Postscript
In 2022, Mack bet $10 million to win $72.6 million if the Houston Astros beat the Philadelphia Phillies in the World Series. When the Astros won 4 games to 2, Mack collected on the biggest sports bet of all time (and more than the entire state of Nevada has ever won in an entire month). The total payout was split among multiple books, but it was all on the Astros to win; the biggest portion, $30 million, came courtesy of Caesars. Mack brought a wheelbarrow to collect (click for video).
Update 11/20
As mentioned, the entire play ran 42 days. During that time, Frank and I talked every day to plan and make the bets. While most of the work was done in my office, where we could access betting lines via computer, we found that it was helpful to go to an outside venue to clear our heads. Our almost-daily meeting spot became the Crown & Anchor British pub. There are two in town — the “Big Crown” on E. Tropicana and the “Little Crown” on W. Spring Mountain.
We met at the Little Crown, which is closest to my office, almost always at noon. The reason is that from noon to 1 pm, both bars run a “gambler’s happy hour.” Play $200 through a machine and get $20 in free-play. We’d partner up and play each day while we discussed the hedge and the timetables. Mack would often call right around that time and we’d walk outside where the reception was better.
The Happy Hours run at both Crowns from midnight to 1 am, noon to 1 pm, and 5 pm to 6 pm and you can play one per day. Both Crowns have good food, including a superb clam chowder that we discovered during this period. It’s Boston (white) with a non-gloppy base, equal amounts carrots, celery, and potatoes, and lots of whole and chopped clams. A cup is $3.50 and a bowl $4.50. A big batch is made every Friday and even though lots of locals come for it, the supply usually lasts a few days (ask the bartender if they have it). The chicken fingers are the best in town, and other favorites include the British pies (steak & mushroom, steak & kidney, chicken and leek), fish & chips (all-you-can-eat on Mondays), sausage roll, Scotch egg, steak sandwich, and a really good “garden grille” veggie burger, all priced under $15. And, of course, drinks are free while you play.
Check it out when you come to town. We still go there regularly, so maybe we’ll see you there.
Update 11/13
One aspect of this that hasn’t been talked about much is the involvement of the “Professor.” Here’s some detail.
What many continue to misunderstand is that our goal was to hedge an existing (and constantly moving) liability, not to necessarily make positive-expectation wagers. In fact, making good bets was often impossible and we were sometimes taken to task by the Twitterverse after bets were reported. What these dissenters didn’t take into account is that getting the money down in the right proportions to complete the hedge was paramount 99% of the time.
Sounds easy, but it’s not. In fact, it can get extremely complicated. Frank and I were confident in the strategy and the moves we were making, but we wanted confirmation. That’s where the Professor came in. The Professor is Steve Heston, a long-time friend of ours who formerly headed the arbitrage desk at Goldman Sachs and has taught finance at Yale, Columbia, Washington University, and currently at R.H. Smith School of Business, University of Maryland. Um, yeah. If you want more, check out his Wikipedia page. What makes Steve particularly potent in such endeavors is that he’s big-time into gambling. He’s been Frank’s go-to guy for higher math for years and contributed greatly to two of our top poker books — Kill Phil and Kill Everyone.
Steve was involved from the start, perfecting our spreadsheets and assisting with the game plan. He’s a pretty good dude to have in your back pocket and was a primary reason that we didn’t give a rat’s rear end what the Twitter observers were grousing about. Additionally, throughout the process, we referenced Steve to Mack only as the Professor, and I can assure you that it had a lot to do with Mack’s level of confidence in us.
We’ve added some recent podcasts to the media list below, a couple of which go into more detail about Steve’s role in the play.
Update 11/6
The Nationals defeated the Astros 4-3 in a wild World Series that saw the visiting team win every game — the first time that’s happened in any of the major professional sports. Frank and I have been working on tying everything together — accounting, settling positions, documenting details, etc. Hence, the long lag in blog posts here. While we continue to work these things out, following are some excerpts from the November Las Vegas Advisor newsletter that touch on some key points. We’ll be back with more when we get things wrapped up.
