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Episode: Gambling with Michael Lewis

Author: Pushkin Industries
Duration: 00:52:33

Episode Shownotes

Michael Lewis, host of Against the Rules and author of Moneyball, The Big Short, Liar’s Poker, and Going Infinite, joins Malcolm to talk about the wild world of sports betting. Then, a preview of Against the Rules season 4, which is legal in New Jersey (listen to find out why),

or wherever you get your podcasts. See omnystudio.com/listener for privacy information.

Summary

In this episode of "Revisionist History," Malcolm Gladwell and Michael Lewis explore the transformation of sports gambling in the U.S. from a vice to a booming industry, particularly after the Supreme Court's repeal of the federal ban. Lewis critiques how companies like FanDuel and DraftKings exploit data to manipulate bettors, raising ethical concerns in the context of sports media. The conversation highlights the intricate balance between skill and luck in betting and the challenges skilled gamblers face against corporate giants. Eric Lipton's insights shed light on the legislative shifts and state partnerships with betting companies, culminating in a cultural shift reminiscent of the Prohibition era.

Go to PodExtra AI's episode page (Gambling with Michael Lewis) to play and view complete AI-processed content: summary, mindmap, topics, takeaways, transcript, keywords and highlights.

Full Transcript

00:00:06 Speaker_09
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00:00:48 Speaker_09
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00:01:38 Speaker_09
If you have an iPhone, you can apply for an Apple Card right this moment in the Wallet app. It's that easy. Just promise to come back and listen to the rest of the episode. December will be a time of rest.

00:02:04 Speaker_09
At the time I'm recording this, I look toward December knowing that I'll have completed a two-month-long book tour across North America. As I look towards next year, I'm dreaming about visiting some of the cities I've never seen before.

00:02:17 Speaker_09
Bangkok, anyone? Buenos Aires? Believe it or not, I've never been to Albuquerque. I'm sure you have your own wish list. And if you actually make it happen, you might want to consider hosting your home on Airbnb while you're away.

00:02:30 Speaker_09
Your home might be worth more than you think. Find out how much at airbnb.com slash host. Hello, hello, revisionist history listeners. Malcolm here. I'm stopping by near the end of my book tour because I have a special guest in the house, Michael Lewis.

00:02:47 Speaker_09
You may know him as the author of Moneyball, The Big Short, Liar's Poker, and most recently, Going Infinite, which just came out in paperback, by the way. Or you may know him by his alter identity as a Pushkin superhost.

00:03:00 Speaker_09
Michael's show, Against the Rules, is now in the middle of a fantastic new season. It's all about the insane rise and the consequences of sports betting in the US. You're gonna get a chance to hear one of the latest episodes in just a moment.

00:03:14 Speaker_09
But first, I thought we would chat with the man himself. Michael Lewis, welcome to Revisionist History. It's been too long. Yes. I haven't seen you in ages. I know, I know, we need to write that wrong.

00:03:28 Speaker_09
So you've done this show about sports betting, and this comes after, what, your first one was about referees, and then coaching, right, coaches?

00:03:39 Speaker_05
Experts, we sort of set them all in the sports arena, and this is, you know, we frame this as fans, and it's sort of like, the fracking of the fan, how the sports leagues have decided to squeeze ever more juice out of the fan base.

00:03:55 Speaker_05
And six years ago, the Supreme Court repealed a federal ban on sports gambling. And at that time, the NFL, the NBA, Major League Baseball, the NCAA, we're all saying sports betting is evil.

00:04:11 Speaker_05
You know, that it's just like it will destroy the integrity of sports, et cetera, et cetera. And there's long been this taboo in the sports world about gambling. I mean, not even gambling on your own sport.

00:04:20 Speaker_05
If you caught sports gambling, people have been tossed out of sports.

00:04:24 Speaker_05
And they flipped on a dime and essentially went into business with the sports gambling industry, particularly FanDuel and DraftKings, the two sort of big companies at the center of this world.

00:04:38 Speaker_05
And there's this kind of sports gambling industrial complex It has arisen in the last few years. And it's really interesting. It's like, so the past seasons, I've loved doing the podcast. You are responsible for me doing the podcast.

00:04:51 Speaker_05
So, I mean, you kind of talked me into this. And I love that. I love the way it works, kind of different muscles. And when you're writing these scripts, it's a different thing than writing the books. And I like it for all kinds of reasons.

00:05:03 Speaker_05
But up till now, we've taken themes. This season is whatever, seven episodes, and it's variations on a theme. it isn't one story. In this case, this could be a book. It's almost plotted like a book.

00:05:18 Speaker_05
It's about this vast social experiment that's going on that's largely invisible because of the consequences. You don't see it the way you see, I don't know, opioid addiction or alcohol addiction.

00:05:30 Speaker_05
You're seeing this thing that's historically regarded as vice understood to be kind of risky behavior, being foisted upon the American people, especially young American males, in a way that would have been unthinkable a decade ago.

00:05:44 Speaker_05
And sort of like how this is happening, how the industry works, what the economics of the industry are, where this is going and the effects it's having on, we're talking to everybody from athletes to high school students who are creating sports gambling rings in their high school, and like ultimately how to defend yourself.

00:06:02 Speaker_05
because the industry's coming for you or your children. It's sort of finely calibrated to exploit all of your mental weaknesses, finely calibrated to get you to do the stupidest things you could possibly do in a casino.

00:06:20 Speaker_09
I'm just curious about how you settled on this particular topic. When was sports gambling, when did it start buzzing around your head?

00:06:31 Speaker_05
Well, to be completely honest, it was buzzing around my head because you can't avoid it, right? Even in California, sports gambling is still illegal. It's legal in 39 states. California is not one of them, soon will be one of them probably.

00:06:42 Speaker_05
But even in spite of that, living in California, four years ago, I started getting bombarded with ads from DraftKings and Vanderbilt telling me to bet on sports. And the commentary around sports had completely changed.

00:06:56 Speaker_05
So it caught my attention then, but it was our, brilliant producers who came and said, what do you think about this as a subject? It instantly went, yes. It just hasn't quite been done.

00:07:10 Speaker_05
Sometimes the best stories are things that no one ever thought about. Some of the best stories is just like what's under your nose that no one's really noticed. Hiding in plain sight. Hiding in plain sight. The more we dug into it,

00:07:23 Speaker_05
the more shocking it was, just how predatory it is. As a business, FanDuel and DraftKings, the two companies at the center of the industry, they're framed in the public mind as always just fun, it's gaming or whatever. It may be like a casino.

00:07:41 Speaker_05
It's not at all like a casino. These are businesses that really haven't ever existed before. It's casinos with unbelievable amounts of data about the gamblers and incredible ability to nudge the gamblers into ever and ever stupider things.

00:07:56 Speaker_05
And it's in your pocket. It was combination of that that kind of dragged me into it. And it was also just like the whole sports gambling as an activity, is more interesting to me than casino gambling, or even blackjack.

