Why Crowd-Think doesn’t work for SPECIAL REPORT Horse Racing - Why favourites don't ... ·...

SPECIAL REPORT

Why Crowd-Think doesn’t work for Horse Racing

REVEALED! Why favourites don’t win as often as you think....

Horse Racing – the sport that defeats

Crowd-Think....

Crowd-Think is a proven and effective phenomenon – but it does

not work in horse racing....

Follow the crowd in horse racing and you’ll be wrong many times more often than

you are right....

www.Crowd-Think.co.uk

www.Crowd-Think.co.uk | Horse Racing - the sport that defeats Crowd-Think 1




Crowd-Think is a real and powerful phenomenon....

Back in 1906, noted anthropologist Sir Francis Galton took a butchered ox to a country fair in Plymouth, Devonshire....

The people who attended the fair were asked by Galton to participate in a contest....

What they had to do was to guess the weight of the butchered meat....

A total of 787 people took part in the contest and each registered their individual estimations....

Galton and his team of helpers studied the 787 responses and calculated that the median guess (the median being the value separating the higher half from the lower half of the data sample) was 1207 pounds....

The actual weight of the butchered meat amounted to 1198 pounds....

In other words, the crowd of people who took part in the contest had between them guessed to within 1% of the actual weight....

The crowd at the country fair was very accurate in its collective deliberations....

Other similar experiments have also served to demonstrate that there are situations where Crowd-Think is frequently more precise than the thinking of individuals....

Jack Treynor, Professor of Finance at the University of Southern California, asked a class of 46 of his pupils to estimate how many jelly beans there were in a glass jar....

The pupils were not permitted to work together or to confer in any way. They were asked to make subjective assessments and to provide independent estimates....

The glass jar held 810 jelly beans. The median estimate produced by the 46 respondents amounted to 840....

Crowd-Think produced a response just 3.7% higher than the actual amount. That’s quite a feat....

To put it into proper perspective, only two of the 46 individual estimates were closer to the true number of jelly beans than the collective estimate....

Treynor repeated the experiment. This time with a class of 56 pupils and a glass



jar containing 850 jelly beans. Again, the respondents were not permitted to work together and were instructed to produce an independent estimate....

The results were very similar. The median estimate produced by the group amounted to 871 – just 2.47% beyond the actual number of jelly beans in the jar....

And of the 56 individual estimates, only a single one was closer to the actual number of jelly beans than the collective estimate....

Crowd-Think won hands-down in both experiments. The collective estimate was more accurate than most individual estimates....

Crowd-Think did not beat every individual every time. But it certainly performed well in advance of most individuals that took part in the experiments – and consistently so….

We’re only looking here at two experiments and two sets of data. It’s limited evidence, for sure. But, even so, we can start to make one or two observations....

First, it is difficult for individuals to consistently out-perform Crowd-Think....

If you ran this jelly bean experiment say twenty times, some individuals would always manage to beat the group with a more accurate assessment. But it would not be the same individuals beating the group every time....

Second, over the course of the twenty experiments, it is almost a certainty that the Crowd-Think performance will run out the best results....

And from those observations, we might reach for a tentative conclusion: the best and easiest way to get reliably good answers to these kinds of problems where the answer in unknown is to trust to Crowd-Think and to ask the group – using the median response as the best possible answer....

And we have a recent example in popular culture that supports this idea....

There won’t be too many people reading this report who are not aware of or have not seen the television programme called Who Wants to be a Millionaire?

Contestants go on to that show to try and win a £1,000,000 by correctly answering fifteen questions....

They get some lifelines to assist them along the way – which once used cannot be used again.



If the contestant doesn’t know the answer to a specific question, he can go 50/50 (where two of the possible answers are removed from the list of four possible answers)....

Or he can phone a friend (where he gets to ask one of a pre-nominated bunch of friends for assistance)....

Or he can ask the audience (where the audience in the TV studio are polled for their answers via computer and the results given to the contestant as an aide)....

