What Do Casinos, Bookies and Market Makers Have in Common?

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Of casinos, bookies and market makers.

For the past 25 years I have been avid supporter of all three businesses – casinos, bookies and market makers. And by supporter, I mean my hard earned money has gone to support these businesses.

At some point it occurred to me that these business models are connected and that connection became the access to a breakthrough in my performance and profitability.

Let’s look at these business models:

CASINOS

Casinos make money because every game they offer has a built in statistical advantage for the casino. That edge can be very small (lower than two percent), but over time and the millions of bets placed by casino patrons, that edge earns the casino enough money to build elaborate hotels, fountains, giant pyramids, towers and replicas of famous landmarks.

BOOKIES

Generally, a bookie is an expert in the field in which he or she offers bets. Bookies have to be extremely knowledgeable, or they will not be able to turn a profit.

The goal of a bookie is to set up a point spread which allows him or her to profit no matter what the outcome of an event is. This requires a constant adjustment of the odds, and in some cases a bookie may even buy bets from another bookie to create a desired spread.

MARKET MAKERS:

Ever think about how you can just call your broker (or go online) and in a moment’s notice sell 1,000 shares of Cisco? I mean, who is buying those shares? How does that really work?