00:08:12 Speaker_05
We spent some time with sports gamblers, the very best sports gamblers, who beat the house.

00:08:19 Speaker_05
And they're doing stuff very like what the Oakland A's front office did back in the late 90s and early 2000s, where they're doing a fresh analysis of the sports to glean fresh insights that the market

00:08:33 Speaker_05
is sort of oblivious to, so then they get an edge. And that's interesting to me. It's like, at the same time, the corporate side of it is kind of dark and gross.

00:08:46 Speaker_05
The gambling side of it is kind of fun and interesting for the people who know what they're doing.

00:08:51 Speaker_09
I've been struck by how much the sports gambling has infected our world, podcasting. I mean, sports podcasts have turned into sports gambling podcasts. You got it.

00:09:02 Speaker_09
I mean, I listen, I spend many, many hours of my life listening to Bill Simmons, but it's like all, he mentions FanDuel in every second paragraph.

00:09:12 Speaker_05
They've rained so much money on media that there's just not much blowback. There's a huge financial disincentive to doing the story. Like first question, your business people ask me is, can we take FanDuel and DraftKings money?

00:09:27 Speaker_05
And very much not in your spirit, I said, no. What do you mean, very much not in my spirit? Because you are so good at plowing right through the ordinary ethical objections and getting to the cash. It's so true. It's so true. Isn't that true?

00:09:52 Speaker_09
You know, we got mouths to feed here at Bush Kids.

00:09:54 Speaker_05
Yeah, you do. You're a responsible parent and you're generating the income for the family. But I'm kind of off to, I'm just, I'm a wing nut off to the side of your operation.

00:10:02 Speaker_05
And I just said, no, it's pretty clear that we've got to be completely free of the taint of their money. These two companies in the last five years have spent something like $2 billion each on marketing.

00:10:17 Speaker_05
And a lot of it ends up in the pockets of sports partners, yes. Two billion. Two billion, yes. That's like General Motors level. We had someone who I think is the trusted source tell us that they're the biggest advertisers in America.

00:10:31 Speaker_05
They're bigger than the beer companies. They're bigger than the car companies. And that isn't actually surprising to anybody who watches sports. It's like every other ad is an ad for gambling. And beyond that,

00:10:44 Speaker_05
Like the announcers, not just Bill Simmons, the announcers during the games are framing all their commentary around their bets.

00:10:54 Speaker_05
And their bets that they make are encouraging or sort of suggesting to the audience they might make too, are precisely the stupidest bets you can make and the bets that maximize the profits of the companies. Like it's long shot bets, it's parlay bets.

00:11:14 Speaker_09
Parlays, yes.

00:11:15 Speaker_05
And what it's taking advantage of, and we haven't quite got to this, the last, I don't want to burn the season on your podcast, but the human mind makes all kinds of mistakes when it's placed in conditions of uncertainty.

00:11:28 Speaker_05
And one routine mistake it makes is that when it's given long odds, it starts to cease to make distinctions. So if someone offers you 40 to one odds on some parlay bet, or 20 to one odds, you think, wow, I get $20 for every one I,

00:11:42 Speaker_05
I put up, and you don't stop to realize that actually the true odds are something like 100 to one.

00:11:48 Speaker_09
You mean because you're betting on a series of long shots and you have to multiply out the odds to get to the right?

00:11:54 Speaker_05
Yes, people don't do exponentials very well. And the mind gets sloppy when you're starting to present people with long shot bets. That's why people play the lottery. They've been kind of grooming the American gambler

00:12:08 Speaker_05
to move away from, oh, just betting on taking the Chiefs and giving up the points, to these bets where the house take is multiples of what a casino takes for casino games. As a result, the two companies, they're both listed companies.

00:12:26 Speaker_05
DraftKings is listed as DraftKings, and FanDuel is owned by, it's holding companies called Flutter. All of Wall Street basically got them wrong the minute they ran up as companies, the stocks ran up in the wake of the legalization of sports gaming.

00:12:43 Speaker_05
And then everybody came and said, oh, they're inflated, short them, and they crashed temporarily.

00:12:48 Speaker_05
It's like late into 2021, because everyone's sort of looking at them as standard casino businesses, and they knew what the take was for standard casinos, and they could kind of guess what the handle was going to be, what the betting volume was going to be, and they did the casino math, and they said, this doesn't justify the stock price.

00:13:05 Speaker_05
In fact, the take is multiples of what casinos, and is growing, the margins. And a way to think about it is, It's sort of like exploiting their ability to get people to do dumber and dumber things.

00:13:18 Speaker_05
And I think, I think what's going to happen, our podcast is going to be a part of this. The way to address this is to make it clear that anybody who is

00:13:30 Speaker_05
A VIP of FanDuel or DraftKings or one of these sports gaming apps, or anybody who even does it a lot, is someone who's almost certainly making dumb bets.

00:13:43 Speaker_05
Because on the other side of this, the gaming apps are really good at figuring out who's a smart bettor and kicking them out.

00:13:53 Speaker_05
If you know what you're doing, if you're the equivalent of the card counter, if you actually figured out something about football that nobody has realized before, and you've got a systematic edge, very, very quickly, they figure it out and they get rid of you.

00:14:07 Speaker_09
They could do that? I've never understood this. If I walk into a store, they can't kick me out. You know, isn't there a whole kind of level?

00:14:19 Speaker_05
You would think their analogy that they want to draw is it's like the card counter coming into the casino. We can throw out that we don't we don't have to service the card counter at the blackjack table.

00:14:27 Speaker_05
I don't want to ruin the whole show, but our producer took an enormous pile of cash with smart betting ideas, and it took her moments to get checked out. Poor Lydia Jean Cot has been banned by every sports betting

00:14:40 Speaker_05
Yeah, because it's a very simple way how they identify that you are smart. If the line moves in your favor after you've made the bet, systematically, you knew something. Basically, we're saying the odds will drift to the true odds.

00:15:00 Speaker_05
And if you were ahead of the market, they don't want you. But the important part is that And I said this to an audience of money managers not that long ago. They're asking me, like, do you have any tips to how to identify a good money manager?

00:15:14 Speaker_05
And I said, well, there's a new one now available.

00:15:16 Speaker_05
Before you let someone manage your money, you got to ask them if they if they have accounts of Fando and DraftKings and they're sports bettors and like, what's their relationship with those enterprises?

00:15:24 Speaker_05
And if they say, man, I'm like a VIP or I do it all the time or I, you know, don't give them your money to invest. Like, they're identifying people who should not be professional investors.

00:15:37 Speaker_09
Michael, can you describe the... Tell me a little bit about the episode we're about to hear.

00:15:41 Speaker_05
So this is the episode where the main character is Rufus Peabody, who is one of America's great sports bettors.

