Risk of Ruin
Audio documentaries about risk takers.
Risk of Ruin
Greetings from Las Vegas - Part I
Mark DeRosa, Zack White, and Rufus Peabody. The story a group of friends from Appalachian State that went on to team up with an econ grad from Yale. They started playing casino games and eventually would go on to bet the max at sports books all over Las Vegas.
Follow Zack White on Twitter.
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Follow Rufus Peabody on Twitter.
Rufus's betting analytics startup: Unabated.
One of our bigger betting events always and still to this day is the Super Bowl because, you know, the sportsbooks put out hundreds, if not thousands of bets and they can't possibly get them all right. Every sharp group comes out of the woodwork for the Super Bowl. People that you only see once a year. It's like it's just a huge event. And back in those days, Vegas was the only place that you could bet it legally. We would bet a million or more, one and a half, two on that game, depending on the year. We would have the outcome of a bet decided on just about every play.
SPEAKER_01:Risk of Ruin is a podcast about gambling and life and their intersection. I'm John Reeder. This is Greetings from Las Vegas, Part 1. In week one of the 2019 NFL season, Ravens quarterback Lamar Jackson threw for 324 yards and five touchdowns on just 20 attempts as his team routed the Miami Dolphins 59-10. After the game, sportsbooks everywhere scrambled to adjust their Lamar Jackson MVP odds. The problem for the books was that they had been offering prices of 50 to 1 or better all summer. In fact, a sports better known as Mark DeRosa, had been loading up on these tickets for months. He got 66-1 at DraftKings, 80-1 at the Borgata, 100-1 at the South Point and the Westgate, and 125-1 at the Golden Gate. Also, these bets were not like taking a flyer on your college football team to win the national championship, where you essentially throw away$25 just so you can hold your head up high at the tailgate. When Lamar Jackson eventually won the MVP, Mark held tickets worth more than a quarter of a million dollars. Then, just in case anyone thought it was a fluke, in early 2020, he bet heavily on the Tampa Bay Buccaneers futures and ended up with another huge payday.
SPEAKER_04:I can't tell you how many times I've had futures tickets that, you know, were in their final leg and didn't cash. You know, I've had a lot of heartbreaking stories over the years of almost winning and So it's been nice to have some big wins.
SPEAKER_01:These two calls made Mark somewhat more well-known in gambling media. But interestingly, he's not even the most famous gambler in his group of friends. In the late 2000s, Mark was part of a sports betting group in Las Vegas that also included Rufus Peabody. If you're not familiar with Rufus, let me try to explain his approximate level of fame. He co-hosts the Bet the Process podcast, although I guess nobody really cares about podcasts. He also co-created the Massey Peabody football ratings, which appear in the Wall Street Journal, although only nerds like me care about stuff like that. He's a regular at the Sloan Sports Analytics Conference, which I guess is just more nerd fame. Okay, how about this one? Rufus has been on ESPN. Here he is with Linda Cohn.
SPEAKER_00:Will there be a safety? You say no. Will both teams make field goals of 33 or more yards? And you say no. All right. So of all of those, what interests you the most there?
SPEAKER_02:Well, Linda, I love the no safety bet. It's the public loves betting on the safety every year and it drives that price down. But safeties are really rare. They happen in about one out of every 14 or one out of every 15 games. And so you're getting odds that say it'll happen one out of eight So I think it's a lot of juice to lay, but it's a great bet.
SPEAKER_01:This episode is the story of how Mark DeRosa and his college friends became winning gamblers first, then partnered with Rufus Peabody to take things to the next level. In addition to Mark and Rufus, we're also going to hear from another partner in the group, Zach White. It all started thousands of miles from Las Vegas in a small college town in North Carolina. This is Mark.