The hedge was good. Everyone surmised that success required the Astros to win. It was a natural assumption. After all, Mack was betting millions on the Stros. But that wasn’t the case. An Astros championship would have been nice—Mack was rooting for them and so were Frank and I at the end—but the fact is it didn’t matter financially. Our job was to hedge a multimillion-dollar liability similar to the way you would by buying insurance. If the event (Astros win World Series) happens, a lot of money is lost, so you want insurance to cover that loss. If the event doesn’t happen, there is no loss, except you have to pay for the insurance. The losing bets on the Astros were the cost of that insurance. We’re not divulging all the numbers at this time, but I can tell you that going into that Game 7, the hedge was fully in place. If it wasn’t for Mack’s passion for the Astros, I wouldn’t have cared who won.
There’s a lot involved in betting millions of dollars. This was one of the biggest surprises—betting enormous sums of money creates a lot of logistical challenges. Banks don’t carry that much cash, so we had to wire funds or carry cashiers checks. And guess what? Wires and cashier’s checks aren’t guaranteed to clear the same day they’re issued. And what about weekends? Two of the biggest betting days occurred on Sundays and if we hadn’t thought ahead, we’d have had no access to money to bet. Then there were the logistical problems. Earlier in this blog I wrote about a cashier’s check for $100K almost flying out of my suit coat pocket. On another occasion after cashing a big ticket at the D, the bag we brought wasn’t big enough to hold all the bills. I had to scoop up $10K bricks and carry them out in full sight under my arm.
Twitter is the new crack cocaine. Good Lord, I didn’t know I had so many friends in the media, but that was only until I didn’t give one of them the first notice of a big bet. I get it. The competition to break stories is huge, but man, is it ever cutthroat. A few relationships got stretched in the process.
Not all sports books are created equal. This is the big one. I learned a lot about which ones are talk and which are action. Which are trustworthy and which are snakes. Which are timid and which are bold. And it’s not just the books; it’s also the jurisdictions. Honestly, New Jersey and Mississippi kicked Nevada’s butt overall. The biggest accepted bet was $3.5 million by DraftKings at the Scarlet Pearl in Mississippi. The second biggest was $1.5 million booked by FanDuel in New Jersey. Also accepting $1 million bets were Unibet out of NJ and William Hill. In Las Vegas, our savior was Circa Sports, which handled action at almost every turn (they booked more than $2 million total) and saved our bacon with their help in the execution of the bets. I’ll hold the negatives for now, saying only that some of these books are the pure definition of “weak sauce.”
It was a hell of a ride. The whole thing took 42 days and I’m so far behind in work and personal obligations that I can hardly keep them straight, but I wouldn’t trade it for anything. I remember driving into work one day and listening to a VSiN host comment that this story was unique in sports betting and something we might not see again. What a feeling to know that we were at the center of it all. I thought I’d be happy to see the back of it, but honestly, I’m feeling a bit melancholy that it’s over.
Update 10/30
Tonight is Game 7 and we’ve been getting bets in as best we can. Some of the books have had enough. Some didn’t have any. Hats off to Circa for sure. Thumbs down on CG Technology in particular and a couple others that make me wonder why they’re even in the business. We’ll get into these issues more after things settle down.
For those wondering what we’re rooting for, it’s all Astros tonight. We’ve bet a little over $1 million on them tonight at numbers that jumped all around, but we got down in the -130 to -136 range to tighten up our position. Of course, Mack is on the Astros emotionally as well as financially. Look for him tonight in his usual spot behind home plate. Check back here for the round-up, which we’ll provide in multiple posts over the next few days.
Go Stros!
Update 10/28
Three straight wins by the Astros in D.C. has turned the World Series on it’s head. We made bets on Houston in all three games. In Fridays Game 3, bets in NJ placed by Mack at Unibet and William Hill netted a total of $593,197 as Houston won 4-1 with Zack Grienke getting the start. Game 4 on Saturday saw Jose Urquidy pitch five innings of two-hit ball for the Stros as they ran away from the Nats 8-1. Bets at the D in Las Vegas and William Hill in Jersey returned $500,000 as the series was evened at 2-2. All of these accumulation bets pushed the hedge farther in the right direction, though we would have preferred at least one Nationals win be in the mix.