For the American version of the show they introduced something different. Instead of having the ‘Phone a friend’ lifeline like we do here in the UK, they had ‘Ask an Expert’ – where the contestant got to ask a bona fide authority on a subject for their response....

But even with experts involved, the best source of assistance to the contestant was always provided by the studio audience – by a country mile too....

James Surowiecki, the author of The Wisdom of Crowds crunched the numbers on the American version of the Who Wants to be a Millionaire? show, and he told CBS News this....

‘The experts do pretty well -- they get the answer right about two-thirds of the time, but the audience gets the answer right 91% of the time.’

Two-thirds of the time amounts to 65%. That means the ‘Experts’ provided the correct response (when asked) 6.5 times of ten. Compared to the correct responses supplied 9.1 times of out of ten by the studio audience....

Of course, the expert is just one person. He might know a lot. But he can’t know everything. But the audience is made up of many people – all of whom know different things. Across the long-term, the audience when taken together as a whole, is always going to know more than the individual....

That’s the power of Crowd-Think. Across the long-term, the crowd will know more and be right more often than the individual can ever hope to be....

Make no mistake. Crowd-Think is a real and powerful phenomenon. In many situations and circumstances, Crowd-Think is an effective tool that will consistently bring you closer to the truth. No doubt about it.

But Crowd-Think does not work quite so effectively when it comes to the sport of horse racing....



How Crowd-Think works in horse racing....Excepting those rare occasions when two horses finish in a dead-heat, there can only be one winner in a horse race....

In short, the horse that runs out the winner of a horse race represents the correct answer to a puzzle – a correct answer that was unknown before the race was contested....

Admittedly, picking the winner of a horse race and calculating the weight of butchered meat or the number of jelly beans in a jar are two different things....

With a horse race, there is no easy way of arriving at a median estimate of what will win – the collective view that might turn out to be more accurate than the largest proportion of individual estimates....

But Crowd-Think is still something that exists in horse racing. It’s just that the Crowd-Think view of a horse race is something that is expressed a little differently....

Instead of a median calculation based on multiple estimates, in horse racing Crowd-Think is expressed via money placed on bets in the markets that exist around individual races....

Bookmakers construct these markets and individual bettors express their opinions as to which horse will win a race via bets placed at prevailing odds...

The more popular a horse is in the betting – as measured by sheer weight of money – the shorter its odds will be....

By the time the race is scheduled to be run, the entirety of the market will have expressed its view via money put down in the betting markets and the most popular horse, the one that most people think will win the race (the one that has attracted the most money and is trading at the shortest prices), will be termed the favourite for the race....

You can think of the favourite for any horse race as the Crowd-Think candidate. It is the majority’s view – as measured be weight of money – of which horse will pass the finishing post first and win the race. The favourite is to all intents and purposes consensus opinion.

Now, this report is not focused on or interested in betting. This report does not have any interest in what horses win races or why. Nor is this report in the slightest bit



concerned on how best to pick horses that will win races. We will leave that to the racing experts and/or the clairvoyants.

The interest of this report lies purely in how Crowd-Think works in horse racing – and how effective or ineffective that Crowd-Think is....

We know, from studying the experiments we described earlier, that Crowd-Think is quite effective when it comes to guessing the weight of butchered meat or estimating the number of jelly beans in a jar or in helping quiz show contestants find the right answers to often difficult questions....

And, based on those findings, we can probably imagine any number of other scenarios and circumstances in which Crowd-Think might work effectively and prove more accurate than individual opinion....

But we wanted to know how effective Crowd-Think is when applied to the sport of horse racing....

If the Crowd can steer us in the right direction when it comes to calculations about weight or counting units or finding the correct responses to multiple choice questions, how does the Crowd perform when confronted with a horse race....

Are the Crowd’s deliberations as accurate in those circumstances? Are the Crowd’s estimations as reliable? Is the Crowd’s steer as effective?