SPEAKER_04:I went to school at Appalachian State in Boone, North Carolina. And when I was there, I used to work at a restaurant. And I was the head waiter at this restaurant. And I used to play poker on Friday nights with some guys who worked at the restaurant. And after a whole summer of playing poker with these guys, I got to know a couple of their roommates. And one of them was really into sports betting. And at the time, he was doing arbitrage betting. And he was betting one side at even money and taking the other side at plus 110. And he was doing this all on the internet. And he wasn't going to class or didn't really take his school very seriously. But he was making tons and tons of money doing what he was doing. And so we got to talking. And I guess maybe he saw something in me. And he had some really bright ideas for somebody his age. Back in those days, you could gamble... on the internet from anywhere. And the casino you were playing against was all over the world. Some of them were up in Canada. Most of them were in the Caribbean. And they were all trying to get into the North American market. And they were giving away bonus money to attract new customers. So you could sign up and deposit like$100. And they would give you$100 of their money to play with. So now you've got$200 And if you played a game a certain way at a certain stake, you could expect to extract, depending on the conditions, probably anywhere between 50% to 95% of their money, as well as yours, almost completely risk-free. So he got me interested in that. And we kind of teamed up doing those things. And it turned out that there was just literally hundreds of these online casinos. And the terms of their bonuses, it became... like a regular extra regular mental exercise, calculating how much these bonuses were worth, um, and how to exploit them. It got to the point where we were playing, we could play blackjack, we could play video poker. Um, there was even some, some slot games that were good depending on how, how big the bonus was. And, uh, we figured out, you know, which casinos were affiliated with others. So we would find a good bonus at, at one place and then figure out that, Oh, you know, this is, This one's affiliated with 20 other sites under the same ownership group and they're all offering the same bonus. We got so involved with this that we actually, we were like 21, 22 years old and we were renting out office space in downtown Boone and buying like 15 computers and having, you know, seven different routers and, you know, learning how to change IP addresses and, you know, do all kinds of crazy stuff.
SPEAKER_01:These guys got their start at perhaps the perfect time. The internet bonuses of the early 2000s were a goldmine. In this case, it's important to note that the group established an early pattern of thinking about their gambling not as a distraction, but as a business.
SPEAKER_04:We had actually put up flyers all over campus advertising for the Boone gambling team. And basically, we just needed help with this online endeavor that we had. And we had about 10 to 12 guys show up to my apartment for our initial meeting. And we put them through the ringer. We basically told them, we're going to teach you how to play blackjack and other casino games. And you're going to get to travel to Las Vegas. And, you know, we're going to go to Atlantic City and we're going to make a living doing this. But you got to have discipline and you got to take it really seriously. And so we had we had like nightly practice. I forget how many nights a week throughout the year. And it was basically kind of like an initiation. And Zach was one of the guys who showed up. And if I remember correctly, he wasn't the best of the initial guys. people that came, but he was definitely the most dedicated. And once it clicked for him, it really clicked for him. So this is Zach White.
SPEAKER_03:With the exception from Rufus, pretty much all the other gamblers I've ever been involved with at a close level were all from Boone. They're all Appalachian State graduates. The core of our group for a very long time was me and Mark and This other guy, Matt, and this other guy we called Mad Dog. But there were several other players that came from Boone that were friends of ours from Appalachian State. So I wasn't part of the very original group, but I was pretty close. I was a card player. I was playing a little bit of poker in college, and I was doing a little bit of betting on NASCAR races. I was a little bit of a gambler, but nothing high stakes. I was doing mostly pools with friends on the sports side of it and doing a little bit of online poker. This was back, you know, early 2000s when the poker stars and the full tilt and all those guys were just rampant and giving away bonus money. And it was very easy to win. So I was doing a little bit of poker playing and I was walking through campus one day and I saw a flyer on the wall that said something along. I wish somebody still had it. because it'd be really cool to look back at that now and say, wow, that's what got me involved. But the flyer says something along the lines of, do you like gambling? Do you like cards? Are you good at math? Come to this meeting. I wasn't exactly sure what to expect, but I showed up and it was Mark was there and Matt was there and a few other people I had never met. I brought one friend with me and, you know, I was thinking maybe it had something to do with poker, but it turns out they were trying to put together a blackjack team. So I heard the spiel from them, and they're basically pitching this idea that they want to recruit some players to play Blackjack and win money at Blackjack. So I took the information they had, they gave me, I took it home, and I was like, I wasn't really sure what to think of these guys. The meeting was in this little run-down two-bedroom apartment. It certainly didn't look like anything high-roller was happening there or anything too prosperous, or they weren't making a whole lot of money from what I could tell. So I wasn't sure what to think, but I ended up doing a follow-up meeting They kind of, we did a few like, you know, interviews and skills tests and stuff like that. And I ended up, they were doing some other stuff online with like online casinos. And I had kind of a little bit of experience with that with like the poker bonuses and stuff. So it turned out that, you know, we were interested in the same type of thing. And so I started hanging out with them more. We started doing some formal, you know, training on the card counting side of things. I was learning more about what they were doing with the online casino bonus stuff, and it stuck. So I took a trip with those guys down to Tunica, Mississippi, probably a few months after we met, and we played some cards down there. I don't think anything went too well. The next trip, I think we went to New Orleans and Biloxi. Things went a little bit better. We started betting a little bit more money. Some Vegas trips were involved, Atlantic City trips, and Pretty much right when we started having some success at the blackjack tables, we started getting thrown out of places. And it became very clear very early on that if you want to do this in a manner that makes any sort of decent amount of money, you have to be pretty aggressive with it. And when you're aggressive at the blackjack table, it makes it very easy for the casino to figure out what you're doing. And they don't really appreciate that type of customer experience. Um, so, you know, they, they just, you know, they, they get rid of you.