Sunday’s game was the most interesting from a betting perspective. Our betting would take place only in NV for Game 5 and began seven hours before the first pitch. First stop was the D. Gerit Cole was a -149 favorite at the time and a bet for $298k to win $200K was made in our standard fashion of “Action” instead of listing pitchers. As pointed out two weeks ago, if you list your pitchers and one of them does not start, your bet is deemed “No Action” and you get a refund. Due to the unique nature of our situation, we determined at the onset that getting a bet voided due to an off-pitcher would be far worse a result than just rolling with the new pitching match-up. We need decisions when we bet more than anything else so Action is the way to go.
The match-up Sunday was Gerit Cole vs Max Scherzer. After the D bet was in we headed to the Rio. They had a good line, but the maximum bet they’d take was to win $10K. We took that and headed next to the Palms where CG Technology showed a line of -145. In the time between the Rio bet and approaching the counter at the Palms, the game was taken off the board. Scherzer was getting scratched as the Nats starter and a new pitcher was being put up. We didn’t learn of this until we were at the window and were informed by the CGT writer. The new pitcher turned out to be Joe Ross. Ross had pitched primarily in August, starting five games with the Nats and winning all five while compiling a 1.05 ERA for the month — a capable replacement. The new line went up at Astros -235, an increase of 90 cents! That converts to a new implied win probability for the Astros of 70.2% vs. the previous 59.18%. We thought that was a stretch so declined to bet at the new price. As per standard rules, the two bets already made were recalculated using the opening numbers at each book, which turned out to be -235 at the D and -230 at Rio. Game 5 resulted in a 7-1 Astros win and a net win of $133,069 after the price adjustment. It wasn’t the amount that we’d planned on, but the strategy of declaring “Action” instead of “Listed” paid off. We got a decision instead of a voided bet.
In the three-game sweep played in Washington the Astros gave up just one run in each game, outscoring the Nats 19-3. Heading back to Houston for Game 6, the Astros are rolling and will send Justin Verlander out to try to seal the deal. Verlander has struggled in his career in the World Series. In six starts he has an 0-5 record and a 5.73 ERA. It’s a short sample for a top-flight pitcher who’s in a great spot to notch his first World Series victory in a close-out game. The Monday price was in the -170 to -175 range and we’ll be betting the Astros again. The big question still to be decided is for how much.
As for the fun part of this saga, Mack flew in Monday night to arrange funding for a bet at Will Hill. I met him and his two pilots at the Atlantic Aviation complex on Tropicana and they wanted to go to Ellis Island for the $7.99 steak special. That’s what we did. I told them about all the great selections on the menu, but the Texans were having none of it and it was the steak special all around. Mack wouldn’t let me buy.
After dinner we headed back by way of the Strip at Mack’s request. It was the first time in Vegas for one of the pilots, so he got the 10-cent tour, then it was back to the plane for the flight home. Long day, but set up for today, which could mark the end of the play — or lead to a wild day of betting tomorrow for Game 7.
Update 10/25
Two games into the WS, the Nationals are up 2-0, beating both Gerrit Cole and Justin Verlander in Houston. Say what? No one here saw that coming, but we allowed for it in the wagering and welcomed it with monstrously open arms. This result flipped the numbers so we could bet whatever more was needed on the Astros at plus money, preserving the “insurance” budget for still-possible future opportunities in this series.
By late morning Mack had made his move in New Jersey with over 1.3M in bets split between Astros in Game 3 and Astros to win the series. Once the dust settled there we re-evaluated and decided to take two more bets in Las Vegas. Both were best-in-market wagers and both went down at the Mirage with West from Bleacher Report in tow after he spent yesterday hanging with Mack in Jersey (we like young West, a Montana St. alum). Bet #1 was on the Astros to win the World Series at +220. After betting 300K to win 660K, we followed up with a more specific bet called “Exact Result.” This bet is for the Astros to win in exactly 7 games at a price of +400. This was best-in-market as well and returns 100K.
