What It Takes to Be a Professional Gambler

Can you earn a living gambling on sports or picking stocks?

Happy Friday morning again everyone! I wrote an article a few days ago about how natural gas is just as dirty as coal. I didn’t want to send it in the newsletter since it isn’t really related to personal finance, but I figured some of you would be interested in reading it. Today’s newsletter is about gambling, on sports and stocks. Is it possible to gamble professionally?

Gambling is entertaining. It can make sports more engaging, bachelor parties more exciting, and a trip to the gas station could be life-changing. Gambling is also an addiction. A survey found that most callers to a problem gambling hotline made less than $35,000 a year and lost an average of $21,500 a year gambling. That means many of those with a gambling problem are spending over half their income on gambling.

Gambling can also be a career. James Holzhauer, the ‘Jeopardy!’ contestant who won 32 games in a row, is a professional gambler. He makes a living by finding inefficiencies in the sports betting market, especially football and basketball. How does he do it? What does it take to be a professional gambler?

The right combination of brains and luck

Holzhauer is the first to admit that luck plays a significant role in gambling success. He told The Ringer, “As a gambler, I know you can do everything right and still have to wait a long time to see positive results if luck is not on your side.”

Aside from luck, professional gamblers need to be brilliant, not just smart. James Holzhauer doesn’t think like anyone else. His strategy on ‘Jeopardy!’ almost broke the game, and he reads children’s books to gain knowledge. To find inefficiencies in the sports gambling market you have to think like no one else. 

Did I mention luck?

Even if you have a brilliant system that exploits inefficiencies in the gambling market, success is far from guaranteed. Finding market inefficiencies can improve your odds, but you’ll still need luck on your side to turn a profit. Imagine betting on a coin flip; you have a 50/50 chance to win. No matter how many times you bet, your expected gain or loss from betting on the coin flip will be $0.

Now imagine you notice something about the coin flip that gives you an edge. Maybe the weight of the coin isn’t evenly distributed, and with this information you predict the coin will now land on heads 52% of the time.

Congratulations, you’ve found an inefficiency that you should theoretically be able to profit from. If your luck is average, you’ll make $40 in profit for every $1,000 you bet on coin flips. When you have a stretch of bad luck, though, you may start doubting your system and abandon it entirely. If your luck is above average, you may become overconfident in your ability and see inefficiencies where there aren’t actually any. The odds may be on your side, but even the most brilliant gamblers need a little bit of luck.

Gambling and the stock market

Buying individual stocks can be just like gambling. Investing in a company’s stock means essentially betting that the stock will perform well in the future. As we’ve seen in the past with companies like Enron, even the biggest corporations can come crashing down. At its height, Enron was the 7th largest corporation in America. Today, that would put them ahead of companies like AT&T, Google, Kroger, and CVS.

This doesn’t mean that investing in stocks is always gambling. Broad market indexes strive to  capture the return of the market. By investing in market indexes, like an S&P 500 index, you are betting that the market will grow in the future. We of course don’t know if the markets will continue growing in the future, but with the pace of technological innovation and continued growth of labor productivity, the outlook is promising.

Picking stocks and placing bets

Gamblers and stock pickers have something in common: they both think they can find inefficiencies in the market and profit. Unfortunately, most gamblers and stock pickers have not found success. The average household in the U.S. loses $556 every year gambling, and active investment managers lose to the market more than 90% of the time over 15-year periods.

It’s safe to say that the vast majority of gamblers would be better off not playing the odds. Even those who do have the right combination of brains, skill, and luck don’t have it easy. Staying one step ahead of the rest of the market is no easy task, and in many cases is a full-time job.

Still, gambling is a fascinating display of risk and reward, of addiction and skill, of gain and loss. It’s also a display of human arrogance, with the amount of people who think they can outsmart the system, and are smarter than the average person.

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