00:15:49 Speaker_09
And, uh... By the way, did you make up that name? No. No, I don't. That is like... If I had to imagine the name that Michael Lewis would make up for his lead character, it would be Rufus Peabody.

00:15:59 Speaker_05
I told Rufus Peabody when I met him that if my name was Rufus Peabody and Michael Lewis, I'd be worth three times what I'm worth. Are you kidding me? Totally. It's wasted on a sports better. It should be an author. Rufus, he's still young.

00:16:18 Speaker_05
Yale class of 2009 or whatever. He is the leading kind of smart edge of gambling, but he was present before legalization. He was present in the markets back when Vegas was the market.

00:16:31 Speaker_05
We traveled with him to the point where his bets are no longer accepted. What interested me about him and his mentor is also a big character in the episode, Roxy Roxburgh, a legend in old Vegas sports. I know, I know, I know.

00:16:47 Speaker_05
And what you love about Roxy is he's Canadian.

00:16:49 Speaker_09
He's Canadian. Michael, we now have a parlay of improbably perfect names.

00:16:58 Speaker_05
You're going to love listening to them. They're wonderful. They have a lot to say. They're very smart people. I just thought, what is the most interesting point of view on this market?

00:17:07 Speaker_05
It was obviously was the point of view of the sharp, the edge player, the person who's beaten the market. It's like who's the most interesting person to talk to about a casino?

00:17:15 Speaker_05
Either the person actually running the casino or is the card counter, or the person who's figured out how the slots are rigged, or who's seen that the roulette wheel is slightly off.

00:17:25 Speaker_05
It's someone who is looking at the market from a superior vantage point. It's walking us into this new market through the eyes of an edge player.

00:17:37 Speaker_09
You have, the one thing that has distinguished you throughout your career is I feel like you, no one has his finger closer to the pulse than you. You've done it repeatedly and it sounds like you've done it again.

00:17:49 Speaker_05
It's a gas of a season.

00:17:51 Speaker_09
Michael Lewis is host of Against the Rules right here at Pushkin. Here's his latest episode, A Hard Way to Make an Easy Living. Give it a listen and head over to Against the Rules and subscribe to hear more. Thank you, Michael. Thank you, Malcolm.

00:18:11 Speaker_05
May 2018, the United States Supreme Court strikes down the federal law that has effectively banned sports gambling in nearly every state.

00:18:22 Speaker_05
What happens next happens faster than anyone imagined, and happens in so many places at once that it's basically impossible to follow it all in real time.

00:18:32 Speaker_04
I ended up picking Mississippi and Kansas as the two states that I really decided to focus on, and really was just there becoming a part of the furniture as the lobbyists were working their magic.

00:18:44 Speaker_05
That's Eric Lipton, New York Times reporter, who with his colleague Ken Vogel, just sat and watched as lobbyists created the conditions for a new industry to emerge overnight, sports gambling.

00:18:58 Speaker_04
and buttonholing various legislators, getting them to introduce language that they wanted into the gambling bills, changing the tax rates, getting provisions included that would allow them to entice bettors with free bets that they wouldn't have to pay taxes on.

00:19:16 Speaker_05
Eric knows that state capitals are where the action is. He started his career covering state governments for local papers.

00:19:23 Speaker_05
When he returns to his old beat, he sees right away how much lonelier state capitals are, because his old job, state house reporter, now barely exists.

00:19:33 Speaker_04
There were times when I was in the state capital where I was pretty much the only reporter there while they were debating, you know, sports betting.

00:19:40 Speaker_04
And I would stay until they wrapped up two in the morning as the session was closing and they were trying to get the bill passed. And there were no other reporters present. It's like, if you do something at the federal level,

00:19:53 Speaker_05
There are going to be a lot of people watching still, a lot of reporters who will cover national politics. But if you push things down to the states, you're more likely to just operate in the shadows.

00:20:05 Speaker_04
Yeah, and I think the lobbyists know that. And it's actually a lot easier to get things done in state capitals. You can build a national strategy through a collection of states.

00:20:16 Speaker_05
Eric and his colleague at The Times wrote about Kansas back in 2022. but he could have written the same piece almost anywhere in the United States.

00:20:25 Speaker_05
38 states, plus Washington, D.C., were rushing to legalize sports betting and rolling over for the new sports bookies, who were pushing to minimize just how much of a cut the states took.

00:20:37 Speaker_04
They cut the tax rate almost in half. They gave them the ability to give out free bets as a promotion to sign people up and not have to pay taxes on that.

00:20:49 Speaker_04
So essentially, the state becomes a loss leader, a promoter of getting people into gambling by giving them tax-free promotions. And without a whole lot of pushback from anyone.

00:21:03 Speaker_04
Oftentimes the legislators weren't even aware that they were passing these things, or it was given to them at the last minute just before they were asked to vote on it, and they weren't even fully informed as to what they were voting on.

00:21:16 Speaker_05
Overnight, the states have gone from the bookie's cop to the bookie's partner. So have all the pro sports leagues, the NFL, the NBA, and Major League Baseball.

00:21:26 Speaker_05
The entire sports industrial complex now has a stake in the revenues that flow into sports gambling companies like DraftKings and FanDuel.

00:21:34 Speaker_05
There's now a vast new machine with one clear purpose, to maximize those revenues by maximizing the number of bets that Americans make on sports.

00:21:57 Speaker_05
It's as if when Prohibition ended, there were these two massive liquor companies sitting there with databases on individual Americans and their tastes for alcohol.

00:22:06 Speaker_05
And the government ordered them to go wave a glass of whiskey under the nose of every alcoholic to persuade as many as possible to start drinking again. Of course, there are some restraints, some rules.

00:22:18 Speaker_05
No state has allowed small children to gamble on sports. Eight have declined to allow people to gamble on their phones. And the taxes that the new industry pays varies a lot from state to state. New York takes 51% of all sportsbook revenues.

00:22:34 Speaker_05
Indiana takes only 9.5%. In 2017, the year before the Supreme Court struck down a federal law against sports betting, legal sports bookies in the United States generated roughly $300 million in revenues. In 2023, they took in $11 billion.

00:22:50 Speaker_05
In 2017, Americans made roughly $5 billion in legal sports bets. Last year, they laid down more than $120 billion. The numbers are crazy. The consequences are even more so. And we'll be exploring them for the rest of the season.

00:23:11 Speaker_05
Take your shot at more than $270,000 in payouts. That's a lot of money. I'm Michael Lewis, and this is Against the Rules, a show where we look at specific roles in American life and how they're changing.

00:23:30 Speaker_05
The fan's role's changing because a powerful new machine has sprung up to encourage the fan to gamble on sports. Sports gambling's never been just a simple and straightforward marketplace. It's more like a jungle.

00:23:43 Speaker_05
And DraftKings and FanDuel are like this invasive species that's been dropped into it by accident. They've disrupted the food chain and overrun the habitat because they feed so efficiently on phantom ocean.

