see Rufus pebo. We're in the right place.
We're still in Vegas, but far from the strip. We're
not gonna be a wrong We're just gonna make a
bunch of sports bets. He runs into legal gamblin operation.
I've never even knew that you want any action.
Speaker 5 (33:02):
The real action is no longer on the strip. The
real action is basically invisible. But here on the seventeenth floor,
with a sweeping view of the distant casinos, Rufus Peabody
lives and works.
Speaker 2 (33:16):
Rufus We're here.
Speaker 4 (33:18):
We're here.
Speaker 2 (33:19):
Rufus Peabody is who crossed Roxy's bridge.
Speaker 8 (33:22):
I never was a better as a kid. I didn't
know anything about sports betting.
Speaker 2 (33:26):
You can feel a little twinge of desire none.
Speaker 8 (33:30):
Most people that got their start, they started losing and
they learned how to win. But I was never better.
I never grew up betting like besides NCAA tournament pools,
I was always good at those, But for me, it
was a game and I'm not I'm a risk taker.
But I'm not a gambler by nature.
Speaker 2 (33:47):
Rufus grew up outside of Washington, DC, always loved sports,
thought he might like to be a sports journalist.
Speaker 5 (33:53):
He still reminds me a bit of a journalist. He's
a watcher, a person whose eyes move more than his mouth.
But even when he was a kid, his mind took
him places that journalism usually doesn't.
Speaker 8 (34:05):
So so it was this team one eighty two to
sixty four, But why did they win? Basically I kind
of wanted to report on the why it happened rather
than just this guy got eighteen points and twelve rebounds
and this team one right. I kind of wanted the
story of why.
Speaker 2 (34:20):
He wanted explanation.
Speaker 8 (34:21):
I want explanations.
Speaker 5 (34:23):
In two thousand and four, Rufus graduated from high school
and went to Yale. He was still obsessed with figuring
out why. He studied statistics and built models that predicted
the performance of athletes and the outcomes of sporting events,
not because he wanted to gamble on them, just because
it was cool to figure out stuff that even people
who run sports teams don't know.
Speaker 2 (34:45):
He wanders around Yale looking for someone to teach him more.
Speaker 9 (34:49):
Rufus wants to do a thesis on, if I remember correctly,
behavioral biases and the baseball betting market.
Speaker 5 (34:57):
He's who rufe has found. His name is Cade Massey.
He's a professor of organizational behavior. Was it interesting, Oh.
Speaker 9 (35:06):
Yeah, absolutely, I mean what's not interesting about trying to
find psychological mistakes that people make with like, you know,
hundreds of thousands of observations of real money being.
Speaker 2 (35:16):
Met, and he found mistakes.
Speaker 9 (35:18):
I mean, he was finding profitable strategies right off the bet.
Speaker 5 (35:22):
Rufus just kept asking questions about the behavior of sports gamblers.
He still wasn't placing bets himself. He was just working
with this professor to build a model to predict college
football scores. They pitched it to the Wall Street Journal,
and the journal agreed to publish their college football picks
of the week. It was just how they would bet,
were they to bet on college football.
Speaker 9 (35:44):
And he would then post our picks of the week.
We're just posting them because we were working with the
Wall Street Journal, So post him on Tuesday or Wednesday,
and then he would watch as the prices started moving
on his screen.
Speaker 2 (35:55):
Oh my god.
Speaker 5 (35:56):
Which is to say the sports gambling market would see
their picks and move in response because the market figured
out that their picks were that good.
Speaker 9 (36:05):
Within a year or so, we quit posting college picks
because it was getting too much in the way of
what he was trying to do, because he wanted to
bet it himself, because he wanted to bet it, and
then if they're so good you would bet them, you
wouldn't sell them, right. I mean, it was bound to
eventually occur to Rufus that if he could predict the
scores of college football games, then he should just bet
on them himself. But it's funny how he got there.
Speaker 5 (36:28):
In his head, Roxy Roxboro had started as a gambler
who then set out to find some kind of edge
to bet. Rufus Peabody started by finding these edges and
kind of stumbled into gambling and then found Roxy. During
Rufus's junior year at Yale, he read an article in
(36:49):
ESPN about Roxy's sports analytics company, Las Vegas Sports Consultants.
Roxy's company wasn't used to getting resumes from Yale juniors,
but they gave him a summary internship anyway and showed
him their world from their offices right next to the
Las Vegas Airport.
Speaker 8 (37:07):
They would bet on what plane was most likely to
land next, right, And this is like sort of pre
internet days or pre like being able to see flight
plans and stuff like that, and so it was like, okay,
American Airlines is like six to one, like you know,
Southwest is two to one whatever. What people didn't realize, though,
was Roxy actually had a contact in the control tower,
(37:29):
and so Roxy won. He made money off of these bets,
but he didn't make enough to draw suspicion. That was
the key. But he would occasionally hit the japan Air
at three hundred to one, right or whatever.
Speaker 5 (37:49):
Roxy screw would bet on everything. Rufus wasn't like that.
He didn't even think of what he wanted to do
as gambling, but he did want to understand this other world,
this world where people bet on anything that moved.
Speaker 8 (38:04):
They shared the building with American Wagering, so with LeRoy's,
which was a sort of third party sportsbook operator. Le
Rois didn't have a casino, but they were in casinos
like Hooters or Terrible Herbst. Right, Hooters has a casino, Yeah,
Hooters casino. It's on the strip. It's right, tropic cannot
(38:25):
basically right, Yeah, So I met, I meet this the
head trader there right, and I have all these questions.
A book maker can make more money, Let's say, if
they know the public's bias, they can make more money
setting a line somewhere between the true price and the
price of the public thinks that's the way to maximize.
Speaker 2 (38:46):
There's no reason you should understand what rufe has just
said there, but let me try to explain it, because
it tells you a bit about how this old school
sports gambling world works. The line is just the odds
or the points spread.
Speaker 5 (38:58):
The true price is what the odds would be if
you somehow knew every possible relevant bit of information about
some upcoming game. Of course, no one ever knew everything,
so there is in reality, never a perfect true price,
just some number that the smartest and best informed betters
agree on. Say they agreed that the Packers should be
(39:20):
eight point favorites over the Cowboys, but most of the
gamblers are Cowboys fans, and the Cowboys fans think the
Cowboys are only three point underdogs. Rufus was asking the
bookie if he thought he could entice the public to
make more stupid bets if he set the line not
at the true price of eight points, but it's say
five points because Cowboys fans will think the Cowboys are
(39:44):
better than they actually are and bet even more.
Speaker 8 (39:48):
I said, theoretically, you can make more money setting a
line somewhere between the true price and where the public
thinks the price is. And he says, theory, theory, and theory.
A dick don't fit in an asshole. And this guy, yeah,
he was probably three hundred pounds five to eight, smoking
(40:12):
a cigar in a dark room, looking at a bunch
of numbers on a screen.
Speaker 2 (40:15):
In just a flash, there you've changed our podcast rating.
Speaker 8 (40:19):
Sorry.
Speaker 5 (40:30):
Rufus Peabody recently of Yale is no one's idea of
a hustler. He's too sweet natured and even tempered, and
way too open to telling other people about the stuff
he's learned. He finishes up at Yale and moves back
to Vegas to work full time at Las Vegas Sports Consultants.
But now Rufus thinks he might have an edge, and
(40:51):
people in and around Roxy's firm think that maybe he's right.
Speaker 8 (40:55):
The Super Bowl was my first big break. Super Bowl
two thousand and nine. Okay, I had made a friend
with a professional sports better guy that bet baseball, and
he loaned me ten thousand dollars to bet. I had
my own ten to twelve thousand dollars. My boss, Kenny,
unbeknownst to everybody else, invested forty thousand dollars in me
(41:19):
and gave me a twenty percent free.
Speaker 2 (41:21):
Roll on it, meaning that if it wins, you take
twenty percent of nance, but you've suffered another losses correct.
Speaker 8 (41:29):
And so I ended up with close to sixty thousand
dollars bet on the Super Bowl, and so I basically
was pretty leveraged. Yeah, and I remember being like, this
game doesn't work out, you know, I gave it a shot.
Speaker 2 (41:41):
All right, And what is causing you to have such
conviction about a game?
