Some guys just liked to get punched around.
Mark Crovelli sends the below email:
Hi Mr. Wenzel,
Since our discussion of probability a few weeks ago ended so abruptly, I thought I would pass along my recent article at Mises Brazil in which I address some of the issues we discussed (and a few other important issues). I would love to hear what you think of the article if you have the time to look at it: http://www.mises.org.br/Article.aspx?id=1304
Cheers,In Crovelli's latest disaster, he calls me "naive", for pointing out an error he made in a paper at Libertarian Papers. I kid you not. He writes:
Mark Crovelli
Bob Wenzel recently made this naïve mistake in a conversation with me, for example.What was my naive mistake? I pointed out that Crovelli didn't know how a line was generated at sports books. In a 2009 paper, he wrote:
As is well known, however, casinos and bookies do nevertheless assign numerical odds to these singular sporting events based upon indirect evidence (e.g., common opponents, injury reports, physical conditioning of the fighters, the fighters’ ages and weights, perceived psychological advantages and disadvantages of each fighter, venue, etc.), and their odds are astoundingly accurate most of the time. Indeed, if casinos were not able to consistently generate very accurate numerical odds for these singular events, they would very quickly find themselves bankrupt and out of business.
According to the brothers von Mises, however, the assignment of a numerical probability to a singular case such as a boxing match is totally inappropriate and meaningless. What are we to make of this? Are the numerical odds assigned by casinos and bookies to singular boxing matches (and other singular events and phenomena, like the 2008 presidential election) absurd or meaningless, simply because they are not derived from long-run frequencies of “collectives” or “classes,” as the von Mises brothers contend? If so, how can we explain the fact that casinos continuously generate such odds, and, more importantly, continue to make money year after year from wagers placed on the basis of those odds?This indicates that at the time of the paper he had no clue as to why sports lines were created and why they moved. I pointed this out to him last month in a comment to an earlier post:
I just read into page 3 of your paper that you provide the link to above, and you are using an example that is a pedestrian error about odds set by casinos at sporting events. Casino operators don't set odds based on the probabilities of who they think will win,as you state, they set odds so that the money flows are the same for both sides of the bet.
From the Sportspage
"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. ....Sportsbooks move lines to reflect betting trends to balance the betting so that the book won’t lose gobs of money on a particular game or event."
You don't even understand reality, never mind imaginary constructs around infinity.It is with reference to this exchange that Crovelli digs himself deeper into a hole with his latest paper. He now turns and tells us that his cluelessness as to how a sports line is made, is simply a case of confusion being caused by his deeper meaning:
The most common misconception about probability that I encounter stems from an example that I used in an article I wrote several years ago. In the article, I claimed that since casinos and bookies generate numerical probabilities for singular sporting events (like boxing matches), this is strong prima fascia evidence that Austrians have been wrong to claim that numerical probabilities cannot be assigned to singular events...This example has caused so much confusion, in the first place, because many people do not fully understand what casinos do when they take sports bets. They think that no prediction is involved in generating sports odds because casinos don't care who wins the game. All the casinos hope to do is to make money from the commissions on the bets. Thus, according to this common line of thinking, no prediction is involved, because the casino simply needs to figure out the odds that will "balance the books" by equalizing the bets for and against. (Bob Wenzel recently made this naïve mistake in a conversation with me, for example).Note that this bit of tap dancing about "confusion" does nothing but attempt to cover up the error he made in his 2009 paper that I took him to task on, above.
Judging by his latest venture into an area he doesn't understand, his latest paper doesn't make the above mistake, in the first few sentences of a key paragraph. However, he fails to be honest about his earlier mistake and attempts to twist it about to make it appear that others are confused and naive, chiefly, me. How does he do this bit of tap dance? With this doozy (my bold):
The obvious problem with this line of thinking, however, is the fact that casinos have to predict the odds that will balance the books! Casinos don't have a crystal ball to consult in order to know what the odds "should" be on any given sporting event in order to induce the same amount of money to be betted for and against a team. They have to predict the odds that will balance the books. In the case of the Super Bowl, for example, which can involve millions of dollars being wagered on either side of the line, casinos are not in a position to know a priori how the thousands upon thousands of people around the world intend to bet on the game. They have to predict how they think people will wager. And how do casinos predict something as ethereal as the way tens of thousands of people that they don't even know might bet on a single game? They predict the outcome of the game of course!Oh yeah, here we go again, "They predict the outcome of the game of course!" Casinos don't have to predict anything, including money flows. Again, I state, casinos are not interested in the outcome of a game, they are interested in getting balanced betting on both sides of the line, so they can make their middleman's vigorish. Beginning and end of story.