00:23:56 Speaker_05
And phantom ocean is the jungle's greatest food source. But they're also vulnerable to a creature that feeds on them.

00:24:16 Speaker_05
Let's recall for a minute what sports gambling once was in America by listening to just a snippet of a press conference held back in 1961 by then Attorney General Robert F. Kennedy.

00:24:27 Speaker_12
The report has been since the passage of the legislation that big-time gambling by the big-time operators has been materially decreased since the passage of the legislation.

00:24:39 Speaker_05
Kennedy, celebrating a new law called the Federal Wire Act,

00:24:43 Speaker_05
The point of the law was to cut the legs from under the mafia by shutting down its sports gambling operations, by giving the federal government the power to arrest and prosecute anyone who booked a sports bet over any phone or telegraph wire that crossed state lines.

00:24:58 Speaker_12
And in fact, the head of the Royal Mounted Police in Canada said in a speech last week that Canada will now have to pass legislation and take new steps because

00:25:10 Speaker_12
Many of the big-time gangsters and hoodlums of the United States are now moving to Canada because of the drive that is being made against them here in this country.

00:25:19 Speaker_05
When you think of Canada, this isn't the first thing that pops into your head. Happy refuge for big-time gangsters and sports gamblers. But I don't know. It was a different era.

00:25:28 Speaker_14
I always had an interest in sports. My father coached me in swimming, coached me in tennis. But my world changed when I found out you could gamble on it. I became no longer a fan. I became interested in gambling.

00:25:44 Speaker_05
That's Michael Roxborough. Everyone just calls him Roxy now. He grew up in the 1950s in Canada, in a nice upper-middle-class family.

00:25:54 Speaker_05
He's now Zooming with me from a home in rural Thailand with the AC blasting in the background and a straw fedora on his head. and the emotional feel of a man in a witness protection program, a placeless man. But he really did grow up in Canada.

00:26:09 Speaker_05
When Roxy was a kid, there was a sports gambling market. It was smaller and more constrained than it is now, but very real. And its center was the pool halls of Vancouver, British Columbia.

00:26:20 Speaker_14
If you envision, in the movie, The Hustler, if you take a look at the pool rooms of that day, those were the pool rooms of my day.

00:26:31 Speaker_14
It was just full of wannabes, desperados, hustlers, drug dealers, bookmakers, everybody that was operating outside the law. Right. When you got the bug, what'd your parents think about it? Not too happy.

00:26:50 Speaker_14
My father was a Harvard MBA, and my mother was a high school valedictorian. And I think they had higher aspirations.

00:26:58 Speaker_05
— Roxy's dad wanted him to go to Dartmouth, and he got in. But he went to American University in D.C., because he sensed the action was better there.

00:27:08 Speaker_14
— I ran a blackjack game in the American University dorm at night, and that's what's the source of most of my profits. But then I got kicked out. For what? For running that blackjack game.

00:27:24 Speaker_05
Roxy never did finish college. Instead, he went back to Canada, cycled in and out of boring jobs, but never stopped gambling. And then he finally caught a big break by reading a book.

00:27:35 Speaker_14
I was in a Reno airport flying back to Vancouver, and I picked up a copy of Ed Thorpe's Beat the Dealer.

00:27:44 Speaker_05
Beat the Dealer was the first book to show how a gambler inside a casino could have a systematic edge by counting cards in blackjack. The other casino games, like slots and roulette, were more or less perfectly rigged against the gambler.

00:27:59 Speaker_05
Anyone who played them for long enough was sure to lose. Blackjack was an exception. Play blackjack for long enough, at least the way Ed Thorpe taught people to play, and you were sure to win. Ed Thorpe published his book in 1966.

00:28:13 Speaker_05
A few years later, Roxy read it, and it gave him the idea that changed his life.

00:28:19 Speaker_14
I decided that if I'm going to look at sports betting, I need to look at it statistically driven, data driven, not by visual or instinct or just watching a lot of games.

00:28:32 Speaker_05
Outcomes in sports were obviously far less regular and predictable than outcomes inside slot machines or even at blackjack tables. But that didn't mean you couldn't learn stuff about sports that would allow you to make better predictions.

00:28:44 Speaker_05
Not perfect predictions, but better predictions than everyone else betting on games in the 1970s. Roxy had baseball in mind.

00:28:53 Speaker_05
The guys who booked baseball, legally in Nevada and illegally everywhere else, offered gamblers the chance to bet on not just who would win the game, but how many runs both teams would score. Roxy had an insight that seems obvious now.

00:29:07 Speaker_05
The number of runs scored in any baseball game depended on factors like the weather at game time and the size of the fields. San Diego's was a good example.

00:29:17 Speaker_14
You just could not hit the ball out of there. And then the Padres went and spent like an outrageous contract to sign a guy like Oscar Gamble. All he did was hit fly balls. And that park was a place where fly balls went to die.

00:29:30 Speaker_14
So you soon found out that general managers really didn't know anything about their own ballparks either.

00:29:36 Speaker_05
The idea that the people who run sports teams don't know what they're doing has probably never been a new idea. Fans have always thought that they know better. What was new is that someone in the stands was actually figuring something out.

00:29:49 Speaker_05
The effects of the wind and the humidity and the barometric pressure on a ball that was flying through the air.

00:29:55 Speaker_14
We started to start getting weather reports from all the cities to parse out which ones helped scoring or hindered scoring. And dimensions, right? I mean, just the length of the left field fence. Dimensions were important.

00:30:08 Speaker_14
And we found out a couple of the ballpark dimensional drawings were wrong. They had the North Pole wrong. Well, pointed north because we went out and did them ourselves.

00:30:22 Speaker_05
— Roxy moves to Vegas full-time in 1975 to bet on sports. And just by taking into account the weather and the size of ballparks, he's able to make a killing, while trying to avoid the people who know a thing or two about actual killing.

00:30:36 Speaker_05
— Were the Nevada legal bookmakers effectively run by the mob?

00:30:40 Speaker_14
— They would have had a hand in it until about— — Right.

00:30:44 Speaker_05
— Until about the late 70s, probably, yeah. — In that environment, was it dangerous to win too much?

00:30:52 Speaker_14
Now, because actually what they would do is they could find somebody else who could take your bet and they can move it for more money someplace else in the country.

00:31:04 Speaker_05
The old sports gambling market inside the United States was shady, but it had its unwritten rules. And one was that they always took your bets. If you bet a lot, they eventually moved the lines. These betting lines were all set in Vegas.

00:31:19 Speaker_05
For a very long stretch, they were actually set in a single Vegas casino, the Stardust. The bookie at the Stardust set the odds, and everyone else just followed his lead.

00:31:31 Speaker_05
There was a bank of payphones outside the Stardust that were said to be the most profitable in the country for the phone company, because sports gamblers used them to relay the odds to the illegal bookies and bettors across the country.

00:31:43 Speaker_14
Communications back then was just with a phone call. That was the only communications there were.

