I’ve made money over the years on political betting, although I nearly got my fingers burned over Brexit and Trump but, in both cases, could see which way the wind was blowing right at the end.
The largest bet I’ve ever had was on the result of the 2001 general election which looked like a certainty but one could get a greater rate of interest by betting on a Labour win than keeping your money in the building society for a few months. I remember going down the line of bookmakers at a Cheltenham race meeting and betting, on credit, with several of the major firms on a Labour victory (it must have been the late January meeting because, if you remember, there was no Cheltenham Festival (of racing) in 2001 because of foot and mouth, which also postponed the general election by a month). Labour won, and so did I although the returns were fairly modest.
The following is not financial advice.
There are two runners in this race, a mare and a stallion. On the exchange betting firm Betfair you can get 13/1 on Sunak (ie you would win £13 if you bet £1 on Sunak to win (and get your original £1 back too)) whereas, almost symmetrically, Truss’s odds are 1/14 (ie if you bet £1 on her, and she wins, then you get your £1 back and about 7p as well – woohoo!). The market believes that Truss is very, very, very likely to win.
The market is usually right in these matters but I think there are reasons to be sceptical in this case. In the spirit of full disclosure, I’m going to win a small amount of money whichever of Truss or Sunak wins the election and my profits will be higher for a Truss win than a Sunak win but not much higher.
I don’t think that Truss is quite such an overwhelming favourite in reality as the odds make her out to be. Why not? Simply because it is a very small electorate, they are difficult to poll, people lie about things like this, and even well-designed polls have quite often been badly wrong in recent UK political contests. I think Truss will probably win, but I wouldn’t be surprised if, today, Sunak has a 6/1 chance of winning rather than a 13/1 chance. Does that make any difference?
Well, not to most of us – we’re going to get a pretty awful Prime Minister, probably, whoever the Tory party elects. How about the financials?
This gives me the opportunity of introducing the concept of ‘value’ in betting. If, in the Derby (a famous horse race) a particular horse has odds of 20/1 then it means that if the odds were fair odds (ie they added up to 100% chance that one horse or another will win) then that horse would have a 1 in 21 chance of winning. Imagine the race were run with the same horses 210 times (it isn’t) then you’d expect the 20/1 horse to win about 10 times and you would break even. This never happens because the Derby isn’t run multiple times and the odds are never that fair because bookmakers keep some of the money – that’s their business. You can see this because you can’t bet on Truss and Sunak in any proportions of stakes, today, with any single bookmaker and make a profit.
The amount by which the collective odds for all runners in a race deviate from 100% is called the overround and is a measure, in the long term, of bookmaker profit. If you are good at mental arithmetic, very few people are these days, then you can calculate the overround by converting the odds to probabilities and adding up the probabilities of all the ‘runners’ in the event. Overrounds are biggest in big fields and especially in races where large numbers of naive people hand over their money – the Grand National is the best example.
A ‘value’ bet is therefore one where the bookmakers, or your friend in a pub, are giving longer odds (lower probabilities) on the event than is the real probability of the event happening. And so in the Grand National, if the favourite is 10/1 that is a value bet if that horse would win more often than once in eleven runnings, and a 100/1 chance is atrocious value if the race would have to be run thousands of times before it won.
So if I had the courage of my convictions, which I don’t (and as I said, I’m heading for a small profit anyway), then I would bet on Sunak today because my conjecture is that his odds are too generous at 13/1 – I think he is the value bet. I’d probably lose, but if the race were run multiple times then I’d win about twice as often as the odds suggest – that would be quite profitable. However, the race isn’t run multiple times so I’d be hoping that the 1 in 7 result came along instead of the 1 in 14 as the odds suggest.
It probably won’t be any consolation to Sunak that he is winning on the Woodcock signatures race. His constituency of Richmond, Yorks has delivered 80 signatures to this Wild Justice petition Limit the shooting season of Woodcock – Petitions (parliament.uk) whereas Truss’s Southwest Norfolk home turf has contributed 57 signatures. Just for interest, Keir Starmer’s Holborn and St Pancras constituency has contributed 46 signatures.
And just in case you are trying to figure out how I will win whatever happens, its because I got involved with this race long ago when the odds for both candidates were different, but also because some of my profit will come from betting against a few of the runners who have long since left the race.
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I shall have to go and lie down!