Speaker 9 (41:45):
Oh?
Speaker 8 (41:45):
Nothing. It wasn't conviction about the game. It was betting
the props.
Speaker 5 (41:49):
The props short for proposition bets not on the whole game,
but pieces of the game. But the standard story, which
is almost certainly not true, was that the prop bet
was invented for the nineteen eighty six Super Bowl between
the Chicago Bears and the New England Patriots. The Bears
were such heavy favorites that Vegas had trouble jinting up
in interest in the game, so a Vegas bookie created
(42:12):
a side bet the odds that a Bear's defensive tackle
named William the Refrigerator Perry would score a touchdown. It
was a long shot bet, and the betting public loved it,
and Vegas bookies lost a fortune when the fridge did
indeed score. But back to Rufus and forward to the
Super Bowl of two thousand and nine, the Pittsburgh Steelers
(42:35):
played the Arizona Cardinals. Rufus wasn't betting the whole game,
but pieces of the game. His Pro Football model spits
out odds for all this weird stuff that Vegas bookies
are now offering bets on the odds that Steeler's running
back Gary Russell will score the game's first touchdown. For example,
Rufus has vast troves of data to mine. He can
(42:57):
do stuff with it that Roxy would never imagine. He
could do stuff that even the people who run the
Pittsburgh Steelers would never imagine doing.
Speaker 2 (43:06):
I mean, even Gary.
Speaker 5 (43:07):
Russell likely has no idea that you can calculate the
odds that he will score the game's first touchdown.
Speaker 2 (43:13):
But Rufus can. His model puts those odds much higher
than the bookies' odds. So in Rufus's mind, it's a
great bet. He makes dozens of similar bets BET's where
his model tells him that the bookies are giving him
better odds than they should.
Speaker 8 (43:29):
I still remember going. It was like Hara's Caesar's the Rio.
I ended up getting down like two hundred dollars at
a time, like five thousand dollars. Positions on a few
things like that were really good, and so I was
diversified within the game. Within the game, I wasn't betting
(43:51):
on the outcome of the game, but I was. I
still to this day, have never watched that game.
Speaker 2 (43:55):
I was too nervous. How did you experience the game
if you didn't watch it.
Speaker 8 (43:59):
I went to this little par three course that's open
at night, right south of the airport, and I played
the part three course twice until I felt like the
game would definitely be over. And then I went grocery shopping.
And I didn't have a smart this is pretty smartphone.
I went grocery shopping, and then I went home and
(44:19):
cooked myself dinner.
Speaker 2 (44:21):
Huh.
Speaker 8 (44:21):
And then and only then did I open my computer
and check and see how the game went.
Speaker 2 (44:27):
And were you just going through your prop bets seeing
what happened?
Speaker 8 (44:29):
First I went to the boss score and I saw
the first score was Gary Russell one yard touchdown run.
I was like, ah right, And it turned out out
of like fifty six thousand dollars bet like, I profited
like twenty three thousand on it.
Speaker 5 (44:45):
Rufus figures out how much he's won. Then he physically
retraces his steps to the many casinos that had taken
his many bets, still driving an old Honda Civic.
Speaker 2 (44:55):
You had all these little tickets you have to write,
you go cash each one individually, so you had you
must have had one hundred tickets.
Speaker 8 (45:01):
Oh yeah, probably.
Speaker 5 (45:03):
He just drives around Las Vegas and the money piles up, and.
Speaker 8 (45:08):
I remember how having like thirty thousand dollars on the
front seat and being like, oh my god, so much money.
Speaker 2 (45:14):
In cash in cash. After that, lots of people in
Vegas wanted to lend money to Rufus and take a
cut of his bets.
Speaker 5 (45:26):
Rufus, for his part, was still sitting in his office
in Las Vegas Sports Consultants, but pretty soon he was
directing an army of people to lay bets in sports
books across the city, sports books that got their odds
from Las Vegas sports consultants. Rufus was in effect betting
against the lines created by Roxy's firm. Roxy himself had
(45:47):
moved on at this point, but he watched what Rufus
was doing and he admired it.
Speaker 7 (45:53):
He came to bootcat once I met him, even after
one line. She said, this guy's thinking at a higher
level than other people. And I learned a lot for
a moment, not because he was divulging your secrets, but
he was just thinking at a higher level.
Speaker 2 (46:10):
To get his edge.
Speaker 5 (46:11):
Roxy had used weather reports, Rufus was using the spin
rates on pitcher's curveballs.
Speaker 8 (46:17):
I try to drill things down to their root. Cause
it's kind of what you do when you write books.
You try to figure out the person, what makes them tick,
what's the story. I try to figure out why things
happen in a baseball game or a golf tournament, what
makes the player good. It's not just their score, Like
what are the things that are driving their score? Which
(46:38):
of those are repeatable, which aren't. And right now you
have all this computer vision and that type of data
available now, and with a lot of these sports. I mean,
we're now talking about bat speed, measuring bat speed and
looking at like aging curves for bat speed.
Speaker 5 (46:53):
The whole point of Rufus is that he never lets
emotion interfere with his process. But that doesn't mean he
doesn't feel emotion.
Speaker 2 (47:00):
He does. He feels it for his process.
Speaker 8 (47:04):
We're using bat speed to then predict exit velocity, and
we're using exit vie to then predict like waited on
base average and basically whether a ball will be hit
or not, and what kind of damage it'll be if
it is, and then you know, use that to predict wins.
Speaker 2 (47:20):
And how did it work?
Speaker 8 (47:21):
How did it work? It works? Well, we made one
hundred and twenty five thousand in the first month. I
don't know what our volume was overall, and I got
twenty percent of it, which was great because my yearly
salary was twenty five thousand.
Speaker 5 (47:36):
Rufus had become the card counter at the blackjack table,
only it was richer than that. He was generating new
insight about why things happened in sports. A blackjack dealer
knows where the card counter gets his edge the sports book.
He couldn't really tell where Rufus was getting his, which
made Rufus and what he was doing even more unsettling,
(47:57):
and did the M at any point say we're now
taking your bets. The M Casino was one of Rufus's
favorite sports books.
Speaker 8 (48:05):
Now they had their whole thing was we're going to
take all comers. We want to be we want a
lot of volume. We think we're better than people.
Speaker 5 (48:14):
Then comes the Supreme Court decision of twenty eighteen, twenty
three states soon legalized sports gambling. Rufus now has the
M Casino and a lot of others right in his pocket.
Speaker 10 (48:25):
Fan Duel and the PGA Tour have teams up. Now
you can get more action out of every stop on
the tour.
Speaker 5 (48:32):
And Rufus of course stands to make a killing. The
bigger the markets, the more he can bet, bet.
Speaker 10 (48:37):
The PGA Tour and make every moment more with Fan
Duel sports book.
Speaker 5 (48:43):
But as it turns out, that's not how it's going
to go down. This ecosystem is going to change in
ways Rufus didn't predict, and he began to sense it
in late twenty twenty.
Speaker 8 (48:55):
So I would drive up to New Hampshire to bet
at these kiosks initially and then once there was mobile betting.
I had an account on DraftKings.
Speaker 5 (49:07):
Rufus had a girlfriend in Masses. Massachusetts hadn't yet legalized
sports betting, so he needed to cross state lines to
use the betting app on his phone. The drive took
him like forty five minutes, but it was actually easier
than running all over in Vegas trying to get cash down.
He and his process were built for this new type
of casino. He could bet on golf basically all day long,
(49:29):
until one day he couldn't.
Speaker 8 (49:32):
One week, I lost thirty thousand dollars. I got a
phone call to tell me that they were cutting my
limits on golf.
Speaker 5 (49:39):
He'd lost thirty thousand dollars, and DraftKings stopped taking his
big bets. By the way, we've reached out to DraftKings,
and so far they have declined to talk with us. Anyway,
it was clear to Rufus back in twenty twenty that
this was definitely no longer his old sports gambling world.
Speaker 8 (49:56):
Because I had bet enough. It spurred them to actually
go in and look at the stuff I'd been betting
and how I'd been doing. Books are not limiting people
just because they win, They're limiting them because they think
they're going to win.