Crovelli is just wrong and confused about how sports books accomplish this. They don't need to be able to pick the odds of a game to make a line or even forecast the money flow. The line is adjusted as the bets come in! That's how the line is set. Indeed, I could set the line on a game without knowing the sport, the two teams playing or the skill level of two teams playing. For example, if Team A is playing Team B in sport Y, I could start off by setting the odds at 50/50, if the bets come in stronger for any reason for Team A, I move the line against Team A and continue to do so until the bets even out on both sides. In other words, the market tells you what the line should be and you don't need any forecast about the outcome of game to start the line or what the eventual line should be. It makes things go faster to a correct line if you know something about the bettors coming in, but it is not necessary and all books generally have to adjust their lines to money flows.
Crovelli really doesn't have a clue. One wonders what corner of the world will be willing to take and publish his next ramblings. Perhaps Bulawayo?
You guys are both making mistakes. For instance
ReplyDelete"The line is adjusted as the bets come in! That's how the line is set."
That is just flat out false. Sports-books set initial lines based on their mathematical models that incorporate a host of data. This is why when Mike Tyson fights myself in a boxing match, the line doesn't open even and just move as the money flow.
The line opens in a way that the sportsbook thinks reflects an accurate probability of the various outcomes. From that point, money flows can move the line. In fact, the better sportsbooks look at THE TYPE of money coming in (pro bettors vs amateurs) to evaluate whether or not to move the line.
I'm as Misesian as it gets, but you can not dismiss sportsbetting as being non-predicative. It is.
My discussion was not focused on how Vegas sets its initial lines. I understand what Vegas does, In fact, I said," It makes things go faster to a correct line if you know something about the bettors coming in..."
DeleteMy point was simply that you don't need to know the names of teams, or the sport to make a line. If you balance money flows, you are going to be successful. And to balance money flows, well all you need is to watch the money flows.
Bottom line: The essence of a sport line is that it doesn't have to predict outcome or money flows, you can still make a line. To the degree some Vegas books do something different, they are going beyond the role of an odds maker.
To respond in this way is completely disingenuous, Wenzel, because you and I both know that precisely what is at issue is the question of initial odds. In our exchange several weeks ago, I wrote this:
Delete"The problem is how do casinos generate the INITIAL odds to start taking bets. They can't start taking bets without an INITIAL line, so where does it come from. No one doubts that odds and lines can be adjusted AFTER they start taking bets, but where do the initial odds come from?
Quite obviously, the initial line is built, in part, on a forecast of who is going to win. Duh."
My recent article quite clearly indicates that the issue at hand is how the initial odds are generated. For you to try to pretend that this debate has nothing to do with initial odds means that you have either failed to grasp what is being discussed or you now see how ridiculous it is to think that odds just fall out of the air, or, even more ridiculous, that initial sports odds are just randomly selected by casinos.
Your INITIAL 2009 paper makes no reference to INITIAL odds, you never made such a point until after I brought up the point that oddsmakers are concerned about moneyflow and not the outcome, something that is clear you didn't understand in your 2009 paper.
DeleteSo what? Am I right or not? Do casinos predict the outcome of games in order to set the initial odds or not? If all you are complaining about is how well written my paper was, instead of criticizing the argument itself, then you have completely failed to "crush Crovelli."
DeleteI just went through all Crovelli's papers and he never mentions INITIAL odds until after Wenzel caught him misstating what bookies do.
DeleteCrovelli is trying to clean up his sidewalk shit with his bare hands.
For you to claim that I did not understand how odds are generated in 2009 is completely indefensible. My father is a PhD in statistics and probability (http://mises.org/journals/scholar/crovelli4.pdf) and I have been hearing about sports lines and probability all of my adult life. For you to claim that I do not understand this topic, when you are now leaning toward conceding that casinos do predict the outcome of games in order to set their initial odds (which means that what I wrote is completely true!), is completely unfair and ridiculous.
