December 29, 2014

Why the bookie always wins

Posted in Sunday Business Post · 36 comments ·
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One of the many positive by-products of the system of better roads built in Ireland over the last decade is the patchwork of better views. Many of the new roads have cut through parts of the countryside that were never seen before, and lots of new vistas of our lovely countryside have been opened up.

On a clear, sharp winter’s day, some elevated parts of the country offer uninterrupted views for miles and miles. Many of the panoramas have not changed in two or three hundred years. Even today, the tallest buildings in much of Ireland are church steeples that were built in the 18th and 19th centuries.

This unusual fact underscores the lack of development in the countryside, and it is also an indication of the pattern of 17th and 18th century sectarian settlement. These landscapes, dotted with isolated churches, are the architectural telltale signs of dispossession.

As a result, the bragging rights for top ecclesiastical design go to the Church of Ireland, whose steeples are beautiful, typically needle thin and perfectly proportioned. And, of course, due to the plantations, the midland towns of Laois and Offaly are resplendent with magnificent examples of these steeples.

Isn’t it weird to think that the landscape is almost unchanged in 200 years and that the church steeples still give us markers centuries after they were built?

Even the most redoubtable Wesleyan couldn’t have imagined such unchallenged dominance. But back then steeples gave people natural maps of their own regions. People could measure distance from steeple to steeple, and the obvious extension of this measurement was the human urge to race between two steeples.

You can imagine two lads coming out of a pub after a few jars around this time of the year and declaring: “I’ll chase you from that steeple to this one!” This is where the racing expression a “steeplechase” comes from.

The first steeplechase ever took place in 1752, from the Steeple of St John’s Church of Ireland in Buttevant to St Mary’s in Donerail – 4.5 miles away. It was a two-horse challenge between Blake and O’Callaghan. They raced between the steeples, clearing whatever fences and obstacles they encountered, and so was born one of the most demanding and exciting contests in sport.

Fast-forward 260 years, and over the past few days in Leopardstown, Limerick and Down Royal, tens of thousands of us have been to the races and witnessed the finest of steeplechases.

A billion euro industry

Horseracing is deeply rooted in this country and it has been operated in a successful, commercial manner for a long time. The direct economic contribution of the industry to the Irish economy was €1.1 billion in 2012. Racecourses and festivals generate the greatest proportion of this revenue, accounting for €361 million in 2012.

The industry employs 16,877 people, most of whom are geographically dispersed. It is a national attraction – some 80,000 international visitors every year said that one of the reasons they came here was to go racing. In 2012, 1.19 million people attended horseracing events all over the country.

Right now, there are 4,463 racehorse owners in Ireland, 7,781 registered breeders and 704 licensed trainers. Ireland is the fourth largest breeder of foals in the world and the largest producer of thoroughbred foals in Europe, accounting for 40 per cent of the total. Ireland is the third biggest producer of mares in the world.

In per capita terms, the scale of the industry here is staggering, and Irish punters seem to display natural pride in their industry in the way we bet. The irrational tendency for Irish punters to back Irish horses is truly phenomenal.

We display an amazing weakness for backing an Irish horse even when the form tells us that a foreign horse has a better chance of winning. I asked the good people at Paddy Power for figures on Irish betting patterns, and the data confirmed what we all probably suspected: that we are deeply irrational.

In Paddy Power’s shops on the main streets of most Irish towns and cities, the average Irish-trained runner in a race in Britain takes 21 per cent more of the book than an equivalent British-trained runner.

The figures from Paddy Power’s online, phones and mobile business – by far the fastest-growing side of the business – are even more remarkable: the average Irish-trained runner, competing in a race in Britain, takes 24 per cent more of the book than an equivalent British-trained runner.

So today, at racecourses across the country, we will display all classes of irrationality, backing local over foreign horses and trainers, supporting the local industry – at least in theory. In practice, however, the house always wins. The real money is taken from the punters by the bookies and very little is given back from the bookies to the industry.

