Wall Street vet backs MLB betting in book
February, 27, 2013
By Chris Gigley | ESPN The Magazine
J. Meric/Getty ImagesAccording to "Trading Bases" author Joe Peta, the Rays' 2010 success was due largely to "hidden luck."You’d think a guy who gets hit by an ambulance, spends the next few months in a wheelchair because of it and then gets fired from his seven-figure Wall Street job is having a pretty bad year.
Not Joe Peta.
Amid all that hardship in 2011, Peta filled the idle time between rehabbing and job-seeking by combining his three passions, a process he recounts in his forthcoming book: “Trading Bases: A Story About Wall Street, Gambling, and Baseball (not necessarily in that order).” The book hits stores on March 7.
Calling on his Wall Street background, Peta created a market model for the 2011 Major League Baseball season and used it to place bets. He got a 41 percent return. How he did it just might thaw the relationship between Major League Baseball and Las Vegas.
Peta recently spoke to ESPN Playbook about the parallels between sports betting and trading stocks and why betting on baseball is easier than on other sports.
Do a lot of people on Wall Street bet on sports?
I was like about everyone I’d ever met on trading floors. Football dominates the sports gambling scene on Wall Street. I was part of inventing this NFL market that traded like NASDAQ stocks. It was a tremendous innovation over the usual over/unders.
Courtesy of Dutton AdultPeta got a 41-percent return on his MLB bets in 2011.
How did that work?
Let’s say a team like the Bears had an over/under of eight total wins. When you bet over or under in Vegas, it’s win or lose. It doesn’t matter how many games they win as long as it’s over eight. The way we worked it was if eight was the midpoint, you bought it at 8.5 or sold it at 7.5, just like a stock. You win more the more games the team wins.
And the best part was these traded all year. The markets trade every week. It was a huge hit on trading desks and a great illustration of how people trading stocks all day are also gamblers. It’s part of what they do.
Do any of them bet on baseball, too?
There are some degenerates who certainly gamble on just about anything. They just roll from one sports season to the next. But even when they are betting on baseball, that stops the moment football begins.
And yet, in your book, you say baseball is easier to bet on than football or basketball. Why?
Baseball is more model-able than anything else. It’s really just a series of one-on-one matchups. It can be modeled fairly effectively. You have to put so many caveats in football because there is so much interdependence. But it didn’t matter where Randy Johnson pitched, who his catcher was or who he was facing. Over a 10-year period, he struck out 34 percent of the batters he faced. There was very little deviation.
Still, there is some luck involved, right? You mentioned that about the 2010 Rays.
It’s hidden luck. The Rays were scoring runs thanks to sequencing or cluster luck, which was hidden from mainstream analysis and even sabermetric analysis. No one was covering why the Rays were so efficient at turning hits into runs. It’s possible if you have great power, but the Rays didn’t have that. I uncovered it and knew it was non-repeatable and lucky. Then, I started looking at it as a market and knew the Rays would be overvalued the next year.
Courtesy of Dutton AdultPeta's book comes out on Mar. 7.
They still made the playoffs in 2011, though.
They also scored 100 fewer runs. What happened was their pitching staff and defense more than overcame that deficiency. David Price had a tremendous year and James Shields emerged. They were able to duplicate their success in a different way.
Growing up, you were a Phillies fan. Has betting on the game taken any of the fan out of you?
There were times when I was first doing this in 2011 when my wife would see me suddenly rooting against the Phillies. She’d only be vaguely paying attention and ask me why I was doing that. I think it comes from trading stocks. When it comes to placing a bet I have no problem rooting against a team I have an emotional attachment to. If the model spits out that it’s mispriced, I’m going to put my money on the mispriced securities.
But I honestly became more attached to baseball than I had been since I was 12. I enjoyed throwing myself completely into a baseball season and understanding the rosters on all the teams, just like I did when I collected baseball cards. It heightened my appreciation for the game.
Is there anything Major League Baseball can do to make the sport more bettor-friendly?
A needless variation in the game is incorrect calls. I don’t understand why they don’t use replay technology. You see Bud Selig and Joe Torre, 70-year-old men who just want to keep the status quo with no replay. Yet within Major League Baseball there are incredibly tech-savvy people. The at-bat app is awesome. The technology they employ for customer enjoyment of the game is tremendous. Why would they let blown calls taint the game when they have so much technology?
Do you think Major League Baseball will ever accept gambling like, say, the English Premier League does?
I get why a 70-something man like Bud Selig is so anti-gambling. So is my mom. It wasn’t an exercise in critical reasoning back then. It was an underground mob business. But I think those sort of feelings will change once new blood gets in.