We decided to find out. And we wanted to be as scientific as possible – basing our conclusions on as big a dataset as we could manage.

So we went back and studied every single horse race run in Great Britain since the beginning of 2002 – and we recorded the performance produced by every single outright (clear) favourite to run in Britain over that period....

Yes, that’s right. No half-measures. We went back some sixteen years in total and we ran the rule over more than 140,000 horse races for which a clear favourite was nominated by the Crowd (via the market)....

That a serious undertaking requiring dozens of hours of meticulous research. We know of no other publication, service or institution that has set-out to complete that work. It was an onerous task. But it was entirely necessary work to undertake if we were going to reach an authoritative answer to our query about how Crowd-Think works in the sport of horse racing.

But we didn’t stop there. Instead we broke down the overall dataset into segments....



There are two types of races run in Great Britain. Handicaps and non-handicaps....

Handicaps are based around weight carried. The weight a horse carries in a handicap is allotted on the back of ratings awarded (and adjusted on an on-going basis) by the official handicapper. Handicaps are considered the toughest races on the racing programme – harder to win for owners and trainers and harder to solve for the market....

Horse also carry weight in non-handicap races. But in non-handicap races the weight the individual horse carries is based on factors other than official ratings – such as, for example, but not confined to, age, sex, class of wins achieved over a specific period, money won or the money a horse cost at auction....

Handicaps and non-handicap races are distinct in nature. The latter are considered easier puzzles to solve than the former. So we thought it was appropriate to recognize that fact and to report the results of our research on that basis....

The British racing year is also split into two distinct seasons – flat and jumps. And within those two separate seasons there are distinctions to be made....

Flat races can be run on turf or on synthetic all-weather surfaces (mainly in the winter months).

Jumps races can be contested over fences (in chases) or over hurdles.

Our results also acknowledge these distinctions....

So, to clarify, we looked back across 140,000+ races run in Britain since the start of 2002 and considered the performances of outright favourites (the clear consensus choice of the market as measured by weight of money) in eight specific divisions....

O Turf flat races – handicap

O Turf flat races – non-handicap

O All-weather flat races – handicap

O All-weather flat races – non-handicap

O Hurdle races – handicap

O Hurdle races – non-handicap

O Chase races – handicap

O Chase races – non-handicap



We figured this was the most effective way of establishing the performance of Crowd-Think across the entirety of the sport and within the specific divisions and codes it encompasses....

Our findings lead us to a clear and definite conclusion....

Crowd-Think might be very effective when it comes to estimating the weight of a butchered animal or the number of jelly beans in a jar. But Crowd-Think is not a reliable predictor of the outcome of horse races. Far from it. Put bluntly, when it comes to horse racing Crowd-Think selects many more losers than winners....

Wrong 70%+ of the time in Turf handicaps....The table below highlights the performance of outright favourites in every Turf flat handicap run in Great Britain since 2002....

Year W R WSR% LSR%2018 728 2328 31.3 68.72017 722 2412 29.9 70.12016 651 2285 28.5 71.52015 663 2305 28.8 71.22014 638 2320 27.5 72.52013 682 2332 29.2 70.82012 577 2139 27.0 73.02011 592 2218 26.7 73.32010 648 2272 28.5 71.52009 565 2066 27.3 72.72008 499 1898 26.3 73.72007 524 1792 29.2 70.82006 471 1767 26.7 73.32005 392 1693 23.2 76.82004 378 1532 24.7 75.32003 414 1557 26.6 73.42002 349 1482 23.5 76.5

There’s no room for doubt. There’s no margin for error. The conclusions are clear.

Crowd-Think is not effective when it comes to identifying the winners in this specific division of races....



Across the entire 16-year period, the consensus view – as determined by the most popular horse in the betting – has been correct just 27.5% of the time....

Another way of putting that is this: the consensus view has been the wrong view almost 75% of the time....

