PDF Summary:Gambler, by Billy Walters
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1-Page PDF Summary of Gambler
Born into poverty, Billy Walters accrued a net worth north of $100 million by gambling on sports. In his autobiography, Gambler, Walters tells his remarkable life story and reveals the secrets behind his approach to sports betting.
In this guide, we’ll start by discussing Walters’s childhood and adolescence in rural Kentucky. Next, we’ll examine his early adult years, which saw him married and divorced by age 21 and working incessantly to support two children. Then, we’ll turn toward Walters’s time in Las Vegas and how he ultimately formed his own sports betting business that netted millions annually. Finally, we’ll examine Walters’s legal troubles, culminating in his 2017 conviction for insider trading.
Our commentary will go into more detail about the major influences in Walters’s youth, such as the effects of early exposure to alcohol and gambling. We’ll also explain what became of some of the major people and companies in Walters’s life that he doesn’t cover in the text. Finally, we’ll explore legal and ethical concerns about Walters’s lifestyle as a high-stakes gambler.
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By working with this group, Walters earned enough money to finally pay off his outstanding debt and then some. By the mid 1980s he had accumulated a net worth of $3.5 million.
(Shortform note: Walters mentions that the Computer Group’s modeling software was the foundation of the organization’s success, but he doesn’t go into much detail about how it worked. The software analyzed numerous factors in any given matchup, such as the strength of each team’s lineup and who had the home field advantage; there are rumors that the system even factored in how far the away team had to travel.This detailed, methodical approach resulted in the Computer Group winning the majority of their bets—it’s estimated that the group had about a 60% win rate overall—and making tens of millions of dollars in the process.)
Walters explains that the Computer Group worked by identifying inaccurate sports betting lines and exploiting them.
For example, suppose the Chiefs are playing the Ravens, and the spread—the expected difference in score between the two teams—is three points in the Chiefs’ favor. This means bookmakers think there’s a 50% chance that the Chiefs will win by at least three points. It also means that, if the Chiefs win by fewer than three points (difficult as that would be in American football) bets on the Chiefs would still lose.
In this situation, if the Computer Group’s model predicted that the spread should instead be six points in the Chiefs’ favor, then the Computer Group would bet on the Chiefs accordingly. Since the bookmakers believe there’s a 50% chance that the Chiefs will win by three points, but the Computer Group predicts that the Chiefs will perform better than that, the Computer Group members should have a better-than-even chance of winning their bet.
The Sports Betting Industry Has Advanced Along With Technology
The Computer Group’s methods were remarkable in the 1980s, but nowadays most bookies take a similar technology-based approach to calculating odds and creating betting lines. In fact, many betting sites now outsource those calculations to companies that specialize in using data analysis and computer modeling to compile odds for sports betting.
This outsourcing has had the unintended side effect of standardizing betting lines across competing sportsbooks—if two betting sites use the same company to compile their odds, then naturally they’ll end up with identical or near-identical lines. This means that even savvy bettors like those in the Computer Group would find it more difficult to find exploitable betting lines today. After all, if the lines are all more-or-less the same, then none of them will stand out as likely targets for gamblers like Walters and his colleagues.
Founding Sierra Sports Consulting
Because of a growing desire to bet at levels that the Computer Group couldn’t support—along with some legal trouble that we’ll discuss later—Walters founded his own company, Sierra Sports Consulting, in 1992. According to Walters, Sierra Sports Consulting functioned like an elite investment bank, with “war rooms” running 14 hours a day, seven days a week.
(Shortform note: Outside of Gambler, there aren’t many details to be found about Sierra Sports Consulting or its day-to-day operations. Walters is notorious for keeping quiet about his work—he only gives vague information to interviewers, when he gives any information at all. Furthermore, on at least one occasion, Walters has openly said that he doesn’t trust the media. When Sierra Group encountered legal trouble, he became even more tight-lipped, saying his lawyers had forbidden him from discussing anything related to the investigation into Sierra Group.)
Walters had learned that scale was crucial to sports betting success: For instance, if he had a 5% edge (a higher chance of winning than the calculated odds), then betting $1 million would net him $50,000 in expected profit, while betting $10k would net him only $500. Consequently, he aimed to grow his sports betting operation by finding as many bookmakers as possible who’d take his bets, allowing him to wager exponentially more money than he could while betting only one line at a time.