Speaker 5 (50:09):
Future Rufus used data to predict what athletes were going
to do. DraftKings was using data to predict what Rufus
would do. When they looked at the data, they saw
that after Rufus placed his bets, the odds nearly always
moved in his favor. These were the bets of someone
who knew things before the market knew them, and the
(50:29):
new bookies were not like the old bookies. They only
wanted to take certain kind of bets, Bets that were
more like the bet you make when you press the
buttons on a slot machine. Bets that if you made
them often enough, you were sure to lose, the sort
of bets a fan would make, the sort of bets
Rufus Peabody never made.
Speaker 8 (50:50):
Refusing a bet wasn't a thing. It never was a
thing here, huh. Like you if you got kicked out
of a casino, or if you couldn't get there, it
was because you did something wrong, like you violated the
sacred bookmaker better covenant.
Speaker 5 (51:05):
Being smarter than the market didn't used to get you
kicked out of the market, But the market's changed. Sports
gambling is still a hard way to make an easy living.
But now it feels even less fair. Now it feels
like someone should step in and help.
Speaker 2 (51:21):
Rufus okay cool.
Speaker 11 (51:24):
So I downloaded FanDuel, DraftKings, Fliff Fanatics, Caesar's Bet, MGM,
and PayPal. So now everyone has all of my information
and my social security number.
Speaker 8 (51:34):
Oh, your social security number.
Speaker 11 (51:35):
They all asked for it.
Speaker 5 (51:36):
Yes, these new sports gambling apps, they all ask for it,
and so we're going to give it to them in
our next episode. Against the Rules is written and hosted
by me Michael Lewis and produced by Lydia gene Kott,
(51:57):
Catherine Gerardeau, and Ariela Markowitz. Our editor is Julia Barton.
Our engineer is Jake Gorski.
Speaker 2 (52:04):
Our music was composed by Matthias Bossi and John Evans
of stell Wagon Sepinett.
Speaker 5 (52:09):
Our fact checker is Lauren Vespoli. Against the Rules is
a production of Pushkin Industries. To find more Pushkin podcasts,
listen on the iHeartRadio app, Apple Podcasts, or wherever you
listen to podcasts. And if you'd like to listen to
ad free and learn about other exclusive offerings, don't forget
to sign up for a Pushkin Plus subscription at pushkin
(52:32):
dot fm, slash plus, or on our Apple Show page.
Pushkin. Hello, Hello, Revisionist History listeners. Malcolm here, I'm stopping
by near the end of my book tour because I
have a special guest in the house, Michael Lewis. You
may know him as the author of Moneyball, The Big Short,
Liar's Poker, and most recently Going Infinite, which just came
out in paperback, by the way, or you may know
(00:37):
him by his alter identity as a Pushkin SuperHost. Michael's
show Against the Rules is now in the middle of
a fantastic new season. It's all about the insane rise
and the consequences of sports betting in the US. You're
going to get a chance to hear one of the
latest episodes in just a moment, But first I thought
we would chat with the man himself. Michael Lewis. Welcome
(01:01):
to Revisionist History.
Speaker 2 (01:02):
It's been too long. Yes, I haven't seen you in ages.
Speaker 1 (01:06):
I know, I know we need to write that wrong.
So you've done this show about uh, sports betting, and
this comes after what your first droom was about referees
and then coaching right experts.
Speaker 2 (01:20):
We sort of set them off into the sports arena
and this is yeah, you know, we frame this as
fans and it's sort of like the fracking of the
fan how the sports leagues have decided to squeeze ever
more juice out of the fan base. And and and
you know, six years ago, the Supreme Court uh uh
(01:40):
repealed a federal ban on sports gambling. And at that time,
the NFL, the NBA, Major League Baseball, the nc DOUABA,
we're all saying sports betting is evil. You know that,
it's just like it will it will destroy the integrity
of sports, et cetera, et cetera. And there's long been
this taboo in the sports world about gambling. I mean,
not even gambling on your own sport. If you've caught
(02:02):
sports gambling, people have been tossed out of sports and
they flipped on a dime. And and essentially when into
business with the sports gambling industry, and particularly Fan Duel
and DraftKings, the two sort of big companies at the
center of this world. And there's this kind of sports
gambling industrial complex that has arisen in the last few years.
(02:24):
And it's really interesting. It's like, so the past seasons,
I love doing the podcast. You are responsible for me
doing the podcast, So I mean, you kind of talked
me into this and I love that. I love the
way it works kind of different muscles, and when you're
writing these scripts, it's a different thing than writing the books,
and I like it for all kinds of reasons. But
(02:44):
up to up till now, we've taken themes. This season
is whatever seven episodes, and it's it's it's variations on
a theme, but it isn't one story. And in this case,
this could be a book. It's like almost plotted like
a book, and it's it's about this vast social experiment
that's going on that's largely invisible because the consequences are
(03:05):
sort of you know, you don't see it the way
you see on an opioid addiction or alcohol addition. You're
seeing this thing that historically regarded as a vice, understood
to be kind of risky behavior, being foisted upon the
American people, especially young American males, in a way that
would have been unthinkable a decade ago. And so like
(03:26):
how this is happening, how the industry works, with the
economics of the industry, are where this is going and
the effects it's having on We're talking to everybody from
athletes to high school students who are creating sports gambling
rings in their high school and like, ultimately, how to
defend yourself because the industry's coming for you or your children.
(03:47):
It's sort of finally calibrated to exploit all of your
mental weaknesses, finally calibrated to get you do the stupidest
things you could possibly do in a casino.
Speaker 1 (04:01):
I'm just curious about how you settled on this particular topic.
When did you when was sports gambling did you start
buzzing around your head?
Speaker 2 (04:12):
Well, completely honest, it was buzzing around my head because
you can't avoid it. Right, Even in California, sports gainly
is still illegal. It's legal in thirty nine states. California's
not one of them. Soon will be one of them probably.
But even in spite of that, living in California, four
years ago, I started getting bombarded with ads by from
Draft Kings and vendor telling me to bet on sports.
(04:34):
And the commentary around sports had completely changed. So it
caught my attention then. But it was our brilliant producers
who came and said, you know, what do you think
about this as a subject, and it instily went yes, yes,
like yes that it just hasn't quite been done. Sometimes
the best stories are things that no one ever thought about.
(04:54):
Some of the best stories is just like what's under
your nose that no one's really noticed and sight hiding
in plain sight. The more we dug into it that
the more shocking it was. Just how predatory it is,
how the as a business fan, Duel and DraftKings the
two companies at the center of the of the industry.
They're they're framed in the public mind it's always just fun,
(05:18):
it's gaming or whatever. It's maybe like a casino. It's
not at all like a casino. These are businesses that
really haven't ever existed before. It's casinos with unbelievable amounts
of data about the gamblers, an incredible ability to nudge
the gamblers into ever and ever stupid things, and it's
in your pocket. It was a combination of that that
(05:40):
kind of dragged me into it, and it was also
just like the whole sports gambling is as an activity,
it's more interesting to me than casino gambling or even blackjack.
We spent the time with sports gamblers, pro the very
best sports gamblers who beat the house, and they're doing
(06:01):
stuff very like what the Oakland A's front office did
back in the late nineties and early two thousands where
they were. They're doing a fresh analysis of this sports
to glean fresh insights that the market, you know, is
sort of oblivious to so that they get an edge.
And that's interesting to me. It's like, at the same
(06:22):
time the corporate side of it is kind of dark
and gross, the gambling side of it is kind of
fun and interesting for the people who know what they're doing.
Speaker 1 (06:32):
I've been struck by how much the sports gambling has
has infected our world podcasting. I mean, sports podcasts have
turned into sports gambling podcasts.
Speaker 2 (06:43):
You got it.
Speaker 1 (06:43):
I mean I've listened. I spent many, many hours of
my life listening to Bill Simmons. But it's like all
he mentions FanDuel in every second paragraph.
Speaker 2 (06:53):
They've rained so much money on media that there's just
not much blowback. There's a huge financial disincentive to doing
the story. Like first question your business people ask me
is can we take fan duel and draftings money? And
very much not in your spirit? I said no, Now, I.