00:31:51 Speaker_05
In the late 1970s, the Nevada Gaming Control Board tossed the mob out of Vegas and out of sports gambling. And pretty soon, Roxy became old news.

00:32:00 Speaker_05
By the early 1980s, everyone knew that the weather and the size of ballparks had big effects on baseball scores. and Roxy never found another systematic edge. His life became a bit of a mess.

00:32:13 Speaker_05
He'd been arrested for violating RFK's Wire Act, he'd taken crazy risks as an illegal bookmaker, and he'd run through two marriages. Is a gambling business hard on relationships? It's arrogant. Why?

00:32:25 Speaker_14
It just sort of takes over your mood and your personality. I don't know anybody who's ever been in gambling who thought they were a better person for it.

00:32:36 Speaker_05
It's interesting because when you think about why a person would drift into gambling in the first place, it would be because you think it might be an easy way to make money.

00:32:43 Speaker_14
Yes.

00:32:43 Speaker_05
It ends up being a harder way to make money.

00:32:46 Speaker_14
It does. What do they say? It's a hard way to make an easy living.

00:32:52 Speaker_05
People said that. Roxy now knew it. So in 1982, he quits gambling. He creates a company called Las Vegas Sports Consultants. This new company will effectively replace the Stardust Casino in setting the odds for all major sports contests.

00:33:09 Speaker_05
Roxy's just better at it. And pretty soon he's selling his odds to all the sports bookies, including the Stardust. This makes sense to everybody in Las Vegas.

00:33:21 Speaker_05
Hiring Roxy to set the odds in sports is like hiring the first card counter to guard the blackjack tables.

00:33:28 Speaker_14
So I said, you know, I'm going to try this for a couple of years, but I'm not sure if it's going to work because it wasn't a given that every hotel was going to have a sportsbook. It was a rather limited business.

00:33:40 Speaker_14
But that was one of my better decisions because it turned out to be a massive business.

00:33:45 Speaker_05
Sports gambling isn't exactly a financial market, but it rhymes with financial markets. What happens on Wall Street somehow eventually also happens in sports gambling. And Wall Street's about to undergo dramatic change.

00:33:57 Speaker_05
First computers and then the internet will allow the markets to become a lot more complicated and the bets a lot more complex. The world's about to speed up and a new kind of person with a different kind of education is going to enter it.

00:34:12 Speaker_05
Old school traders with high school degrees and lots of body hair and names like Vinnie and Donnie are about to be replaced by hairless PhDs from MIT with computer models, who as kids thought they'd grow up to be professors, not traders.

00:34:26 Speaker_05
On Wall Street in the late 1980s, smart old school guys served as a kind of bridge between the two cultures. In sports gambling, Roxy was that bridge. But it took a while for anyone to cross it.

00:34:49 Speaker_09
This show is sponsored by BetterHelp. I have a friend named Charles. I've known him for almost 25 years.

00:34:56 Speaker_09
He has many wonderful qualities, but my favorite side of him is how he uses all his considerable powers of imagination and creativity and generosity to come up with elaborate defenses of nearly everything I do. He always has my back.

00:35:12 Speaker_09
And it is one of the peculiarities of our friendship that both of us lack the capacity to actually talk about what's so special about our friendship. So I thought today I'd break the fourth wall and say, you're the best, Charles.

00:35:25 Speaker_09
Life is hard, and having people around who always keep your head above water is a blessing. A friend can do this, and a therapist can too. So if you're thinking of starting therapy, give BetterHelp a try.

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00:36:05 Speaker_07
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00:37:09 Speaker_07
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00:37:13 Speaker_10
This episode of the Happiness Lab on the joy of giving is brought to you by the 2024 Subaru Share the Love event. There are lots of everyday things that bring us happiness, but few compare to enjoying a wholesome meal or seeing a friendly face.

00:37:26 Speaker_10
Sadly, these are simple pleasures too many of our seniors miss out on.

00:37:30 Speaker_11
Most people don't realize that we have two epidemics going on concurrently in our country, senior hunger and social isolation. This is Ellie Hollander, president and CEO of Meals on Wheels America.

00:37:42 Speaker_11
So we deliver nutrition, but we talk about the power of a knock. There's someone coming in to check on those seniors and they feel safe, more independent and able to live out their best lives in the comfort of their own homes.

00:37:55 Speaker_10
Meals on Wheels calls this nourishment for the body and the soul, and Subaru is a big part of making it all possible. For 17 years, Subaru has made buying a car during the holiday season an act of love with the Subaru Share the Love event.

00:38:08 Speaker_10
From now until January 2nd, when you get a new Subaru, Subaru and its retailers will donate a minimum of $300 to charity. This generosity has helped Meals on Wheels make more than 4.6 million deliveries.

00:38:20 Speaker_11
The relationship with Subaru is extraordinary. They're our number one automotive supporter, and they care. They always talk about the fact that they are more than just a car company, and Meals on Wheels is more than just a meal.

00:38:33 Speaker_10
And Subaru's literally been putting the wheels in Meals on Wheels by donating 50 delivery cars. But there's still so many more seniors needing help, with waiting lists for people who have trouble shopping or cooking for themselves growing.

00:38:46 Speaker_11
And those waiting lists average over 100 days, some as long as two years. So if people can donate, you can help end the wait for seniors who are looking for nourishing meals and friendly visits.

00:38:57 Speaker_10
The 2024 Subaru Share the Love event runs through January 2nd. To learn more, go to Subaru.com slash share. Subaru, more than a car company.

00:39:14 Speaker_05
We're here to see Rufus Peabody. We're in the right place. Yes, great. We're still in Vegas, but far from the strip. We're not going to be long. We're just going to make a bunch of sports bets. He runs an illegal gambling operation upstairs.

00:39:30 Speaker_10
Oh, does he? I never even knew this.

00:39:32 Speaker_05
Do you want any action?

00:39:34 Speaker_10
Jump off the ladder.

00:39:39 Speaker_05
The real action is no longer on the strip. The real action is basically invisible. But here, on the 17th floor, with a sweeping view of the distant casinos, Rufus Peabody lives and works. Rufus Peabody is who crossed Roxy's bridge.

00:40:00 Speaker_03
I never was a bettor as a kid. I didn't know anything about sports betting. You didn't feel a little, little twinge of desire? None. None. Most people that got their start, they started losing and then they learned how to win. But I, I was never a bettor.

00:40:13 Speaker_03
I never grew up betting, like, besides NCAA tournament pools. I was always good at those. But for me, it was a game. And I'm not, I'm a risk taker, but I'm not a gambler by nature.

00:40:24 Speaker_05
Rufus grew up outside of Washington, D.C., always loved sports, thought he might like to be a sports journalist. He still reminds me a bit of a journalist. He's a watcher, a person whose eyes move more than his mouth.