Good for MGM in taking these bets, which, as we’ve expressed over and over, have positive expectation for them. We’re making these bets solely to bolster the hedge. Here’s what making a bet like this looks like, compliments of BleacherReport.com.
Up until now, after every bet made we’d get some form of a send-off at the book that included a well-intended but perhaps half-hearted “Good Luck!” We’d reply in turn with a much more sincere “same to you” (we really did want to lose those bets). Today was the first time that this response amounted to simply being polite. Tonight, the Astros in Game 3 is what we’re rooting for.
Mack will be at the game in Washington, sitting in his usual spot behind home plate. Frank and I will be watching at an undisclosed dive bar in Vegas while gnawing at our fingernails, or at least I will be. Either winner tonight is OK — that’s the aim of what we’re doing — but Astros is better. Yes this is fun, but it ain’t easy.
Update 10/22
Going into Game 1 of the World Series it becomes more difficult to make the bets we’d like to make. One reason is that the Astros are big favorites, lined at -225 for the series with some variation in a few places, which means we have to lay a big price to get more down on hedging an Astros WS win. If the Nationals can take a lead, this situation will relax. But it will be difficult if the Astros continue to steamroll. Another problem is that some of the books that have taken Astros wagers from us are now overloaded on that side and don’t want to take more, even though they have the best of it on the bet. Nothing can be done about that — you can’t force them to take a wager. The result of tonight’s game will dictate our next moves.
The media continues to follow the story and is doing a reasonably good job of tracking the bets and Mack’s overall position. It’s not perfect, but we’re not at liberty to disclose all the details at this time. In the latest article from the Las Vegas Review-Journal (added to the article list below), the main omission is a $1 million bet taken by William Hill in Nevada. This was the bet for which Mack flew into Vegas and made the bet on the WH app without leaving the plane, then flew back to watch the game in Houston.
Adventures in banking and posting funds continue, though we’re now a lot more knowledgable about how things work. Transport is always a concern. For example, I had a $100K cashiers check almost fly out of my suit coat pocket (and it would have had Frank not seen it escaping).
As mentioned, tonight’s game, though only the first of the series, is pivotal. A win by the Nats will almost certainly result in more bets so stay tuned.
Update 10/16
It’s been a wild week of betting, still mostly on the Astros to win the World Series, but also on some single games, including yesterday’s Houston win that added bullets to the betting fund. It’s a strange feeling to watch a game where you have $750K bet on one team and are still rooting for the other, because a Yankees win would have strengthened the overall position. Today was a rainout, so we had a day to get our bearings and post this blog.
Mack came to Las Vegas yesterday to help make some bets and we met him for the first time. Good dude for sure. He bet $500K at the Mirage and several people knew who he was and came up to talk. Mack talked to all of them. I told Frank I wanted to watch him to see if he really was rooting for the Astros and there’s absolutely no question anymore. As mentioned above, we needed the Yankees to win yesterday, but Mack was clapping and hollering for the Stros all the way. He has deep ties to the city and the team and pretty much “can’t help [himself].” We told him that he’s all heart and we’re all wallet in terms of priorities, so it works out.
One interesting aspect of this whole thing is the logistics and dynamics of moving the money. Of course, we do everything we can to avoid carrying large amounts of cash, but wiring or bringing cashiers checks to casino cages is no walk in the park and almost can’t be done spur-of-the-moment. Hence, there’s a lot of planning and coordinating that needs to be done. On the few occasions where we have to carry cash, all kinds of things come into play, such as not getting into an accident or getting pulled over by police while driving. We’re not doing anything illegal, but carrying $500K in the trunk of your car can get you into some awkward spots if it becomes public. Cash also requires counting, both in preparing the bet and at the counter, and that takes time. Everything requires verification and paperwork. We made the game bet yesterday with only about five minutes till first pitch.
The recent players have been William Hill, MGM, and Circa — all willing to take bets of $500K and up. We’ll likely be betting Astros and rooting Yankees again tomorrow. At least Frank and I will be.