SPEAKER_01:Long-term winners are such a small percent of gamblers that most people don't even really think it's possible. Here's Mark again.
SPEAKER_04:So my mom was cool with it. My dad was from New York and, you know, I think everybody from New York has that story about that one relative that got in trouble with the mob in some way. And then the parents had to bail them out. And, um, I think my family's story was somebody had to sell their house to get somebody out of gambling trouble. So my dad was very wary of that. But at the same time, I was independent and on my own and not asking anybody for any money and doing things on my own. And I think it became pretty apparent to them that I knew what I was doing pretty quickly.
SPEAKER_01:By the time the group got together... there existed something of an advantage gambler's library consisting of books and internet forums.
SPEAKER_03:We certainly had all the books. You know, you had that book bringing down the house and then Sanford Wong sharp sports betting was like the Bible to us back then, you know, with the prop betting stuff. And then the forums, you know, the internet forums were rampant with good information at the time. If you knew how to sort through it, Sanford Wong had one called green chip. There was some good information on there. Mark was even running his own forum for a while that was trying to sharpen up the world. The RX forum and those two plus twos. There was good information on there. There was a lot of bad information too. But if you knew what you were looking for, you could certainly find some inspiration to go after something and become a winner.
SPEAKER_01:These guys were learning the language and mechanics of betting as well as how to develop good judgment.
SPEAKER_04:If you think that something has a 40% probability of winning. The money line, the break-even money line on that is like plus 150. So if you're getting plus 151, are you really getting a good bet? It's like, well, you're getting the slightest little bit of expected value, but not really. You're not really getting much value there. But if you were getting, say, plus 170 on that, then you should probably make that bet. So learning how to translate numbers, it's like speaking another language.
SPEAKER_01:Players that find an edge... are confronted with a sometimes unknowable question, which is, how hard can this thing be hammered?
SPEAKER_03:The whole online casino and bonus thing, there was no other time period anywhere near that where it was just that easy. There was just so much dead money, so much square money in the marketplace where the bonus money was tremendous. And I felt like a lot of times these operators knew what was happening, but they just didn't care because they were making so much money. At one point, We had run so many accounts through this one particular group where there was, you know, the terms and conditions when you're signing up for this bonus, they would always list certain countries that were banned. And it would usually be like China, you know, India, Iran, like places that were either gambling was banned or they were ripe for fraud. And then one day at the end of this list, it said China. It had all those countries and then it said, or boon North Carolina under the terms and conditions of ineligible players. And I was like, oh man, I think we, I think they finally had enough, enough of us there.
SPEAKER_01:I've heard lots of back off stories, but this is the first time I've heard of an entire zip code getting backed off. But from the very beginning, these guys were aggressive.
UNKNOWN:Yeah.
SPEAKER_03:We started in this little office. We had one little room in the back corner of this office building. And I'm not sure what we told the guy to get on the lease initially, but he didn't really care. We were paying in cash, so... whatever. But eventually we expanded as we grew, as this operation kind of grew, we ended up having like the whole back of the bottom level, the whole back half of the bottom level of the office building. And the office building was two levels and the entire upper level was professionals. There was like a doctor's office, an accountant, a lawyer, like an acupuncturist person. And like, so we would be coming in after class four or five o'clock in the evening, You know, carrying a box of pizza and a six pack of beer, you know, three or four guys at a time, maybe a couple of girls that were hanging out. And these professionals would be coming down the stairs, leaving and like trying to figure out what exactly is happening in these back in the back end of this office building. We got some very strange looks and it was interesting. You know, we never put a sign on the front of the building that says, hey, people are gambling in here. It was a good time. You know, we had we had like a practice blackjack table in there and obviously other setups for the different Internet connections, Internet connections for the bonus stuff, couch in case somebody need to take a nap or whatever. And, you know, it was great. It was a great little office. I mean, that was a lot of fun. I mean, you don't as I was still in school. So we were going to class. Well, sometimes going to class and then sometimes, you know, going to work in the office and or you getting out of class at five o'clock and going into the office to work and do some bonus stuff and then going to the bar and having a few beers and then going back to the back to the office to finish up, you know, later. It was a it was certainly, you know, the lifestyle that any 21 year old kid, you know, would fall in love with pretty easily.
SPEAKER_01:Even though they operated at a high level in college, it wasn't certain the guys would choose gambling as a career. The internet bonuses dried up after the enactment of the unlawful Internet Gaming Enforcement Act of 2006. Because it became harder to make money online, Zach entertained other plans.
