It's just two hours before post time at Sha Tin Race Course, a big, modern-looking gambling mecca in the Hong Kong suburbs. Sleek Jaguars pull up to a members-only entrance, elite horseplayers show off custom-tailored finery, and Moët & Chandon flows as the Hong Kong Jockey Club (horse racing's ruling body here) prepares to host one of its richest days of the year.
It would seem to be the ideal place to encounter the world's most successful gamblers. But Australian Alan Woods and his team of high-flying horse bettors are nowhere in sight, even though they'll put millions of dollars into today's betting pools. This discreet bunch shun the track and are scattered across six countries, connected to the action via fiber optics and Instant Messages.
At Sha Tin, thousands of horse-obsessed gamblers crowd the stands and rush the betting windows to make wagers that are primarily based on half-baked hunches and illogical systems. Woods will have no part of that. Inside a small, neat home office, on the second floor of his duplex apartment some 1,500 miles away in a Manila high-rise, Woods is connected via computer to nearly $3 million worth of wagers that will be placed over the course of today's nine races.
These bets are all mathematically sound, divined from modeling software similar to what Wall Street's sophisticated hedge-fund analysts employ. And like the best stock market plays, Woods's wagers are rooted in a computer program that uses past performances and current conditions to find overlays—good-value bets where the odds being offered are longer than those calculated by the software. It's an approach that has revolutionized horse betting and transformed Hong Kong into a lightning rod for professional gamblers.
The 58-year-old Woods has used computer technology to win more than $150 million in Hong Kong racing during the last 16 years. But even Woods, who is well established among the world's top equine gamblers and more than a little jaded, is excited about today's most alluring wager: a Triple Trio. This requires bettors to pick the first three finishers in each of the fourth, fifth and sixth races, with a prize pool of $26 million.
Woods and his team—which include technicians, racing analysts, accountants and money movers—are so intent on snagging this pot of gold that they pursue it in a gargantuan way: betting on 1.77 million combinations, at a cost of $1.88 million. Around 14 percent of the $13 million in new money being wagered on today's Triple Trio will originate with them. Judging by the exclamation-pointed IMs flying between Hong Kong and Manila, however, this is a bigger percentage than would be desirable, coming as a result of overly optimistic expectations in regard to how much money would finally flow into the Triple Trio pool. "Ideally," says Woods, sounding slightly bummed, "we should have a fraction below 10 percent."
Wearing a pair of beaten-up gym shorts and a faded golf shirt, the barefoot and white-haired Woods sits in front of three screens and groans that Hong Kong racing is not what it used to be. "After 56 months of deflation in Hong Kong, the public's no longer so enthusiastic about jumping into these things." The subtext here is that as long as amateur gamblers are more conservative with their betting budgets, there is less for the professionals to win.
Woods sips a banana smoothie from a thermos as his pretty Filipino girlfriend enters the office with sandwiches. He grabs a crab salad croissant and matter of factly says, "Since 1995, the amount of money we bet has been limited only by the size of the pools." (In other words, he and his team are so confident of winning that they will wager as much as they possibly can without betting so much that it tilts the odds against them.)
Heady stuff for a small-town boy who failed to finish college and couldn't hold a job (Woods half-seriously blames the latter on a sleeping disorder, which, he says, made it impossible for him to reach the office by 9 a.m.). What young Woods could do, long before he made it as a horse bettor, was bluff his way around a poker table and play bridge brilliantly.
In 1972, while working at an actuarial firm, Woods became aware of the financial possibilities of card counting from a buddy on the bridge scene. Initially he doubted the viability of card counting because another friend had recently analyzed the house advantage at blackjack for a new casino in the Australian state of Tasmania, and he confirmed that, long term, players did not stand a chance. Nevertheless, Woods found himself intrigued and spent a weekend counting cards in the Wrest Point Casino in Hobart, which was then Tasmania's only legal gambling venue. By Sunday afternoon, he doubled his $500 bankroll and became a believer.
But Woods didn't do much about it until 1979—after fathering two children, divorcing his first wife and having some success in the stock market—when he began to live the life of an itinerant gambler. He operated below casino radar, traveling around the world, backing other card counters, forming teams and playing solo; in his first six months, he earned what most people would consider an impressive income: $100,000.
During his time on the circuit, Woods learned to be emotionless about money. He secured five-figure loans from bare acquaintances, tolerated at least one blackjack partner with suspicious losses (he now figures that the "lost" money had been skimmed off by the dishonest player), and trusted strangers with inappropriately large sums.