The upshot is that Walters hired teams of beards—people who placed the bets for him via proxy—who shuttled money around Las Vegas every day. These beards placed bets decided by Walters and other handicappers: those who use computer models to decide which Las Vegas lines are inaccurate and worth exploiting. Walters writes that, during this time frame, his teams were betting several million dollars on a weekly basis.
(Shortform note: In addition to placing more bets than would normally be possible (or permitted), savvy gamblers hire beards for a number of reasons. For example, if a highly successful gambler like Walters were to place a bet in person, the bookmaker might recognize him and change the odds to be less favorable; after all, such a bet would imply that the current line is inaccurate and exploitable. The anonymity of a beard also allows bettors to get around rules preventing them from betting, such as laws forbidding coaches from betting on the sport they coach. It further enables them to place bets with a bookie who’s refused to do business with them.)
Walters’s Approach to Sports Betting
Between his time with the Computer Group and Sierra Sports Consulting, Walters developed a concrete approach to sports betting success. His approach has three components: handicapping, unit sizing, and betting strategy.
Component #1: Handicapping
Handicapping, as we mentioned earlier, involves using computer modeling to predict the spread between any two teams (though Walters focuses on American football). Walters created a system in which teams have relative “power rankings" that estimate which team will have the advantage in any given game, and how large that advantage will be. For example, if the Cowboys are worth 45 points and the Cardinals are worth 38 points, the predicted spread would be seven points in the Cowboys’ favor.
Although Walters doesn’t provide an in-depth strategy for creating these power rankings, he does provide a few examples of how he ranked teams. For instance, he writes that home-field advantage is typically worth three points. Additionally, injuries to key players might be worth, one negative point each. So, for instance, if the Cowboys’ running back were injured, that team might have a power ranking of 44 points instead of 45 for their upcoming game.
Some Factors Handicappers Consider
Walters doesn’t go into detail about which factors handicappers consider when creating their rankings, but a few key factors they commonly use include:
Overall team strength: The most obvious clue for how two teams will perform in an upcoming game is their respective records for the season—logically, a team that has won the majority of their games would most likely beat a team that has lost most of their games this season.
Matchup advantages and disadvantages: How each team tends to perform against teams that are similar to their opponents. For instance, a team that struggles to break through a strong defensive line could be at a disadvantage against an opponent that specializes in defense, regardless of the two teams’ records in the current season.
Recent play: Each team’s current form and trends, including how they’ve performed recently (as opposed to their total win record for the season) and how they've adapted to any recent changes, such as player injuries or shifts in strategy.
Home advantage: While playing at home is often beneficial, handicappers are careful not to overvalue this factor, recognizing that its impact varies between teams and situations.
These factors help handicappers set more accurate odds by providing a nuanced understanding of the teams and the likely outcome of the game.
Component #2: Unit Sizing
After determining his handicapping, Walters would then determine his unit size, meaning the size of his bet as a percentage of his bankroll (or the total amount of money he’s earmarked for gambling)—1% of the bankroll is one “unit.” According to Walters, you should size your bets in proportion to the size of your edge, though never betting more than three units (meaning 3% of your bankroll) at once.
For example, suppose the Giants played the 49ers and Walters’s handicap was 14 points in the Giants’ favor. In this case, the massive discrepancy would justify his maximum bet of three units. By contrast, if Walters’s system calculated only one or two points in the Giants’ favor, he would place a much smaller wager on the Giants to win: say, 0.5% of his bankroll (half a unit).
(Shortform note: Unit sizing provides useful guidelines for how to handle your bankroll, but how should you determine how big that bankroll is in the first place? In Antifragile, risk analyst Nassim Nicholas Taleb suggests using the Barbell Model to plan your investments. This model means keeping most of your money (say, 90%) in a savings account or something similarly safe, and using the remainder for high-risk, high-reward investments—in this case, your gambling bankroll. In this analogy, the “bar” is the spectrum of risk, and the “weights” are your money; you load up both extremes (very low risk and very high risk) while avoiding the middle, just like you don’t put weights in the middle of a barbell.)
Component #3: Betting Strategy
The final component of Walters’s approach involves searching widely for the best lines available to maximize your edge—in other words, look for the bookies whose lines have the greatest discrepancies with the odds you’ve calculated. This will ensure that you get the highest possible return on a winning bet.
For example, you might find that in a game between the Ravens and the Steelers, 10 bookmakers have the spread set at seven points in favor of the Steelers, while one other has it set at only five points in favor of the Steelers. If your handicapping method predicted a spread of, say, eight points in the Steelers’ favor, it’d make sense to place a bet with the bookmaker whose spread is only five points. In short, the more you go against the odds, the more money you’ll get if you win.