Speaker 3 (07:14):
Know you very much not in spirit because you were
so because you are so good at plowing right through
the ordinary ethical objections in getting that and getting to
the cash.
Speaker 2 (07:27):
It's so true.
Speaker 1 (07:28):
It's so true, isn't true? You know, we got mouths
to feed to hear at Bush kind you do.
Speaker 2 (07:35):
You're a responsible parent and you're generating the income for
the family. But I'm kind of off to I'm just
I'm winging that off to the side of your operation,
and I just said, no, it's pretty clear that we've
got to be completely free of the taint of their money.
These two companies in the last five years have spent
something like two billion dollars each on marketing, and a
(07:58):
lot it ends up in the pockets of sports work.
Speaker 1 (08:00):
Yes, brillion two billion, Yes, that's like General Motors level.
Speaker 2 (08:05):
They We had someone who I think is the trust
is or us tell us that they're the biggest advertisers
in America. They're bigger than the beer They're bigger than
the car companies. And that isn't actually surprising anybody who
watches sports. It's like every other ad is an afrogambling
and and and beyond beyond that, Like the announcers, not
(08:28):
just Bill Simmons, the announcers during the games are framing
all their commentary around their bets, and their bets that
they make are are encouraging or sort of suggesting to
the audience they might make. Two are are precisely the
stupidest bets you can make, and the bets that maximize
the profits of the companies Like it's it's it's long
(08:53):
shot bets, it's parlay bets. Uh yes, and when it's
taking advantage of we haven't quite got to this the last.
I don't want to burn the season on your podcast.
But the human mind makes all kinds of mistake when
it's placed in conditions of uncertainty, and one routine mistake
it makes is that when it's given long odds, it
(09:14):
starts to cease to make distinctions. So if someone offers
you forty to one odds on some parlay bet or
twenty to one odds, you think, wow, I get twenty
dollars for everyone I put up, and you don't stop
and to realize that actually the true odds or something
like one hundred to one.
Speaker 1 (09:29):
You mean, because you're betting on a series of long
shots and you're feeling multiply out. Yes, the odds well
don't get right.
Speaker 2 (09:35):
Yes, people don't do exponentials very well, and the mind
is sloppy when when you're starting to present people with
long shot bets. That's why people play the lottery. They've
been kind of grooming the American gambler to move away
from oh, just betting on the taking the chiefs and
giving up the points to these bets where the house
(09:58):
take is multiples of what a casino takes for its
for casino games. As a result, the two companies that
they're both listed companies, DraftKings has listed DraftKings, and FanDuel
was owned by what's holy companies called flutter All of
Wall Street basically got them wrong the minute they ran
(10:19):
up as companies. The stocks ran up in the wake
of the legalization of sports gaming, and everybody came up
and said, oh, they're inflated short them, and they crashed temporarily.
It's like the Land of twenty twenty one because everyone's
sort of looking at them as standard casino businesses, and
they knew what the take was for standard casinos, and
they could kind of guess with the handle was going
(10:39):
to be, with the betting volume was going to be,
and they did the casino Mathew, they said, this doesn't
justify the stock price. In fact, the take is multiples
of what casinos and is growing the margins, and a
way to think about it is it's sort of like
exploiting their ability to get people to do dumber and
dumber things. And I think, I think it's going to happen.
(11:02):
Our podcast is going to be a part of this.
The way to address this is to make it clear
that anybody who is a VIP of fan Duel or
DraftKings or one of these fourths gaming apps, or anybody
who even kind of does it a lot, is like
someone who's who's almost certainly making dumb bets because they
(11:26):
are on the other side of this. The gaming apps
are really good at figuring out who's a smart better
and kicking them out. If you know what you're doing,
if you're the equivalent of the card counter, if you
actually figured out something about football that nobody has realized before,
and you've got a systematic edge, very very quickly, they
figure it out and they get rid of you.
Speaker 1 (11:47):
So you know what they could do that I never
understood this. They you not allowed if I walk into
a store, they can't kick me out. You know, there's
isn't it a whole kind.
Speaker 2 (11:58):
Of you would think you would think their analogy that
they want to draw it is. It's like the card
counter coming into the casino. We can throw out that
we don't we don't have to service the card counter
at the blackjack table. I don't want to rule the
whole show. But our producer took an enormous pile of
cash with smart betting ideas, and it took her moments
to get chucked out. Poor lidiagen Cott has been banned
(12:19):
by every sports betting or so. Yeah, because and the way,
it's a very simple way how they identify that you
are smart. If the line moves in your favor after
you've made the bet systematically you knew something is basically
were saying the odds, the odds will drift to the
(12:41):
true odds, and if you were ahead of the market,
they don't want you. And so, but the part of
part is that, and I send this to an audience
of money managers not that long ago. They're asking me like,
do you have any tips to how to identify a
good money manager? And I said, well, there's a new
one now available. Before you let someone manage your money,
you got to ask them if they if they have
accouncil Fando and DraftKings and their sports betters and like,
(13:03):
what's their relationship with those enterprises And if they say, man,
I'm like a VIP or I do it all the time,
or I don't give them your money to invest, like
they are identifying people who should not be professional investors.
Speaker 1 (13:18):
Michael, can you describe the the Tell me a little
bit about the episode we're about to hear.
Speaker 2 (13:22):
So this is the episode where we're the main character
is Rufus Peabody, who is one of America's great sports betters.
Speaker 1 (13:29):
And by the way, did you make up that name?
Speaker 2 (13:33):
No? No, I don't.
Speaker 1 (13:34):
It's like that is like if I had to imagine
the name that Michael Lewis would make up for his
lead character, it would be Rufus Peabody.
Speaker 2 (13:40):
I told Rufus Peabody when I met him that if
my name was Rufus Peabody and Michael Lewis, I'd be
worth three times when I'm worth that It's are you
kidding me? Yeah? It would be totally. It's wasted on
a sports better It should it should be. It should
be an author. Rufus was in he's still young Yale
class of two thousand and nine or whatever. He is
(14:02):
the leading kind of smart edge of gambling, but he
was present before legalization. He was present in the markets
back when Vegas was the market. We traveled with him
to the point where his bets are no longer accepted.
What interested me about him and his mentor is also
a big character in the in the episode Roxy Roxborough
(14:25):
a legend in the old Vegas spoiling I know, I know,
I know. And what your love about Roxy is?
Speaker 1 (14:29):
He's Canadian, He's Canelo Michael, did we know we have
two Improbably we now have a parlay of improbably perfect names.
Speaker 2 (14:39):
You're gonna love listening to them. They're wonderful, they have
a lot to say. They're very smart people. I just thought,
what is the most interesting point of view on this market?
And it was obviously it was the point of view
of the sharp, the edge player, the person who's beaten
the market. It's like, who's the most interesting person to
talk to about a casino? Either the person actually running
the casino or is the card counter, or the person
(15:01):
who's figured out how the slots are rigged, or who's
seen that the roulette wheel is slightly off. It's someone
who is looking at the market from a superior kind
of vantage point. So it's walking us into this new
market through the eyes of an edge player.
Speaker 1 (15:18):
You have the one thing that has distinguished you throughout
your career is I feel like you. No one has
his finger closer to the pulse than you. You've done
it repeatedly, and it sounds like you've done it again.
Speaker 2 (15:30):
It's a gas of the season.
Speaker 1 (15:32):
Michael Lewis is host of Against the Rules right here
at Pushkin. Here's his latest episode, A Hard Way to
Make an Easy Living. Give it a listen and head
over to Against the Rules and subscribe to hear more.
Thank you, Michael, Thank you, Malcolm.
Speaker 4 (15:48):
Oh yay, oh yay, oh yay.
Speaker 5 (15:52):
May twenty eighteen, the United States Supreme Court strikes down
the federal law that has effectively banned sports gambling in
nearly every state. What happens next happens faster than anyone imagined.
It happens in so many places at once that it's
basically impossible to follow it all in real time.
Speaker 6 (16:13):
I ended up picking Mississippi and Kansas as the two
states that I really decided to focus on and merely
was just there, becoming a part of the furniture as
the lobbyists were working their magic.
Speaker 5 (16:25):
That's Eric Lipton, New York Times reporter, who with his
colleague Ken Vogel, just sat and watched as lobbyists created
the conditions for a new industry to emerge overnight sports.
