Joseph Buchdahlon CLV, biases, Patrick Veitch and more

This is the transcript of a podcast interview we did with renowned author and sports analyst Joseph Buchdahl, unfortunately the audio was corrupted but it‘s well worth reading.

Dylan: I’d like to welcome on the show Joseph Buchdahl, the author of four books in the sports betting sphere. He has an intimate knowledge of the mathematical aspects of sports betting and has featured on Pinnacle’s website as a journalist over 60 times. After attending Trinity College Cambridge Joseph went on to work as an environmental scientist but eventually found his passion in sports betting. On a couple of occasions he collected winnings from British racing cult figure Patrick Veitch who has won millions off sportsbooks in his time betting on horse racing. After this Joseph had his own success getting ‘busted’ in his words by many prominent UK bookies for winning too much money. His twitter @12xpert has close to 20k followers where he frequently opines on various topics that extend beyond sports betting. Thank you for coming on the podcast Joseph.

Joseph: Thank you for having me.

Dylan: So was becoming an author always your ambition?

Joseph: No, becoming an author was probably the last thing I thought I would do. I had relatively poor English skills during my school years. I excelled in critical analysis but struggled in other areas. So, I never believed I would become a writer. Even now, I don’t necessarily view myself as one. The inspiration for my journey into writing stemmed from spending a significant amount of time on a Betting Forum called Punters Lounge, which I believe is still active today. Perhaps some of your users are familiar with it.

I dedicated a considerable amount of time to sharing my thoughts and opinions on various topics on the forum, whether it was about betting systems, UK football, or general politics. One day, it occurred to me that I had written so much on the forum that it might be worthwhile to compile it in a more formal manner. That’s what drove me to write "Fixed Odds Sports Betting". At the time, I had no clear idea of what I was doing. I didn’t even approach a publisher before starting to write the book. I simply wrote it and, after completing the manuscript, I approached potential publishers.

Over a span of 12 weeks, I wrote the book. When I began seeking a publisher, I submitted the manuscript to them. They provided feedback and suggestions, but then surprisingly, they changed their minds and decided to accept it as it was.

Dylan: A lot of authors describe the experience of writing a book as like giving birth. You mentioned it only took you 12 weeks to write so what was the experience like for you?

Joseph: I wouldn’t describe it quite like that, but I understand where they’re coming from. The process is indeed intense, yet also enjoyable and somewhat therapeutic. Each day, you wake up with a specific goal in mind - deciding what topic to cover. It’s an exciting and challenging journey, though, as I mentioned, quite intense. By the time you reach the end of it, it does feel like you’ve given birth in a way, having produced a piece of work. Then, you find yourself settling into a sense of accomplishment and satisfaction, especially if you manage to get it published. I can see why people might describe it in those terms.

Dylan: Will there be another book?

Joseph: I said I wouldn’t write another after ’Squares and Sharps’, and 5 years later produced "Monte Carlo or Bust". However this time, I’m more inclined to stick to it. There isn’t much more for me to add, and I don’t want to keep rehashing the same ideas. My publisher has asked me several times if I want to update "Fixed Odds", but if I were to do that, I’d prefer to start fresh and write an entirely new book.

That being said, my most recent article published on the website delves into a reevaluation of the topics I covered in my last two books, specifically concerning the randomness in sports betting. I explored the question of whether most people are essentially just tossing coins or throwing darts when it comes to betting. An individual, who I’d describe as thought-provoking, goes by the Twitter handle @aluckyaday, approached me with this idea. He specializes in horse racing tips and places bets known as "Lucky 15 bets". We engaged in a two- to three-day back-and-forth, and I ended up writing an article based on the challenge he presented. So, there is some new material, but I wouldn’t recommend holding your breath if you’re anticipating a new book. It’s more likely that there won’t be one, and if there is, it won’t focus on gambling-related topics.

A friend did challenge me to write a book that’s accessible to a wider audience. I endeavored to accomplish that with "Monte Carlo or Bust", but ironically, it turned out to be the most challenging of all my books.

I often convey to people that the mathematics presented in it is at the level of GCSE, perhaps even A-level, and comprehending the equations is not obligatory. The core concept is that you don’t need to be a mathematical expert because you can simply input the data into a Monte Carlo simulation. While individuals with a strong mathematical aptitude might choose to employ algorithms, my personal preference leans toward direct usage of the Monte Carlo simulation with minimal complexity. Later on, I may explore the mathematical aspects further, but it’s not a prerequisite for understanding the material.

Dylan: How do you think about closing line value (CLV)?