(Shortform note: Advancing technology has changed the sports betting landscape since Walters was in his prime by driving a huge increase in in-play betting. With more powerful computers able to calculate odds in real time, and the internet making it possible to transmit data worldwide almost instantly, it’s become much easier to set odds and make bets on the outcomes of quarters or even individual plays. Because of this, some experts say that the sharpest gamblers—those who are able to outpace the bookmakers in calculating odds throughout a game—have even more opportunities to find and exploit the kinds of discrepancies that Walters describes here.)
Experience With Legal Authorities
Though Walters eventually developed a winning sports betting strategy, it wasn’t without hitches. Walters was raided by federal authorities, indicted multiple times, and even arrested for insider trading in 2017. In this section, we’ll discuss these brushes with the law as well as Walters’s time in prison and what he learned from it.
The Raid on the Computer Group
Walters’s first serious brush with the law came in 1985, when federal investigators came to suspect that the Computer Group was a massive, unsanctioned bookmaking operation.
According to Walters, the FBI sought to crack down on illegal bookmaking schemes in the 1980s. However, he clarifies that the Computer Group was actually a betting syndicate, meaning they were placing bets rather than taking them. This is a crucial point because placing bets, even as part of an organized group, is not against the law and does not require a state license like bookmaking does.
(Shortform note: Indicted members of the Computer Group, including Walters, publicly testified about their activities to emphasize that nothing they'd done had been illegal. Some news articles from that time even noted the oddity of the case against the Computer Group, saying that it was highly unusual for the federal government to prosecute sports bettors. These articles also noted that many of the charges—such as distributing betting information, which every major news outlet in the country did on a regular basis—didn’t seem actually illegal. In short, at least some of the media seemed to side with Walters and the other indicted Computer Group members, echoing their confusion and outrage at the investigation.)
For the next seven years, Walters and other members of the Computer Group were subjected to repeated investigations, raids, and trials. When charges of illegal bookmaking didn’t stick, the Justice Department reinterpreted laws to say that placing bets across state lines (which the Group regularly did) was a crime. However, even though bookmaking was illegal outside of Nevada at the time, using an illegal bookmaker was not itself illegal, so Walters was also acquitted of these new charges thanks to that legal loophole. In 1992, the federal government finally announced that it would drop all remaining charges against the Computer Group members.
Even so, the stress and publicity of the investigation, along with tension among the leadership, directly led to the Group’s dissolution.
(Shortform note: According to some reports, the actual reason the Computer Group closed down was tax evasion. While the FBI thought it was investigating a massive illegal bookmaking ring—a belief reflected in the agency’s relentless investigations, raids, and accusations—the only criminal activity the agents found was a few high-ranking Computer Group members hiding their winnings in offshore accounts. Nonetheless, that was enough for the FBI to shut down the betting ring. However, this interpretation of events conflicts sharply with Walters’s account, and it’s unclear which version is closer to the truth.)
The Raid on Sierra Sports Consulting
Although Walters founded Sierra Sports Consulting in part to avoid the legal troubles he’d experienced with the Computer Group, he continued to have run-ins with the law. According to Walters, Las Vegas police unjustly raided his consulting group and seized around $5 million of his winnings in 1996.
Although the Las Vegas district attorney declined to press charges after reviewing the evidence, the attorney general moved forward with a false accusation of illegal bookmaking. Over the next six years Walters successfully fended off several different indictments: first the illegal bookmaking charge, and then various money laundering charges.
It wasn’t until 2002, when the chief district court judge of Las Vegas ruled that the attorney general’s case had been based on prejudice and unfounded allegations, that the charges were all dropped and Walters got back the $5 million the police had taken.
(Shortform note: Gambling is a common way for criminals to launder their money. By wagering illegally gotten funds with a casino or bookie, then taking that money back in the form of legal winnings, such people are able to conceal where their wealth originally came from. However, because Walters had earned his money legally, money laundering laws did not apply to him and the charges didn’t stick.)
Conviction for Insider Trading
While Walters managed to avoid convictions for his gambling operations, he lacked the same fortune in the stock market. In 2017, he was sentenced to five years in prison for insider trading.
(Shortform note: Insider trading means using knowledge that isn’t publicly available to gain an unfair advantage in the stock market. This is illegal because it undermines the public’s trust in a free and fair market, and could therefore discourage people from participating in said market.)