As I write, the 2018 Flat Turf season is not quite over. There are still a few more races to be run. And a milestone might be reached....

As things stand, 2018 might be the first single calendar year in the last 16 in which Crowd-Think succeeds in picking the right horse in Turf Flat handicaps three times out of ten....

It’s not much to shout about. But it would be a first. And it would represent a performance high across the period....

But even if that happens, it doesn’t change the broader trend.

Crowd-Think – as represented by betting the outright race favourite – doesn’t work in Turf Flat racing....

Follow the Crowd-Think consensus in Turf Flat handicaps and you’re going to pick a loser in twice as many races (and a few more) than you find the winner....



Better – but not much – in non-handicaps....Crowd-Think performs a little better in the non-handicap races run on the Turf Flat – as evidenced by the table below....

Year W R WSR% LSR%2018 525 1219 43.1 56.92017 521 1271 41.0 59.02016 502 1229 40.8 59.22015 500 1274 39.2 60.82014 547 1279 42.8 57.22013 542 1318 41.1 58.92012 496 1260 39.4 60.62011 571 1415 40.4 59.62010 552 1425 38.7 61.32009 603 1498 40.3 59.72008 573 1414 40.5 59.52007 534 1379 38.7 61.32006 557 1380 40.4 59.62005 602 1602 37.6 62.42004 634 1763 36.0 64.02003 747 1742 42.9 57.12002 665 1654 40.2 59.8

On average, across the 16-year period under review, the consensus horses in this type of race (the horse backed into outright favouritism by the market) won 40% of the time....

That’s a better result than is achieved in Turf Flat handicaps, but let’s not hang out the bunting just yet....

Being right 40 times out of 100 still leaves us with 60 occasions out of 100 when the Crowd-Think horse failed to justify market support....

Crowd-Think still got it wrong more times than it got it right. And not in any single year across the entire period, did Crowd-Think manage to get it right significantly more than 40% of the time....



Sixteen years is a significant period. A big chunk out of any life. If Crowd-Think is indeed capable of calling non-handicap Turf Flat races correctly more than 40% of the time, it is reasonable to expect it to have done so at least once over that period.

The fact that it hasn’t strongly suggests that it never will. 40% give or take the odd percentage point is as effective a performance as we can expect from Crowd-Think in this sphere.

In other words, Crowd-Think is always going to be wrong more times than it is correct....

The All-Weather confirms our findings....What we found in the Turf Flat races was confirmed by our findings on the All-Weather....

Crowd-Think, as the table below illustrates, is not very good at finding the winners of handicap races....

Year W R WSR% LSR%2018 429 1412 30.4 69.62017 481 1557 30.9 69.12016 463 1517 30.5 69.52015 463 1462 31.7 68.32014 515 1463 35.2 64.82013 461 1462 31.5 68.52012 420 1372 30.6 69.42011 379 1280 29.6 70.42010 365 1280 28.5 71.52009 374 1327 28.2 71.82008 404 1367 29.6 70.42007 334 1182 28.3 71.72006 266 965 27.6 72.42005 142 558 25.4 74.62004 155 576 26.9 73.12003 127 512 24.8 75.22002 144 566 25.4 74.6



The Crowd-Think horse (the outright race favourite) only won an average of 29.8% of the time in All-weather handicaps....

Over the last few years, the Crowd-Think horses have been winning more frequently than was the case earlier in the century. And in 2014 the consensus horses did manage to win races 35% of the time – the high-water mark over the period....

But the overall results are clear and direct. Crowd-Think picks out the wrong horse (a loser) 70%+ of the time on average in handicaps run on the All-weather....

Crowd-Think does do a little better in the non-handicap events as the table below shows....