SPEAKER_03:You know, I graduated. I got a degree in business management. I landed this job at Walgreens at the time. And I was supposed to be a store manager at... North Wilkesboro. And it was just, you know, I was looking at the salary that they were going to pay me. And it wasn't bad for, you know, a recent college graduate. But I'm like, you know, I made like half of that last trip to Vegas. It certainly wasn't what my parents wanted to see after putting me to college for four years, putting me through college for four years. But I was like, this is dumb. I'm not going to do this. And I decided to just continue down the sports betting path.
SPEAKER_01:The post-college period started with some uncertainty in the group as to what they would do next. But eventually, Mark and Zach made their way to Vegas.
SPEAKER_03:For the two years from when I left Boone and I was living in Raleigh, North Carolina, until I moved back out there full-time, me and another guy were pretty much strictly betting NASCAR. And there wasn't a lot of ways to get down online at the time, and it was getting tougher and tougher, so we just started alternating who would go to Vegas to bet. So I would go out there for two or three weeks at a time, maybe four, you know, just hotel hop. I didn't have a place of my own yet. And that got old really quick. And then I would come back and then he would go out there for the next two or three weeks. And we would start transitioning a little into some other sports. We started betting golf a little bit. Of course, we would do the NBA props, but they weren't widely available at the time. I think it was like Wednesday or Thursday nights would be the night with the NBA games around TNT or something, and you could get a little bit down on the player prop type stuff then. But there wasn't a whole lot of stuff that I was betting that I felt comfortable I was going to be a long-term winner at at the time. So I was filling a lot of time in between betting the NASCAR and stuff, like playing poker, playing a little bit of video poker, which was a different ballgame back then, too. There was a lot more opportunity in that realm. And then finally, I had had enough of the flying back and forth across the country and packed it up and moved out there about a year after Mark did full-time and got back involved with him. And some more people moved out the following year and we started doing all sports together pretty hard.
SPEAKER_01:In college, these guys sort of flirted with professional gambling. But when you bail on your job at Walgreens and rent a U-Haul with Destination Las Vegas, the flirtation is pretty much over.
SPEAKER_03:You know, if you asked my mom, she would have said my life is going off the rails and that's the craziest idea she's ever heard. My friends were kind of used to it because I would disappear for three or four weeks at the time when I was out there just hotel hopping. And then I'd come back and do like sit on the couch and drink beer by the pool for the next three weeks while my partner was out in Vegas covering the Vegas part of it. So they had kind of seen me in that lifestyle for a while. And it was just it was just when it was finally time to make the leap and move, you know, finding somebody to help me help me pack up and promise they're going to come visit every now and then. It's not hard to get people to come visit you when you live
SPEAKER_01:in Vegas. The early years in Vegas overlapped with the crash of the U.S. economy and the Great Recession. Housing was the contagion that nearly took down the global financial system, and a lot of the problems were located in Sunbelt cities like Las Vegas.
UNKNOWN:Music
SPEAKER_04:It was pretty desperate out there. I have some very real memories of people. I had a safe deposit box that I would use to store cash and I was pretty frequently in and out of the bank accessing that. And so I would see people having meltdowns over their finances, yelling and screaming at the tellers. And I remember one time there was a woman who I guess she had gotten paid and she was behind on her mortgage. You know, she didn't know if she made the payment, if she was going to lose her house or not. And that's what she was trying to find out from the bank is if she paid today, would it put off losing her house for another month or would they just take the money and still she would lose her house? And I mean, she was in tears. She was distraught. And they didn't have an answer for her because, you know, they're just a normal banker. And, you know, in the end, I think she paid it. But, you know, there was a little bit more crime than I would have liked at the time. A lot of people, you know, a lot of armed robberies. and things of that nature. But I lived in a nice gated community. I made sure of that. And I didn't live in the nicest house in the gated community, but I lived in a nice gated community. But the funny thing about that was at that time, right after I moved there, there was a big slew of armed robberies within that community and it turned out to be people that lived in the community. But I've always been really aware of my surroundings. I always carried mace. It was pretty desperate out there. It was strange to be to be having success while everybody else was
SPEAKER_01:having failure. In the early days, the guys bet sports they knew, like NASCAR, and they also hunted for off-market pricing.
