TL;DR Sports betting markets are weird because there are many market makers and they unilaterally set their own prices. This combined with the fact that some sports books are better than others presents an opportunity for sharp bettors to execute a statistical arbitrage strategy across books by using information from more skilled books to take advantage of mispricings at less skilled books. The linkpost covers this sharp[1] market based arbitrage sports betting strategy in more detail as well as how I've fared executing this strategy across ~1,500 bets over the past 11 months or so.
I do have some additional thoughts that I think would be relevant to the folks here on LW that I've been mulling over since doing the initial write up.
Sharp Sports Betting as a Calibration Tool
Sharp sports betting as a hobby seems to be a reasonable way to help calibrate your mind on how likely an event "feels" like it should happen. This is especially true with +EV long odds bets. Outside of an artificial setting (e.g. sequence of coin flips), it is not easy to regularly come across events that have ~5% or a ~10% chance of occurring, but these can be very frequent in sports betting. I think I've placed a few hundred bets that have <5% of paying out and I think it has improved my gut feeling on what a 5% event should feel like.
In the past I have tried out forecasting sites and something along the lines of Katja's calibration exercises, but they mostly failed to keep my attention which is possibly a revealed preference that calibration doesn't matter as much as I thought to me. The skin-in-the-game element and the ability to get in a decent about of volume due to how quickly events resolve (most bets resolve within 24 hours of placing them) make it a more effective calibration technique than other forms of forecasting for me.
The disadvantages to this are, of course, that you have to risk money and it takes effort to find +EV wagers. For me, the main utility from engaging in sharp betting is the money with calibration being a side effect. I imagine you could get some calibration benefit out of placing very small wagers if that is your goal.
There is also possibly an interesting empirical question here to test people's calibration before and after engaging in sharp betting to see if it actually works.
Utility of Sharp Sports Betting
Unlike prediction markets, price discovery for the results of a sporting event are largely pretty useless outside of the sporting context (though there are probably some economic consequences for the cities where teams win championships?) so I think we can rule out any broader societal benefits of sharp sports betting as a means to make these predictions more accurate. Additionally, the strategy I outline is a form of arbitrage across different sports books anyway so I am not even aiding in the macro price discovery process.
How should one, then, think about the utility of sharp sports betting against sports books? I think first order it is a wealth transfer between a sports book and the sharp bettor which is probably a desirable outcome. However, second order one could argue that it ends up being a wealth transfer from recreational bettors to sharp bettors as the sports books can only exist due to bad gamblers placing -EV bets. There is probably some in between where if a sports book is unprofitable it becomes a net transfer from sports book investors to sharp bettors.
Very interested in if there are strong arguments for/against the utility of being a sharp bettor.
TL;DR Sports betting markets are weird because there are many market makers and they unilaterally set their own prices. This combined with the fact that some sports books are better than others presents an opportunity for sharp bettors to execute a statistical arbitrage strategy across books by using information from more skilled books to take advantage of mispricings at less skilled books. The linkpost covers this sharp[1] market based arbitrage sports betting strategy in more detail as well as how I've fared executing this strategy across ~1,500 bets over the past 11 months or so.
I do have some additional thoughts that I think would be relevant to the folks here on LW that I've been mulling over since doing the initial write up.
Sharp Sports Betting as a Calibration Tool
Sharp sports betting as a hobby seems to be a reasonable way to help calibrate your mind on how likely an event "feels" like it should happen. This is especially true with +EV long odds bets. Outside of an artificial setting (e.g. sequence of coin flips), it is not easy to regularly come across events that have ~5% or a ~10% chance of occurring, but these can be very frequent in sports betting. I think I've placed a few hundred bets that have <5% of paying out and I think it has improved my gut feeling on what a 5% event should feel like.
In the past I have tried out forecasting sites and something along the lines of Katja's calibration exercises, but they mostly failed to keep my attention which is possibly a revealed preference that calibration doesn't matter as much as I thought to me. The skin-in-the-game element and the ability to get in a decent about of volume due to how quickly events resolve (most bets resolve within 24 hours of placing them) make it a more effective calibration technique than other forms of forecasting for me.
The disadvantages to this are, of course, that you have to risk money and it takes effort to find +EV wagers. For me, the main utility from engaging in sharp betting is the money with calibration being a side effect. I imagine you could get some calibration benefit out of placing very small wagers if that is your goal.
There is also possibly an interesting empirical question here to test people's calibration before and after engaging in sharp betting to see if it actually works.
Utility of Sharp Sports Betting
Unlike prediction markets, price discovery for the results of a sporting event are largely pretty useless outside of the sporting context (though there are probably some economic consequences for the cities where teams win championships?) so I think we can rule out any broader societal benefits of sharp sports betting as a means to make these predictions more accurate. Additionally, the strategy I outline is a form of arbitrage across different sports books anyway so I am not even aiding in the macro price discovery process.
How should one, then, think about the utility of sharp sports betting against sports books? I think first order it is a wealth transfer between a sports book and the sharp bettor which is probably a desirable outcome. However, second order one could argue that it ends up being a wealth transfer from recreational bettors to sharp bettors as the sports books can only exist due to bad gamblers placing -EV bets. There is probably some in between where if a sports book is unprofitable it becomes a net transfer from sports book investors to sharp bettors.
Very interested in if there are strong arguments for/against the utility of being a sharp bettor.
"Sharps" in sports betting parlance refers to those who have an edge against their counterparty.