Walters explains that he began to dabble in stock market investing in the late ’90s. It didn’t become a problem until 2014, when the Wall Street Journal and the New York Times ran articles suggesting that Walters had traded on insider information. These articles claimed he’d received information from Carl Icahn—a hedge fund manager and a friend of Walters’s—regarding Clorox, a company in which Icahn held a large stake.
(Shortform note: Walters somewhat overstates what the articles in question said: The publications did not write, nor even imply, that he and the others were guilty of insider trading (to make that claim before they were convicted would have been libel). The articles only stated—correctly—that the men were being investigated for insider trading. The New York Times article in particular noted that, even if Icahn had advised Walters to invest in Clorox, that was most likely not illegal. Since Icahn was not on Clorox’s board, he had no duty to keep whatever he knew about the company a secret; in other words, he was not an “insider” and therefore couldn’t have committed insider trading.)
The FBI’s initial efforts revealed no wrongdoing, but the agency continued to investigate Walters, looking for other evidence of illegal activity. The investigation eventually shifted to Walters’s relationship with Thomas Davis, who sat on the board of Fortune 500 company Dean Foods.
Federal agents had separately investigated Davis and found him guilty of embezzling funds from a Dallas charity, forcing him to make a plea deal with the FBI: To avoid jail time and other penalties, he pled guilty to the charges and provided information the FBI could use against Walters, testifying that he had given Walters nonpublic information about Dean Foods.
(Shortform note: Contrary to what Walters writes in Gambler, Davis did not fully escape accountability despite his plea deal. In 2015, Davis suddenly and unexpectedly resigned as chairman of Dean Foods—although this happened following a sharp decline in sales, and it’s unclear whether Davis’s departure was related to the embezzlement case. Furthermore, Davis was made to pay $9 million in restitution, fined an additional $1 million, and sentenced to two years in federal prison for his crimes.)
In 2017, based on Davis’s testimony, a federal jury convicted Walters of relying on nonpublic information from Davis to earn an additional $32 million in profit and avoid $11 million in losses. As punishment, he was fined $10 million and sentenced to five years in federal prison—though he was released a year early when then-president Donald Trump commuted his sentence in 2021.
(Shortform note: The Trump administration cited Walters’s reputation and philanthropic work—in addition to the fact that he’d already served the majority of his sentence—in the official statement about Walters’s pardon. As one example of his philanthropy, Walters and his wife Susan were named the Las Vegas Philanthropists of the Year in 1997, and they’ve continued to support various charitable organizations since then.)
Walters’s Takeaways From Prison
Walters writes that prison drastically shifted his approach to life. In particular, it taught him not to take his life or his loved ones for granted. It also instilled an enduring passion for prison reform.
Walters’s time in prison helped him to reorient his priorities. Most notably, he learned to treasure his time with his family—especially his wife Susan, who stayed married to him and visited him often while he was in prison. He also writes that he prioritizes spending time with old friends, since he knows that many of them won’t be around much longer.
(Shortform note: While the circumstances prompting his shift in perspective certainly weren’t ideal, Walters is fortunate to have had this realization when he did. In The Top Five Regrets of the Dying, palliative care nurse Bronnie Ware shares that one of the most common regrets people have on their deathbeds is that they didn’t spend more time with their families and friends.)
Regarding prison reform, Walters explains that his time in prison illuminated the ways in which prisons fail to prepare inmates for life after their sentences, causing high rates of recidivism. Thus, he’s working to create a program that provides vocational training to inmates, which would allow them to more seamlessly transition back to society. In early 2023, he even committed $2 million to one such program in Nevada, and he hopes to fund several more such programs at other prisons.
The Data Is Clear: Rehabilitation Works
Data supports Walters’s ideas for prison reform: Studies have almost universally found that rehabilitation programs (such as Walters’s vocational training program) lead to much lower recidivism rates than punitive imprisonment. In fact, some studies have found that punishment-focused approaches could be counterproductive and actually increase people's chances of reoffending.
The idea behind punishment is that it provides an incentive for people to make better choices in order to avoid future consequences. However, many people turn to crime because they believe they have no other option; it’s the only way for them to survive in the face of poverty, a lack of education, and limited opportunities. In that context, it becomes clear why rehabilitation produces better results than punishment: It doesn’t matter how much someone fears the consequences of their actions if they can’t see any other possible actions to take.
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