Volume. Its important. (The Story of Nigel Nit and the Loose Cannon)
I was going to call this Blog “Risk Profiling; the differences in equity between alternate gambling risk strategies” but I fell asleep before the 6th word of the sentence. So, step aside Rowling – this is the tale of Nigel Nit and the Loose Cannon (Volume. It’s important).
Risk strategies in Sports Betting
Both Nigel and Loose are keen bettors with long term positive expectation strategies. They understand the long established fables of success: Equity, Variance and Bankroll management.
However Loose embraces risk, whilst Nigel is less tolerant of it. This attitude results in vastly different betting profiles. Lets have a look at their Venn diagrams:
Both wager on large +EV bets with 115% equity or higher.
However Loose Cannon has two additional bet pools he wagers from. He also wagers on thin value bets, with ratings 100%-115%. A third pool consists of bets where he suspects are +EV but can’t accurately defined (steamers, #pickyourpunts, bets that are difficult to benchmark). Because Loose Cannon cannot be sure that all of his bets are +EV, a number of these will be “unknown”. The Venn Diagram above shows that a minority of unknown bets are -EV. He is experienced, confident and applies judgement, therefore -EV bets are minimised – but it wouldn’t be possible for him to eliminate all -EV bets, and for time purposes it wouldn’t be practical.
Why would he risk betting on -EV bets? The simple answer is VOLUME. If the overwhelming majority of your bets are +EV, then it doesn’t matter if a small number of bets are -EV, because your long term betting profile with iron these out. There is also the added bonus of the occasional -EV bet being good for the longevity of your betting account. We can’t avoid restrictions forever, but negative equity bets cannot hurt.
Loose Cannon’s betting profile is the equivalent of an aggressive poker player. He understands that he won’t be right all of the time, but he doesn’t have to be; he just needs to be right the majority of the time. By loosening up his bet selection criteria, the Volume of bets he can get on is significantly greater than that of Nigel Nit. The graph below shows my last 2000 bets (I am Loose Cannon). I have then filtered out all bets 100-115% EV, and bets where I wasn’t confident I was certain of the EV (Nigel Nit):
The variance experienced by Nigel was much lower, but in total he made £15,000 less than Loose Cannon with his low risk approach. That outcome, whether defined as “low risk”, “the old fart method”, or “literally leaving money on the table” is not an optimal strategy.
Aesop proclaimed “Slow and steady wins the race”, in his fable “the Tortoise and the Hare”. Aesop was never faced with a decision whether to bet on “Aguero to score in the first half of the game WAS 5/1 NOW 8/1” 60 seconds before Kick Off on a slow iPhone 5. “It feels like its +EV; he’s 3/1 FGS; but there are more goals in the second half than the first, however there are more first goals in the first half….”. This kind of circular thinking is enough to keep Nigel away from the bet. Loose Cannon thought about it for 2 seconds, decided it was probably value, and even if it isn’t in the long run he has the volume to mitigate the risk of it being a bad bet.
In Summary; embrace the Loose Cannon. His maniacal, carefree approach may have justification in Optimal Game Theory.
Optimal Game Theory in Poker: Low Risk vs High Risk strategies.
John Nash developed game theory as a branch of mathematics at Princeton University around 1950. Poker is an excellent example on the difference of outcome between Low Risk and High Risk strategies. Optimal game theory in poker presents a strategy that cannot be exploited. The strategy is characterised by loose, aggressive play. It is also designed to make the player unpredictable. Unpredictability is not an important characteristic for value betting, but aggression is.
Aggressive poker is a high risk strategy. GTO involves playing an aggressive style of poker with a balanced range of hands; sometimes good, sometimes bad. It involves a lot of betting – whether you have hit the flop, you’re drawing or are bluffing.
Passive poker is a low risk strategy that involves a lot of calling and folding, and not a lot of bluffing. Passive players do not put much money in the pot unless they know they are going to win the hand.
If you mathematically model these two strategies, the aggressive poker wins the majority of the time. That is because the Nigel Nit has to both wait for a hand, and hope it holds up. Loose cannon can play any hand, and will sometimes get lucky with the worst. One of the reasons he’s a longer term winner is because he’s putting in more volume of hands. The reason Loose Cannon wins with his high risk strategy is down to one mathematical attribute – Volume. He loses more pots than a low risk strategy in terms of frequency, but these are outweighed by the large number of pots he is also winning.
An aggressive, high volume strategy can be applied to betting, with the following advantages:
- Avoid Circular Thinking
- Objective Analysis
- Twice the fun in half the time.
So loosen up and fire those cannons.
And remember – whilst Nigel and Loose Cannon are both winners, no-one wants a party full of Nigels (unless its a gardening convention).