00:40:38 Speaker_05
But even when he was a kid, his mind took him places that journalism usually doesn't.

00:40:42 Speaker_03
So it was this team won 82 to 64, but why did they win? Basically, I kind of wanted to report on the why it happened rather than just this guy got 18 points and 12 rebounds and this team won, right? I kind of wanted the story of why. Right.

00:40:58 Speaker_03
You wanted explanations. I wanted explanations.

00:41:01 Speaker_05
In 2004, Rufus graduated from high school and went to Yale. He was still obsessed with figuring out why. He studied statistics and built models that predicted the performance of athletes and the outcomes of sporting events.

00:41:15 Speaker_05
Not because he wanted to gamble on them, just because it was cool to figure out stuff that even people who run sports teams don't know. He wanders around Yale looking for someone to teach him more.

00:41:26 Speaker_02
Rufus wants to do a thesis on if I remember correctly, behavioral biases and the baseball betting market. He's who Rufus found.

00:41:36 Speaker_05
His name is Cade Massey. He's a professor of organizational behavior.

00:41:42 Speaker_02
Was it interesting? Oh yeah, absolutely. I mean, what's not interesting about trying to find psychological mistakes that people make with like, you know, hundreds of thousands of observations of real, real money being bet. And he found mistakes.

00:41:55 Speaker_02
I mean, he, he was finding profitable strategies right off the bat.

00:41:59 Speaker_05
Rufus just kept asking questions about the behavior of sports gamblers. He still wasn't placing bets himself. He was just working with his professor to build a model to predict college football scores.

00:42:11 Speaker_05
They pitched it to the Wall Street Journal and the Journal agreed to publish their college football picks of the week. It was just how they would bet were they to bet on college football.

00:42:22 Speaker_02
and he would then post our picks of the week. We're just posting them because we were working with the Wall Street Journal. So post them on Tuesday or Wednesday, and then he would watch as the prices started moving on his screen.

00:42:32 Speaker_05
Oh my God. Which is to say the sports gambling market would see their picks and move in response because the market figured out that their picks were that good.

00:42:42 Speaker_02
Within a year or so, we quit posting college picks because it was getting too much in the way of what he was trying to do.

00:42:48 Speaker_05
Because he wanted to bet it himself. Because he wanted to bet it. And if they're so good, you would bet them, you wouldn't sell them. Right.

00:42:56 Speaker_05
I mean, it was bound to eventually occur to Rufus that if he could predict the scores of college football games, then he should just bet on them himself. But it's funny how he got there in his head.

00:43:07 Speaker_05
Roxy Roxborough had started as a gambler, who then set out to find some kind of edge to bet. Rufus Peabody started by finding these edges and kind of stumbled into gambling, and then found Roxy.

00:43:23 Speaker_05
During Rufus's junior year at Yale, he read an article in ESPN about Roxy's sports analytics company, Las Vegas Sports Consultants. Roxy's company wasn't used to getting resumes from Yale juniors.

00:43:36 Speaker_05
But they gave him a summer internship anyway and showed him their world from their offices right next to the Las Vegas airport.

00:43:44 Speaker_03
they would bet on what plane was most likely to land next, right? And this is like sort of pre-internet days or pre like being able to see flight plans and stuff like that.

00:43:52 Speaker_03
And so it was like, okay, American Airlines is like six to one, like, you know, Southwest is two to one, whatever. What people didn't realize though was Roxy actually had a contact in the control tower. And so Roxy won. He made money off of these bets.

00:44:13 Speaker_03
But he didn't make enough to draw suspicion. That was the key. But he would occasionally hit the Japan air at 301, right? Or whatever.

00:44:27 Speaker_05
Roxy's crew would bet on everything. Rufus wasn't like that. He didn't even think of what he wanted to do as gambling. But he did want to understand this other world. This world where people bet on anything that moved.

00:44:41 Speaker_03
They shared the building with American Wagering, so with Leroy's, which was a sort of third-party sports book operator. Leroy's didn't have a casino, but they were in casinos like Hooters or Terrible Herbst, right? Hooters has a casino?

00:45:00 Speaker_03
Yeah, Hooters Casino. It's on the strip. It's right in Tropicana, basically. Yeah. So I meet the head trader there, and I have all these questions.

00:45:10 Speaker_03
A bookmaker can make more money, let's say, if they know the public's bias, they can make more money setting a line somewhere between the true price and the price the public thinks. That's the way to maximize.

00:45:23 Speaker_05
There's no reason you should understand what Rufus just said there, but let me try to explain it because it tells you a bit about how this old-school sports gambling world works. The line is just the odds, or the point spread.

00:45:36 Speaker_05
The true price is what the odds would be if you somehow knew every possible relevant bit of information about some upcoming game. Of course, no one ever knows everything.

00:45:47 Speaker_05
So there is in reality never a perfect true price, just some number that the smartest and best-informed bettors agree on. Say they agree that the Packers should be eight-point favorites over the Cowboys.

00:46:01 Speaker_05
But most of the gamblers are Cowboys fans, and the Cowboys fans think the Cowboys are only three-point underdogs.

00:46:08 Speaker_05
Rufus was asking the bookie if he thought he could entice the public to make more stupid bets if he set the line not at the true price of eight points, but at, say, five points, because Cowboys fans will think the Cowboys are better than they actually are and bet even more.

00:46:24 Speaker_03
I said, theoretically, you can make more money setting a line somewhere between the true price and where the public thinks the price is. And he says, theory, theory, in theory, a dick don't fit in an asshole.

00:46:43 Speaker_03
And this guy, yeah, he was probably 300 pounds, 5'8", smoking a cigar in a dark room, looking at a bunch of numbers on a screen.

00:46:53 Speaker_05
In just a flash there, you've changed our podcast rating. Sorry.

00:47:07 Speaker_10
This episode of the Happiness Lab on the joy of giving is brought to you by the 2024 Subaru Share the Love event. Most of us know firsthand the comfort, fun, and happiness that animals can bring into our lives.

00:47:19 Speaker_13
I think anyone who's had the opportunity to even spend a little bit of time with an animal understands the unconditional love and joy that they provide to us.

00:47:29 Speaker_13
My name is Matt Breschadker, and I am the president and CEO of the American Society for the Prevention of Cruelty to Animals, or the ASPCA.

00:47:36 Speaker_13
and our participation in the Subaru Share the Love event has allowed us to help over 130,000 people experience that love, which is so beautiful.

00:47:46 Speaker_10
For 17 years, Subaru has made buying a car during the holiday season an act of love with the Subaru Share the Love event.

00:47:52 Speaker_10
From now until January 2nd, when you get a new Subaru, Subaru and its retailers will donate a minimum of $300 to charity, including the ASPCA, where it will help all sorts of animals, from cats to chickens and from donkeys to dogs.

00:48:06 Speaker_13
About a year ago, my family and I adopted our third dog, named Whiskey. She was a victim of cruelty. And the love and joy that she has brought to my family has been almost unmatched.