SPEAKER_04:So yeah, we were betting a lot of NASCAR. We were betting a lot of... I was always really good at betting small market NFL stuff, like player props and futures. And at the time, I was doing NBA and even NHL stuff. So it was basically anything that was a small market. I, we felt like at the time the sports books out there didn't, we had a better idea of what was what than they, than they did. So, so yeah, that's pretty much what we were betting. We were also doing a lot of stuff with like parlay cards where, you know, the sports book puts out a parlay card on Tuesday or Wednesday and the lines are static. They're not moving at all. And there's hundreds of hundreds of choices between college football and NFL and And by the time the weekend rolled around, you'd have some lines that moved like four or five points due to injuries or, you know, just a major market shift. And you could bet these parlay cards, you know, I would walk the strip all day getting these parlay cards in 500 bucks at a time. And that was a real grind because you basically the way that it goes is generally seven out of 10 weeks you're losing. And a couple of those weeks you're making a little bit of money. And then one weekend, everything wins. And it becomes a huge problem because now you've got all this money to cash out. And the books are trying to figure out how do we lose so much money on the parlay cards. So we had this one supervisor at Arizona Charlie's off of the strip that would allow us to just come in there at night and put in as many as we wanted for the max, like 500 bucks. And after they all hit... We were trying to cash them out kind of slowly and not draw too much attention to keep
SPEAKER_01:our longevity. By this point, the group had some experience with backoffs from their time playing blackjack and targeting internet casinos. So let's see what happened after they pounded Arizona Charlie's parlay cards. Here's Zach.
SPEAKER_03:You didn't have to do any analytics on it at all. It was basically like, well, the line is now minus seven and I can get minus three on this card. So I'm going to take the minus three. Simple, simple stuff. Usually it's hard to get down any significant amount of money, but I guess Arizona Charlie's was taking$500 at the time without any approval. So we had gone in there and fired a bunch through. But the next day we go, the next time we go in there, there's literally a picture, like a surveillance picture of me and Mark walking in the door, stuck on the back wall behind the counter. And basically like, don't take bets from these guys type of picture.
SPEAKER_01:Mark says they would scalp any easy bet. whether it was on a parlay card or not.
SPEAKER_04:So a lot of parlay cards, a lot of just off-market betting, like, you know, if the Jets are plus two and a half everywhere and we can get three and a half, we're going to bet it. Not knowing anything else in the world, it's just, you know, other than how valuable that, you know, the frequency of the three is, things of that nature. So, and we went to work pretty much every day.
SPEAKER_01:Now that we've gotten a sense as to how the Appalachian State group got their start, let's switch gears and hear about their future partner, Rufus Peabody. Rufus went to college at Yale, and then he broke into the gambling business, working for Las Vegas Sports Consultants. LVSC supplied the opening odds for most of the sports books in Nevada.
SPEAKER_02:So I did that internship with Las Vegas Sports Consultants in 2007, the second half of the summer of 2007. The first half of the summer, I actually spent doing a literature review on all the academic research in sports betting. And with the eye towards how it pertains to financial markets. And so for a professor, because I'd actually applied for this, like the economics department summer research opportunity. And the nerd I was, I was like on my own stuff, like looking at like referee bias or something like that and was talking. And I guess in my interview with this professor, he came across like, you know, my passion for the sports betting stuff kind of came across. And, you know, I mentioned I was going to Vegas and long story short, I wrote like a 90 page paper on the academic literature and sports betting. Like, literally reading. I read, I feel like every paper that came out between like 1960 and like 2007. So my knowledge when I moved to Vegas was entirely academic. Las Vegas Sports Consultants was located in the American Wagering Building, which is right across the street from McCarran International Airport. And they shared that building with Leroy's, which eventually no longer exists. It's It got bought by William Hill. But the head trader for Leroy's was this... I got to meet him. He was this guy from New York, short, very large man, smoking a cigar. Exactly what you'd sort of expect for the stereotypical guy in gambling to be. I was so excited to get to actually... I was like, okay, now I get to know how things actually work because I've read all these papers. I said, theoretically, you can make more money setting up a point spread that's in between what the true number is and what the sort of demand is, what the public thinks the number is. And he said, he said, dairy, dairy, and dairy and dick don't fit in an asshole.
SPEAKER_01:Rufus followed up his internship with a full-time job at LVSC. This was a job that many sports fans would have killed for. And also, Rufus was making a whopping$25,000 a year. I
SPEAKER_02:didn't think that much about my prospects. My goal was to, I wanted to make money and I love numbers and I love tracking stuff. And so I had these spreadsheets and it was very much just about the game. And somehow there was some sort of internal reward I got from that. And knowing that that I had... My identity was somehow tied up in it in a way that wasn't related to the actual value of the money, but just the fact that it was going up. But I hadn't actually thought about being a big money professional gambler ever. I was spreading from like$5 to$50 playing double deck blackjack at times when I wasn't working. Yeah, I was betting a few hundred dollars a game, gradually building a bankroll. And there was a point where I thought I could... If I didn't have a job, I could actually make it doing this. And by make it, I mean making like$40,000 a year or something. But somehow to me, that felt like something, like knowing that I could make a living in a way that other people mostly can't. And there was no grand plan.