Speaker 6 (16:37):
Gambling and buttonholing various legislators, getting them to introduce language
that they wanted into the gambling bills and changing the
tax rates, getting provisions included that would allow them to
entice betters with free bets that they wouldn't have to
pay taxes on.
Speaker 5 (16:57):
Derek knows that state capitols or where the action is.
He started his career covering state governments for local papers.
When he returns to his old beat, he sees right
away how.
Speaker 2 (17:07):
Much lonelier state capitals are because his old job, state
House reporter, now barely exists.
Speaker 6 (17:14):
There were times when I was in the state capitol
where I was pretty much the only reporter there while
they were debating sports betting, and I would stay until
they wrapped up two in the morning, as the session
was closing and they were trying to get the bill
passed and there were no other reporters present.
Speaker 2 (17:31):
It's like, if you do something at the federal level,
there's going to be a lot of people watching. Still
a lot of reporters who will cover national politics. But
if you push things down to the states, you're more
likely to just operate in the shadows.
Speaker 6 (17:46):
Yeah, and I think the lobbyists know that. And it's
actually a lot easier to get things done in state capitals.
You can build a national strategy through a collection of states.
Speaker 5 (17:57):
Eric and his colleague at the Times wrote about Kansas
back in twenty twenty two, but he could have written
the same piece almost anywhere. In the United States. Thirty
eight states plus Washington, d c.
Speaker 2 (18:08):
Were rushed to legalize sports betting and rolling over for
the new sports bookies who were pushing to minimize just
how much of a cut the states took.
Speaker 5 (18:18):
They cut the tax rate almost in a half.
Speaker 6 (18:21):
They gave them the ability to give out free bets
as a promotion to sign people up and not have
to pay taxes on that. So essentially the state becomes
a lost leader promoter of getting people into gambling by
giving them tax free promotions.
Speaker 2 (18:40):
And without a whole lot of pushback from anyone.
Speaker 6 (18:44):
Oftentimes the legislators weren't even aware that they were passing
these things, or they were. It was sent, it was
given to them in the last minute, just before they
were asked to vote on it, and they weren't even
fully informed as to what they were voting on.
Speaker 5 (18:57):
Overnight, the States have gone from the bookies cop to
the bookies' partner. So of all the pro sports leagues,
the NFL.
Speaker 2 (19:04):
The NBA, and Major League Baseball, the entire sports industrial
complex now has a stake in the revenues that flow
into sports gambling companies like DraftKings and fan Duel. There's
now a vast new machine with one clear purpose to
maximize those revenues by maximizing the number of bets that
Americans make on sports. A sports sequinot zus coming for
(19:29):
sports one day one to contest that stream to sports
econts frequently contes.
Speaker 5 (19:38):
It's as if when prohibition ended, there were these two
massive liquor companies sitting there with databases on individual Americans
and their tastes for alcohol, and the government ordered them
to go wave a glass of whiskey under the nose
of every alcoholic to persuade as many as possible.
Speaker 2 (19:53):
To start drinking again. Of course, there are some restraints,
some rules. No state has allowed small children to gamble
on sports.
Speaker 5 (20:03):
Eight have declined to allow people to gamble on their phones,
and the taxes that the new industry pays varies a
lot from state to state. New York takes fifty one
percent of all sportsbook revenues. Indiana takes only nine and
a half percent. In twenty seventeen, the year before the
Supreme Court struck down a federal log in sports betting,
(20:24):
legal sports bookies in the United States generated roughly three
hundred million dollars in revenues. In twenty twenty three, they
took in eleven billion. In twenty seventeen, Americans made roughly
five billion dollars in legal sports bets. Last year, they
laid down more than one hundred and twenty billion. The
(20:46):
numbers are crazy, the consequences are even more so, and
we'll be exploring them for the rest of the season.
Speaker 2 (20:52):
Take your shot at more than two hundred and seventy
thousand dollars in payouts. That's a lot of money. I'm
Michael Lewis, and this is Against the Rules, a show
where we look at specific roles in American life and
how they're changing. The fans.
Speaker 5 (21:11):
Roles changing because a powerful new machine has sprung up
to encourage the fan to gamble on sports. Sports gambling
has never been just a simple and straightforward marketplace. It's
more like a jungle, and DraftKings and FanDuel are like
this invasive species that's been dropped into it by accident.
They've disrupted the food chain and overrun the habitat because
(21:33):
they feed so efficiently on fan emotion, and fan emotion
is the jungle's greatest food source. But they're also vulnerable
to a creature that feeds on them. Let's recall for
(21:58):
a minute what sports gambling once was in America by
listening to just a snippet of a press conference held
back in nineteen sixty one by then Attorney General Robert F.
Speaker 2 (22:07):
Kennedy.
Speaker 4 (22:08):
The record has since the passage of the legislation, and
that's big time gambling by the big time operators has
been materially decreased since the passage of the legislation.
Speaker 2 (22:20):
Kennedy celebrating a new law called the Federal Wire Act.
The point of the law was to cut the legs
from under the mafia by shutting down it's sports gambling operations.
By giving the federal government the power to arrest and
prosecute anyone who booked a sports bet over any phone
or telegraph wire that crossed state lines, and.
Speaker 4 (22:40):
In fact, head of the Royal Mounted Police in Canada
said in the speech last week that Canada will now
have to pass legislation and take new steps because many
of the big time gangsters and hudlums of the United
States are now moving to Canada because of the drive
that has been made against them here in this country.
Speaker 5 (23:00):
When you think of Canada, this isn't the first thing
that pops into your head. Happy refuge for big time
gangsters and sports gamblers. But I don't know a different era.
Speaker 7 (23:10):
I always had an interest in sports. My father coached
me in swimming and coached me in tennis. But my
world changed when I found out you could gamble on it.
I became no longer a fan. I became interested in gambling.
Speaker 5 (23:25):
That's Michael Roxborough. Everyone just calls him Roxy now. He
grew up in the nineteen fifties in Canada in a nice,
upper middle class family. He's now zooming with me from
a home in rural Thailand, with the ac blasting in
the background and a straw fedora on his head, and
the emotional feel of a man in a Witness Protection Program,
(23:46):
a placeless man, but he really did grow up in Canada.
When Roxy was a kid, there was a sports gambling market.
It was smaller and more constrained than it is now,
but very real, and its center was the pool halls
of Vancouver, British Columbia.
Speaker 7 (24:01):
If you envision in the movie to Hustler, if you
take a look at the pool rooms of that day,
those were the pomo were the full rooms of my day.
It was just full of wannabees, desperados, hustlers, drug dealers, bookmakers,
everybody that was operating outside the law.
Speaker 2 (24:25):
When you got the bug. What's your parents think about it?
Not too happy.
Speaker 7 (24:31):
My father was a Harvard MBA and my mother was
a high school valedictorian, and I think they had higher aspirations.
Speaker 5 (24:41):
Roxy's dad wanted him to go to Dartmouth and he
got in, but he went to American University in DC
because he sensed the action was better there.
Speaker 1 (24:50):
I ran a blackjack game in the.
Speaker 7 (24:53):
American University dorm at night, and that's what's the source
of most of my profits.
Speaker 2 (24:58):
But then I got kicked out for what for ready
that blackjack game. Roxy never did finish college.
Speaker 5 (25:07):
Instead, he went back to Canada, in and out of
boring jobs, but never stopped gambling.
Speaker 2 (25:13):
And then he finally caught a big break by reading
a book.
Speaker 7 (25:16):
I was in a Reno airport flying back to Vancouver,
and I picked up a copy of Ed Thorpe's Beat
the Dealer.
Speaker 5 (25:25):
Beat the Dealer was the first book to show how
a gambler inside a casino could have a systematic edge
by counting cards in blackjack. The other casino games, like
slots and roulette, were more or less perfectly rigged against
the gambler. Anyone who played them for long enough was
sure to lose. Blackjack was an exception. Played blacksjack for
(25:46):
long enough, at least the way Ed Thorpe taught people
to play, and you were sure to win Betthorpe published
his book in nineteen sixty six. A few years later
Roxy read it and it gave him the idea that
changed his life.