Joseph: CLV (Closing Line Value) is somewhat like Marmite in the sense that people tend to either find it amazing or consider it a load of rubbish. The truth probably lies somewhere in the middle. Its relevance depends on the specific market you are involved in. If you’re a line chaser or someone who bets in highly liquid markets like US sports or top-level football, then CLV holds significant importance. It is more likely to apply in more efficient markets and less likely in less efficient markets where bookmakers may not possess the same level of expertise.

CLV is particularly valuable because there’s much less variation in the closing line. In terms of results, it’s either a win or a loss, represented as +1 or -1. However, with CLV, it revolves around expected value, involving dealing with small decimals. Instead of +1 or -1, you might be dealing with +0.02 or -0.02. Consequently, the variability with the closing line is much smaller over a series of bets compared to outcomes. This means that if you discover a signal using CLV, it’s more statistically significant due to the reduced variance. Statistical significance is determined by what you observe relative to the variance, and when the variance is smaller, you reach meaningful conclusions much more quickly. This is why you can identify a signal after 50 to 100 bets with CLV, while it might take thousands or tens of thousands of bets using just results (wins and losses).

I always advise people that if you spot a CLV signal, it’s almost certainly legitimate because such signals don’t typically arise by chance. However, if you don’t observe it, that doesn’t necessarily mean you lack skill as a bettor. It might simply indicate that you’re betting in smaller markets or not focusing on line chasing. It probably reduces the likelihood that you’re a skilled bettor, but it’s not entirely ruled out.

Dylan: What do you make of the current regulatory environment in the UK?

Joseph: Regarding the state of the industry, it’s a complex issue. I believe it’s quite messy, and the majority of people share that sentiment. When evaluating the competence of the gambling commission, you just need to look at how they dealt with the Football Index situation. The issue of affordability checks seems to be spiraling into a complicated matter that could potentially harm the racing industry significantly. I doubt the Government are going to be able to push the proposed changes through before the next General Election. The downside is that Labour is almost guaranteed to win, and their approach could prove to be even more challenging. The absence of established legislation and the bookmakers’ proactive implementation of affordability checks to avoid future penalties make the situation even messier.

Dylan: You knew Patrick Veitch while at Cambridge University. Can you give some insight into him and also do you think it is possible for there to be another Patrick Veitch in today’s environment?

Joseph: Indeed, he was quite a character, incredibly intelligent, and a math prodigy. He was a fun character to be around. I remember cruising in some fancy sports car with him, though I’m not sure where we were headed. I recall asking him how often he won his bets, and he casually mentioned that it was about half the time. Curious, I inquired about his average odds, and he estimated they were probably around nine to four, or something in that range. Doing the mental math, I was impressed, thinking, "Wow, you're doing quite well".

Feeling a bit bold, I ventured to ask him how much he took home in a week, and he replied, "Well, I'm not at liberty to tell you, but it's a few thousand". Keep in mind, this was in the pre-internet days of 1991. That’s why people like myself had to place his bets and collect his winnings. By the way, I only collected his winnings a couple of times because he couldn’t show his face in any of the bookmakers. He also operated a premium rate tips line, and a friend of mine handled the calls on Saturdays. Interestingly, his professors used to question his choices, telling him that his pursuits would never amount to anything. But he knew better, raking in thousands per week.

Perhaps they were focused more on the perceived frivolity of betting rather than the potential profits. Sometimes I reflect on my own life, having spent the last 25 years immersed in this betting world, despite starting my career as an environmental scientist. So, there’s a valid argument there. In his own book, he mentions contemplating a future in the judiciary, suggesting that he has contemplated other avenues.

As for whether there will be another Patrick Veitch, it’s challenging to imagine. Back then, he had to go to great lengths to disguise his identity. In his book, he describes carrying a briefcase with around 15 phones velcroed inside, one for each of his runners. Today, the landscape has changed with the introduction of affordability checks. If you’re a professional bettor, your income isn’t considered acceptable. Unless you’re willing to engage in illegal activities or resort to the black market, your options are limited. Even in the UK and Irish racing, the black market isn’t an option, as it doesn’t cater to those markets. I’m not advocating for black market activities in any way, but it illustrates how challenging it would be for someone to follow in the footsteps of Patrick Veitch today.

Dylan: You developed a methodology that goes by Wisdom of the Crowd can you explain it for the audience please?

Joseph: This idea emerged from the notion that if I couldn’t beat the bookmakers’ odds directly, perhaps there was a way to utilize those odds. It occurred to me that by using the odds from the sharpest bookmaker, which we all recognized as Pinnacle at the time, I might gain an edge over some of the softer bookmakers. To backtrack a bit, I initially considered calculating an average from all bookmakers’ odds, thinking it could serve as a benchmark of efficiency. However, I found the results unsatisfactory because the average included odds from bookmakers who weren’t proficient at setting lines.