SPEAKER_01:The inherent challenge of the slow grind up is that it's contingent on being able to play. Rufus found out that if you're counting cards, even if you're not winning anything, You may not last long.
SPEAKER_02:I got barred from the Las Vegas club in like 2008 and I had lost$35. I was spreading from five to 35 and within like 20 minutes I'm gone. And I, after losing money, it was, it was, I was like, wow. And now thankfully the Las Vegas club is not there anymore. Now it's circa.
SPEAKER_01:One reason that Rufus may have had reasonable ambitions is that he thought he had already missed the golden time to be a sports better.
SPEAKER_02:When I moved to Las Vegas, I remember thinking, wow, markets are so much more efficient than they used to be based on this academic stuff I had read and having all this historical data. I remember hearing from one of my coworkers at LVSC that he once parlayed in college football a 41-point favorite with over 44.5 points for the game, which is a very high degree of correlation because how often is a team going to win by more than 41 points without there being 45 points scored total in the game? It's like 42-0. That's the only way it can happen. At the time, I remember parlaying something like minus 37 with over 56. That was allowed at Sportsbooks. There were incredible opportunities looking back on it. I think you kind of take it for granted in a way that these opportunities are going to remain.
SPEAKER_01:Rufus loved living in Las Vegas, but his experience did not fit the Sin City stereotype.
SPEAKER_02:I loved Vegas at the beginning. It was the... It was the first city where that I'd lived as an adult because I moved straight there from college. So I didn't really know anything else. And, you know, I'm newly a Vegas resident again, actually, although I'm mostly nomadic at the moment. But I loved all the outdoorsiness. I, you know, hiked. especially the beginning, I went hiking a ton. I visited all the national parks. I started playing golf like more than twice a year. And I made so many road trips like San Francisco, LA. There was one winter where I spent like a month just in Denver and up in the I just lived with him for a little while. So I still feel this incredible sense of loyalty to Vegas. And it's like the place where I became the person I am. I don't know. There's this bond that I will always have with Las Vegas no matter where I go.
SPEAKER_01:So Rufus had an entry-level job that paid a modest salary, and he was out making small-time bets. But even those small-time bets probably should have been discouraging because betting small didn't keep him from getting barred. Then his life changed when he met Mark DeRosa. Their first encounter happened in the frenzy leading up to the Super Bowl.
SPEAKER_04:The AFC-NSC championship games would end and then nothing would happen until Thursday when, at the time, the Las Vegas Hilton, which is now the Westgate, would put up their numbers. So then that was on the Thursday. And then the Friday, the next Friday, a couple other places would put up numbers. But then Saturday, it was like all hell broke loose and everybody put up their stuff. The day that I met Rufus, I was at the Golden Nugget. It was a Saturday. It was a crazy Saturday. And I had been working all day since like 7 a.m. And I had just finished betting at the Golden Nugget. And I was done for the day. Or just cleaning up a few little things here and there. And I decided I was going to have a drink. I don't ever drink on the job. But the day was over. It was the hardest day of the whole year. So I was just relaxing a little bit, kind of just finishing out the day. And this kid walks in in like a white Adidas jogging pants and jogging shirt. And he's got a laptop on his arm. And back in those days, you had to be careful about talking on the cell phone in the sports book. They had just had a law. They had just overturned a law that said you couldn't even talk on a cell phone in the sports book. And there was nothing illegal about having a computer, but it was just like you didn't want to because a lot of the book Sportsbook operators would be like, oh, what's this guy doing with a computer? You know, yada, yada, yada. So Rufus walked in and he had the computer like attached to his arm. He went up to the counter and bet a lot of things that I didn't bet. And I kind of had this attitude of, oh, who does this kid think he is? You know, I've already I've already beat him to everything that there was to bet. So what does he think he's doing? You know, I kind of watched him and, you know, he he's kind of had a little bit of odd behavior. You know, he's he's an interesting guy. And so, you know, he just kind of stuck out. I kept on seeing him in a couple places here and there. I would see him and I wasn't sure if he saw me, but I remembered him. You know, he wasn't betting tons of money, though. That was the thing. He was betting like$100 here and$50 there, a couple hundred there. So I really didn't think too much of him. And then one day we were at the Palms and the Palms was an independent sportsbook at the time. And I noticed that he kind of was following me towards the parking garage. He was behind me like 50 feet or so. And I had parked all the way, you know, the furthest away that I possibly could. I just guess I couldn't find a parking spot that day. And at first you're thinking to yourself like, okay, maybe this guy's not following me. Maybe he just parked near me. But the further you get out, the more you realize that maybe this guy's following me. And not only was he following me, but he was getting kind of close. I finally turned around and said something like, you know, can I help you with something? And I had my... hand on my mace you know not that rufus was too intimidating but you just never know you never know if somebody's got a gun or somebody's got a knife or you know you just never know so he said yeah he said uh didn't i see you at the golden nugget a few months ago and i said yeah i think so and he says oh okay yeah i remember that and he said um you know do you do this for a living and at that time i was very secretive about you know what i said to people and i said what do you mean he says well i see you all over town Ever since I saw you at the Golden Nugget, I've seen you so many other places. Do you bet for fun or are you betting for a living? And I said, well, I do okay. And he said, oh, okay. He says, well, I moved out here this year and I work for Las Vegas Sports Consultants. And I just graduated from Yale with a degree in economics. And my ears just kind of perked up a little bit when he said economics degree from Yale. This is how Rufus remembers
SPEAKER_01:the meeting.