Speaker 7 (25:59):
I decided that if I'm going to look at sports betting,
I need to look at it statistically driven, data driven
not by not visual or instinct or just watching a
lot of games.
Speaker 5 (26:13):
Outcomes in sports were obviously far less regular and predictable
than outcomes inside slot machines or even at blackjack tables.
But that didn't mean you couldn't learn stuff about sports
that would allow you to make better predictions. Not perfect predictions,
but better predictions than everyone else betting on games. In
the nineteen seventies, Roxy had baseball in mind. The guys
(26:34):
who booked baseball legally in Nevada and illegally everywhere else
AREFRED gamblers. The chance to bet on not just who
would win the game, but how many runs both teams
would score. Roxy had an insight that seems obvious now.
The number of runs scored in any baseball game depended
on factors like the weather at game time and the
size of the fields. San Diego's was a good example.
Speaker 7 (26:58):
You just could not hit the ball out of there,
And then the Padres went and spent like an outrageous
contract to sign a guy like Oscar Gamble. All he
had is hit fly balls, and that park was a
place where flyballs went to die. So you've soon found
out that general managers really didn't know anything about their
own ballparks either.
Speaker 2 (27:17):
The idea that the people who run sports teams don't
know what they're doing has probably never been a new idea.
Speaker 5 (27:23):
Fans have always thought that they know better. What was
new is that someone in the stands was actually figuring
something out the effects of the wind and the humidity
and the barometric pressure on a ball that was flying
through the air.
Speaker 7 (27:36):
We started to start getting weather reports from all the cities,
the parts out in which ones helped scoring or hindred scoring.
Speaker 2 (27:43):
And dimensions right, I mean just the length of the
left field fence.
Speaker 7 (27:47):
Dimensions were important, and we found out a couple of
the ballpark dimensional drawings were wrong. They had the north
pole raw well pointed north. Because we went out and
did to ourselves.
Speaker 5 (28:03):
Roxy moves to Vegas full time in nineteen seventy five
to bet on sports, and just by taking into account
the weather and the size of ballparks, he's able to
make a killing while trying to avoid the people who
know a thing or two about actual killing. Where the
Nevada legal bookmakers detectively run by the mob.
Speaker 7 (28:22):
They'd have had a hand in till about right well,
aged seven.
Speaker 2 (28:28):
Yeah, I just wonder in that environment was it dangerous
to win too much now?
Speaker 7 (28:34):
Because actually what they would do is they could find somebody.
Speaker 1 (28:37):
Else who could take your bet, and they can move.
Speaker 7 (28:40):
It for more money someplace else in the country.
Speaker 5 (28:45):
The old sports gambling market inside the United States was shady,
but it had its unwritten rules, and one was that
they always took your bets if you bet a lot.
They eventually moved the lines. These betting lines were all
set in Vegas for a very long stretch. They were
actually set in a single Vegas casino, the Stardust. The
(29:07):
bookie at the Stardust set the odds and everyone else
just followed his lead. There was a bank of payphones
outside the Stardusts that were said to be the most
profitable in the country for the phone company because sports
gamblers used them to relay the odds to the illegal
bookies and betters across the country.
Speaker 7 (29:24):
Communications back then it was just with a phone call.
That was the only communications there were.
Speaker 5 (29:32):
In the late nineteen seventies, the Nevada Gaming Control Board
tossed the mob out of Vegas and out of sports gambling,
and pretty soon Roxy became old news. By the early
nineteen eighties, everyone knew that the weather and the size
of ballparks had big effects on baseball scores, and Roxy
never found another systematic edge, and his life became a
(29:52):
bit of a mess. He'd been arrested for violating rfk's
Wire Act, he'd taken crazy risks as an illegal book maker,
and he'd run through two marriages.
Speaker 2 (30:02):
Is a gambling business hard out of relationships, charity why?
Speaker 7 (30:07):
It just sort of takes over your mood and your personality.
I don't know anybody who's ever been in gambling thought
they were a better person for it.
Speaker 2 (30:17):
It's interesting because when you think about why a person
would drift into gambling in the first place, it would
be because you think it might be an easy way
to make money, Yes, and it ends up being a
harder way to make money.
Speaker 8 (30:27):
It does what did they say?
Speaker 2 (30:29):
It's a hard way to make an easy living.
Speaker 5 (30:33):
People said that Roxy now knew it. So in nineteen
eighty two, he quits gambling. He creates a company called
Las Vegas Sports Consultants. This new company will effectively replace
the Stardust Casino in setting the odds for all major
sports contests. Roxy's just better at it, and pretty soon
(30:53):
he's selling his odds to all the sports bookies, including
the Stardust. This makes sense to everybody in Las Vegas.
Hiring Roxy to set the odds in sports is like
hiring the first card counter to guard the blackjack tables.
Speaker 7 (31:09):
So I said, you know, I'm going to try this
for a couple of years, but I'm not sure if
it's going to work, because it wasn't given that every
hotel was going to have a sportsbook. Was there rather
limited business. But that was one of my better decisions
because it turned out to be a massive business.
Speaker 5 (31:26):
Sports gambling isn't exactly a financial market, but it rhymes
with financial markets. What happens on Wall Street, somehow eventually
also happens in sports gambling. And Wall Street's about to
undergo dramatic change. First computers and then the Internet will
allow the markets to become a lot more complicated, and
the BET's a lot more complex. The world's about to
(31:47):
speed up, and a new kind of person with a
different kind of education is going to enter it. Old
school traders with high school degrees and lots of body
hair and names like Vinnie and Donnie are about to
be replaced by hairless PhDs from MIT with computer models
who as kids thought they grow up to be professors,
not traders. On Wall Street in the late nineteen eighties,
(32:09):
smart old school guys served as a kind of bridge
between the two cultures in sports gambling. Roxy was that bridge,
but it took a while for anyone to cross it.
Speaker 2 (32:37):
We're here to see Rufus pebo. We're in the right place.
We're still in Vegas, but far from the strip. We're
not gonna be a wrong We're just gonna make a
bunch of sports bets. He runs into legal gamblin operation.
I've never even knew that you want any action.
Speaker 5 (33:02):
The real action is no longer on the strip. The
real action is basically invisible. But here on the seventeenth floor,
with a sweeping view of the distant casinos, Rufus Peabody
lives and works.
Speaker 2 (33:16):
Rufus We're here.
Speaker 4 (33:18):
We're here.
Speaker 2 (33:19):
Rufus Peabody is who crossed Roxy's bridge.
Speaker 8 (33:22):
I never was a better as a kid. I didn't
know anything about sports betting.
Speaker 2 (33:26):
You can feel a little twinge of desire none.
Speaker 8 (33:30):
Most people that got their start, they started losing and
they learned how to win. But I was never better.
I never grew up betting like besides NCAA tournament pools,
I was always good at those, But for me, it
was a game and I'm not I'm a risk taker.
But I'm not a gambler by nature.
Speaker 2 (33:47):
Rufus grew up outside of Washington, DC, always loved sports,
thought he might like to be a sports journalist.
Speaker 5 (33:53):
He still reminds me a bit of a journalist. He's
a watcher, a person whose eyes move more than his mouth.
But even when he was a kid, his mind took
him places that journalism usually doesn't.
Speaker 8 (34:05):
So so it was this team one eighty two to
sixty four, But why did they win? Basically I kind
of wanted to report on the why it happened rather
than just this guy got eighteen points and twelve rebounds
and this team one right. I kind of wanted the
story of why.
Speaker 2 (34:20):
He wanted explanation.
Speaker 8 (34:21):
I want explanations.
Speaker 5 (34:23):
In two thousand and four, Rufus graduated from high school
and went to Yale. He was still obsessed with figuring
out why. He studied statistics and built models that predicted
the performance of athletes and the outcomes of sporting events,
not because he wanted to gamble on them, just because
it was cool to figure out stuff that even people
who run sports teams don't know.
Speaker 2 (34:45):
He wanders around Yale looking for someone to teach him more.
Speaker 9 (34:49):
Rufus wants to do a thesis on, if I remember correctly,
behavioral biases and the baseball betting market.
Speaker 5 (34:57):
He's who rufe has found. His name is Cade Massey.