DeleteAs I have said, I wish that I had used a different example in the paper, like the example I gave involving weather forecasting, but to think that you have "crushed Crovelli" solely on the basis that YOU THINK a sentence in an example being unclear (but still true!) is the height of arrogant absurdity.
Tony, on the other hand, is so clueless that I would be surprised if he can actually read my papers. Can you read English, Tony? I mean English words bigger than "shit?"
Since this "crushing of Crovelli" has now devolved into a debate about whether I knew about sports odds in 2009, (instead of debating whether Wenzel is right to claim that casinos don't predict the outcomes of games), let's have a look at another paper that I wrote. In reply to David Howden, I had this to say about Howden's mistaken view of bookies:
Delete"[Howden's] reason for denying that such odds are probabilities, however, is almost embarrassingly question begging. Indeed, his evidence that such odds are not probabilities amounts to nothing more than a mistaken restatement of how bookies go about generating odds:
'[T]he odds-maker only has to have an estimate of who will win and who will lose a fight. The odds established are used to entice individuals to bet against the expected winner, in the hopes of pocketing more winnings. (Howden 2009, p. 4)'
Setting aside the fact that this is not how bookies manage a sportsbook, (and setting aside the fact that Mr. Howden is here admitting that odds-makers can indeed accurately predict who will win a fight!), it should be obvious that it is question begging to use claims such as this as evidence that probability must be defined as a frequency." (http://libertarianpapers.org/articles/2009/lp-1-44.pdf)
If I had the naive view of odds that Wenzel is claiming I had, then why did I criticize that very same view coming from David Howden? Again, I do not see it as legitimate for Wenzel to have even made this claim in the first place, since it is nothing more than malicious supposition on his part, but my criticism of the naive view of odds makers dispels any claim that I held that same view.
LOL, An appeal to superior genes:
Delete"For you to claim that I did not understand how odds are generated in 2009 is completely indefensible. My father is a PhD in statistics and probability (http://mises.org/journals/scholar/crovelli4.pdf) and I have been hearing about sports lines and probability all of my adult life."
I have never, ever heard this one before. This one needs to go into the books. I have translated this logical error in argument into Latin, for eternity:
"videor ut excellens imperator"
Crovelli,
DeleteAs I noted in my first comment on this entire issue, I stopped reading your 2009 paper after page 3, since it was clear you did not understand how odds were constructed by bookmakers.
Now that you quote deeper into the paper it is even more obvious in your argument against Howden that in 2009, you did not understand the role of oddsmakers.Perhaps the error is a result of the from your mother's side. What is the pedigree of her genes?
Well, I feel like I can claim victory at this point, Wenzel. You have completely backed away from your initial claim that casinos do not predict the outcome of sporting events. In fact, you have not even tried to defend the idea ONCE in this thread.
DeleteThe best you could come up with is to say "Well, casinos COULD make due by arbitrarily setting their initial odds," instead of saying that casinos DO NOT predict the outcomes of games as part of their model to predict how bets will come in. (You did manage to throw in a couple of disgraceful ad homenems, though). Since this was the basis for your claim to have "crushed Crovelli," perhaps you would be willing to amend your original title to read "Crushed BY Crovelli"?
I don't blame you for abandoning the idea that casinos don't predict the outcome of games as part of their models of how bets will come in. It was making you look ridiculous.
Crovelli,
DeleteYou are a total ass, I just searched the entire page, the section you put in quotes claiming Wenzel wrote is not on the page anywhere out side of your quote.
You are continuing to make new forms of errors. You don't take people out of context, you make up the damn quote. What side of your families gene pool does this trait come from?
Give me a break, Banacek. Of course I was just mocking Wenzel. But, it's nice to see that the majority of the readers of this website have no compunction about the ad hominem. You are reading the right page to get your daily dose of that!
DeleteA totally made up quote is mocking.
DeleteYou are as deceitful as they come.
Bookies (and casinos) have a fear of being "middled' in sports betting, so they are never in absolute money balance and they tend to adjust lines slowly and infrequently. . There are at least two schools of thought...
