It might be good to start at the beginning and talk about why we are mixed up in this "handicapping" business, and why horse race betting works so well in the much wider world of gambling. The answer is found in The Second Law of Gambling. 

There are not many "laws" in horse race handicapping, and handicappers who have been around a while are fond of saying, "The only rule is — there are no rules." This is certainly true when you get down to the handicapping process and start trying to decide things like how to treat a 30-day layoff, or whether or not to take the first pace/speed line, fastest pace/speed line, or any of the other variables we face in each and every race. These types of decisions are based on knowledge gained by hard-won experience. They are situational in the context of each race, and there is no rulebook. 

One of the first things to get past is that "handicapping" is the goal. Making money is the goal and the two are not the same. I'm not all that old, but in my middling lifetime, I have seen the sport change from an era when "handicapping" could, in fact, be the goal — because odds were shaped in favor of my style, and short odds on some wins were offset by easy, decent odds on others. So, for a very long time (like the early seventies through the early nineties), I didn't have to look much beyond simple horse selection.

It wasn't until the Beyers were first published and every nincompoop who could open a Form had decent figures that drastically cut into my speed handicapping edge, that I saw a big enough slump in my bottom line to ask what every selection-oriented "handicapper" does sooner or later: "Damn! I'm a good handicapper — Where's my profit?"

The answer was that I was almost totally focused on handicapping and — even though, by then, I really did know better — I was not moving quickly enough in realizing that the game is horse race betting, not "picking winners." (This is group therapy, so I'll be brutally honest: I was worse than that — one of my biggest giggles was to select all three money horses in order and predict the lengths apart at the finish — blissfully ignoring the fact that in many situations, trifectas can be the worst underlays on the board. I'm pleased to report I got well.) 

Horse race betting is the game, and making money is the goal — and this would be a fool's errand, if it wasn't for one fact: if you play the game right, you can develop a positive edge. 

I promise not to do many formulas (my fingers are only a little crossed), but the absolute beauty of The Second Law of Gambling is that it is a pure mathematical certainty. Not that you will win, but — depending upon how you play — you can achieve a positive edge. Remember, we're talking about gambling here, and that fact should be front page news.

If a casino suddenly announced a rule change that turned the natural edge of the crapshooter from negative to even a minuscule positive one, there would be bedlam at their tables. If the horse racing industry ever figures out how to market this fact . . . well, racing might take off, but don't hold your breath. 

The third- or fourth-law of pari-mutuel betting is that the crowd is fundamentally lazy — which is great for your edge — but bad for making something that implies that you might have to work for a living, even at gambling. 

So here is the second law, which makes horse race betting the most attractive form of gambling there is (excuse the absence of really cute math symbols, which aren't available in Web fonts): 

E= Dr x Pw - R x Pl
 

In plain English, this says that your edge is equal to the amount of money you can potentially win, times the probability of winning, minus the amount of money you place at risk, times the probability of losing. 

I won't test your patience by plugging in numbers — you can if you want — but take my word on two things: 1) it can be positive for horse race betting; and 2) the actual edge for even strong players is probably a hell of a lot less than you think. 

We've all seen people toss around hot numbers like "25% ROI," (now, there's a useless concept) but at any rate, we have cultivated the myth that strong players have big edges — of some sort or other. The fact is that even very strong players are playing in the +/-3% edge range! (Edge, remember, not ROI.) 

So why should this be front page news? Because, with mathematical precision, you can plug in the facts about other forms of gambling and prove the obvious: virtually all other forms of gambling have a negative edge for any player — regardless of skill, knowledge, or bankroll. 

Craps proposition bets range from minus 9% to minus 17%!
Roulette = minus 2.63
Craps pass line = minus 1.41
Blackjack basic strategy = minus 0.4
Blackjack card counting = positive 1.5
Horse race betting = positive 3+/-
Poker = positive % depending on skill 

Of all common forms of gambling, only Blackjack card counting, poker, and horse race betting can show an edge in favor of the gambler. But guess what? If you become a Blackjack genius and actually show that tiny positive edge in Las Vegas, two former linebackers from BYU will arrive at your table and escort you politely to the street. In horse race betting, the parimutuel clerk could care less! Not only that, you can actually monkey with the equation to improve your edge! Try that at a table game in Las Vegas. [Note that horse race betting and table poker are situational and exact edges cannot be calculated, as they can with the strict rules and known possibilities of the other games.] 

Please take a look again at the equation. To make "E" — your edge — bigger, all you have to do is make the things on the left of the minus sign bigger — and/or make the stuff on the right of the minus sign smaller. 

What's on the left of the minus sign? The amount of money possible to win — your odds. And, you're probability of winning — your handicapping. What's on the right? The amount of money at risk — your bet. And, your probability of losing (simply the remainder after your probability of winning). 

Probably the most overlooked elements of the equation are on the right of the minus sign — avoiding and minimizing losses (or at least making losses work for you by gaining some insight that increases the left side for future bets). 

Everything we do in horse race betting is wrapped in that little equation. If it were not possible to make "E" become positive, a more lucrative horse hobby might be trading horse action figures on eBay. Since it can be made to come out positive, in future columns we just have to worry about four little things improving handicapping, improving odds, improving betting strategies, and decreasing losses. This shouldn't take very long . . .