He's a professor of organizational behavior. Was it interesting, Oh.
Speaker 9 (35:06):
Yeah, absolutely, I mean what's not interesting about trying to
find psychological mistakes that people make with like, you know,
hundreds of thousands of observations of real money being.
Speaker 2 (35:16):
Met, and he found mistakes.
Speaker 9 (35:18):
I mean, he was finding profitable strategies right off the bet.
Speaker 5 (35:22):
Rufus just kept asking questions about the behavior of sports gamblers.
He still wasn't placing bets himself. He was just working
with this professor to build a model to predict college
football scores. They pitched it to the Wall Street Journal,
and the journal agreed to publish their college football picks
of the week. It was just how they would bet,
were they to bet on college football.
Speaker 9 (35:44):
And he would then post our picks of the week.
We're just posting them because we were working with the
Wall Street Journal, So post him on Tuesday or Wednesday,
and then he would watch as the prices started moving
on his screen.
Speaker 2 (35:55):
Oh my god.
Speaker 5 (35:56):
Which is to say the sports gambling market would see
their picks and move in response because the market figured
out that their picks were that good.
Speaker 9 (36:05):
Within a year or so, we quit posting college picks
because it was getting too much in the way of
what he was trying to do, because he wanted to
bet it himself, because he wanted to bet it, and
then if they're so good you would bet them, you
wouldn't sell them, right. I mean, it was bound to
eventually occur to Rufus that if he could predict the
scores of college football games, then he should just bet
on them himself. But it's funny how he got there.
Speaker 5 (36:28):
In his head, Roxy Roxboro had started as a gambler
who then set out to find some kind of edge
to bet. Rufus Peabody started by finding these edges and
kind of stumbled into gambling and then found Roxy. During
Rufus's junior year at Yale, he read an article in
(36:49):
ESPN about Roxy's sports analytics company, Las Vegas Sports Consultants.
Roxy's company wasn't used to getting resumes from Yale juniors,
but they gave him a summary internship anyway and showed
him their world from their offices right next to the
Las Vegas Airport.
Speaker 8 (37:07):
They would bet on what plane was most likely to
land next, right, And this is like sort of pre
internet days or pre like being able to see flight
plans and stuff like that, and so it was like, okay,
American Airlines is like six to one, like you know,
Southwest is two to one whatever. What people didn't realize, though,
was Roxy actually had a contact in the control tower,
(37:29):
and so Roxy won. He made money off of these bets,
but he didn't make enough to draw suspicion. That was
the key. But he would occasionally hit the japan Air
at three hundred to one, right or whatever.
Speaker 5 (37:49):
Roxy screw would bet on everything. Rufus wasn't like that.
He didn't even think of what he wanted to do
as gambling, but he did want to understand this other world,
this world where people bet on anything that moved.
Speaker 8 (38:04):
They shared the building with American Wagering, so with LeRoy's,
which was a sort of third party sportsbook operator. Le
Rois didn't have a casino, but they were in casinos
like Hooters or Terrible Herbst. Right, Hooters has a casino, Yeah,
Hooters casino. It's on the strip. It's right, tropic cannot
(38:25):
basically right, Yeah, So I met, I meet this the
head trader there right, and I have all these questions.
A book maker can make more money, Let's say, if
they know the public's bias, they can make more money
setting a line somewhere between the true price and the
price of the public thinks that's the way to maximize.
Speaker 2 (38:46):
There's no reason you should understand what rufe has just
said there, but let me try to explain it, because
it tells you a bit about how this old school
sports gambling world works. The line is just the odds
or the points spread.
Speaker 5 (38:58):
The true price is what the odds would be if
you somehow knew every possible relevant bit of information about
some upcoming game. Of course, no one ever knew everything,
so there is in reality, never a perfect true price,
just some number that the smartest and best informed betters
agree on. Say they agreed that the Packers should be
(39:20):
eight point favorites over the Cowboys, but most of the
gamblers are Cowboys fans, and the Cowboys fans think the
Cowboys are only three point underdogs. Rufus was asking the
bookie if he thought he could entice the public to
make more stupid bets if he set the line not
at the true price of eight points, but it's say
five points because Cowboys fans will think the Cowboys are
(39:44):
better than they actually are and bet even more.
Speaker 8 (39:48):
I said, theoretically, you can make more money setting a
line somewhere between the true price and where the public
thinks the price is. And he says, theory, theory, and theory.
A dick don't fit in an asshole. And this guy, yeah,
he was probably three hundred pounds five to eight, smoking
(40:12):
a cigar in a dark room, looking at a bunch
of numbers on a screen.
Speaker 2 (40:15):
In just a flash, there you've changed our podcast rating.
Speaker 8 (40:19):
Sorry.
Speaker 5 (40:30):
Rufus Peabody recently of Yale is no one's idea of
a hustler. He's too sweet natured and even tempered, and
way too open to telling other people about the stuff
he's learned. He finishes up at Yale and moves back
to Vegas to work full time at Las Vegas Sports Consultants.
But now Rufus thinks he might have an edge, and
(40:51):
people in and around Roxy's firm think that maybe he's right.
Speaker 8 (40:55):
The Super Bowl was my first big break. Super Bowl
two thousand and nine. Okay, I had made a friend
with a professional sports better guy that bet baseball, and
he loaned me ten thousand dollars to bet. I had
my own ten to twelve thousand dollars. My boss, Kenny,
unbeknownst to everybody else, invested forty thousand dollars in me
(41:19):
and gave me a twenty percent free.
Speaker 2 (41:21):
Roll on it, meaning that if it wins, you take
twenty percent of nance, but you've suffered another losses correct.
Speaker 8 (41:29):
And so I ended up with close to sixty thousand
dollars bet on the Super Bowl, and so I basically
was pretty leveraged. Yeah, and I remember being like, this
game doesn't work out, you know, I gave it a shot.
Speaker 2 (41:41):
All right, And what is causing you to have such
conviction about a game?
Speaker 9 (41:45):
Oh?
Speaker 8 (41:45):
Nothing. It wasn't conviction about the game. It was betting
the props.
Speaker 5 (41:49):
The props short for proposition bets not on the whole game,
but pieces of the game. But the standard story, which
is almost certainly not true, was that the prop bet
was invented for the nineteen eighty six Super Bowl between
the Chicago Bears and the New England Patriots. The Bears
were such heavy favorites that Vegas had trouble jinting up
in interest in the game, so a Vegas bookie created
(42:12):
a side bet the odds that a Bear's defensive tackle
named William the Refrigerator Perry would score a touchdown. It
was a long shot bet, and the betting public loved it,
and Vegas bookies lost a fortune when the fridge did
indeed score. But back to Rufus and forward to the
Super Bowl of two thousand and nine, the Pittsburgh Steelers
(42:35):
played the Arizona Cardinals. Rufus wasn't betting the whole game,
but pieces of the game. His Pro Football model spits
out odds for all this weird stuff that Vegas bookies
are now offering bets on the odds that Steeler's running
back Gary Russell will score the game's first touchdown. For example,
Rufus has vast troves of data to mine. He can
(42:57):
do stuff with it that Roxy would never imagine. He
could do stuff that even the people who run the
Pittsburgh Steelers would never imagine doing.
Speaker 2 (43:06):
I mean, even Gary.
Speaker 5 (43:07):
Russell likely has no idea that you can calculate the
odds that he will score the game's first touchdown.
Speaker 2 (43:13):
But Rufus can. His model puts those odds much higher
than the bookies' odds. So in Rufus's mind, it's a
great bet. He makes dozens of similar bets BET's where
his model tells him that the bookies are giving him
better odds than they should.
Speaker 8 (43:29):
I still remember going. It was like Hara's Caesar's the Rio.
I ended up getting down like two hundred dollars at
a time, like five thousand dollars. Positions on a few
things like that were really good, and so I was
diversified within the game. Within the game, I wasn't betting
(43:51):
on the outcome of the game, but I was. I
still to this day, have never watched that game.
Speaker 2 (43:55):
I was too nervous. How did you experience the game
if you didn't watch it.
Speaker 8 (43:59):
I went to this little par three course that's open
at night, right south of the airport, and I played
the part three course twice until I felt like the
game would definitely be over. And then I went grocery shopping.
