Lampley, Las Vegas, and the 2004 Election
Jim Lampley argues at THP that John Kerry really won the 2004 election. His evidence?
At 5:00 p.m. Eastern time on Election Day, I checked the sportsbook odds in Las Vegas and via the offshore bookmakers to see the odds as of that moment on the Presidential election. John Kerry was a two-to-one favorite. You can look it up.
People who have lived in the sports world as I have, bettors in particular, have a feel for what I am about to say about this: these people are extremely scientific in their assessments. These people understand which information to trust and which indicators to consult in determining where to place a dividing line to influence bets, and they are not in the business of being completely wrong. Oddsmakers consulted exit polling and knew what it meant and acknowledged in their oddsmaking at that moment that John Kerry was winning the election.
I don’t expect Lampley to know anything about politics but I would expect him to have some clue about sports betting. As anyone who has studied betting for more than fifteen minutes knows, Las Vegas odds are not based on who the oddsmaker thinks will win. Rather, the idea is to set the line so as to evenly distribute the betting to minimize the risk to the house.
Odds for Las Vegas sportsbooks are made by sports Ã¢€œexpertsÃ¢€ who use their knowledge, experience, inside information and a host of other factors – mainly statistical Ã¢€“ to determine the likely outcome of any particular sports contest. Much of this process is educated guesswork. But the goal of oddsmaking for the casino oddsmakers is not to predict the outcome of a game, it is to furnish the bettors with a betting line that will split the public in two with half of the people betting one side and half on the other. This is where Ã¢€œjuiceÃ¢€ or vigorish comes into play. The Ã¢€œjuiceÃ¢€ is the 10% that bettors have to pay if they bet football or basketball at 11 to win 10.
Indeed, the line constantly moves in order to keep up with actual betting.
Sportsbooks move lines to reflect betting trends to balance the betting so that the book wonÃ¢€™t lose gobs of money on a particular game or event. If a lot of money is bet on John Smith to win the French Open at 3-1, the sportsbook will move the odds on Smith down to 2-1. Here is another example: if the Raiders are getting a lot of money at -4 Ã‚½ the boys in the book will move Oakland up to -5 to try to tempt people to bet the other side.
The house gets to keep its vigorish and makes a killing.
A simple example can be explained using a coin toss. With a coin toss, the chances of tossing Heads is exactly the same as tossing Tails. You have a 50% chance of either one. Therefore, there is no advantage to playing one side or the other. However, if a casino offered this game, they may charge you $1.10 to play, but only return $1.00 if guessed correctly. Therefore, if you guess correctly, you win $1.00. If you guess incorrectly, you lose $1.10. This would give the casino and edge, or Vig, of 4.5%. To calculate this, you would use this formula:
((percent chance of losing * loss ) – (percent chance of winning * win)) / (amount wagered) =
((.50 * $1.10) – (.50 * $1.00)) / ($1.10) = .045 or
the house with have a 4.5% Vig on this bet.
You should note that in this example, you are wagering $1.10 to win $1.00. The same Vig would apply to wagering $1.00 to win $0.91.
Moreover, oddsmakers are seldom “right” about the outcome of the game. Giacomo was a 50-1 shot at winning the Kentucky Derby Saturday. The spread of an NBA or NFL game–even the Super Bowl–is seldom on the money.
As the exit polls were coming in Election Day afternoon, commentators as diverse as Hugh Hewitt, Mark Blumenthal, Dan Drezner, Jack Shafer, and Yours Truly were cautioning that people not read too much into them. The exit polls, which had Kerry winning by big margins in toss-up states and even winning in solid Red states like Virginia, turned out to be wildly wrong. The pre-election polls and the election futures markets predicted a narrow Bush victory and were proven right.