Level Staking Versus Progressive Staking: opposing theories of successful turf investment.

Thanks a lot Jon, for making the time available for this extended interview. I’ve got a whole pile of questions I want to fire at you, so let’s get started straight away.

My first question is, ”What side of the fence are you on with regard to progressive staking?”

JH: Nothing like diving straight in! I guess my predilection has always been for the mild progression, and it’s the one with which I’ve had most success in my professional career.

When I first started with Practical Punting, I latched on to one of Statsman’s (or was it yours?) very earliest staking plans for the magazine, the 1 per cent mild progressive, and apart from one or two discoveries along the way it’s still probably the best I’ve ever seen.

TO: In that case, I’ll take the credit. I suppose if you’d said it was no good I’d have said it belonged to Statsman, but the bottom line is that I originally designed it when I was editing (if my memory holds up) the original Dark Horse. That’s a long time ago now.

JH: Yes, you can pretty easily modify it, according to the probability of striking winners. I mean the regularity thing: if you know that you’re applying it to a system which is more than likely going to hit one winner every three or four bets, you might even go to 2 per cent, and I have known occasions when we’ve extended it to 2.5 per cent.

But that’s still pretty safe for most occasions, when we’re talking about single bets, because you still can have a run of 40 outs before you do your bank in.

On the other hand, and again being frank, I would never operate a system which I thought had the remotest chance of establishing a bad record like that!

TO: The idea of 40 losers in a row, especially if you’re dealing with single bets, is pretty darn scary in anybody’s language. For that reason, how would you feel about bumping it up to, say, 5 per cent of your bank? I mean to say, 20 losers in a row would also be pretty hard to swallow, wouldn’t it?

JH: Of course it would, but the statistics provided by the mathematical professors tell me that Murphy’s Law comes into play here, and that you can expect a losing run around that long every so often, if you’re betting on horses in the $5 to $6 range.

That’s pretty scary stuff, like you say above, but it’s still only half as many as the figure you nominated. Forty, as I just said, wouldn’t even enter my thoughts, but I have to admit that 20 is more or less my ultimate margin of error for singles.

And on that basis, you could, given the worst-ever scenario, get one winner at say $6, then have another horror run of maybe another 15 losers.

The trouble with something like this is that while a professional might go with it, and still have expectations of long-term profit, if he’s betting at 2.5 per cent of the bank, he’s only pulled back five units of profit and now he’s gone in for another 15 units of loss. The average punter isn’t going to like that at all and, as you’re very fond of saying, it happens.

I think under those circumstances, whatever my own personal judgement might be about the basic percentage bet, I would be advising our readers, no matter what the circumstances, to exercise patience and stick within the 1 per cent range.

Look, the profits will come if the system is any good, and if it isn’t a system you’re operating but a straight selection program, then your selection process is either profitable or it isn’t.

TO: So you don’t subscribe to the idea that a good staking plan can save a moderate selection process?

JH: I don’t completely go down the line that says nothing can save an iffy selection method, but frankly, if you have to go to those lengths to make the thing show a profit, well, I’ve never seen one that could make a success of it long-term.

Oh look, I could give you examples of short-term success, and that American Kelly concept is absolutely brilliant when the winners fall in the right place. If they don’t, the whole thing collapses in a heap. It’s why a lot of English bookmakers used to offer to operate systems for punters each day of the week.

Mind you, they didn’t do this on a carte blanche basis; for example, that one I mentioned above, the Dark Horse, had the potential to be modified for overseas use, and they would have steered clear of something like that. But, as always, they were offering to help the losers lose their money. The moment you produced a winning system like, okay, being parochial, some of the ones we put out, you’re going to find a certain reluctance on the part of any bookmaker to assist you.

TO: That’s a bit cynical and harsh on our benevolent bookmaking brothers.

JH: The only amusing thing about what you just said is the alliteration. It would probably go down well in a poem, but I’m thinking of what you have so very frequently remarked about “the enemy”; you can put it in the same basket as Matthew Hayden opening for Australia against the English quicks. If Matthew thought for a moment that these guys were going to give him an inch, he would find himself quickly dispatched to the dressing room. When the innings was over, they would all go off and have a drink together, but the psychological battle would remain. The days of Keith Miller and Denis Compton are well over.

TO: So you’re a cricket fan?

