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Foolin' Around - Financial-Advice Specialists Look At Gambling...By Nelson Lardner

I've spent enough time in the newspaper business (in the toy department, aka sports) to know what usually happens when the general-interest/news side of a paper grabs hold of a story of sporting significance.

Oh, they get the facts right often enough - it's how the facts are interpreted that frequently disappoints. The old bromide holds true - sportswriters tend to handle general-news stories better than general-news regulars turn out nuanced sports items.

Sports? Nuanced enough to create a rocky road for the uninitiated. The perspective needed to write gambling properly (especially as related to sports) requires further backgrounding of a special sort. The run-of-the-mill university education won't cut it. The School of Experience/Hard Knocks is almost a necessity.

A most-credible online investment-oriented site, The Motley Fool, ( lined up "Gambling, Investing, and Poker" for another once-over ( Even for veterans of the wars, David and Tom Gardner's venerable site's latest venture into this territory remains worth a look as a refresher-course/mental alignment.

The Fool's game-classification portion of this piece does well to remind how difficult things can be, even with the best backgrounding and intentions. Chess, checkers and Go are games played with complete information, and there's no randomness (an odd gust of wind, a perverse bounce of the pigskin) to alter established equations. What you see is what you get, and the possessor of superior brainpower and proper strategic grounding is likely to prevail, so long as distractions are minimal.

The boys classify poker and the stock market as diametrically opposite in nature to the above board games. In both, you're dealing with incomplete information and a significant measure of randomness, as not all of the variables involved can be anticipated in all cases.

But then, the brothers Gardner get into discussing casino games, where they charge headlong into serious trouble. When you read, "If you play perfect blackjack the best you can do is -2%", you can feel the thin ice making ominous noises beneath your skates. And we're never comfortable with that.

Just f'rinstancing: if you find yourself playing basic strategy against a typical two-deck game in which naturals pay the traditional 3-2, but in which the dealer will hit soft 17 (meanie!), an optimum basic-strategy practitioner will be paying against close to 0.40% in house advantage for the privilege of taking his shot at the bank. Four-tenths of one percent . . . not easy to overcome, in these days of preferential shuffles, without some fancy gamesmanship and card-counting . . . but not 2%, either.

But outside of this piece of statistical errata, the text threads carry on logically. Sufficiently skilled poker players and equity investors are granted a legitimate fighting chance to stay on the bright side, if nasty ol' deviation/variance doesn't take down the undercapitalized. But even mentally-blessed poker/market players have to deal with casino/online rakes, and the securities investor has commissions and frictional (the added costs inherent in established spreads between typical buy/sell prices) fiscal hills to climb.

Any sustained exception I might take to their poker/market discussion would lay in their bold statement that "Investing naturally has a long-term 10% positive tilt, due to the nature of the markets."

Productivity improvements and prudent reinvestment have a good deal to do with that. But I'll note as a public-service caveat that any folks who got caught in the '29 crash with a diversified portfolio had to wait close to three decades to break even -- if they lived to see it . . . and that the case can be made that much of the current market's surface appreciation can be at least partially connected with the declining value of the dollar . . . and that there are certain political/economic developments in the wind which could potentially put a severe crimp in the middle class's intermediate-term hopes for sustained appreciation in conventional markets.

The best advice in the article comes at the end, where they summarize some lessons learned by a poker/market veteran, notably:

(1) The importance of maintaining emotional control, and (2) The need to recognize and capitalize on the best high-percentage situations, while being careful not to get too heavily-involved in 51-49% coinflips, where repeated negative deviations can sting.

It was somewhat bizarre that - other than a sidebar mention of the legality/illegality of various gambling pursuits, sportsbetting was conspicuous by its absence from this piece. Sports speculation is markedly similar to poker and the securities markets. With the data that's available today, would submit that top-level football and college basketball offer frequent, sustained, tangible positive opportunities, even with increased awareness displayed by those on the other side of the counter -- and growing competition amongst speculators for the best odds to be had in the marketplace.

Competent sports practitioners will encounter fewer unnerving deviations from expectation than they'll run into in poker (unless they're able to maintain private game preserves of fish, eager for the taking). What frustrates some in sports is that unless they enjoy exceptional access to prime outs, it's far more difficult to move significant money at the "right" prices than it is, say, in a comparable favorable stockmarket situation.

But sports betting is certainly worthy of being mentioned in the same breath with securities-market involvement and poker - and am more than a little surprised the Gardner brothers declined to do so. Meanwhile, good luck to all who are willing to exercise their brains in an effort to anticipate results in any area - as opposed to the lottery players and reel-slot-machine addicts sitting, waiting and hoping for lightning to strike.

Nelson Lardner

If you would like to make or read comments about this article, you may do so by visiting the Mess Hall forum at where a thread has been started. Please click HERE

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