Subsequently, I decided to use Pinnacle’s line with the margin removed as the benchmark of efficiency. The task was then to determine how Pinnacle distributed their margin across the market, factoring in the favorite-longshot bias. This approach appeared to be quite favorable, and it could be aptly called the"Wisdom of the Pinnacle Crowd" because it draws from the collective insights of their traders and sharpest bettors. Pinnacle’s business model focuses on offering sharp odds, effectively making their odds a fundamental part of your betting strategy. You replace your rating system with Pinnacle’s odds.

However, the drawback is that you can’t place bets on Pinnacle or the exchanges. This methodology is highly effective on soft bookmakers but may not be as applicable elsewhere. Nevertheless, for many, it’s a practical strategy because there are ways to prolong your account’s lifespan with bookmakers, even if you can’t bet on Pinnacle or the exchanges. It’s worth noting that I’ve had my accounts restricted at numerous UK bookmakers by using a method similar to the "Wisdom of the Crowd", although not identical. This can be frustrating, but it’s the reality. My recommendation to those using this strategy is to exercise caution and employ smaller stakes to avoid swift account restrictions.

The challenge lies in comparing the difficulty of winning at an exchange versus a soft bookmaker. It’s probably approximately 10 times harder to win at an exchange. While I can’t provide precise figures, I estimate that only about three to five percent of individuals betting on soft bookmakers manage to beat the bookmaker. In contrast, if we look at Betfair Exchange, they claim that only 0.5% of users are subject to the premium charge. Using this as a proxy, it’s evident that beating the exchanges is significantly more challenging.

Dylan: What forms of betting are you engaging in nowadays?

Joseph: As for my own betting approach, since I’ve been restricted at most soft bookmakers, I don’t engage in much strategic betting anymore. I often just have fun with it, occasionally placing quirky bets or following Professor Leighton Vaughan William’s strategy, which involves betting on the outcome you don’t want to happen. For instance, as a Liverpool fan, I might wager on a 0-0 draw in a Liverpool versus Manchester United game. The drawback of this strategy is that you end up caring more about the money than your team’s success. I recall a notable incident when I made an initial bet on England to win in the third test of the 2005 Ashes series. The match was incredibly thrilling and went into the fifth day, but I then had so many subsequent back and lay bets on the exchange that I ended up in a precarious position. I was financially rooting for Australia to win, which felt absurd. My turnover must have been in the thousands, but I ended up with a profit of just four pounds. At the end of the day, I realised I couldn’t subject myself to such emotional turmoil, so I vowed not to engage in such betting again or at the very least ensure that bets on things I didn’t want to happen were at small stakes and long odds.

Dylan: What biases do you think hold sports bettors back?

Joseph: Overconfidence is a significant challenge. Once you’ve placed a bet, it’s easy to trick yourself into believing that it’s bound to happen, even if there’s only a 3% chance. This kind of thinking can be very dangerous. Ideally, you should maintain a purely mathematical approach, but it’s undeniably challenging. Overconfidence is, without a doubt, one of the most potent biases I’m aware of. It’s often referred to as the Dunning-Kruger effect. In my book "Squares and Sharps", I mentioned a study conducted on a college campus in America where students were asked to rate their social abilities relative to their peers. Remarkably, among thousands of responses, nobody rated themselves as below average. Additionally, when male drivers were asked if they were above average at driving, about 90% responded affirmatively, which, logically, can’t be the case.

The need to be right is a strong human desire. If we are wrong or perceived as wrong, we feel threatened. There’s certainly an evolutionary aspect that makes bettors prone to thinking they are right more often than they actually are.

Dylan: What books would you recommend both betting and non betting related?

Joseph: I would recommend reading "Betfair Trading Made Simple" by Caan Berry and "Statistical Sports Models in Excel" by Andrew Mack. In terms of non-betting books, "Thinking, Fast and Slow" by Daniel Kahneman and "Fooled by Randomness" by Nassim Taleb are insightful reads. While none of these books will provide a magical solution that guarantees success, they are important to gain a better understanding of various aspects. I believe one reason why "Wisdom of the Crowd" still works is because it involves a business model versus business model dynamic, and it doesn’t seem like Pinnacle or the soft bookmakers will change how they operate anytime soon.

Dylan: Thank you so much for coming onto the podcast. I found your analysis of CLV particularly interesting and also your take on the human biases prevalent in sports betting. I hope to speak to you again soon! Once again thank you!

Joseph: Thanks for having me, speak soon.