I wasn’t a big fan of math in school. I hated Algebra although, to be honest, I wasn’t terrible at it. When I graduated high school, I remember being so happy that math was in my rear view. Little did I know that my calling as a professional gambler would make math a part of my every day.
Standard deviation is a measure of how spread out numbers are. I see myself like a professional mountain climber. Every year thousands seek to climb Mount Everest. Many can handle the first part of the trip; but as the trail gets tougher and tougher, people start falling off and turn back. Only a select few ever make it to the top and safely return.
Even if everyone that follows me is assured of success at the end of the year, a large percentage will still fail, since some people cannot handle the losing streaks. Losing a few weeks in a row is enough to rattle even the hardcore guys. Most will start questioning the strategy, the information, they get gun shy, or worse, chase. We would all prefer low variance, right? It would be great if we could just win every night. But, that just isn’t how it works. Sports betting has very high variance.
It is extremely important to note that thanks to the “law of large numbers” the fewer games bet, the higher the variance. What does this mean? It means that the chances of winning a lot or losing a lot increases as the number of bets decrease. It also means that over the short run, my picks (and all sports betting in general) has a much higher variance than other wagers or investments (like the stock market). The stock market tends to change very little on a daily basis (usually less than 1%). Meanwhile, your sports betting bankroll will see much larger daily swings (sometimes more than 10%).
Think of it this way. If we flip a coin, the probability of heads is 50% and tails is 50%. If we flip a coin 5000 times, we would expect the results to be very close to 2500 heads and 2500 tails. It would be extremely rare, with 5000 “trials” to vary far from that. But if we flip 100 times, we are much more likely to vary from the expected 50 heads and 50 tails. It would not be unreasonable to see 60% heads on 100 trials. If variance is high in sports betting (giving many of us a lot of frustration), why do it? Well, the upside is that you can make more money betting sports than you can in most other wagers or investments, including the stock market. Based on my historical performance, you can expect to do about five times better than the stock market with my picks on average over the long haul (although doing better or worse is always possible).
The tradeoff for having a higher expected outcome than other investments is that you have to be willing and able to accept high variance. You must be able to withstand losing streaks. You must be willing to practice strict money management. And you must be willing to look at the long-term instead of the short-term. That is what separates the few that safely summit Everest and the many that do not.
