I love betting on sports.
Starting in September 2018, I started betting regularly. I learned a lot during the 2018-2019 football and basketball seasons. Sports gambling has great parallels to the rest of the world: expected values, hedging, behavioral psychology, and the balance between risk and reward.
Yet the biggest lesson had nothing to do with betting, sports, or money.
It was about communication. Betting odds are specific. They communicate precise information from the sportsbook to the gambler. There is no confusion about the terms of the bet.
We aren’t as precise with our friends, family, and colleagues. It leads to miscommunication, which grows into frustration over time. We need to reduce our subjectivity. There are better ways to communicate where the possibility of misinterpretation is much lower.
I bet the moneyline. This type of bet is easier to understand than the spread or totals. Just pick the winner of the game and you win. Betting on a heavy favorite earns you a little. Betting on a longshot earns you a lot - if they win!
The odds given by a casino reflect the different levels of risk and reward for each team.
A moneyline favorite at -200 is expected to win 66.7% of the time. Betting $100 would earn you $50 in profit, plus your original $100 back.
An underdog at +500 is expected to win just 16.7% of the time. Betting $100 would rake in $500 in profit, plus the original $100.
This odds converter shows the relationship between odds, probability, and payouts:
Betting requires precise communication of information from the casino to the gambler. Knowing the latest odds is crucial. Gamblers need to know the risk and reward to decide if they should place a bet.
I bet on teams that I thought had a higher win probability than their odds implied. If the underdog is at +150, Vegas is estimating that the team has a 40% chance to win. I would bet if I thought their odds of victory was higher than 40%.
It’s the same rationale as the stock market: if you think a stock is undervalued, you buy it. You sell if you think the market overvalues it.
During my betting phase, I traveled to Las Vegas for the International Builders’ Show for work. I attended a dozen classes about finance and homebuilding. The most impactful presentation focused on team communication. The speaker inadvertently connected the dots between betting and communication.
He asked the room to think about the word “often”. What did the word mean to us? What did we think about the word? After a moment, he continued:
“If I told you that something happens ‘often’, how many times out of 100 do you think it happens?”
An app quickly tabulated and graphed responses from the 200+ in the audience. The results showed a bell curve that ranged from 35 to 80!
“How” the speaker asked, “is it reasonable for us to communicate if one person thinks ‘often’ means 35% of the time and someone else thinks it means 80%?”.
Maybe it was because I was in Las Vegas, but the relationship between communication and the casino couldn’t be clearer. We might both speak English, but if I think “often” is a 35% occurrence and you think it’s 85%, then we aren’t speaking the same language.
If the moneyline implied that a team would win that matchup “often”, I wouldn’t know how to bet that game. How often is “often”? Is “often” higher or lower than my estimated win probability? For betting to work, both parties need to agree on the odds. And to agree on the odds, they need to be explicit.
Never (0%) and always (100%) are rarely the right words to use. There’s no such thing as an underdog with a 0% chance or a favorite that’s a 100% lock. Few things in life are black and white. We have words to describe the shades of grey, but poor definitions of them.
Sometimes, frequently, occasionally, all the time, often, rarely, regularly, seldom, constantly.
Everyone has their own understanding of what those words mean. The interpretation differs across cultures, backgrounds, and contexts. No wonder communication is hard. We use ambiguous words without a shared definition.
Avoiding objectivity is key. Amazon’s corporate culture emphasizes this. The more objective we can be, the more likely we are to be understood.
The subjective sentences have different meanings to different people. The objective sentences leave no room for misunderstanding. Numbers mean the same thing around the world. The meaning of the adjectives and adverbs vary by person.
“Increased significantly” could mean almost anything. It’s unlikely the writer and reader would both define a significant increase as 40%. Making the percentage explicit forces us onto the same page. A 40% increase means the same thing to everyone. No room for misinterpretation.
We don’t need precise data to communicate this way. Estimates work. Saying “John’s late about 75% of the time” is great. The listener has a clear picture of how often they can expect John to be late. It breaks down if John is only late 5% of the time. We don’t need our estimates to be exact, but they need to be in the ballpark. The range of acceptable estimates will depend on the context.
The odds at a sportsbook are a way of converting vagueness into shared meaning. The odds clearly communicate the risks and rewards of each bet with no room for miscommunication.
There’s a reason casinos don’t list teams as “pretty likely” to win. If the odds aren’t objective, there can’t be a bet. When we communicate subjectively, we’re making bets with unclear odds. Then we’re confused when there’s disagreement later.
Communication is hard. Subjectivity makes it even harder. We all have the same definition of 50%, 75%, or 95% of the time. Replacing our descriptive words with estimated frequencies will improve our communication. At least, it should help often.
Cover photo: Playnj.com