Year W R WSR% LSR%2018 269 572 47.0 53.02017 276 654 42.2 57.82016 285 667 42.7 57.32015 284 662 42.9 57.12014 318 681 46.7 53.32013 323 725 44.6 55.42012 337 777 43.4 56.62011 335 783 42.8 57.22010 325 761 42.7 57.32009 322 788 40.9 59.12008 375 860 43.6 56.42007 286 757 37.8 62.22006 293 889 33.0 67.02005 253 814 31.1 68.92004 273 834 32.7 67.32003 195 503 38.8 61.22002 185 507 36.5 63.5

Crowd-Think horses (horses sent off the outright favourite) have been winning 40%+ of time – with the figure rising incrementally over the last few years....

From this we can deduce that Crowd-Think is getting a little better at solving these races. But not so much as we can point to Crowd-Think as a reliable and effective pointer....

Whatever the recent trend towards better overall results, Crowd-Think has a long way to go before it is calling more of these races correctly than it is calling erroneously....



You can’t trust Crowd-Think over Hurdles....The table below shows how Crowd-Think horses (horses sent off outright favourites) have performed in handicap Hurdle races run in Great Britain since the beginning of 2002....

What it tells you is that you cannot rely on the majority decision – as represented by weight of money in the betting markets – to steer you reliably in the direction of a winning horse....

Year W R WSR% LSR%2018 236 811 29.1 70.92017 344 1099 31.3 68.72016 305 1023 29.8 70.22015 303 1046 29.0 71.02014 292 992 29.4 70.62013 276 929 29.7 70.32012 246 865 28.4 71.62011 271 926 29.3 70.72010 220 740 29.7 70.32009 179 722 24.8 75.22008 167 694 24.1 75.92007 176 696 25.3 74.72006 213 747 28.5 71.52005 183 728 25.1 74.92004 185 712 26.0 74.02003 204 735 27.8 72.22002 191 701 27.2 72.8

In such races, the Crowd-Think horse has won just 28.1% of the time over the entire period....

Only in one year during the entire 16-year period under review has Crowd-Think succeeded in highlighting winners 3 or more times out of ten....

That was in 2017 when the Crowd-Think horses produced an overall winning strike-rate of 31.3%. The rest of the time it’s been no better than the high 20s and hit a low of 24.1% in 2008....

Clearly, Crowd-Think can not be trusted as an effective pointer in handicap Hurdle races....



And whilst the results of Crowd-Think are much improved in non-handicap Hurdle races – as the table below highlights – the results still fall well short of a level where we might consider Crowd-Think a truly effective pointer....

Year W R WSR% LSR%2018 311 636 48.9 51.12017 447 878 50.9 49.12016 411 852 48.2 51.82015 418 845 49.5 50.52014 408 846 48.2 51.82013 403 819 49.2 50.82012 352 802 43.9 56.12011 438 940 46.6 53.42010 333 805 41.4 58.62009 412 903 45.6 54.42008 377 889 42.4 57.62007 351 833 42.1 57.92006 400 869 46.0 54.02005 336 817 41.1 58.92004 345 850 40.6 59.42003 390 822 47.4 52.62002 359 802 44.8 55.2

The overall strike-rate of Crowd-Think horses (outright favourites) in non-handicap Hurdle events since 2002 weights in at 45.6% and reached a high point last year with a strike-rate in excess of 50%....

In context with what we have seen so far, I guess we must flag-up this performance in the non-handicap Hurdle sphere as one worthy of note....

But, wrong a little more often than it is right (at its best), Crowd-Think still falls short as a reliable indicator....



You can’t rely on Crowd-Think over fences....Crowd-Think performance in Chase handicaps is very much in-line with what we have seen with the performance in handicaps on the Turf Flat, the Turf All-weather and handicap Hurdles....

Year W R WSR% LSR%2018 249 760 32.8 67.22017 312 1046 29.8 70.22016 300 1000 30.0 70.02015 313 1015 30.8 69.22014 309 1042 29.7 70.32013 260 970 26.8 73.22012 274 851 32.2 67.82011 267 923 28.9 71.12010 214 757 28.3 71.72009 221 755 29.3 70.72008 194 755 25.7 74.32007 208 706 29.5 70.52006 225 746 30.2 69.82005 194 729 26.6 73.42004 232 734 31.6 68.42003 180 678 26.5 73.52002 190 674 28.2 71.8

In occasional years, the Crowd-Think horse (the outright favourite) will get over the 30% ceiling – but never very far and certainly not consistently....