Off-course betting in Ireland generates €1.35 billion from horseracing as well as the rapidly expanding online betting industry. This return is many times that achieved by breeders, owners and trainers, whose contribution to the thoroughbred industry far outweighs that of the betting industry.

The off-course betting industry redistributes only a fraction of this turnover via the 1 per cent betting levy. And obviously, the online betting industry redistributes nothing to the thoroughbred industry or to the national exchequer.

In Ireland, only 1.6 per cent of betting turnover is returned to Irish racing. This compares to 9.6 per cent in France, 26 per cent in Argentina, 14 per cent in Italy and 6 per cent in Japan. Is it time that the betting houses pay more back into the industry that treats them so well and gives them such a decent living?

The reason this is a crucial question is because for the industry to expand it needs both public and private investment. Given that it generates so much cash for the gambling industry, maybe some fraction of this huge gambling windfall money could go towards the industry rather than only maintaining the bank balance of the bookies?

This afternoon, as you continue the 200-year-old Irish tradition of betting on the steeplechase, consider for a minute, where exactly does your money go?


  1. michaelcoughlan

    Hi David,

    A real Gem of an article. A flawless one too.

    It could be used as an analogy for the derivatives “industry”;
    imagine if the bookies could ring the government to bail them out if from their perspective the wrong horse wins or they could lobby the government to implement laws to control the horse breeding industry in a way the bookies always come out ahead or imagine if the punters were handed so much money by the banks for backing horses that the debt the banks created was too big to sustain etc, etc….

    The thing to remember is that the real value is in the talent and skills for producing the bloodstock.

    Super article.

    Michael.

  2. By employing people in Ireland who in turn pay taxes then the industry returns cash to the government. Remember VAT and income taxes.

    Remember all the visitors who take nothing much from government but leave behind payments for goods and services and payment of taxes directly.

    I am now visiting Ireland again and find most pricing of goods in stores look reasonable at a glance as priced in Canadian dollars. But add the 40% currency swap and all is expensive. Same again in England.

    The last thing Ireland needs is to increase pricing by increasing taxes.

  3. Is it a Bookie or a Horse

    We need to know how to stick the additional earned benefits in racing etc to be able to demand a payment to the exchequer .Tax is the same as glue . It sticks.

    Forget the bookies they have political clout. Take on the horses they don’t .

    International Law will soon recognise ‘ that some intelligent animals will have legal rights as non- human person entity .

    All taxes seek to stick to entities that is all government policies and this is no exception .

    Horses should now be given PPS ( personal public service ) Numbers and file tax returns every year and hold bank accounts .

    This could solve the unequal equation and what better than out of the horses mouth.

  4. Thomas Cooke

    I’m always amazed at the number of bookies shops even in the smallest towns. I can’t understand how a “business” such as this-that causes such destruction is so tolerated except as you point out the clout of the industry and the taxes that arise are more important than the morality of this industry. Btw Wesley wasn’t into building fine churches. You will find that the Methodists were much more practical and modest. Indeed they railed against the over decorated and expensive established churches of the day.

  5. Reality Check

    “Princes of the Yen” reveals how Japanese society was transformed to suit the agenda and desire of powerful interest groups, and how citizens were kept entirely in the dark about this.

    Based on a book by Professor Richard Werner, a visiting researcher at the Bank of Japan during the 90s crash, during which the stock market dropped by 80% and house prices by up to 84%. The film uncovers the real cause of this extraordinary period in recent Japanese history.

    Making extensive use of archival footage and TV appearances of Richard Werner from the time, the viewer is guided to a new understanding of what makes the world tick. And discovers that what happened in Japan almost 25 years ago is again repeating itself in Europe. To understand how, why and by whom, watch this film.

    “Princes of the Yen” is an unprecedented challenge to today’s dominant ideological belief system, and the control levers that underpin it. Piece by piece, reality is deconstructed to reveal the world as it is, not as those in power would like us to believe that it is.

    https://www.youtube.com/watch?v=p5Ac7ap_MAY

    • michaelcoughlan

      hi reality check.

      Thanks for the link. I have learned a lot from watching the video.

      Michael.