SPEAKER_02:I happened to be at the Golden Nugget right when they released their prop sheet. It was just very lucky. And there are all these other professional bettors there, including Mark, who I think knew that the prop sheet was coming out. I was just doing a loop going from book to book. And my timing just was very lucky. So I'm behind Mark in line. I'm the second person in line. And Mark is there for 40 minutes. I'm not exaggerating. For 40 minutes, he actually ordered a drink. I think he ordered a Jack and Coke from a cocktail waitress while he was at the counter placing bets. So fast forward, I didn't say anything to him or anything. Fast forward a few months later, and I see him at the Palms asking at the counter about NBA props. And so I followed him out of the sports book into the parking lot. Because I was curious what, you know, I was probably a little too shy to ask myself about NBA props. And I was curious what they said. And I was kind of like, who is this guy? I think he was afraid I was going to mug him or something. And if you've met me, I mean, I'm not exactly a very threatening looking guy. But if you're betting for a living and carrying tens of thousands of dollars in cash in a backpack, I mean, a little bit of paranoia comes with the territory.
SPEAKER_01:Mark invited Rufus to a dinner so he could meet more members of the group. Rufus understood this was a big opportunity, so he brought his laptop. But he was so nervous that when the restaurant brought him the wrong food, he was too intimidated to actually say anything. Then later, Mark invited Rufus to a party.
SPEAKER_02:And they had this whole group of friends out there, too. I mean, people playing casino games. And so Mark invited me to some party at I can't
SPEAKER_01:help thinking about the culture clash that could have existed between Rufus Peabody and the guys from Appalachian State. Rufus wrote a 90-page paper about sports betting. They went to class when they weren't figuring out ways to hammer internet casinos. Rufus went to Yale. They had a friend named Mad Dog and a house in Vegas called the Frat House. It could have been like mixing oil and water, and probably in some ways it was. But it was also like dumping gas on a fire. Here's Zach.
SPEAKER_03:I mean, he was certainly an interesting character. Anybody who's met Rufus, nobody says, man, that guy's boring. I mean, he's an interesting guy, and he's definitely a smart guy, and he'll let you know how smart he is very quickly. But he was basically allowing us to, a lot of what he brought to the team was new stuff to us. Like, he had this idea that he could beat the live baseball lines, which live lines were just starting to even show up at the time. And certainly the live lines that were out back then, I was sure he could be looking back on it now. We probably should have beat it a lot worse or a lot more. But, you know, it was obvious he was a sharp guy. He was under some weird circumstance when we met him. You know, he was working for Las Vegas sports consultants and they were paying him like next to nothing to like make the lines and work on modeling and all this stuff that's just It has a lot of value to anybody who's not Las Vegas sports consultants, I guess. So we were able to get him to agree to come on and work with us. And he was with us for a very long time. And obviously, he learned a lot. And we learned a ton. And we made a lot of money together. And I certainly would have never gotten involved with a lot of the other sports and the segments of the industry as quickly as I did if he hadn't have come along. and certainly sped up a lot of the things that we were doing manually. He had a lot of programming background, a lot of stuff we were doing, old school Excel spreadsheets and stuff. So, you know, he was a huge addition to the group from day one. One of the first things he got us betting was second halves for, I think we were betting second halves college football right off the start. And it was just a segment we had never looked at. I had never had that set of data or that way to kind of quickly compute you know, take that, take those first half inputs and quickly compute it into something that was meaningful. But we had done some, I mean, obviously with anything that we bet, it wasn't just, you know, oh man, I really know this NASCAR driver is going to win this week. It was, you know, we were getting data and we were, you know, we were doing what we needed to do to, to come up with a winning product. When I say Rufus helped us out, I mean, like the golf thing comes to mind specifically, like we had just started betting golf before we met Rufus. And like, we were compiling like, We were compiling like just line by line tournament results and there was barely any shot track of data back then. What we were doing was so manual and Rufus had everything where he was able to just speed up and run a golf sim in a few hours on Monday morning on something that would take us all week or, you know, the first couple of days of the week to even get a meaningful product. meaningful simulation or projection out of it. So he definitely helped us out on the programming side. And, you know, when I was still not a programmer, when I need programming work done, I outsource it. It's just something that I've never taken the time to sit down and learn to do myself. But Rufus was that was his that was his thing from day one using Stata and R and all this programming or those computer programs to do everything that we were doing, but tremendously way faster and less mistakes and stuff like that.