And I didn't have a smart this is pretty smartphone.
I went grocery shopping, and then I went home and
(44:19):
cooked myself dinner.
Speaker 2 (44:21):
Huh.
Speaker 8 (44:21):
And then and only then did I open my computer
and check and see how the game went.
Speaker 2 (44:27):
And were you just going through your prop bets seeing
what happened?
Speaker 8 (44:29):
First I went to the boss score and I saw
the first score was Gary Russell one yard touchdown run.
I was like, ah right, And it turned out out
of like fifty six thousand dollars bet like, I profited
like twenty three thousand on it.
Speaker 5 (44:45):
Rufus figures out how much he's won. Then he physically
retraces his steps to the many casinos that had taken
his many bets, still driving an old Honda Civic.
Speaker 2 (44:55):
You had all these little tickets you have to write,
you go cash each one individually, so you had you
must have had one hundred tickets.
Speaker 8 (45:01):
Oh yeah, probably.
Speaker 5 (45:03):
He just drives around Las Vegas and the money piles up, and.
Speaker 8 (45:08):
I remember how having like thirty thousand dollars on the
front seat and being like, oh my god, so much money.
Speaker 2 (45:14):
In cash in cash. After that, lots of people in
Vegas wanted to lend money to Rufus and take a
cut of his bets.
Speaker 5 (45:26):
Rufus, for his part, was still sitting in his office
in Las Vegas Sports Consultants, but pretty soon he was
directing an army of people to lay bets in sports
books across the city, sports books that got their odds
from Las Vegas sports consultants. Rufus was in effect betting
against the lines created by Roxy's firm. Roxy himself had
(45:47):
moved on at this point, but he watched what Rufus
was doing and he admired it.
Speaker 7 (45:53):
He came to bootcat once I met him, even after
one line. She said, this guy's thinking at a higher
level than other people. And I learned a lot for
a moment, not because he was divulging your secrets, but
he was just thinking at a higher level.
Speaker 2 (46:10):
To get his edge.
Speaker 5 (46:11):
Roxy had used weather reports, Rufus was using the spin
rates on pitcher's curveballs.
Speaker 8 (46:17):
I try to drill things down to their root. Cause
it's kind of what you do when you write books.
You try to figure out the person, what makes them tick,
what's the story. I try to figure out why things
happen in a baseball game or a golf tournament, what
makes the player good. It's not just their score, Like
what are the things that are driving their score? Which
(46:38):
of those are repeatable, which aren't. And right now you
have all this computer vision and that type of data
available now, and with a lot of these sports. I mean,
we're now talking about bat speed, measuring bat speed and
looking at like aging curves for bat speed.
Speaker 5 (46:53):
The whole point of Rufus is that he never lets
emotion interfere with his process. But that doesn't mean he
doesn't feel emotion.
Speaker 2 (47:00):
He does. He feels it for his process.
Speaker 8 (47:04):
We're using bat speed to then predict exit velocity, and
we're using exit vie to then predict like waited on
base average and basically whether a ball will be hit
or not, and what kind of damage it'll be if
it is, and then you know, use that to predict wins.
Speaker 2 (47:20):
And how did it work?
Speaker 8 (47:21):
How did it work? It works? Well, we made one
hundred and twenty five thousand in the first month. I
don't know what our volume was overall, and I got
twenty percent of it, which was great because my yearly
salary was twenty five thousand.
Speaker 5 (47:36):
Rufus had become the card counter at the blackjack table,
only it was richer than that. He was generating new
insight about why things happened in sports. A blackjack dealer
knows where the card counter gets his edge the sports book.
He couldn't really tell where Rufus was getting his, which
made Rufus and what he was doing even more unsettling,
(47:57):
and did the M at any point say we're now
taking your bets. The M Casino was one of Rufus's
favorite sports books.
Speaker 8 (48:05):
Now they had their whole thing was we're going to
take all comers. We want to be we want a
lot of volume. We think we're better than people.
Speaker 5 (48:14):
Then comes the Supreme Court decision of twenty eighteen, twenty
three states soon legalized sports gambling. Rufus now has the
M Casino and a lot of others right in his pocket.
Speaker 10 (48:25):
Fan Duel and the PGA Tour have teams up. Now
you can get more action out of every stop on
the tour.
Speaker 5 (48:32):
And Rufus of course stands to make a killing. The
bigger the markets, the more he can bet, bet.
Speaker 10 (48:37):
The PGA Tour and make every moment more with Fan
Duel sports book.
Speaker 5 (48:43):
But as it turns out, that's not how it's going
to go down. This ecosystem is going to change in
ways Rufus didn't predict, and he began to sense it
in late twenty twenty.
Speaker 8 (48:55):
So I would drive up to New Hampshire to bet
at these kiosks initially and then once there was mobile betting.
I had an account on DraftKings.
Speaker 5 (49:07):
Rufus had a girlfriend in Masses. Massachusetts hadn't yet legalized
sports betting, so he needed to cross state lines to
use the betting app on his phone. The drive took
him like forty five minutes, but it was actually easier
than running all over in Vegas trying to get cash down.
He and his process were built for this new type
of casino. He could bet on golf basically all day long,
(49:29):
until one day he couldn't.
Speaker 8 (49:32):
One week, I lost thirty thousand dollars. I got a
phone call to tell me that they were cutting my
limits on golf.
Speaker 5 (49:39):
He'd lost thirty thousand dollars, and DraftKings stopped taking his
big bets. By the way, we've reached out to DraftKings,
and so far they have declined to talk with us. Anyway,
it was clear to Rufus back in twenty twenty that
this was definitely no longer his old sports gambling world.
Speaker 8 (49:56):
Because I had bet enough. It spurred them to actually
go in and look at the stuff I'd been betting
and how I'd been doing. Books are not limiting people
just because they win, They're limiting them because they think
they're going to win.
Speaker 5 (50:09):
Future Rufus used data to predict what athletes were going
to do. DraftKings was using data to predict what Rufus
would do. When they looked at the data, they saw
that after Rufus placed his bets, the odds nearly always
moved in his favor. These were the bets of someone
who knew things before the market knew them, and the
(50:29):
new bookies were not like the old bookies. They only
wanted to take certain kind of bets, Bets that were
more like the bet you make when you press the
buttons on a slot machine. Bets that if you made
them often enough, you were sure to lose, the sort
of bets a fan would make, the sort of bets
Rufus Peabody never made.
Speaker 8 (50:50):
Refusing a bet wasn't a thing. It never was a
thing here, huh. Like you if you got kicked out
of a casino, or if you couldn't get there, it
was because you did something wrong, like you violated the
sacred bookmaker better covenant.
Speaker 5 (51:05):
Being smarter than the market didn't used to get you
kicked out of the market, But the market's changed. Sports
gambling is still a hard way to make an easy living.
But now it feels even less fair. Now it feels
like someone should step in and help.
Speaker 2 (51:21):
Rufus okay cool.
Speaker 11 (51:24):
So I downloaded FanDuel, DraftKings, Fliff Fanatics, Caesar's Bet, MGM,
and PayPal. So now everyone has all of my information
and my social security number.
Speaker 8 (51:34):
Oh, your social security number.
Speaker 11 (51:35):
They all asked for it.
Speaker 5 (51:36):
Yes, these new sports gambling apps, they all ask for it,
and so we're going to give it to them in
our next episode. Against the Rules is written and hosted
by me Michael Lewis and produced by Lydia gene Kott,
(51:57):
Catherine Gerardeau, and Ariela Markowitz. Our editor is Julia Barton.
Our engineer is Jake Gorski.
Speaker 2 (52:04):
Our music was composed by Matthias Bossi and John Evans
of stell Wagon Sepinett.
Speaker 5 (52:09):
Our fact checker is Lauren Vespoli. Against the Rules is
a production of Pushkin Industries. To find more Pushkin podcasts,
listen on the iHeartRadio app, Apple Podcasts, or wherever you
listen to podcasts. And if you'd like to listen to
ad free and learn about other exclusive offerings, don't forget
to sign up for a Pushkin Plus subscription at pushkin
(52:32):
dot fm, slash plus, or on our Apple Show page.
Host
Malcolm Gladwell
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