Alan Woods was born in 1945 in Murwillumbah, New South Wales, right on the border with Queensland.
A university drop out who also enrolled on an actuarial course that he never finished, Woods might not have had any qualifications to his name, but his natural mathematic ability was off the scale.
Alan was known as a bit of a playboy during his time, and although he made his serious money betting on the horses, he started out in the casinos.
Woods even worked for one. He was employed to calculate the odds of the games to make sure the casino always had the edge, and ironically, he believed that blackjack was a game that could not be beaten.
He was a bridge player at the time, but when he learned about card counting, he wanted to try it for himself. You see, he had always been a recreational gambler, and yet, he had been a losing gambler for over a decade before card counting entered his life.
His gambling activities had even caused the breakup of his first marriage in 1979, but oddly, rather than take this as a sign to perhaps step away, he doubled down, and decided to pursue card counting full time.
He had soon made it work for him, and he spent the next decade or so touring the casinos in America and beyond, making a fortune from blackjack. This is how he met Bill Benter, with whom he formed a card counting partnership.
After a while though, as casinos got wise to their tricks and they were banned from multiple venues, it became too difficult, and the pair moved on to horse racing.
Woods and Horse Racing
Woods’ early days betting on the horses recreationally were not successful. He would keep notes on every single bet, so had a running tally showing just how much he had lost, and eventually, he quit.
It wasn’t until 15 years later, after his blackjack career came to an end that he went back into the sport, but this time, he was doing so with a strategy, a model, and a heck of a lot more experience.
He had also relocated to Hong Kong.
That was at the end of 1984. Woods and Benter worked together to build a predictive software model, then used a $150,000 pool to begin making bets. The system was far from perfect at this point, and by the end of Summer 1986, they had lost $120,000. They split up to raise more funds, Benter unsuccessfully searching for investment, and Woods very successfully gambling in Korea.
When they came back together though, Woods decided he wanted 90% of the profits since he had found the additional money, and the pair had a bitter falling out.
Benter left the project and started again (but not before sabotaging the system with a cut off date), and Woods continued with a small team of people he had hired to help him, essentially forming a betting company.
His company, Libertarian Investment Limited, was a small collection of maths wizards and horse racing experts, who worked together to constantly refine their computer program, which calculated the probabilities of each horse in a race.
This was consistently developed over the following years, taking into account everything from a horse’s weight, number of races, the going, the sex, etc., and then playing with the weightings of each category until the system began making them money. This happened in 1987, when the software made them around $100,000.
From that point onwards, Woods and his team made more and more each year, creating ginormous wealth for the Australian, who would regularly bet several million dollars a race.
Staking Millions Pari Mutuel Betting
The key to Wood’s success, was that he didn’t take fixed odds like you would at a regular bookie.
A bit like the Tote over here, in Hong Kong, pari mutuel betting is huge. Woods relied on regular punters throwing their stakes into the pot and making ill-informed decisions on which horses to back, so that he could swoop in with his very well calculated bets, and hoover up.
His computer program would do its work, then spit out a simple A4 sheet of paper for each race, with four columns on it:
- Horse’s number
- Horse’s odds
- Win probability (according to their software)
- Win expectation
The first two are self-explanatory.
The win probability is calculated based on the settings in the system, and displayed up to 3 decimal points. The win expectation is a monetary prediction, showing how much Woods could expect to win for every dollar bet if the horse won.
Using these figures, he could quickly see if any horses were over or under bet, and therefore which were offering good value and which were not, remembering that the organiser takes 18% of ever dollar before the rest goes into the winnings pool.
Woods then made bets based on this information, but applied it to multiples as well, resulting in huge numbers of bets being made for each race, covering numerus eventualities. To oversimplify it, he took a contrarian approach to whatever the general public was doing.
In 2005 he was regularly betting more than $2 million dollars a day across all races at a meeting.
Apparently he never worked out exactly what he was worth, only vaguely admitting that it would be “in the hundreds of millions, but definitely not a billion“, but most estimated place his fortune at around $400 million around the time he died in 2008, aged 62.