JH: An absolute tragic and my apologies for using such an old reference there, but I’m sure most readers can see what I’m getting at. Miller and Compton were the closest of friends on and off the field, but as I just said those days are gone. I think money’s got a lot to do with it. And that brings me right back to racing. It’s the money you know, that’s what it’s all about, they want mine and I want theirs.

TO: What about the tote?

JH: The TAB wants my money every bit as hard as all the other bookmakers do. Punters need to remember that the TAB, and I mean all of them, is just another bookmaker, one that enjoys at this stage an enormous edge in most parts of the country, but it looks to me as though their honeymoon might just be over. That’s another topic for another day, and I know that Michael Kemp is fascinated by it at the moment, because it is so heavily affecting Sydney and Melbourne.

Anyway, coming right back to what you asked me to come here for, progressive staking so far as I’m concerned makes sense only after an investor has established that his modus operandi at least cuts even. Now this takes some doing (talking about the TAB reminded me of this) because you’re around 15 per cent down the drain before you even start.

Thinking about that, and your entry donation of 15 cents in the dollar in order to play, you’d better be pretty darn good at anything you do with the TAB. Another way of looking at this is that you are going to have to make 18 per cent on your dollar before you cut even!

TO: I know what you mean, but you’d better spell this out for new readers.

JH: When you start with $1, you immediately donate, well I’ve said 15 cents or more, to the TAB. That leaves you with 85 cents. To get that back to the dollar, you have to make about 18 per cent on it.

I know there are all sorts of ways of looking at this, but that’s one, and it is a cold hard fact of this cold hard punting world that as soon as you have put your buck over the counter, the TAB owns, well I’ve said, 15 cents of it. I accept that there are other ways of looking at this and that this one is pretty fundamental, but the cost to play the game is that percentage.

If you happen to win the game, that’s fine, you get your cut of the 85 per cent available in the pool. They keep theirs. Every time.

TO: Where’s this leading? More specifically, what’s it got to do with your argument about having something secure before you move on to progressive betting?

JH: Fair enough. I just wanted to make it crystal clear that every time you have a dollar on with the TAB you pay them for the privilege. If you think otherwise, just look what happens to the Darwin bookmakers on those days when one of the big TABs announces a tax-free day.

TO: Well, what does happen?

JH: The bookmakers immediately offer, maybe, best of two TABs instead of three, or maybe five cents above the home state TAB. I have even seen offers of one cent above! So you have to assume that the TAB odds are working for the bookmakers and against the punters on the more traditional days. Now as far as progressive betting is concerned, the next thing I’d like to talk with you about is whether you do it race by race or day by day, or what?

TO: I’ll bite. Or what?

JH: Yeah, well, look . . . different people with different lifestyles enjoy different opportunities, and also different selection programs offer different opportunities as well. For example, if your selection process is only for Saturdays, you may decide that every selection will be supported for precisely the same amount on that day, and that your calculations will be updated on, say, the Sunday.

That seems to make a lot of sense to me, for anybody who is not a professional. I would advise them to make whatever commitments they are going to make before the beginning of the racing, and to find some way of locking away their funds until the next morning!

TO: You’re not a believer in loss-chasing?

JH: My God no! Never, under any circumstances. I learned many years ago that there would always be another day in any endeavour. Racing most of all. I think it’s very much in every punter’s interest to make all the decisions of the afternoon as soon as humanly possible, and to have already calculated their investment procedures.

It’s not that difficult if you’re using something like the one we were talking about above. Say for argument’s sake you have a bank that stands at $1,325 and you are betting at 1 per cent per selection, you know right from the start that your bets for that day are going to be, to the nearest dollar, $13 each.

If you’re a client for a reliable service, if you are following a system or three, if you have the various PPM selections available to you, if you make your own selections, or if you prefer a combination of some or all of these, the whole thing is probably going to take you an hour or two on Saturday morning or maybe even on Friday evening.

Using my example above, if you’ve got eight selections then you are going to be outlaying a wee bit over $100 for the day. 8 per cent of your bank will be in play. Or, you could allocate 1 per cent total per day, so each bet would be a miserly $1.50.

So far as exotic betting is concerned, I think you can have a progressive staking philosophy there too, so long as it’s extremely mild.

TO: I’d say you’re pretty unusual, then, because practically everybody I know would disagree with you on that one.