ReplyDelete1) First, what I think is Mr. Wenzel's view, is that they set the line using insiders knowledge of past betting patterns and then try to keep the two side more or less even by adjusting the odds, and the other view
2) that they set a line to generate action, even if it is unbalanced (remember the vig is always on the side of the house so book can be unbalanced and still make money). A bookie is interested in maximizing profit, and he needs action to do that.
There is a trade off between being balanced and having a lot of action.
I wouldn't believe a sports book manager's explanation because he has a vested interest in attracting action, so we may never know what really happens.
I also think Mr. Fellner is wrong about the casinos using math models to set lines. I think the bettors use math models, and there are darn few consistent winners. Of course my NFL math model is an exception LOL.
It's not a guess. I'm not even going to engage this thread any further, it's remarkable how confident some people can be about their guesses of a subject matter they have no familiarity with.
DeleteI'd agree with that.
DeleteI basically agree with Fellner when he wrote “…it's remarkable how confident some people can be about their guesses of a subject matter they have no familiarity with.” But whom is Fellner talking about? Wenzel? Crovelli? Me? It is sort of rude to slime people without specific examples and then run away.
DeleteI re-read my comments and they do not seem to be over confident, except for “There is a trade off between being balanced and having a lot of action” which is, I think, a truism.
Maybe Fellner is just touchy when I said that I think he is wrong about casinos using math models to set lines. Wikipedia says “Today most sportsbooks get their opening prices from other sportsbooks as well as private companies like Las Vegas Sports Consultants.” And I think LVSC uses math models in their analysis. And the casinos may have an algorithm to alert management when their books are too much out of balance.
I am not an expert on casino operations, but I do have a math model for sides in NFL football that wins ATS about 60% and I have won many football handicapping contests. So while not an expert on setting and adjusting lines, I do have some familiarity with sports books, point spreads and math models.
An example that disproves what Crovelli is saying is what is referred to as a "public team". Teams such as the Yankees, Red Sox, Cubs, Notre Dame etc. have large followings that will place a bet on their team regardless of the line.
ReplyDeleteIf the sportsbook thinks ND should be a 3 point favorite against Navy for example, they know that a disproportionate amount of public money will come in on ND fans in Vegas for the weekend to watch games regardless of the line because they want to bet on their team.
Therefore, they may open the line at -4 or higher to try and balance the action against sharp bettors. "Sharps" that have no loyalty to ND will likely take Navy +4 if they agree with the ND-3 prediction by the book. If one side or the other gets out-of-whack, the book will adjust the lines as Bob states.
Betting against public teams by sharp bettors is a well known strategy in sports gambling for this reason. It is an example of a market inefficiency created by disproportionate action on one side of the bet.
The fact that sportsbooks often come so close to predicting outcomes has far more to do with free market speculators than the ability of the books to predict an outcome from the start. They want to get it close as Bob says so that the action doesn't get too far out of balance right off the bat, but they are just informed individuals making a market in the action. The bets then inform them as to how accurate their prediction was and they adjust their risk accordingly.
Incidentally, ND finished 5-7 against the spread last season, so betting against them in every game would have returned a decent profit, despite the vigorish.
Talk about tap dancing, Wenzel! This post takes the cake. Where do the initial odds come from? You still think that odds just fall out of the air, don't you? No modeling is involved? No prediction of a winner is involved? What a joke of yourself you are making. And you didn't even have the balls to respond to me personally. Well, the fact that you just made a joke of yourself by claiming that odds have nothing to do with predicting the outcome of the game is satisfaction enough for me!
ReplyDeleteCrovelli,
DeleteHey do you agree or not agree that you could reach the correct line by starting out 50/50 and not knowing the identity of the two participants?
Wenzel has you by the balls and squeezing.
"And you didn't even have the balls to respond to me personally."
DeleteYou say this after publicly calling Wenzel naive for slapping you down. What's this only you can publicly attack people?
