The Risk Takers Podcast
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The Risk Takers Podcast
"+EV Betting" is a Dangerous Term... | Ep 48
"+EV Betting" is a popular term that can hinder you as a bettor if you don't understand it. This episode explores how EV differs from spot to spot - and how creating frameworks for that difference can lead to big profits.
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Right, it doesn't mean so. Like our bet sizing comes gets a lot bigger when there's more confidence that we have an accurate fare. It doesn't get bigger when there's a bigger discrepancy between our fare and the market price. Like, hey, what's up? Everybody? Gp13 here, new episode of the risk takers podcast, and I'm gonna be talking about Something that I often bang the table for, which is we need a different term than plus EV betting or or.
Speaker 1:People need to actually understand what expected value is, and we have to have more of a discussion around it, because I do not think it helps to bucket Only d-vigging, like odds jam strategies into plus EV betting. I don't, you know, I I don't think that that Really helps people understand what expected value isn't, how it, how it. It's not. Expected value isn't just like. Oh, three sports books said this and then the fourth sports book said that. So it's expected value like there. That is very different than the expected value in the in a Face-up hand of poker, for example. You know these are because what's happening is we're not talking about certainties, air or error, you know, possibility of errors or Other ways of finding expected value. We're just saying expected value is created from d-vigging sports books and that's wrong. So I want to talk about how I think about expected value, how Expected value differs from situation to situation, and then I will kind of break down a couple of examples. Actually, let's start with the examples.
Speaker 1:Okay, so here's a good example using poker that should help you understand the difference in certainties around expected value. So let's say you have a situation where you have pocket fives and your opponent goes all in with Ace King Offsuit. You know this because they go all in and then they flip over their ace king off-suit and then it's over to you to act. So in this situation, you know you would know I'm gonna show my rust at poker, but I think you're like 56% there. So your expected value would be like 56% of the total pot and you know that exactly if he's, you know how many cards are in a deck and you know the true probability of you know the true probability of your fair value, your win, your win percentage in that situation. So you can be extremely confident there that your expected value is 56% of the pot or whatever the actual 5s versus ace-king-off probability is. And then you would take Kelly and you go full Kelly and you could do that and you'd be perfectly fine, right? So that's a situation where you know your expected value.
Speaker 1:And is that expected value different than what happens if you have pocket 5s and your opponent goes all in and they don't flip over their cards? Well, yeah, definitely, but they could have ace-king. So your expected value could be the same. And if they have ace-king and they don't flip it over but they go all in, your expected value is the same, but you just don't know that, right? So you are putting your opponent on a range of hands. You're saying, okay, sometimes they have ace-king off and sometimes they have pocket 2s, 3s and 4s, which I'm doing really well against, but sometimes they have pocket 6s and jacks and they have whatever they could have 6-7 suited. I'm just BSing right now, showing my poker rush.
Speaker 1:But what happens is your expected value is the same, but you have no way of knowing that. So you're trying to make a estimated guess as to your expected value in that situation and you're putting your opponent on a range of hands that they could have in this situation and then you decide, okay, against all of those hands and the frequencies at which I think they have those hands, my expected value is x. And then you decide to call or fold and in that situation you're playing against ace-king both times, but one time you just don't know for sure they have ace-king and even though your expected value is the same, you are. The scenario is different because you have no way of knowing your actual true expected value. And in sports betting you have no way of knowing your true expected value either, no matter what a screen, an odd jam screen, will tell you it's not actually fair value, it's just a guess as to what fair value is, just like in the poker hand. So in sports, what we're doing is we're trying to figure out our best guess and in this situation we're handcuffed even more than the poker situation, because in poker there's a deck of cards that's 52 cards. We know the exact makeup of the deck and we can, over time, get close, close, close to an approximation of expected value.
Speaker 1:In sports betting we're not going to be as close as poker because sports betting we're trying to predict the future of a sporting event that has all of these variables, all these different players, way more complex rules in gameplay than poker, and we have no. Also, we have no hand in the matter. We don't have any. There's probably information that some people are aware of that we're not aware of the health of a certain player. If they went out and blacked out last night, now they're super hungover. There's just so much there that we don't know about. So our error bar is much, much bigger. And we're at the same time trying to predict, just like the sports books, the estimated expected value of an event happening. Okay.
Speaker 1:But now you might be saying, oh wait, but it's different, because if you're looking at a screen and you're seeing the expected value on a screen, that's true because all these sports books have agreed on a price and they have millions of dollars of investment and getting the right prices and all this rhetoric that you hear, and it's just like bullshit, honestly. And the reason it's bullshit is most of these sports books are just copying each other and they are not that great at finding fair value. They're good at understanding their customers and who's sharp and who's not sharp and they're trading in line with them. But a lot of stuff, like a lot of markets, don't trade, so they're just kind of guessing on those. They're guessing like we're guessing right and their guess is, in some aspects and in relation to some players, not even as good as ours.
Speaker 1:So what you're doing with sports books is you might be saying, oh, this is the fair value, but you might be weighing three books that copy each other against one book that's a decent originator and getting crushed right. So the same problems apply. You're just copying someone else's estimated fair value instead of your own, which is fine, and there is more safety to the market-based approach. And I'm not saying these sports books are bad at pricing. A lot of them are good and a lot of them are really good at customer profiling and arriving at a good price. But I just want to make it clear that just because three sports books say this is a good bet, it doesn't mean it's a good bet and it definitely doesn't mean that's the expected value of the bet. That's the fair price. Certainly does not mean that, and if you think it does, it's going to limit you and your growth as better. Because what you're trying to do is you're trying to take that next step where you're, in some instance, breaking free from just tailing the market average of some sports books that might not even know what they're doing.