Update 10/10
Things moved fast this morning. An agreement with William Hill NV to take $1 million on the Astros in Game 5 at -260 resulted in a quick trip to the Vegas airport by Mack. He was in and out of town in record time, staying just long enough to submit the wager using the William Hill app, then headed directly back to Houston in time to pick up 100 of his employees and get to Minute Maid Park for the 4:07 PST first pitch (look for him three rows behind home plate).
While Mack will be rooting for this bet (if it wins he’ll net $385K) along with several others he’s placed on the Astros up to now, Frank and I will be pulling for the Rays. The hedge we were brought in to construct is at a point where we’d like to see this end tonight. If it doesn’t, it’s on to face the Yankees and a new round of betting.
Update 10/10
Back in action Thurs night for Game 5 of the ALDS. In an elimination game things become very simple. Try to accumulate some extra bullets in the event the Astros advance. If they lose then that ends things. A bet on the Astros in the game was made at a moneyline of -252 at Circa Sports for $504,000 to win $200,000.
As this thing unfolds interesting changes to the normal way of doing things pop up. This was the first game bet made. The others have all been futures to win the World Series. At the window for a game bet you have the option of listing one, both, or none of the pitchers. If you list a pitcher and he does not start the game, your bet is No Action. Listing both pitchers is the normal practice of just about every serious bettor. The factor handicappers give the most weight to is who the starting pitchers are. Listing pitchers assures you have a bet only if your expected starters go.
As we were making the bet, the writer was given the standard instructions to “list ’em both.” But, before the ticket was printed, we reconsidered. Due to the unique nature of these bets, we realized that a change of pitchers wouldn’t be nearly as damaging as ending up with a ticket declared “No Action” due to a change of pitchers. Since realizing a monetary gain should the Astros win was the clear objective, we switched the ticket to “Action.” If a pitching change takes place, the ticket is recalculated at the new price but we still get a result, and that’s the key.
Taking it a step further, a pitching change from Gerrit Cole to anyone else would result in a lower lay price and generate a greater return on an Astros win, while simultaneously enhancing the probability of a Rays win, which is probably the best result given our overall objective.
Update 10/7
There’s been no action on the betting front for a couple of days while we await the results of the current playoff series. We’ve been contacted by several books asking to be put in the betting queue for the AL Championship series and games, assuming the Astros go through (they lead 2-1). We’ve made several connections, especially with new East coast books that are seemingly willing to take big action. We’ll see.
At this juncture the biggest bet was made at Mississippi’s Scarlet Pearl for $3.5 million. FanDuel took $1.5 million and the Vegas books combined for just under $400K. An interesting aside, when Frank made the $200K bet at South Point, he asked the ticket writer how many drink tickets it would get him. The answer was “as many as you want,” then five were handed over. We went to the bar and they were good for domestic beer and well drinks only. Come on! Jimmy Vaccaro commented in a later interview that “everyone gets treated the same at South Point.” Funny.
Having absolutely no loyalty to any team other than those that will best serve our purposes (Mack is an Astros fan, so he can’t necessarily say the same), we’d like to see the Rays win Game 4 tomorrow and put us in a position to make a recoup bet on the Astros in Game 5, where, if the Rays win it’s over and Mack’s promotion liability is erased, and if the Astros win we recoup some outlay and continue on.
FIRST POST
Have you heard about the Houston furniture salesman who’s hedging a promotion he’s been running at his stores by making sports bets? His name is Jim McIngvale and he’s known as Mattress Mack, or just Mack once you get to know him. And get to know him I have.
First some quick background. Mack owns Gallery Furniture and has built it into a juggernaut by way of a promotion that offers to refund purchases to customers if various local teams experience success. This year’s trigger is the Houston Astros winning the MLB World Series. Good promo, but there’s a problem—not only have the Astros made the playoffs, they’re the favorites to win. Mack needs to hedge his promotion position by betting on the Astros, so if he has to refund millions, he’ll win millions at the same time.
He’s done this before and I was always interested in reading reports about the bets he made, but that was the extent of my connection to him—until, that is, I took a call last month from Mack’s attorney. It turns out the attorney is a Huntington Press customer who’s purchased several of our books and he asked if I’d be interested in talking to Mack about strategy. Who could turn that down? Not me. I accepted and brought in Frank B, our sports betting expert and author of the “Weekly NFL Updates” blog.