"On the way home from a junket in Manila, I walked past airport security with $10,000 in each of my sneakers and another $10,000 down my underpants," remembers Woods, explaining that the Philippines had currency restrictions, which necessitated the subterfuge. "But I had another $20,000 that needed to get through. So I gave it to a guy to carry in his sneakers. I didn't really know the guy—we had just met on this trip—and the doors to the plane were ready to close when he had not yet materialized. I wasn't worried about him robbing me so much as I was concerned he'd miss the plane. It turned out that he had to go to the hotel to get his luggage, and he made the flight, with my money, but at the last possible second." Though Woods sounds pretty cool about the whole thing, you have to wonder what he'd have done if the guy failed to show up. "I would have tried to find him in Sydney. But I don't even know that I had his address."
This casual relationship with cash came in handy in 1984 when Woods and an Australian friend named Malcolm Sims discovered the potential riches of horse racing in Hong Kong. It was a place with huge amounts of money wagered (thus making it possible to lay down enormous bets without hurting your odds), small pools of jockeys and horses (easy to maintain stats), and enough superstitious bettors to make the city into a candy store for savvy gamblers with objectivity.
Ultimately, Sims opted out of the Hong Kong racing venture, but Woods teamed with a fellow card counter named Bill Benter and their Vegas friend Walter Simmons. Benter and Simmons believed that computer technology could be used to find an edge in horse racing. Woods wasn't so sure, but he put up most of the bankroll anyway and did much of the bet placing. Meanwhile, Simmons built the database and Benter wrote a software program designed to find overlays. Years later, this system turned all three of them into multimillionaires.
But it wasn't easy. "The beginning was nightmarish," says Woods, explaining that the software was full of kinks that needed to be worked out. "We started with a $150,000 bankroll and most of it went—on expenses and losses, including blackjack losses. I remember going to Korea on gambling trips and twice losing my bankroll of $10,000 very quickly, as a result of nothing but bad luck. Then I had to spend the rest of those trips not gambling."
Things were so bad that when Benter retreated to Las Vegas, where he hoped to raise additional funds from gambling pals, he was turned down, despite a willingness to give up as much as 70 percent of the group's racing profits. "People had so little faith in the system," says Woods, "that they would not have invested for 100 percent of the profits."
After a few years, however, once the system was up and running, there was plenty of cash to be made. Woods says he had his first winning season in 1986/1987, right around the time when he and Benter parted ways over money disputes. In the end, each wound up with his own number-crunching machine and put together teams.
Woods and Benter saw their profits rise in multiples that usually define bubble economies. Only this was no bubble. The margins kept getting bigger. And bigger. And bigger. "My third year in Hong Kong I won $100,000," remembers Woods. "I would have benefited by not telling anybody about this—thus not tipping off the several other computer teams that have since come in here and made their own millions. "But that is an extremely difficult thing to do. I just could not keep my mouth shut."
The most stunning thing about watching a computer team in action is how little actual handicapping seems to take place on race day. While some adjustments might be made for how a particular horse looks in the paddock and amounts wagered are dictated by monies that flow into particular pools, most of the hard work gets done long before the ponies are led to their starting gate.
As post-time looms, the biggest job centers around printing betting slips and making hundreds of wagers. The actual picking of horses, after all, gets entrusted to a computer system that is regularly updated with fresh information about horses, jockeys, track conditions and hundreds of specifications each week. "The only input that we do is based on the pool sizes," explains Woods. "But there are default values and the variation generally is not very much. Ten years ago Bill [Benter] said he could just switch the computer on and leave it during the race while he has a nap or drinks a beverage. But of course you'd be too scared to actually do that."
The system is so automated that Woods barely pays it any mind on this particular day and, for the first few races at least, he devotes most of his attention to his middle monitor. It is connected to a U.K.-based peer-to-peer wagering service called Betfair.com, which permits him to bet on today's races directly with other gamblers. "The turnover at Betfair is very small, which makes betting there a waste of time," Woods acknowledges, pointing out that it's patronized mostly by professionals and others with smart money, which turns the online wagering site into a more efficient (and tougher to beat) market than the racetrack. "But we do it with the hope that it'll eventually get bigger." Plus, it can be a good gauge as to where the sharp action is going. "Occasionally, we'll adjust what we're doing at the track based on what we see happening with Betfair."
You'd think that somebody who wagers the way Woods does would care deeply about horses and racing. He doesn't. For him it's purely a numbers game, and he brags that the last time he watched a race in person was some 18 years ago. Woods has had a couple misadventures with thoroughbred ownership, but he got into those situations only because friends presented them as sure deals. Not surprisingly, they never came to much.