    • michaelcoughlan

      Hi,

      The story in the video is almost the same story told by John Perkins in “confessions of an economic hitman”

      Excellent contribution.

      Michael.

      P.S. if you read this post David the 1 min section between 1:08 and 1:09 will be of most interest to you because it states that the previous Japanese economy model (whilst more regimented) delivered trade surpluses, well paid employment, good pensions, job security etc ALL the worst things possible in the eyes of the Troika.

      In other words it validates your central hypothesis that it’s the imbalance which currently exists in the return to capital above all else that is the core of the problem. The video and John Perkins tell the same story.

      Michael.

    • michaelcoughlan

      Hi Reality Check,

      A video along the same lines;

      https://www.youtube.com/watch?v=6mhj-j0z-fk

  6. David, I wonder what answer you would have got if you asked the bould Paddy Whackers how much of their revenue is made from the hated Fixed Odds Betting Terminals that are the staple of their growing UK business segment. Indeed, racing punters are being left behind, poorly serviced and have their accounts closed if they win consistently. The FOBTs, a boon for drug dealers and a magnet for the poor and marginalised in the UK, appear to be the dirty future of bookmaking. You can bet (see what I did there) that Powers are lobbying for their introduction here. If and when they are introduced, it will be the death of bookie shops in Ireland as anything resembling pleasant, welcoming places, which to be fair they have been over the years.

    Make no mistake, Powers do not rely on horse racing to prop up their share price.

    • Off Comment

      I hope that David will write in 2015 issues regarding the Contributory Social Welfare Pensions and entitlements to paid up workers and to compare what elected politicians are entitled to and why and if they pay contributions . This kind of reporting is long overdue for all workers to know and the full truth needs to be discussed and reforms made .

  7. StephenKenny

    Marginally tangentially.
    One of the interesting things about the past 25 years is movement, first to respectability, and then to full social and cultural centre stage, of what can only be described as the “Seven Deadly Sins”. Here they are: Lust, Gluttony, Greed, Sloth, Wrath, Envy, Pride.
    Think of the most successful websites, and online sectors, and see how many sins each one of them cover. It’s an interesting exercise. In fact, one way to think up a successful online model would be to try and find one that includes all of them. For those sharpening their quills, I’m not blaming the online world, I’m pointing at general social and cultural implosion.

    Betting is just part and parcel of a number of them, depending to some extent on the various type, scale, and regulatory, of the betting. But, just as everyone knows you shouldn’t eat sweet things too much, everyone knows betting is basically wrong.
    Many of us would have heard stories, behind their backs, of wayward uncles who spend every last cent at the tracks. They’re generally the most charming and fun. But we all know it’s basically a wrong thing to do.

    So it’s not at all surprising to me that not only is betting now at worst a bit of fun, and too often, a virtue – good for the economy, good for charities, etc.
    Upside down land indeed.

    • StephenKenny

      and for some reason I omitted from this, the fact that very little of the multi trillion dollar financial services industry is related to the wealth making economy, so is simply, trader betting against trader.
      If no one on either side of a trade actually taking delivery of the product concerned, then it is actually betting.
      “I bet you $50 that the price of wheat will rise by more then $2 per ton by 3rd January” is not much different to “I bet you $50 that “Hello Dandy” will, at least once, win by more than 3 lengths by 3rd January.

      • DB4545

        It is much different Stephen. The punter making that bet stands to lose everything. When German and UK banks made that bet on the Irish economy they lost nothing as the Irish taxpayer paid for the beaten docket.

      • Rightly or wrongly, thousands of people are being employed by trading industries (both financial services and bookmaking), and most of our pension funds would hold some stake in Paddy Power shares as they are a fairly large component of the Irish Stock Exchange.

        Not just a large component of the ISE, they are a rare massive international business success story, born in Ireland. The industry is not to everyone’s tastes (then again nor does everyone hold the seven deadly sins to be an particularly relevant way of living your life), but Powers undoubtedly sit at the top of it.