The overall strike-rate of Crowd-Think horses over the 16-year period closes-out at 29.3%....

In other words, in such races the Crowd-Think candidate is the wrong candidate just over 7 times out of ten....

But the Crowd-Think performance was significantly better in the non-handicap Chase events....

Nowhere have Crowd-Think horses performed better since the beginning of 2002 than they have in the non-handicap Chase events....



Year W R WSR% LSR%2018 122 240 50.8 49.22017 165 334 49.4 50.62016 161 310 51.9 48.12015 146 308 47.4 52.62014 157 319 49.2 50.82013 193 396 48.7 51.32012 203 422 48.1 51.92011 230 494 46.6 53.42010 202 438 46.1 53.92009 220 478 46.0 54.02008 207 484 42.8 57.22007 210 462 45.5 54.52006 239 470 50.9 49.12005 183 474 38.6 61.42004 232 538 43.1 56.92003 292 572 51.0 49.02002 259 543 47.7 52.3

In four separate years to date over the 16-years under review, Crowd-Think pointed to winning horses in non-handicap races over fences 50%+ of the time....

And overall, across the entire 16-years, the strike-rate weighed-in at 47%....

We must take our hats off and salute the best Crowd-Think performance returned across our range of tests....

But whilst doing so, we should bear in mind that even in the area Crowd-Think got it right most often, it was still getting it wrong more than 50% of the time across the long-term....

17


www.Crowd-Think.co.uk | Horse Racing - the sport that defeats Crowd-Think

In conclusion....Putting it all together, the consolidated performance figures of Crowd-Think horses (outright favourites) across the various codes and divisions since the beginning of 2002 look like this....

Type W R WSR% LSR%Chase - non-handicap 3421 7282 47.0 53.0Hurdle-non-handicap 6491 14208 45.7 54.3

AW Flat - non-handicap 4934 12234 40.3 59.7Turf Flat - non-handicap 9671 24122 40.1 59.9

AW Flat - handicap 5922 19858 29.8 70.2Chase - handicap 4142 14141 29.3 70.7Hurdle - handicap 3991 14166 28.2 71.8

Turf Flat - handicap 9493 34398 27.6 72.4

And these results enable us to make some very simple and straight-forward observations....

Across the board, Crowd-Think performs better in non-handicap races than it does in handicap races....

Across a 16-year-period Crowd-Think has performed best in non-handicap Chases – and performed with merit in non-handicap Hurdle races....

Across the same 16-year period, Crowd-Think has consistently found Flat handicaps run on the turf the most difficult puzzles to solve correctly....

But, taking everything together, the overall conclusion that it is impossible to avoid or refute is this....

Crowd-Think is NOT a reliable or effective predictor of the outcome of horse races....

In every area we tested, Crowd-Think is wrong more often than it is right – and this is especially the case in handicap races....

It is fair and true to say that most racing bettors back the outright favourite in races. Whether they realize it or not, they are indulging in Crowd-Think – betting that the consensus horse will win....



Most of the time they will be wrong. Crowd-Think consistently produces more losers than winners. Our research proves as much....

Our results and conclusions are based on a study of more than 140,000 races run on British race tracks over a 16-year period. And we are confident that similar rigorous testing going back another 20+ years would only serve to deepen the trend of our findings....

Horse racing consistently defeats Crowd-Think (backing outright favourites) – across the board and across the years.

Crowd-Think doesn’t work in horse racing. It doesn’t work today. It never worked in days gone by. And you can be certain that following the crowd won’t work tomorrow either....

Best regards,

Nick Pullen


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