Mack had a standing offer from FanDuel to bet up to $10 million at +220, meaning that every $1 million wagered would return $2,200,000 if the Astros win. At the time, that offer was slightly below the market, and Frank and I set out to do better, at least for a portion of whatever was ultimately bet. What sounded like an easy enough task turned out to be anything but, as the books were a lot more timid to take the action than we expected. Why would the books be reticent? This is a futures bet with a 20%+ house edge cooked into the line. But this is also corporate Las Vegas and department heads are loath to take a chance on putting red ink on the balance sheets. Taking this bet, this good bet, still put them at risk and many weren’t having it.
After a whole lot of haggling, several bets have now been made in Las Vegas at +250, led by South Point, which booked it for $200K. That’s good old-fashioned bookmaking from the likes of Jimmy Vaccaro and Michael Gaughan. Four other Vegas sports books took bets at varying amounts: Caesars, MGM, TI, and Circa. Also, one monster $3.5 million wager at +220 was accepted by DraftKings and placed in Mississippi at the Scarlet Pearl. That’s where things stand right now, with close to $4 million in action. But using a hold ’em poker analogy, this is only pre-flop action; there’s much more to come.
In the time we’ve been involved, there’s been a growing media frenzy over this story. Everyone wants the inside scoop and Frank and I are providing it, to the extent we can, in the interviews that we do. But there are certain things we can’t disclose until the story plays out.
As for what’s been put out so far, I’ve been misquoted a few times already, which goes with the territory when dealing with the mainstream media. Nothing serious, but still some inaccuracies. Frank and I will be putting up posts with accurate information in this blog throughout the process, with some inside disclosures that you won’t see anywhere else. In the meantime, here are some links to several major articles that have appeared.
Las Vegas Review-Journal 10-21-2019
GWAE Podcast – The Inside Story of Mattress Mack
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There is also an interview with Mack on NPRs Planet Money podcast its titled three bets. Heres the link https://www.npr.org/2019/09/27/765208270/episode-941-three-bets
I have a question. Has Mack done this more than once? in the NPR interview it said he had.
Yes, but his liability previously was much lower, so he was able to cover his position more easily.
A lot of those articles are implying that he’s being really savvy by making all those hedge bets. The exact opposite is true.
His existing liability–which he created–is/was (the amount of all refunds that will be claimed if the Astros win) X (the likelihood of the Astros winning). Let’s say for grins that the former amount is $4 million and the latter percentage is 28%, or .28–reflecting the decimal equivalent of a +250 line. So his liability from making the promise is a little over $1 million.
Nothing he subsequently does can change that. If he makes a big bet on the Astros, now he has a liability associated with the Astros NOT winning the Series. If they fail to do so, he will have wasted all the money he bet, and was never going to lose any money from his furniture store guarantee. Whatever he does, in other words, cannot change the -EV arising from his promise–it can only alter how it manifests.
Added to that consideration is whatever juice he’s paying. I can guarantee that if the books are giving him 7 to 2 (+250), then they think the Astros’ chances are actually worse than 2 in 9. So the hedge is just costing him, ultimately, more money in addition to the locked-in sunk-cost loss from his guarantee.
But then, isn’t that what’s wrong with ALL hedge bets? (At least, the ones with a house edge.)
Kevin is correct about the primary hedges being negative-expectation wagers. Such is the nature of most hedge betting, but there’s personal utility to be considered. People buy insurance policies to protect against catastrophic results, no matter how unlikely, and a 1-in-3 chance of the Astros winning the World Series is far from being comfortably unlikely.
Certainly true, and for that matter, all insurance is -EV. The best life strategy is to not assume any more risk than you have to. Mattress Mack probably calculated that the risk he voluntarily assumed was worth it in terms of publicity, additional sales, etc. That calculation may or may not have been in error. My point was that having voluntarily assumed that negative EV, he shouldn’t try to negate it with hedges, because in actuality, he can’t.
