Blood in the Desert
Holyfield pummeled Tyson, but here's why the bookmakers took the real beating.
The bleeders were the Nevada sports books, suspected of having collectively lost maybe $3 million Nov. 9, when Evander Holyfield upset Mike Tyson at the MGM Grand Arena in Las Vegas. As marvelously summarized by Joe Lupo, who runs the book at the Stardust, "This will probably go down as one of the worst fights we've ever booked, in terms of losing." Michael "Roxy" Roxborough, who runs Las Vegas Sports Consultants, which sets the betting lines for most of the casinos in town, suspects that Holyfield vs. Tyson may be the biggest loss they have ever incurred on any single sports event. How could it have happened?
One asks the question not because a long shot won--after all, this happens from time to time in sports and even life--but because the bookmakers' behavior this time seemed so remote from the theory undergirding their business. As every Nevada schoolchild knows, the theory begins with a firm statement that the odds being served up must not reflect the bookies' own probabilistic judgments. The quoted odds must, instead, be set at whatever levels will attract bets to both sides, leaving the house indifferent to which side wins and enabling it to earn guaranteed returns on the vigorish. The standard model is one wherein the bettor on one side of the proposition collects, say, $100 when his team wins (or beats the point spread), while the guy on the other side loses and pays the house $110.
The Tyson-Holyfield script showed that 1) Getting the house to the indifference point can be harder than you might think; and 2) A lot of those guys have trouble keeping their own judgments out of the odds. The problem around No. 1 is that the betting public can be hard to decipher. Roxborough's opening line in September was, in the local lingo, -25 for Tyson and +17 for Holyfield--a formula telling Tyson bettors that they needed to put up $25 to win $1 and Holyfield bettors that they could win $17 by putting up $1. This extraordinary imbalance was rendered plausible by the fact that, in recent years, Holyfield had been given a lot of trouble by relative stumblebums and, furthermore, he was now 34 years old (compared with Tyson's 30) and had a history of heart trouble. In contrast, Mike's post-prison record showed him terrorizing and disposing of four opponents in a total of 18 minutes. (One of the four fights lasted only 109 seconds and inspired the wisecrack that you'd better not invite Bruce Seldon and Mike Tyson to the same party, as the last time they were together, they almost came to blows.) A poll of 48 boxing writers produced only one--Ron Borges of the Boston Globe--who picked Holyfield. The betting line assumed that the Tysonites saw their man as invincible and would spring for a fast 4 percent return on their investment, while the other side needed a 1,700 percent return to lure them into action.
I t didn't exactly turn out that way. During September and October the line never budged, but the money coming in was overwhelmingly for Holyfield. At first, this did not seem especially alarming to the sports books, which had gone through similar sequences in other Tyson fights and always found that the wise-guy money on Mike poured in eventually. In the Seldon mismatch early in September, the avalanche of late money had driven many of the books to decrease the payoffs to Tyson bettors, who found themselves suddenly looking at prices like -22, up from -18.
In the Holyfield fight, the Tyson avalanche never came. And so, in the week leading up to Nov. 9, Roxborough and his customers began nervously sweetening the deal for Tyson bettors. By Nov. 4, a typical line was somewhere around -15 for Tyson and +10 for Holyfield. At fight time, some books were around -6 and +4. A swing of this magnitude--with Tyson moving from -25 all the way down to -6--was just about unprecedented, for boxing or any other sports-book event. And still the Tyson money did not show up. Robert Walker, who runs the sports book at the Mirage, was exaggerating only somewhat when he mentioned despairingly, the other day, that he'd never run into anybody holding a Tyson ticket.
Well, why weren't the prices pushed still lower--to -5 for Tyson, or even -3, or whatever it took to get the house books into something approaching balance? That sounds like a reasonable question until you focus on the fact that bookmaker betting is not like racetrack betting. At the track, the parimutuel system leaves all payouts being made at final prices. At the sports book, the house is still on the hook for bets made weeks earlier at different prices. And when those bets include huge amounts of money placed on a long shot, it is more or less impossible to attract enough favorite money to give the house the standard-model guaranteed profit. Sid Diamond, who runs the sports books at the seven Circus Circus casinos, said that he tried to load up on Tyson bets during the last few days and actually did get about $250,000 of them, but that he had to stop pushing down the price because it would have given him a "minus pool"--a guaranteed loss no matter how the fight came out.
Pushing the odds way down can give the bettors a chance at guaranteed profits. Even with Tyson at -8, there must have been wisenheimers who already had a $1,000 bet on Holyfield at +17 and now observed that they could lock in a guaranteed net of $1,000 by turning around and betting $16,000 on Tyson. The books could certainly have limited their losses by pushing the line down still further, but only at the price of giving up all hopes of a profit--not an attractive option.
And especially not when you bring into play your own gut feeling that Iron Mike will prevail again and get you out of this hole. Problem No. 2, as noted above, is that a lot of books have trouble totally overriding their own powerful judgments about sports outcomes.
In trying to explain retrospectively why Tyson money never materialized in the quantities expected, the sports-book guys one talks to keep coming back to Mike's massive unpopularity, said to be driven by his rape conviction and arguably not helped by the huge Mao tattoo on his right arm. As an explanatory variable, Mike's lack of lovability seems weak, since he got bet on in all those other fights. However, it may account for the well-publicized call of congratulations from Sen. Ted Kennedy to the Globe's Ron Borges.
Dan Seligman is a columnist for Fortune.