What I learned from Gambler, secrets from a life at risk

At The Edges No.6

Gambler: Secrets from a Life at Risk is the autobiography of Billy Walters. I was lucky enough to grab this on Libby when there were no holds on it. The book chronicles his journey from being born in the sticks of Kentucky, spending a few decades as a shithead, getting his shit together, and becoming “The Micheal Jordan of sports betting.”

I enjoyed listening to Billy’s stories about growing up in Kentucky and gambling in Vegas. He reminded me of sitting on the porch on a hot Georgia summer, eating watermelon with my Grandpa, and listening to him spin yarns about his past. Full or flourish and exaggerations. How much is true? It doesn’t matter. I know Billy didn't really put “50 stacks of newspapers” in his bike basket for his paper route at 9 years old. But it makes for a heck of a story.

Why people gamble more when they can’t “afford” it

Walters started from meager beginnings and spent his early years in a cycle of hustle and self-destruction. Have the biggest quarter of any car salesmen in the region, then blow it all on booze and playing pool.

Keeping money in the bank when you aren’t bringing much in is tough. You could spend March, April, and May scraping together a few extra bucks, only for your in-window AC unit to die in June. Your savings are gone; you’re sweating from the sun and your next car payment. And it’s not just about the money. It’s about the habits.

It’s rational for people in that situation to put a few bucks towards lottery tickets, not just for daydream equity, but because a 1-in-11,688,053.52 chance of escaping poverty is better than zero.

There’s a strong connection between growing up in poverty and having a gambler’s spirit. “gamb00l,” as we called it back in the online poker boom of the early 00s. You see people with steady incomes getting nowhere. When you can’t afford to fund a ROTH IRA and your employer does not provide a 401k, saving is not seen as a path to wealth.

The lucky few find opportunities to channel this gamb00l into variant-income careers like sales, finance, and entrepreneurship. Maybe they get started waiting tables. The difference between success and failure is whether or not you can break old habits and build new ones.

Betting like a businessman

When Billy watches one of their friends die in his 40s, it’s a wake-up call. He stops smoking, drinking, and going to casinos(though he continues to bet on sports). He starts saving his money.

Eventually, he partners with a group of quants called ‘The Computer Group’ and manages to build a sustainable, winning sports betting operation. Walters claims to bring in $50 to $60 million in winnings in a good year.

When he starts “wagering as a business,” he uses mathematical modeling to create lines and bet the deltas between his lines and the sportsbooks. Model shows the Bengals as a +4.5 favorite and the sportsbook has them at +2? Put some money down and pray Joe Burrow pulls through for you.

Funnily enough, this book made a lightbulb go off with me about investing. Value investors do this with stock pricing—betting on your models vs. the market.

Investing lessons from a gambler

1: Bankroll management — Have a bankroll(a pile of money dedicated solely to your betting). You have to be comfortable losing 100% of this money. Don’t put more than 3% on a single bet. And when you’re ahead, take some money off the table.

2: Every percentage point matters — The house edge on most casino games is 3-5%, but that’s enough for casinos to rake in $8.3 billion last year. The slimmest edges can make the difference between winning and losing.

I’m reminded of a quote from Roger Federer’s commencement address at Dartmouth:

In tennis, perfection is impossible... In the 1,526 singles matches I played in my career, I won almost 80% of those matches... Now, I have a question for all of you... what percentage of the POINTS do you think I won in those matches?

Only 54%.

In other words, even top-ranked tennis players win barely more than half of the points they play.

3: Find the best price — Pay attention to fees and taxes. Use multiple accounts, and when you’re ready to make a play, ensure you’re paying as little as possible.

4: Different horses for different courses — There is no universal strategy. Understand the context you’re in, and adjust accordingly.

The Gambler’s journey

I want to say Billy had an unconventional path out of poverty, but that feels weird to say because there isn’t a conventional one. Some standard advice still applies: If you’re not born lucky, you must work hard, have discipline, and still get lucky at some point.

I’m reminded of the time in college I spent two years making a living playing online poker: People imagine gambler as these rogue mavericks who put it all on the line. In reality, the successful ones are stoic, risk-averse, nerdy number crunchers.

And they had a couple of lucky breaks early on, which seeded their bankroll and their self-confidence.