Would it truly be a “catastrophic result” for him if the Astros won? Or could he afford to eat the loss? If the former, he never should have made the offer to his customers. If the latter, he should just suck it up and await the outcome. Either way, he made an unwise decision.
i think I’ll open up an auto dealership in Miami and promise everybody in town a new car if the Dolphins win the Super Bowl.
We’re not arguing about any of these points, but it gets even deeper with considerations of risk tolerance and what has to be done to become super successful. Lots in play. And one more point that should be made is that hedging usually emanates from a position of strength. That’s not the case here. We’re working from behind.
Why isn’t Mack covering this with insurance? Surely the insurance premium would be less than the amount he is betting.
For many years Jordan’s Furniture (a chain of 4 or 5 stores in eastern Massachusetts) ran these gimmicks, with respect to the Red Sox of course. And more than once in the past 15 years Jordan’s had to pay off. This was well-covered in the local newspapers and it was always stated that the exposure was fully protected by insurance.
In fact, the owners (who always appeared in their advertisements) used that very point in marketing the deal: “We’ve paid an insurance premium to cover our possible loss on this deal, so we’re actually on YOUR side! We want the Sox to win the World Series, just as you do. And we’d love to see that happen even more because it would be great to provide all of you with free furniture!”
Jordan’s always bought the insurance at the beginning of the promotion (at the start of the baseball season), so many other teams were in the mix as possible World Series winners. Because of that, I’m certain that the insurance premium Jordan’s paid was a MUCH lower percentage of the exposure than the bets that Mack is placing now. With only a few teams in the mix and in fact the Astros being the favorite he’s paying hugely more on these bets than insurance would have cost him several months ago.
Anthony: Do you know why Mack did not cover this with insurance? Did he decide to avoid the certain cost of insurance bought early in the season to see if the Astros fell out of contention at some point, in which case he wouldn’t need to hedge at all? If that’s what his thinking was, and since (apparently) he does feel the need to hedge now that his exposure is clear, it seems to me he made a bad tactical decision early on.
Or did he try to get insurance but was rebuffed?
All points regarding the EV of bets are true and that’s why this is an interesting exercise. A standard hedge begins when you’re in a
positive position initially. It’s arguable whether that’s the case here or not. Either way the objective is to minimize the neg EV cost of the required accumulated amount. There’s a target that is desired due to bankroll particulars. How that target is met eventually is what’s interesting.
He is getting a lot of publicity.To me, a punter, it seems like a lot more fun than just selling furniture.Following.
He’s taken out insurance policies on this promotion in the past, but this time waited too long and got ambushed by the Greinke acquisition. When he tried to go normal insurance routes, he was being quoted rates that he could exceed in the gambling markets.
The books are really juicing up poor Mack. Minus 260 on the Astros in Game 5???? Could they really have been expected to win the game five out of every seven times??
Every half a million he bets costs him roughly $20,000, regardless of the outcome. Casinos LOOOOOVE people who hedge bets because they get the juice in both directions. I was at a pai gow poker table the other day and saw players eagerly taking advantage of the options to make side bets that they would get a good hand and get a bad hand–AT THE SAME TIME. Illogical.
I’m sure he’s having fun and all, but when the dust settles and assuming the Astros do make it to the World Series, he’ll have coughed up about a quarter million in vig. He should donate that amount to charity instead of donating it to the casinos and just go home and watch the games.
Mac gives a LOT of money to charity, both publicly and privately. I’m from Houston, and he is a stand up guy. He worked his way up from nothing, and he gives back. If you have been in Houston since his beginings, you can see it, and he really is sincere. May be rare in the business world, but he really does give back, and a lot.
What you’re missing here is that this is not a purely mathematical consideration.
If viewed from an EV standpoint on the bets, of course all the comments are valid. That’s not the way to look at it though. This is the method of “insurance” that was chosen when the previous route was deemed unsatisfactory. Insurance has a cost. Whether with a Lloyds Of London type coverage or this method there is a cost. The objective here is to minimize that cost by using all that the U.S. baseball betting market makes available. Bet size ceilings are the biggest obstacle to maximizing efficiency. The -260 in Game 5 was market price and not a special “Mack gouge” being used by the books. -252 was best in market and that was taken for as much as possible. Next up was -260 and more was needed to achieve the desired coverage so that bet was made.