That is about the dumbest think you have written in what appears to be a series of dumb things/
Yes, I deny that you could set the initial odds on the Super Bowl, which is, of course open to millions of betters around the world, at 50/50 without thereby setting oneself up to lose tons of money. The instant people who knew anything about the game saw that the line was 50/50, the casinos would be flooded with bets against the overvalued team. I mean, this is so obvious that it does not even need to be stated: the initial odds on sporting events are NOT set at a default 50/50. Why is that, smart guys? Isn't that what Wenzel would have us believe they do? They just start at 50/50 and let the line move where it wants to, right? Wrong.
DeleteHey, "Queen," nice try, but you might want to actually read what I wrote before you stick your foot in your mouth like this. I have only been saying that casinos and bookies that produce odds use a prediction of the winner as part of their models to predict how the bets will come in. This is just a fact, and anyone who thinks that casinos don't use a prediction of the winner as part of their model, including Wenzel, is completely clueless. The idea that modern casinos grope around for their odds in the dark is just plain wrong.
DeleteCrovelli,
DeleteI just read your article, this is what you say:
"how can we explain the fact that casinos continuously generate such odds, and, more importantly, continue to make money year after year from wagers placed on the basis of those odds?"
There ain't nothin there about just starting out with a prediction and moving the line. You think the sportsbook bets on the game to make money. You a dumb shit when it comes to the sports book.
As far as the Super Bowl, why can't the line be moved? That's how its done at race tracks,every mother f'ing day, you dumb shit. Kentucky Derby and all dumb shit.
Tony,
DeleteThe Kentucy Derby betting is a good example of how the tote board can move the line via computer pretty quickly, but parimutuel betting is different than the betting that goes on at a sports book.
Crovelli has a hidden assumption that a sports book would take millions of dollars in bets at 50/50 when the odds are different, your tote board example shows that the line can be adjusted in seconds, thus blowing up Crovelli's hidden assumption.
Further, online betting shows how no "starting line forecast" is even needed for betting to start. Crovelli just doesn't know what he is talking about.
So, tell me, Wenzel, do the odds on the horses in the derby all open at 50/50? If not, then your argument pretty much falls apart. You seem to think that saying "casinos COULD grope along with randomly generated initial odds" is equivalent to saying "casinos DO grope along with randomly generated initial odds." A silly logical error.
DeleteAllow me to add a few extra points. You are completely begging the question by claiming that casinos merely "watch the money flows." You cannot have a "money flow" at all until you set initial odds that will bring money in. So, how are the initial odds set? The odds are set by predicting the outcome and adjusting the odds by considering market size, injuries, et cetera ad nauseum. If you think that the initial odds set by casinos on the Super Bowl is 50/50, then I have a fog making machine in San Francisco that I'd like to sell you. Second, I have no idea whatsoever why you think that the "teams' names" have anything to do with this. They don't, and I have never claimed that they do. Why you would even mention this is beyond comprehension to me. Third, as I have argued over and over, the fact that casinos don't primarily care about the outcome of the game does not imply that the outcome of the game does not factor into the model that predicts how bets will come in. For you to assume this is a complete non sequitur, which is why I called you objection "naive." It is completely naive to think that casinos would randomly set odds (at 50/50, for example) in order to get the betting started, instead of predicting the outcome as the central feature of a model that predicts how bets will come in. If you set the initial odds on the Super Bowl at 50/50 you would be inundated with bets against the team that was unduly "overvalued." You would not be able to recover from this mistake by adjusting the odds after the first day. It would be like Gresham's Law applied to gambling. I am dumbfounded that you fail to see this.
ReplyDeleteHey Crowbar,
DeleteTeam names means team identities. RW is completely correct that you could reach the correct line by starting 50/50 and not knowing the identities.
It does not mean that this is how lines are developed in Vegas, where more information is available, but merely that lines can be developed this way.
Crovelli pawned!!!
"Bookmakers would base most of their action on [Robert Martin's] betting numbers, hoping they would attract an equal division of betting." "Naive football fans thought that he had badly misjudged the strength of the teams. But picking a winner wasn't Martin's job... 'Quite a few people thought that was too many points, and they bet on the Jets. Eventually, the line came back to the original price. That was one of the better prices I ever made because it threw money both ways.'" -Dan Moldea, "Interference"
ReplyDeleteI'm with Wenzel on this one. Even individual oddsmakers don't see predicting the outcome of a game as their job. Their job is to get money flowing both ways.