00:48:16 Speaker_13
And without Subaru's support, it would be incredibly difficult for us to support Whiskey and the hundreds of other cruelty cases that we see every year.

00:48:24 Speaker_10
The ASPCA also improves the lives of farm animals, cares for pets in disaster zones, and lends a hand when caring owners can't meet their vet bills. All thanks to the $35 million Subaru's donated.

00:48:36 Speaker_13
We are very careful about who we partner with. And Subaru was doing good before it was hip, before it was cool. They were doing good because it's part of their ethos. And that's what's so important to the ASPCA in this relationship.

00:48:49 Speaker_13
And I think that's why it works.

00:48:50 Speaker_10
The 2024 Subaru Share the Love event runs through January 2nd. To learn more, go to Subaru.com slash share. Subaru, more than a car company.

00:49:01 Speaker_09
If you asked someone to name a genius, virtually everyone would give you the same answer. Albert Einstein, the genius of all geniuses. He's most famous for his general and special theories of relativity.

00:49:13 Speaker_09
And even children today know his renowned equation, E equals MC squared. And yet there's one thing that even the great Albert Einstein would have trouble understanding today. mattresses. Think about it.

00:49:26 Speaker_09
There are so many styles, so many sizes, so many companies selling them, and so many seemingly good deals this time of year. It's enough to make your brain hurt.

00:49:37 Speaker_09
Fortunately, there's one simple thing you can do to understand everything you need to know about choosing a mattress. Visit the Sattva blog.

00:49:47 Speaker_09
It has entries like how to test a mattress, what makes a luxury mattress, best Cyber Monday deals, and even the best mattress for sex, plus loads of other buying guides.

00:49:59 Speaker_09
Whatever question you have about mattresses, you'll find the answer at the Sotva blog. It is, in a word, genius. Visit the Sotva sleep blog at sotva.com slash blog. That's S-double-A-T-V-A slash blog.

00:50:18 Speaker_09
As I'm reading this, I'm about to go on a trip to California, leaving tomorrow, renting a convertible at Los Angeles airport, heading up the coast top down, turning my cell phone off.

00:50:29 Speaker_09
I'm sure some of you have something similar planned, or at least have dreamt of doing something similar. And if you pull it off, you know what you could do to make it a little more affordable? consider hosting your home on Airbnb.

00:50:42 Speaker_09
It could be for a few weeks if it's a long trip, or just a few nights. Now, think of the possibilities. While your home is sitting empty as you're away, you could be making some extra money that you put towards your next big trip.

00:50:54 Speaker_09
Or, while your kid is away at college during the semester, you could wisely host your spare bedroom on Airbnb while it would otherwise sit empty. Your home might be worth more than you think. Find out how much at airbnb.com slash host.

00:51:11 Speaker_05
Rufus Peabody, recently of Yale, is no one's idea of a hustler. He's too sweet-natured and even-tempered, and way too open to telling other people about the stuff he's learned.

00:51:23 Speaker_05
He finishes up at Yale and moves back to Vegas to work full-time at Las Vegas sports consultants. But now Rufus thinks he might have an edge, and people in and around Roxy's firm think that maybe he's right.

00:51:37 Speaker_03
The Super Bowl was my first big break, Super Bowl 2009. Okay. I had made a friend with a professional sports better, a guy that bet baseball. And he loaned me $10,000 to bet. I had my own 10 to $12,000.

00:51:54 Speaker_03
My boss, Kenny, unbeknownst to everybody else, invested $40,000 in me and gave me a 20% free roll on it. Meaning that if it wins, you take 20% of the profits. But you suffered another losses. Correct.

00:52:10 Speaker_03
And so I ended up with close to $60,000 bet on the Super Bowl. And so I basically was pretty leveraged. Yeah. And I remember being like, if this game doesn't work out, you know, I gave it a shot. All right.

00:52:23 Speaker_03
And what is causing you to have such conviction about a game?

00:52:26 Speaker_05
Oh, nothing. It wasn't conviction about the game. It was betting the props. The props. Short for proposition bets. Not on the whole game, but pieces of the game.

00:52:37 Speaker_05
The standard story, which is almost certainly not true, was that the prop bet was invented for the 1986 Super Bowl between the Chicago Bears and the New England Patriots.

00:52:47 Speaker_05
The Bears were such heavy favorites that Vegas had trouble ginning up interest in the game. So a Vegas bookie created a side bet. The odds that a Bears defensive tackle, named William the Refrigerator Perry, would score a touchdown.

00:53:02 Speaker_05
It was a long-shot bet, and the betting public loved it, and Vegas bookies lost a fortune when the Fridge did indeed score. But back to Rufus, and forward to the Super Bowl of 2009. The Pittsburgh Steelers played the Arizona Cardinals.

00:53:19 Speaker_05
Rufus wasn't betting the whole game, but pieces of the game. His pro football model spits out odds for all this weird stuff that Vegas bookies are now offering bets on.

00:53:28 Speaker_05
The odds that Steelers running back Gary Russell will score the game's first touchdown, for example. Rufus has vast troves of data to mine. He can do stuff with it that Roxy would never imagine.

00:53:42 Speaker_05
He could do stuff that even the people who run the Pittsburgh Steelers would never imagine doing. I mean, even Gary Russell likely has no idea that you can calculate the odds that he will score the game's first touchdown. But Rufus can.

00:53:56 Speaker_05
His model puts those odds much higher than the bookie's odds. So in Rufus's mind, it's a great bet. He makes dozens of similar bets. That's where his model tells him that the bookies are giving him better odds than they should.

00:54:10 Speaker_03
I still remember going, it was like Harrah's, Caesars, the Rio. I ended up getting down like $200 at a time, like $5,000 positions on a few things that were really good. And so I was diversified. Within the game. Within the game.

00:54:32 Speaker_03
I wasn't betting on the outcome of the game, but I still to this day have never watched that game. I was too nervous. How did you experience the game if you didn't watch it?

00:54:41 Speaker_03
I went to this little par-3 course that's open at night right south of the airport, and I played the par-3 course twice until I felt like the game would definitely be over. And then I went grocery shopping.

00:54:56 Speaker_03
And I didn't have a smart, this is pre-smartphone. I went grocery shopping and then I went home and cooked myself dinner. And then and only then did I open my computer and check and see how the game went.

00:55:08 Speaker_03
And were you just going through your prop bets seeing what happened? First I looked at the box score and I saw the first score was Gary Russell one yard touchdown run. And I was like, ah. Right.

00:55:18 Speaker_03
And it turned out, out of like $56,000 bet, I profited like $23,000 on it.

00:55:26 Speaker_05
Rufus figures out how much he's won. Then he physically retraces his steps to the many casinos that had taken his many bets, still driving an old Honda Civic. You had all these little tickets. You have to cash them. Each one individually.

