Bookies who lose

IT is said that you never meet a poor bookie and its certainly true that their consumption of caviar, Cuban cigars and expensive cars is somewhat above average.

This is an article by Joe Saumarez Smith that appeared in the March 2001 edition of Business Life, British Airway`s inflight magazine for business class travellers.

IT is said that you never meet a poor bookie and its certainly true that their consumption of caviar, Cuban cigars and expensive cars is somewhat above average.

But it is a myth to suggest that all of them enjoy quite such success - bookies can and do lose in the long run.

This comes as a surprise to most people, who think that in the gambling game there is only one winner. But a bookmaker's business is just like an insurer's - and if a disaster occurs, the payouts will be far greater than the premiums taken in.

Perhaps the most devastating loss to bookmakers ever came in the 1946 Epsom Derby. It was the first Derby after the end of World War II and everyone who had ever served in the Royal Air Force - or who had relatives in the RAF or paratroops - went for an outsider called Airborne. The horse, whose form until then was more akin to a donkey than a thoroughbred, hacked up at 50/1. More than half the bookmakers in the UK went bankrupt on the back of that one result, something that has never been repeated since.

More recently, bookies have been stung by slightly sharper punters, who relied more on mathematics than picking an attractive name. The self-styled Hole In One Gang realised after studying the form that the chances of any of the golfers in a given tournament scoring a hole-in-one was around 50%. But talking with friends, the two men realised that most people thought it was nearer a one or two per cent probability. So they decided to tour the country asking bookies for bets on this happening in any one of the four Majors, making small bets of £20 here and £50 there at huge odds. When there were hole-in-ones in three of the four tournaments, the two picked up just short of £1 million. Plenty of bookies squealed that they had been cheated - some just refused to pay up - but some of the more honourable ones admitted they had not done their homework and handed over the keys to their business in lieu of payment.

The problem with bookmaking is that bookies are trained to blindly follow the statistics, rather than going for the emotional choice. At Ascot racecourse on 28 September 1996, jockey Frankie Dettori had ridden the first six winners on a seven race card. The bookies has rated his mount in the last - Fujiyama Crest - a 16/1 shot in the morning and refused to believe it good enough to complete his clean sweep. The large bookmaking firms - who had huge liabilities from multiple bets on all Dettori's rides - tried desperately to cut the price but some bookies carried on laying it as though it couldn't possibly win. Fujiyama Crest led all the way and held on by a rapidly diminishing neck from the fast-finishing Northern Fleet, forcing several bookies to sell their palatial houses and to start all over again.

That said, sometimes the bookies get off lightly.

In 1991, Noel Furlong, an Irish carpet millionaire and former World Poker Champion, placed a huge bet on his two horses winning on the first day of horseracing's Cheltenham Festival. When Destriero won the opening race, Mr Furlong picked up an estimated £1 million. But that was pocket change in comparison to the payout if his other horse, a 16/1 shot called The Illiad, could win the Champion Hurdle. Bookies reaching for their calculators quickly realised they faced a payout north of £8.5 million if The Illiad was successful. Veteran racegoers recall they had never seen so many white-faced individuals in the betting ring - but they got away with it as The Illiad never really showed much and eventually trailed in last of the 21 finishers.

And it is not just individual bookmakers who can suffer from miscalculations or bad luck. In January this year Britain's third largest gambling group, Coral Eurobet, announced abysmal annual results. Their Internet betting division had hit a bad patch during the Euro 2000 soccer championship - the firm offered the most competitive odds on the favourites in the quarter-finals and all four of them won at a canter - which they revealed had cost them £12 million. Given that they have hundreds of thousands of clients among whom they could spread the risk, this was a truly shocking result.

The existence of professional gamblers also proves that bookies can lose but, in the long run, the bookmakers do usually win - a recent report showed that every year gambling losses total £28.50 for every man, woman and child on the planet and that bookies take an estimated £69 billion of bets per year. Should we feel sorry for the ones who lose? Probably not too upset - they know the risks when they choose their career.

But there is one bookmaker I know that I do feel genuinely sorry for. One of his best Singaporean clients called up in the middle of the night for the odds on a series of American football games. A senior assistant took the call and managed to give the opposite odds for each team - so, for example, a massive favourite was offered at odds of 8/1. The client picked out the eight bets that were most out of line - and had a $10,000 accumulator. When the results came in, the bookie found he had lost $3 million on the bet. He considered voiding the bet as an obvious error but he knew it would ruin his reputation across Asia. And so, with a heavy heart, he wrote out a cheque for $3 million, single-handedly wiping out the previous 18 months' profits.