There's Money In Million-Dollar Promotions
How One Very Good Card Player Found a Way to Make Money off of Million-Dollar Product Promotions
From the Print Edition:
Chuck Norris, Jul/Aug 98
It's halftime at the big bowl game and the fans are still in their seats, forgoing a dash to the snack bar lines in favor of a million-dollar proposition unfolding on the field. If one fan picked at random can manage to kick a field goal from 35 yards out, he'll take home the big prize. The overflow crowd is rooting for him, the peanut vendors are rooting for him, even some players have wandered out to cheer him on. Everyone, it seems, is pulling for this guy, except Bob Hamman.
That's because Hamman is the guy who pays the winner. He has sold insurance indemnifying the contest sponsor in the case of a payoff. At least, that's one way of looking at it.
Another way would be to call him a bookie who's willing to take on some of the world's biggest action. One thing is for sure: Hamman is a math wiz whose facility with probability allows him to calculate the odds on the oddest of propositions.
Hamman, 59, is the man behind many of the million-dollar challenges you see at nationally televised sports events. And the hole-in-one contests. And scratch-and-win promotions on the back of your soda-pop bottle. Anywhere chance is involved, whether it's the likelihood of somebody finding a winning game ticket at a fast-food restaurant or redeeming a rebate coupon or shooting a hockey puck into a three-inch slot, Bob Hamman is
often "booking" the bet. He--and his insurance company investors--are the House.
Hamman's firm, SCA Promotions, has covered more than $10 billion worth of potential awards and paid more than $50 million in claims since 1986. The firm, however, takes in a lot more money than it pays out. It does this by utilizing Hamman's uncanny talent for figuring out probabilities. He can do it on almost anything. Not only pure mathematical propositions, like the odds of picking a winning key that starts a Cadillac from a bowl of 1,000 identical losers, but strange and delightful propositions that aren't necessarily subject to the laws of multiplication and division. Like the odds of a random sports fan being able to make a half-court basketball shot to win $1 million. Or the chances of radio listeners in Tucson, Arizona, finding one specific, predetermined dollar bill somewhere in the city. Or the likelihood that the world record in the long jump will be broken at the Olympic Games.
Bob Hamman is good with numbers. You get that way when, for 14 of the past 15 years, you've been the top-ranked contract bridge player on the planet and a nine-time World Champion. "You have to have some special gifts at bridge to be at the very top," says investment maven Warren Buffett, another guy who's pretty good with numbers. "If you play with someone like Bob Hamman, they can look like they're having a drink or eating a sandwich, but they'll know everything that's going on."
Now Hamman has exploited his powerful analytical skills, merged those talents with a profound understanding of odds and probabilities, and created a multimillion-dollar company unique in the world of "risk management," as the insurance business is euphemistically known. He is a gifted card player who has figured out a clever--and profitable--way to gamble with an edge.
"Bridge and our promotions business--they're a very good fit," Hamman says, sitting in the conference room of his Dallas office. "Very similar. But business is less harsh. In bridge, when you miscalculate you can cost yourself the match. It's over. On the other hand, when we look at some of the propositions we cover, they have enough analogous characteristics that we can make a good, educated guess and hope we're not too stupid. If we estimate something has a 10 percent chance of occurring and the real chance is 20 percent, it's not going to kill us," Hamman explains. "It's when we're just plain wrong that hurts."
Thanks to years of experience in the gambling and insurance worlds, Hamman isn't wrong very often. His company is constantly asked to evaluate peculiar risk propositions--a world-record "cow chip" toss; a PGA Tour rookie winning a major championship; an American League baseball team hitting back-to-back-to-back home runs--and come up with a number that makes sense both for the bettor and the bookie.
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