Speaker 1:But what's important for this is understanding that that doesn't mean that that's the fair value. Just because there's an aggregate number that pops up on an odd screen doesn't mean that's fair value. It definitely doesn't mean that you know your EV and that's why everybody says bet quarter kelly. The reason people say bet quarter kelly is because you're protecting against being wrong about your fare. If you know for a fact what your fare is, then you can bet full kelly, like if it's just a mathematical certainty what fare is and you know your payout, then you can bet kelly would no problem. You know full kelly doesn't not work. It's a good formula but it works only in mathematically certain situations. So the reason people are saying that, cordecai, it's because you actually don't know your fare and what that means is you don't know your expected value. So when people are saying like plus EV betting, I don't think that everybody understands that we don't know our EV and it might not be plus EV betting. So this divide where d-vigging is plus EV betting but doing anything different, originating is correlated Parley has come under plus EV betting.
Speaker 1:I guess it's very odd this distinction, because I think it actually stops people from thinking about EV and how to react to having more certainty to less certainty in your EV. And the thing is, the higher the Kelly spectrum you can go. So the way I size bets or we size bets isn't like we don't just do Cordecai, like if we have confirmation from other, let's say if we have other information that is confirmed our original hypothesis like maybe it's a model output that we get some market confirmation from, or we know that another very sharp bettor is on, then we ratchet it up Kelly-wise because it's like we increase Kelly when we increase our certainty that our fare is actually our fare. So our bet sizing gets a lot bigger when there's more confidence that we have an accurate fare. It doesn't get bigger when there's a bigger discrepancy between our fare and the market price. It does a little bit, but the much bigger sizing comes when we're more confident in our fare through objective methods of determining our fare. And that's what's so, so important because that's where you make huge outsize returns is when you know to size up.
Speaker 1:And most people they look at Kelly and they say, oh, you only size up when your fare is farther from the market price because the EV is higher. That's technically right but it's wrong. And it's wrong because we don't have a proper understanding of expected value. And here's a good example of why this the understanding of sizing Kelly up the bigger your edges is not the proper way to do it when you are playing games that don't have mathematical certainty. So let's say that you have some process. It could be devigging, it could be your own model, I don't really care and it spits out a 20% edge on an NFL side on a Sunday, right. So you're like, wow, I'm going to smash this. Well, you're probably going to lose money because the market on NFL sides is never giving out 20% spots On Sunday. What probably happened is one book got some crazy quarterback injury news and they move faster and they're an outlier from the market. And now the rest of the market saying, wow, it's a huge 20% edge on this book. And you go and then you bet your biggest, biggest bet, and you're going to be betting your biggest when you're the most wrong, which is a big problem. You'll go broke.
Speaker 1:So instead of blindly using Kelly to size up when your edge is the biggest, I suggest you look into expected value and you don't see it as a firm thing, but you see it as malleable and you understand when you have more confidence in your expected value being positive or in it being around that number, you have more confidence in your true price. That's when you start to scale your bets up, because I'd rather scale that up that has a 3%, 4%, 5% edge. That I'm very confident has that 4%, 5% edge than something I'm not that confident in or that I only have one source of. I only have my source saying it's a 17% edge. Probably going to question that. So I think it's really important to understand the difference between sizing up because you have confidence in your number and sizing up just because you're following Kelly, and don't just size up because you're following Kelly.
Speaker 1:When you're playing a game that's not mathematically certain, like the poker hand, where someone flips over Ace-King, that's a game where you can bet exactly Kelly because you're 100% confident in your edge. So instead of thinking, okay, we are going to, if he had pocket twos, that's when we're going to size up. Of course you'd follow Kelly there. But what does that mean for sports betting? It means when the hand is face up, when the EV is face up and you're more confident in it, you can scale up the fraction of Kelly. You can go from your 0.25 to 0.5. There are situations where we do that. That's a huge bet sizing increase. So you got to be objective when you're doing stuff like this.
Speaker 1:But it is, I think, the best way to vary your bet sizing and make a lot more money. And I think there's a lot of money left on the table by not understanding dynamic bet sizing and sports betting. And this is, I think of it, way more like a confidence thing than an edge thing. So hopefully that's helpful. I hope that gets people thinking a little bit about what is expected value. Are we doing the right thing with the term plus EV betting? I don't love it but I understand. It's kind of the phrase that describes the community now, but I would just challenge everybody to really think about it so you understand where plus EV stuff is maybe more applicable, less applicable, and think about the confidence you have in your EV. Think about EV, just really think about it, because it is the crux of betting. But it's not as simple as I think. Sometimes we try and make it seem so.
Speaker 1:Anyway, thanks for listening and I will see everybody. Oh, the other thing is if you please could subscribe to the YouTube channel, that would be great. So I'm trying to throw out a couple of videos on there, some shorts and everything. I'm enjoying it. But it'd be great if everybody could hop on. If you get some value out of this and give me a like and you subscribe, it'll help in the algo and I'm trying to put out content that's educational and sometimes that doesn't crush the algo, but it's what I want to do, so I'm going to stick with that. If everybody could give me a hand in that mission, I would really greatly appreciate it. All right, thanks, everybody.