00:55:41 Speaker_05
So you must have had a hundred tickets. Oh yeah, probably. He just drives around Las Vegas and the money piles up.

00:55:50 Speaker_03
And I remember having like $30,000 on that front seat and being like, oh my God, so much money. In cash. In cash.

00:56:02 Speaker_05
After that, lots of people in Vegas wanted to lend money to Rufus and take a cut of his bets. Rufus, for his part, was still sitting in his office in Las Vegas Sports Consultants.

00:56:13 Speaker_05
But pretty soon he was directing an army of people to lay bets in sports books across the city. sports books that got their odds from Las Vegas sports consultants. Rufus was in effect betting against the lines created by Roxy's firm.

00:56:28 Speaker_05
Roxy himself had moved on at this point, but he watched what Rufus was doing, and he admired it.

00:56:35 Speaker_14
He came to Buket one time, met him. Even after one lunch, he said, this guy's thinking at a higher level than other people. And I learned a lot from him, not because he was divulging his secrets, but he was just thinking at a higher level.

00:56:51 Speaker_05
To get his edge, Roxy had used weather reports. Rufus was using the spin rates on pitchers' curveballs.

00:56:58 Speaker_03
I try to drill things down to their root cause. It's kind of what you do when you write books. You try to figure out the person, what makes them tick, what's the story. I try to figure out why things happen in a baseball game or a golf tournament.

00:57:13 Speaker_03
What makes a player good? It's not just their score. Like, what are the things that are driving their score? Which of those are repeatable, which aren't? And right now, You have all this computer vision, that type of data available now.

00:57:27 Speaker_03
And with a lot of these sports, I mean, we're now talking about bat speed, measuring bat speed, and looking at aging curves for bat speed.

00:57:34 Speaker_05
The whole point of Rufus is that he never lets emotion interfere with his process. But that doesn't mean he doesn't feel emotion. He does. He feels it for his process.

00:57:46 Speaker_03
We're using bat speed to then predict exit velocity, and we're using exit velocity to then predict weighted on base average and basically whether a ball will be hit or not and what kind of damage it'll be if it is, and then use that to predict wins.

00:58:01 Speaker_03
And how did it work? How did it work? It worked well. We made $125,000 in the first month. I don't know what our volume was overall. And I got 20% of it, which was great because my yearly salary was $25,000."

00:58:18 Speaker_05
Rufus had become the card counter at the blackjack table. Only it was richer than that. He was generating new insight about why things happened in sports. A blackjack dealer knows where the card counter gets his edge.

00:58:31 Speaker_05
The sportsbook he couldn't really tell where Rufus was getting his. which made Rufus and what he was doing even more unsettling. And did the M at any point say, we're not taking your bets? The M Casino was one of Rufus's favorite sports books.

00:58:46 Speaker_03
No, they had, their whole thing was, we're going to take all comers. We want to be, we want a lot of volume. We think we're better than people.

00:58:55 Speaker_05
Then comes the Supreme Court decision of 2018. 23 states soon legalized sports gambling. Rufus now has the M Casino, and a lot of others, right in his pocket.

00:59:07 Speaker_00
And Rufus, of course, stands to make a killing. The bigger the markets, the more he can bet.

00:59:25 Speaker_05
But as it turns out, that's not how it's going to go down. This ecosystem is going to change in ways Rufus didn't predict. And he began to sense it in late 2020.

00:59:37 Speaker_03
So I would drive up to New Hampshire to bet at these kiosks initially. And then once there was mobile betting, I had an account on DraftKings.

00:59:49 Speaker_05
Rufus had a girlfriend in Massachusetts. Massachusetts hadn't yet legalized sports betting, so he needed to cross state lines to use the betting app on his phone.

00:59:57 Speaker_05
The drive took him like 45 minutes, but it was actually easier than running all over Vegas trying to get cash down. He and his process were built for this new type of casino. He could bet on golf basically all day long, until one day he couldn't.

01:00:14 Speaker_03
One week I lost $30,000. I got a phone call to tell me that they were cutting my limits on golf.

01:00:20 Speaker_05
He'd lost $30,000, and DraftKings stopped taking his big bets. By the way, we've reached out to DraftKings, and so far they have declined to talk with us.

01:00:30 Speaker_05
Anyway, it was clear to Rufus back in 2020 that this was definitely no longer his old sports gambling world.

01:00:37 Speaker_03
Because I'd bet enough, it spurred them to actually go in and look at the stuff I'd been betting and how I'd been doing. Books are not limiting people just because they win. They're limiting them because they think they're going to win in the future.

01:00:52 Speaker_05
Rufus used data to predict what athletes were going to do. DraftKings was using data to predict what Rufus would do. When they looked at the data, they saw that after Rufus placed his bets, the odds nearly always moved in his favor.

01:01:07 Speaker_05
These were the bets of someone who knew things before the market knew them. And the new bookies were not like the old bookies. They only wanted to take certain kind of bets.

01:01:17 Speaker_05
Bets that were more like the bet you make when you press the buttons on a slot machine. Bets that if you made them often enough, you were sure to lose. The sort of bets a fan would make. The sort of bets Rufus Peabody never made.

01:01:32 Speaker_03
refusing a bet wasn't a thing. It never was a thing here. Like you, if you got kicked out of a casino or if you couldn't bet there, it was because you did something wrong. Like you violated the sacred bookmaker better covenant.

01:01:47 Speaker_05
Being smarter than the market didn't used to get you kicked out of the market, but the markets changed. Sports gambling is still a hard way to make an easy living, but now it feels even less fair.

01:02:01 Speaker_05
Now it feels like someone should step in and help Rufus.

01:02:05 Speaker_01
Okay, cool. So I downloaded FanDuel, DraftKings, Fliff, Fanatics, Caesars, BetMGM, and PayPal. So now everyone has all of my information and my social security number.

01:02:16 Speaker_03
Wait, your social security number?

01:02:17 Speaker_01
They all asked for it, yes.

01:02:20 Speaker_05
These new sports gambling apps, they all asked for it. And so we're going to give it to them in our next episode.

01:02:35 Speaker_05
Against the Rules is written and hosted by me, Michael Lewis, and produced by Lydia Jean Cott, Catherine Giraudeau, and Ariella Markowitz. Our editor is Julia Barton. Our engineer is Jake Gorski.

01:02:46 Speaker_05
Our music was composed by Matthias Bossi and John Evans of Stellwagen Symphonette. Our fact checker is Lauren Vespoli. Against the Rules is a production of Pushkin Industries.

01:02:58 Speaker_05
To find more Pushkin podcasts, listen on the iHeartRadio app, Apple Podcasts, or wherever you listen to podcasts.

01:03:06 Speaker_05
And if you'd like to listen to ad-free and learn about other exclusive offerings, don't forget to sign up for a Pushkin Plus subscription at pushkin.fm slash plus, or on our Apple show page.

01:03:23 Speaker_10
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