In these crisis-ridden days for bookmakers, and When the tote seems to be inexorably overhauling them (alas!), it's timely, I believe, to have a look at what makes these bagmen tick. What, in fact, are the secrets of making a 'book' work? How do the bookies manage to survive, and how fair are they in their dealings with the punters?

We all know, in a general sense, how bookies operate. They offer you a price about a horse and you, by betting on it, are 'buying' that price. It's a classic marketplace, where the bookmaker puts a price on a horse and you have a free decision whether to accept that price, or take the option of looking elsewhere, to another bookmaker or to the tote machine.

When betting opens, a bookie offers you a price based on past form of the horses PLUS his own sources of 'inside information' - and these are plenty in the bookmaking ranks. Usually, one or two leading bookmakers will 'lead' the market in framing the prices on offer. (Example: At the big betting Gold Coast ring on Saturdays, the Sydney and Melbourne markets are invariably led by leviathan bookmaker Laurie Bricknell; to protect his prices from his main rival Lloyd Merlehan, Bricknell has a 'shade' device on his board!)

Like the punters, no bookmaker can accurately calculate the probability of a horse winning, so he cannot put up his odds with any degree of certainty that he is right. The odds he offers are those he believes to as closely as possible reflect a horse's chance, while allowing at the same time some room for profit on his side.

Example: He may decide that Horse A is a 2/1 chance, and yet will offer you only 6/4. What you, the punter, should be looking for is to catch the bookie when he is wrong. It may be that you have calculated Horse A to be a 4/6 chance, so even the 6/4 on offer provides you with a nice overlay of some 20 per cent.

Or, it could be that you regard Horse As price as a gross underlay. You may have assessed it as being no more than a 4/1 or 5/1 chance, therefore you will not have a bar of the 6/4 on offer-nor anything to do with any price that does not exceed the one you have framed yourself.

Prices change as betting progresses but now the odds begin to reflect the opinion of the punters. It is ultimately their money which determines the upwards or downwards movements of the initial odds. If most punters are wrong in their assessments, some horses will be offered at below their real value, opening up the possibility of obtaining overlays on other horses which drift in the betting.

Why does the bookie win? The fact is, they don't win on every race, but they do win enough times to make a profit. They win because, to put it frankly, they bet odds that are favourable to them and unfavourable to the punter. This particularly applies to those 'mug' punters we are always hearing about, the uninformed.

The bookie faces his greatest foe in the informed punter. The punter who prepares himself for the battle, with his own set of prices, arrived at after the most careful study of form and all other factors connected with the race (class, distance, going, etc).

If we get back to basics, and that's exactly what we are going to do(!), we have to say that any punter who does not possess a sound grasp of the mathematics of betting is putting him or herself right behind the pack. You must have a knowledge of percentages, and odds and chances, because racing is, at root level, a figures game in the end.

There are many excellent selectors around, but very few excellent money management punters-and this is why so few punters manage to win every year, and why the bookies win. The bookies are figures men. Through and through.

The basis of the maths of betting is a knowledge, then, of how a bookie really works. How he uses the mathematics of the game to 'snip' you and win! It's a sad fact that there are still many punters-old and young-who have no understanding of the meaning, or the value, of odds. They take the suicidal (eventually) view that as long as a horse wins it doesn't matter whether they got 6/4 or 7/4. But, as sensible punters know, there is a big difference.

Price has to be of the utmost importance. The difference between 6/4 and 7/4 is a massive 16.7 per cent. Over a long period, that could mean a lot when you balance up winnings and losses. Let's look first at a simple set of odds, just to give you the basic idea of what all this odds stuff means (those of you who know can treat it as a refresher course!).

If there are four runners in a race the true odds against each of them winning is 3/1. That is the correct price which favours neither bookmaker or punter. As there are four runners each, in figures, has a quarter chance of winning. The probability then, of each runner is one quarter, so the chances of the four horses added together equals One (1). This applies no matter how many horses are in a field-the sum total of the true chances added together will always equal One (1).

Transforming these odds, or prices, to 'chances' is simple. All you do is add up both sides of the prices (in this case, three plus one) which equals four-equalling a quarter, or 25 per cent of the total of one. If a horse is, say, even money (one to one) then one plus one equals two, which is half, so the horse is said to have a 50 per cent chance of winning.