Crovelli can talk about hypothetical, ephemeral "bookies" and "casinos," but have any actual individual oddsmakers come out and said something to the effect that the line is set based on a prediction of who will win a sporting event? Otherwise, he's just psychoanalyzing nonentities from afar.
If you, too, had read my article, Nick, you would see that you are caricaturing what I wrote. I never, ever have said that the primary job of a casino is to predict a winner. Nevertheless, casinos DO indeed predict the winner as part of their model to predict how bets will come in. This is somewhat like forecasting the weather. While the primary concern of the weather forecaster is a concrete forecast that it will rain or snow in some location, he has to predict certain other factors, like barometric pressure, that he does not really care about. The same is true for a casino's sports book. He has to take into account who will win the game in order to set the initial odds that will start bets coming in in a balanced manner.
DeleteCrovelli,
DeleteI just read your article, this is what you say:
"how can we explain the fact that casinos continuously generate such odds, and, more importantly, continue to make money year after year from wagers placed on the basis of those odds?"
There ain't nothin there about just starting out with a prediction and moving the line. You a dumb shit when it comes to the sports book.
Again, psychoanalyzing the presumed initial assumptions of collectivized "casinos" and "sports book." And I love the "if you had read" argument, such condescension. I'll do my best to keep up.
DeleteIf you had read Moldea's "Interference" book, you would have read how at least one individual actual real life bookmaker set his line, a guy who was considered a genius in the field, and how the other other casinos followed his lead.
"On Sunday night I'd make my own pro line. I'd tell what line I thought the games should be, then I'd consult with a few people. I'd say, 'What do you think of such-and-such game?' And some guys would say, 'Well, I think you're wrong here.' And we would make what we call 'man-to-man' bets. So it's getting a few opinions from people I call professionals, whose opinions I respect. The next morning we'd get a number of opinions, make some wagers, and then make some adjustments in the line [based on the betting].'"
...
"Bookmakers would base most of their action on his numbers, hoping they would attract an equal division of betting."
I don't see anything in there about predicting a winner or starting out with a prediction of a winner. Maybe I'm wrong, though. If you can show me an actual oddsmaker who says that he starts out predicting outcomes, then sets the line, I'm willing to learn.
Wenzel,
ReplyDeleteI don't know why you waste time with this guy. He does not understand betting. He does not understand how to get to the essence of a thing and, until you corrected him, he had no idea that odds at a casino were set based on money flows.
According to his 2009 paper, he thought casinos only goal is to predict the outcome of a sporting event and that this is the only way casino sports books make money. BLARGH HARGH HARGH holy sweet hell! how do you people even come up with these things!! Slap the bitch!!
Nice try, but if you actually read my paper you would see that I did not say that casinos "only try to predict the outcome of the game," so the only thing being "slapped" here is a straw man.
ReplyDeleteCrovelli,
DeleteI just read your article, this is what you say:
"how can we explain the fact that casinos continuously generate such odds, and, more importantly, continue to make money year after year from wagers placed on the basis of those odds?"
There ain't nothin there about just starting out with a prediction and moving the line. You a dumb shit when it comes to the sports book.
What the hell are you talking about, Tony? Where have I ever said that odds can't be moved? Of course they can be moved. Duh.
ReplyDeleteCasinos don't take infinite money on an opening line. They all have max bets and if they were to open a line at 50/50 and immediately take a max bet on Team A, they would immediately move the line against Team A. If they then took another max bet on Team A, they would move the line again, possibly by a large amount because they clearly mispriced.
ReplyDeleteThey would NOT immediately be "flooded" with bets. The smart books put up their lines early and by the time this adjustment has happened, the other sportsbooks copy the lines of the smarter books because market information is already available. The scenario described by Crovelli of not being able to recover from a bad opening line is incorrect because the lines become immediately informed and adjust bet-by-bet. Max bets put in place at each sportsbook prevent them from taking on too much risk.
Really sharp books like Cantor know they set good lines and will take high limits, but they still set limits. It is all about risk and a 50/50 line would necessitate a low limit, but it would still work.
FYI, last week Cantor started taking bets for all but the last week of the 2012 NFL season. They're known for taking the largest bets in the business (up to $100k typically on a game).
ReplyDelete