Oh, I realize that. It’s an emotional consideration as well. But executing any kind of financial transaction–running a business, betting, investing, etc.–should be done pragmatically rather than emotionally. The pragmatic thing to do would have been to just stoically wait out the playoffs and be prepared to cough up if the Astros won.
There’s a simple concept in play here–sunk costs. Mack judged that the potential liability from his promotion was worth the attendant publicity. So, fine–that’s now a sunk cost. He decided it was worth it. Un-deciding that with a series of hedges is illogical and just raises the ultimate cost of the promo (regardless of the actual outcome).
I’m sure he’s having a ball, flitting back and forth to Vegas and making huge bets and all, but it’s costly fun. There may be publicity benefits from all that, but I doubt they’re worth the accumulated vig he’s been paying.
Well, it turned out Mack never needed to do all this at all. He was probably ahead up to the World Series, but I imagine he got torched having to lay all those big numbers on Houston and going 3-4. I think that the Nats were dogs in every game. Plus, of course, he lost the original bet on the Astros to win it all.
Houston was horribly overpriced throughout the playoffs. There is NO WAY they should have been 2:1 favorites to win the Series. The teams were equals, though the hype ratio was 700:1 in favor of the Astros. The Nats were a terrific value play.
Both Anthony Curtis and Frank B discuss many of their moves on consecutive GWAE shows starting this Thursday. There is overlap with what was written in this blog, of course, but they saved some things for our show.
I hope you guys discuss some of the negative and/or disappointing interaction with the sportsbooks. Whereas the more aggressive books should be rewarded, the weaker ones should be known as well
Thanks AC and FrankB (and Matt Mack). I’ve been following this from First Post on 10/3, and I, too, am sad it’s over (except for the Nat’s win and Strasberg (SDSU) MVP. What great reporting, inside info, and insight into the high roller world. Lessens I can apply when I place my first multi-million $$ wager (someday soon). Keep up the great work.
Do nothing: lose nothing (as it turned out).
Do something: lose $13 million.
One could make a fairly compelling argument for doing nothing having been the better option. Math wizards and hedges notwithstanding.
All very interesting, thanks for sharing here and on the GWAE podcast. One thing that i didn’t see or hear discussed is the tax implications. (Sorry if it’s was discussed and i missed it)
Was he able to write off his losing bets against business profits? If he had won his bets (if Astros lost) would he have been able to write off business losses against the winning bets? Are these tax laws different between Texas state and federal filings?
P.S, good to see Kim Lee in action 🙂
Sorry, I meant; if he had won his bets (if Astros won)….
What about playing bookie yourself and laying off at an exchanges such as Betfair. That way you are in control of the price/amounts and monitor it constantly from your laptop. Did you explore this method? Obviously $1million+ bets were not possible but drip feeding $10k at a time you would have been able to get a decent amount on over the course of a day.
To Rick: I don’t know what the tax ramifications were. We weren’t given much input regarding taxes, which we took to mean that it wasn’t necessary for us to be in on that part of it to do our job. The only tax-related factor for us was choosing the best jurisdiction to bet in based on taxation on winning bets. Nevada and Mississippi were best. We bet in either state over New Jersey when we had the option. Tax implications were also a major factor in our not pursuing betting options in legal markets outside of the U.S., e.g., England or Australia.
To Lee: That was an early inclination and we have very good connections in that area. However, we quickly learned that it wasn’t feasible. Will explain in the next blog post.
Exchanges and other options all had one or more issues that prevented their use. It was either a scaling problem or something to do with legality/logistics. Often it was both. The suggestion of 10k at a time per day, for example, would have taken 1000+ days theoretically considering the amount of coverage needed.
Do Nothing and the Stros win and he’s out $20 million in free furniture. Do you not get it yet?
Can you better explain to me your term “scaling” ?
How much more or less would Mack have won without the cheating? Would the Astros have even made it that far?