SPEAKER_01:Joining the group made an immediate financial impact for Rufus.
SPEAKER_02:So they gave me a 20% free roll to bet baseball for the 2009 season. And I don't even think it was actually my baseball model. I was working on some live stuff at the time and I was still working at LVSC. And I would tell them what to bet and they would bet it. They had like a code name. I was AAA. They had code names for me and stuff because they would be at a sports book and they wouldn't want people to know that they were working with Rufus, I mean, kind of to protect me because it's my job. And after a month and a half, they pay me like, I think in good faith, we were up, I don't know how much, we were up over$100,000. And so my share of that was over$20,000. And they give me two banded$10,000 stacks of$100 bills. And I mean, that's a moment I remember just because it was, I mean, dealing with that much cash, right? But... At that point, they were like, why are you still working at LVSC? You're making the lines better. You're making them better, which makes it harder for us to make money. And they offered me a chance to be a junior partner or whatever, where I could essentially continue on a 20% free roll and not just with baseball, but other sports and just quit and work for them full time. And I actually agonized over this decision because, I mean, it's a big move. I'm leaving a job that I actually enjoyed. And, you know, I never considered myself like a gambler in that way. It was always kind of it was something on the side. As
SPEAKER_01:Zach said, Rufus didn't come into the group with one or two strategies that they could squeeze until the book sharpened up. He had lots of ideas.
SPEAKER_02:At the time, the books weren't that great at pricing these things. Like my summer of 2009, my project was building this big base live baseball model. That's what I was trying to do. And and it's very difficult. But but that was the late summer. In the early part of the year, I was essentially building it on the fly. I had the data set open and books weren't that great at pricing this stuff. So it was like a logistic regression of whether the team wins on the pregame odds and dummy variables for the score differential at this half inning point. And then something based on like what part of the lineup was up and like some stuff related to starting pitcher, some stuff. I like, there was some thought involved there, some stuff I had built out and like bullpen strength or something, but, but it was, it was, yeah, it was built on the fly.
SPEAKER_01:Of course, when you start betting more, you'll also end up with larger swings.
SPEAKER_02:2009 was the first was the year I started working with them and we weren't actually betting pregame baseball stuff. We were, I hadn't, I hadn't productionized my baseball model yet. And I did that before the 2010 season. And 2010, we had, we had a glorious run to begin the season. We were like printing money, it felt like. And the first, I guess, through the end of June, we had made a million dollars betting baseball. And I think we ended up giving back like 600,000 of it in July and August, which was the first year of many years where I did really well the first half of the season and July and August gave a lot of it back. And eventually decided to just take July and August off of baseball betting. There's weird stuff that happens around the all-star break. Like I can see it quantitatively. but I don't have any good logical explanation for it.
SPEAKER_01:We have to pause there for now, but an important part of the group's success came from the power of teamwork. So when we come back in part two, we'll hear about how they translated predictions into betting success and the unique challenges they faced along the way.
SPEAKER_03:For a while, I was carrying something a little stronger than Mace. I did have a concealed weapons permit for Nevada, so... There was a few incidents in different hotel or sportsbook parking lots that kind of happened consecutively. The Hilton parking lot had an incident where a gambler got jumped, and then it happened again a few weeks after that at the Orleans. At that point, I was just like, well, I need to take a look at this and see if I need to do something better to protect myself. For the most part, I just got used to parking as close as where I needed to be as possible. Sometimes that's not a legal parking space. Sometimes you You learn little tips and tricks around the different sports books to throw your car in park because you're only going to be there for three or four minutes. So you can run in and run out and be gone before anybody even knows you were there a lot of times.
SPEAKER_01:Risk of Ruin is written and produced by me. Special thanks to Rufus Peabody, Mark DeRosa, and Zach White. Rufus has a new startup called Unabated, which makes analytics tools for sports bettors similar to the tools he's used over the years. Actually, his partner in that startup is a prior guest of this podcast, Captain Jack Andrews. I'll put a link to Unabated in the show notes, as well as links so you can follow the guys on Twitter.