As for today's races, Woods watches them on a jerry-rigged simulcast that appears, with severe time delays, on the screen of his laptop. Woods dispassionately checks out the races, occasionally eyeing his plus columns as they build during the first few contests. But even as he appears to be nearly $200,000 in the black, Woods shrugs it off: "This money is trivial. I could lose it all in a single race. The real excitement will come with the Triple Trio."
That Woods doesn't allow himself to get worked up by a couple hundred thousand dollars of profit is testament to the swings he's previously experienced. One afternoon in the mid-'90s, Woods did not have a single horse come in and he dropped $3 million, his worst showing ever. Then there's the single race day in 1995 on which he managed to win $8 million even though he was out of town, not monitoring the betting. The year before, he had also won $8 million with a successful run of soccer bets on the World Cup. When Woods mentions that he won "$5 or $6 million on the 1996 European Championship" and that he currently bets $100,000 per game on the National Football League (with the help of a handicapping colleague in the States), it's impossible not to wonder how he strategizes all of these wagers. Woods smiles tightly and replies, "Let's not talk about that."
A friend of Woods's once likened him to Howard Hughes. Though the reference was based on Woods's reclusiveness, it could have just as easily stemmed from his racing riches: $1.5 million, earned in a single session, is where Woods's idea of a good day begins.
He keeps himself holed up in an air-conditioned apartment where the view is sprawling, a pool table dominates the living room, and a downstairs TV spans 48 inches. "I don't leave this apartment during the day, except to go swimming in the rooftop pool, because it's too hot and humid. If I need something from the market, I get my maid or girlfriend to shop for me," says Woods, adding that he prefers to eat dinner in front of the television or computer and that his leisure time is fairly regimented. "I like going to the seedy girlie bars in Makati [an upscale neighborhood of Manila, where hookers are a main attraction for some Westerners]. I go out only a few nights per month, but on those nights, I tend to come home with two girls, or, usually, more."
Over the years Woods has earned enough money from racing that he was able to withstand a $100 million hit when he attempted to short the NASDAQ, a year too early. And while one of his more memorable stock investments involved shorting the Hang Seng Index in 1987—perfectly timed and bringing him a $1 million windfall in a single day when the stock market crashed—he has no problem in making distinctions between gambling and investing. "When you look at how much money I have consistently made from the horses, from 1987 onward, compared to what I've done in the market, horses would seem to be a far safer investment than stocks," says Woods, adding that he's not the only one who's benefited from his horse sense. "Outside investors [who put money into Woods's horse betting syndicate] normally get 100 percent returns on their money each year. The downside for them is that I can take it away whenever I want. There's no permanence."
Back at the races, a chunk of Woods's wagers is still above water as we head into the sixth event and the final leg of the Triple Trio with the 26 million up for grabs. But Woods and company are not going in with the sort of advantage that makes them comfortable. As he relates in an IM to his partners in Hong Kong: "We outlaid 13.8 percent of the TT [Triple Trio] pool and are alive for only 12 percent. If we miss, lose heaps." This is punctuated by the unspoken reality that for all of their computer technology and prep work and financial risk, the team is disappointingly underlaid as this next race gets set to go off.
For Team Woods to have a good chance at realizing its big payday, the No. 1 horse in the sixth race needs to finish in the running. But it is a favorite, so the team does have a chance, though Woods is quick to point out that it's less than 50 percent. He watches this race intently, but even judging by the choppy feed that comes in from Hong Kong, things seem less than ideal. Long before horses are shown crossing the finish line, Woods sighs deeply and says, "Oh, dear." He turns to me and adds, "I'm guessing we haven't got this." Then, right on cue, comes an e-mail from Hong Kong, punctuated with a frowning face: "No good."
Woods appears disappointed but not the least bit angry. He taps his index finger up and down, checks the screen layered with spreadsheets, looks at a scrap of paper in front of him, scribbles numbers and punches some information into a calculator at his side. The audio feed from Sha Tin resonates with all the emotion Woods lacks—"Somebody has won a hat-load of money," enthuses a British-sounding announcer—and it almost seems like taunting. Seeming to ignore it, Woods glances up from his work and says, "We lost $1.6 million on the TT."
The news is delivered in a neutral tone and followed by a moment of silence before things start to heat up for the next race. In no time Woods is back to work, monitoring Betfair, IM-ing with Hong Kong, momentarily resembling a teenager lost in death-match nirvana as he resumes finding an edge and winning money.
Michael Kaplan is Cigar Aficionado's gambling columnist.