These fractional chances, or probability factors, can be changed into decimals by dividing the top of the fraction by the bottom. Thus a horse with a quarter chance is one divided by four. Get out your calculator! The result is .250. In the case of the even money horse the answer is .500 and a horse at 4/1 would be .200.

But how does a bookmaker look at a field, and how does he manipulate the prices to allow himself a profit? Let's assume the bookmaker is offering Red at 6/4, Black 7/4, Blue 3/1 and White 4/1. In reality, the percentages would fall like this:

RED 6/440%
BLACK 7/436.5%
BLUE 3/125%
WHITE 4/120%

Now we know that in true odds, the total of the percentages should only equal one-yet here the bookie has built in a potential 21.5 per cent profit margin, which means that if the bookie laid all four horses at the quoted prices he would, assuming a $100 book, be holding $128 to pay out $100.

A bookie must always operate in this fashion. He cannot frame prices to 100 per cent or less, otherwise he cannot win. The bookies, then, use the percentages to protect themselves, but occasionally, at various stages of betting, they may offer prices which the clever punter may be able to take and so swing the percentages his way.

How can the 'simple' punter do this, the punter who can't be bothered to work out prices and ratings, and who just wants to bet his fancy? Even these punters can have a go at milking the percentages. Let's say you strongly fancy a horse. You think it can win-but now you have to try to place a 'value' on it. How much is its winning chance worth to you? If your life depended on it, what price would you take? Is it worth risking a dollar of yours in the hope of getting another dollar in profit-evens? Maybe you think the horse's chance is as good as that. If so, okay, look for evens or better.

But maybe you rate it a good chance but not that good. Fix a price in your head, then, at what you consider is a fair price, in much the same way you would when buying, say, a second-hand car. You may finally decide you place a value of 3/1 on your fancy. That is, you believe it has a quarter chance of winning the race. Now it is your task to find 3/1 or better from the bookies.

A lot of punters do this sort of thing instinctively, anyway. How many times have you said, 'I like Mickey Tricky but it's too short at 11/8' and you've foregone the bet. Sometimes these horses win, but many times they'll lose and you have saved yourself money.

Getting this 'idea' of a price in your mind is not a completely satisfactory answer to the bookies, but it's better than not having any price at all in mind. At least it's something of a guideline for you, and will, in the long run, prevent you from plonking on too many horses, or dogs, which are completely under-valued.

If you're a bit 'iffy' about the actual mechanics of bookmaking, I'll give you a little lesson. It may help if you have a look at the back of the bookmaker's board, where his clerk is writing down the bets that are called out. You can then see for yourself how the bets are recorded on the large bookies' sheets.

A typical section might be:

2463 8126
42126 14145

Can you work out the price of Gorby Chev? Look firstly at the 'stake' column. This indicates that the first bet listed was. a $5 bet. Then look to the 'Pay' column, which has the figure 10. This is the actual amount the bookie stands to lose on this bet. Therefore, the $5 has been invested to return a profit of $10 for the punter odds of 2/1. The first column, as you can see, shows the bookie's progressive payout on Gorby Chev; this figure includes the stake.

The second bet is $3 at 2/1, the third bet is $6 at 2/1 and the final bet is $10 at 2/1. In all, then, the bookie has taken bets worth $24 (see fourth column) on Gorby Chev at 2/1 and stands to pay out a total of $72 should the horse win. Of this $72, a total of $48 would be money out of the bookie's pocket (in other words, loss).

The betting sheets have similar sections for each runner. Also on the sheet is a race progressive payout and a race progressive holding column. Each time a bet is made on a horse, the details of the bet are recorded in both the horse progressive payout and holding columns AND the race progressive payout and holding columns.

Next month, we'll look at the different types of bookmakers-the gambling bookie, the opinion bookie and the board bookie. All operate with different pricing approaches. We'll also look at multiple betting whereby the punter can take advantage of the percentages and come out with a handy profit. We'll also have a special chart which tells you what the 'no bet' areas are according to your actual win strike rate with your selections.

What is the least price you can afford to take if you have a selection method that scores with 15 per cent winners? What if your selection rate is 30 per cent?

Click here to read Part 2.

By Richard Hartley Jnr