        • StephenKenny

          “Rightly or wrongly”sums it all up rather nicely.
          All cultures, all religions, including todays political replacements, all contain the equivalent of ‘sins’.
          Sins, such as the seven deadly ones, are no more than socially damaging features, defined within the accumulated wisdom of many thousands of years: They may be fun; they may seem harmless; we can certainly rationalise them away; but they are, fundamentally wrong, and therefore socially harmful, to some degree.
          Some are simpler to see than others, and we may even like them. Lust, for example, is very popular, and increasingly viewed as a virtue, and even a sign of a healthy life. Although pleasant at an individual level, at the group level it is destructive, damaging, and very hurtful. It causes pain and suffering to many others. It’s also corrupting to organisations and social structures – just as money conveys power to those who are good at getting it, so do the other deadly sins.

          Others are ‘greed, envy, and pride’ – can anyone thing of a more concise description of what’s gone wrong in the financial and political sectors, over the past 30 years?

          I’m not suggesting any policies or laws, even if I believed any could work, I’m merely suggesting that it’s probably practical to consider these things as they are, and quit all this absurd ‘rightly or wrongly’ nonsense.

          It’s wrong. They do harm to many, in many ways.

    • jackofalltrades

      Upside down land and Gulliver’s Travels springs too springs to my mind often these days Stephen.

      Betting/gambling is a by-product of a degenerating society – dysfunctional at it’ core.Survival of the fittest mindset and awe and admiration for speculators – toxic mix [ but branding par excelence -they know that crowd well!]

      And not to cheapen your post Stephen (or mine) but the “Prot” character from the K-Pax movie maybe says it best?

      2:55
      https://www.youtube.com/watch?v=3Iy_GpVJv6I

      It’s actually very black and white …and the shades of grey ,however disguised,are also evils.

  8. Colin

    ‘This afternoon, as you continue the 200-year-old Irish tradition of betting on the steeplechase, consider for a minute, where exactly does your money go?’

    …..you could also keep your money in your pocket and wait to spend it on something worthy. You could also google ‘declan lynch sunday independent’, and you will learn from his articles how the gambling industry (ahem, excuse me… gaming industry) works in Ireland.

    • Declan Lynch made plenty of money from his book about gambling, and although he only did it solidly for a year for the experiment, seemed to enjoy it thoroughly.

      Did he pocket the proceeds from the book or donate them to GA? I probably missed that.

      • Colin

        I don’t know. Write him a letter or send him an email asking him, if it’s that important to you.

        How much is ‘plenty of money’ these days anyway? And what’s so bad about writing a book and raises people’s awareness about the dangers of gambling while making a few bucks out of it at the same time?

    • coldblow

      I was thinking of Declan Lynch too while reading David’s article. He wrote a good one the other day as well about children’s books – something I had been arguing myself – and again about the absuridities of the driving test. I wouldn’t agree with him about many things (eg religion, nationalism, music (sometimes) and football (sometimes)) but often he hits the nail right on the head – including music (Lyric FM) and football (Italy) – and very amusingly too. I’d say he is the most articulate critic of BS these days, perhaps anywhere in th world. BS – what used to be known as ‘stupidity’.

    • coldblow

      I was thinking about Lynch too while reading David’s article. He wrote excellent pieces over the last fortnight about driving tests and children’s books also and expressed exactly what I had been telling others. I wouldn’t always agree with him (often I’d take issue with him about religion, nationalism, music and football) but he often hits the nail bang on the head, eg music (Lyric FM) and football (Italy). He is probably Ireland’s, and the world’s, leading critic and mocker-in-chief of bullshit. I still fondly remember his column once about Bernard Manning ‘dying’ onstage in front of a ‘pampered elite’ in Bombay (sic).

  9. DB4545

    Hi Paddy. I just read the article. This would seem to be in breach of EU Competition law as it may distort trade unless Ireland has a specific exemption in this sector?

  10. jackofalltrades

    End the monetarist schizophrenia – now that’s a worthy goal for 2015.

    One door closes,another opens – Bring it on !

    30 secs to
    https://www.youtube.com/watch?v=FZUlr2uJHvQ

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