Lessons in Sports Investing (Part I: The Computer Group)

We’ve all heard about sharps, wise guys, professional gamblers, syndicates and betting groups. Perhaps the most famous sports betting group was the “original” Computer Group. Over 20 years ago, the famous – or should we say “infamous” – Computer Group changed the face of the sports betting world. Many of the Computer Group’s members made unreal amounts of money. Several made millions (indeed, at least one eventually earned a fortune estimated to be in the hundred-million-dollar range!). In this article, we’ll take a look at the Computer Group’s story and see what we can learn.

Can sportsbooks be beaten? Yes. Is success more difficult today? Most definitely yes (tougher lines), although in some ways, no (more Low-Vig or Reduced Juice Books; more competition amongst books Shop for the Best Line). Can SportsInsights.com’s tools be used to achieve success and track sharps? Happily, yes. First, let’s “go to the videotape” and see what we can learn from the Computer Group’s story.

The Computer Group: Early History
Twenty years ago, computers and computing power were not as readily available as they are today. Backtrack even further – into the 1970’s – and computers were even scarcer. Enter our first character, the “computer dude /mathematician.”

The year is 1972. Our statman studied stats for his softball team at work. He wondered, “What made teams better than others?” Later, he saw more value (dollar signs!) in other areas – and turned his interest to writing computer programs for college football. What stats were most important to the outcome? How often did certain factors help to beat the spread? It always pays to be ahead of your time – but this computer dude was THE pioneer in studying everything from: number of first downs, home field advantage, common opponents, etc. Some say that the distance a visiting team traveled to a game was a factor. Amazing…

Fast-forward to 1979 where, seven years later, our mathematician moved to Las Vegas. As usual, there were bumps along the way and this was NOT the “happily ever after” ending that you might expect. Our computer dude saw that sports investing was hard work – and included everything from inputting data, to getting bets down at good prices, to suffering the ups and downs of the business and especially the responsibility of knowing this was his livelihood. The ups and downs of the business were particularly difficult for our mathematician.

The Computer Group: Success
In 1980, our statman partnered with a doctor. The moral support of a partner was key to turning things around – as was sharing some of the responsibilities. The doctor had not been successful in his own handicapping – but was toying around with the idea of forecasting baseball games with a computer. The doctor and computer dude hit it off. The doctor took over the responsibilities of getting the bets down – leaving the mathematician to focus on the computer results. The doctor was a wizard at moving large amounts of money around and getting bets down.

The mathematician (now, with his brother) was happily updating the computer and generating good results. In 1980, the computer researcher and doctor shared about $100,000 in profits. In addition, the doctor was growing a network of people to help get bets down. The doctor eventually had a network of an estimated 1,000 people who used the information. This network included people in almost every state around the country and was used to get money down fast and to find the best lines.

By 1983, it is said that the Computer Group was earning almost $1 million in a good week of college football. Overall, the Computer Group is said to have earned almost half a million dollars a week when it hit its stride. During the 1983-1984 sports year, it is estimated that the Group earned between $10-$15 million. However, even this could be an underestimate because so many people had access to the information. Much more may have been earned “off the books.”

The Computer Group: End Game
In 1987, the Computer Group’s success got to be too big. The federal government initially investigated the Group because there was a question that the Group was operating as an illegal sportsbook. However, the feds soon learned that the Computer Group was “merely” betting on the games – not operating as a book. However, after the case, the Computer Group was dead due to the various principals not cooperating with one another. One example: when the size of the network was revealed (as a result of the investigation), the statman felt like he never got his fair share.

In the five years from 1980-1985, one ledger showed $14 million earned on $135 million total money bet – for a ROI of more than 10%. Overall, it is estimated that the Group achieved a winning percentage of around 60%.

Today, some of the individuals involved with the original Computer Group continue to achieve success against the spread and are successful sports “investors.” Indeed, some of these individuals are said to be worth hundreds of millions of dollars. So, what is the moral of the story?

Some Notes and Points
• Winning at Sports Investing is possible. However, as in other “businesses” that involve competition, only a small percent are successful in the long run.
• The Computer Group achieved 60% back when lines were “looser.” This seems to imply that this is close to an upper limit for a winning percentage. You might be able to achieve a higher winning percentage – but you may be leaving some money/units on the table by being too selective.
• Some believe that “softer lines” aided the Computer Group’s rise in prominence in 1980. This was the result of the FBI’s arrest of Bob Martin – who was the “official line” in Las Vegas from 1967 to his arrest in 1980.
• Today’s lines are “tighter” and are tougher to beat – but this just means that you might have to “settle” for a slightly lower winning percentage – or be more selective – to be successful.
• Value is important. The “leader” of the Computer Group used to compare the actual Vegas lines to the Computer Group’s output. The Group would then get money down on the games that had “value.”
• How do SportsInsights’ tools come in handy? We often talk about “Betting Against the Public.” (LINK) This is one way of finding value.
• We also highlight Smart Money methods as a way of tracking where sharps might be investing.
• Today, one advantage that we have is that more books are available – including some “low-vig” books. Some books are “sharper” than others. Some may need to balance their action a bit. All of this can help to get a better “price.” (LINK)

In Part II of our series, we’ll take a closer look at some of these lessons – and how we can use SportsInsights.com’s tools to succeed in sports investing – and in particular, apply some of these tools to basketball.

We do not guarantee that the trends and biases we’ve found will continue to exist. It is impossible to predict the future. Any serious academic research in the field of “market efficiencies” recognizes that inefficiencies may disappear or fade over time. Once inefficiencies are discovered, it is only a matter of time before the market corrects itself. Past performance is not indicative of future performance. The information in this article is for entertainment and educational purposes only.