JH: It depends what you mean by very mild. I mean maybe a quarter of 1 per cent. I know that doesn’t sound like much but it allows for 400 losing bets, and if you were having, for argument’s sake, one box trifecta at $6 each and every week, you would need an annual bank of $312, and it would take you about eight years without a collect before your theoretical $2,500 bank went bust!

Maybe that’s not very practical, but if you wanted to have three such bets each week, one in Brisbane, one in Melbourne and one in Sydney, you would need a bank for the year of less than a grand. Now I reckon that $18 a week is probably within the reach of most of our readers, and a couple of decent trifectas could give the Brisbane bank, or the Melbourne or the Sydney ones, a real lift.

Just say you get a $506 trifecta in Brisbane. Suddenly your Brisbane bank is up to, shall we say, $3,000 and you would now be betting boxes of $7.50, per trifecta instead of $6. If my maths held up there, you’ll find that your investments have gone up 25 per cent and that if you multiply 7.5 by 400 you’ll come out round about the mark that I set the bank at. Sometimes some change is in there.

I’m sure nobody minds that, as it’s just a little bit of extra money in their pocket.

TO: You make it all sound so simple but of course it isn’t. First you have to get that $506 trifecta.

JH: That’s true, but I’m talking about a situation for exotic betting where you set a bank with a very mild progression, and bet small, hoping that when the big day comes you’ve set everything in place. The terrible truth of any form of betting is that, I suppose, you could miss out on all three states for eight years.

In other words, you have 416 trifecta boxes and you lose the whole lot. You’d lose, theoretically, $2,500 per state. If you bet on all three states over eight years and couldn’t get a trifecta, that would be no trifectas in 1,248 tries, and you’d be down theoretically $7,500.

Bring that back to reality, and the bottom line, to use that phrase again, is that you’ve still spent less than $1,000 a year over the three states. To put that another way, you’ve outlaid $18 per week. No more.

Naturally I’m exaggerating by using eight years as an example, and then throwing three states in, but on the other hand I’m also playing very safe, straight down the line like Matthew Hayden would have to, waiting for the ball I can hit for six.

I mean to say, for anybody who likes to have three $6 trifecta boxes a week, well, they know that this is going to cost them $18 per week or about $1,000 a year if you toss in the Melbourne Cup and one or two other holiday meetings. It just seems to me that if they keep records (and you don’t win if you don’t keep records), when they get lucky is the time to make a very small progressive increase in their outlay.

Don’t forget that point I made above: if you can get your trifecta box from $6 to $7.50, and you can do that these days with the flexible betting, you have increased your stake and your expected returns by 25 per cent. I’m not sure why any cautious punter wouldn’t see that as a reasonable way to travel.

TO: You are a very patient man though Jon. I can’t see many of our readers setting up an eight years plan, progressive or not. Take up that 1 per cent again please and forget the quarter of 1 per cent.

JH: Agreed. I’ll stay with 1 per cent per day. All right then, look at it this way. You decide that trifectas are the way to go, based on your success over a year or two. Or even that they are one way to go, a successful way for you, a way of winning – one of your famous remarks – a lot for a little.

Now, what you do is establish a bank. If you decide to bet $18 per week on  three boxed trifectas, whether they be all in the same city or whatever, you would need a maximum of about $954 for the year. That’s a bank of $1,900 over two years.

I’ve included Melbourne Cup Day in the 53 three-box bets of $18 each. I recall an article of yours, or maybe it was Brian’s, some time back, about not having to establish that thousand dollar bank straight off. What you need is to say that over a year if every bet loses (terrible thought!) you have the resources to back the plan to the tune of $954. You could win the first week.

If you won $477 (needing a return of $495), then the most you’d ever need for the rest of the year would still be $23 times 52, or $1,196, out of the new bank of $2,377. Betting at 1 per cent. Even though your bets would go up by about $2 per box trifecta. I think that’s right. Thirty three per cent. Of course it’s in my head. It won’t work in all cases but it will work with what I’m saying here.

And oh yeah, why did I say “two years”, back there a bit? Because I wanted around 100 bets so I could say, all right, you start with about $18 per day and you bet for, well, 106 occasions including the two Cup Days.

That’s $18 times 106 which is about $1,900, the starting level of the bank. But you still only ever need $18 a week, plus any percentage increase from the profit. OK?

TO: OK indeed. Want to come back next month? I feel we’ve only just begun.

JH: You invite me and I’ll come!

TO: Done!

Click here to read Part 2.

By The Optimist