Bookies and Bookmaking

This is about betting on horseraces, specifically through a bookmaker. You get paid a bit less if you win, but you don't need to go to the track. Bookmaking is therefor a 'service,' and we all have to pay for services. Making a book (Yes, it's actually a 'book') is a little bit involved, but any kid with a high school education or a penchant for numbers and a lot of experience in and around tracks can do it. The enticement is that the bookmaker seldom loses--he sets up his book so losing is improbable. Also, it is illegal--the taxman gets nothing. In fact gambling at poker in your home or in a bar is illegal. That's what poker chips are all about.
Bookmaking is based on a kind of arithmetical shorthand called 'percentage.' An even money horse is said to be 50 percent; a 2-to-1 horse is 33 percent; a 3-to-1 horse 25; and a 4-to-1 horse 20. If there were two horses in a race, both at even money, the book would be 100 percent: if a bookmaker bet $1000 against each, he would break exactly even. If there were three horses and he laid $1000 at even money against each, he would win $1000 no matter what happened. This would be a 150% book. Bookmakers aim at an arrangement of odds that will work out to about 115%
A typical book on an eight-horse race, with the bookmaker laying $1000 against each horse would look like this:

Entry.	Odds.	Percentage.	Risk $1000 to win:
1	2-1	33	$500.
2	5-2	28	$400.
3	4-1	20	$250.
4	6-1	14	$167.
5	10-1	9	$100.
6	10-1	9	$100.
7	30-1	3	$33.
8	50-1	2	$20.
		118	=$1570.

If the favorite should win, the book would have to pay out $1000. of the $1070. it took in from bettors on the other horses. If the second should win, the profit would be $100. more. A victory for the extreme outsider, # 8, would mean a profit of $550. for the book.
The problem is filling the book. Customers always want to bet more than he wants to cover on certain horses, and want to ignore others--so his system is wrecked. He lowers odds against horses most in demand, but often this doesn't suffice. He cannot afford to turn away trade so he tries to place some money with other bookmakers. This is called "laying off." At the same time other bookmakers lay off on him. Bookmakers bet against bookmakers. Odds sometimes change so radically in response to the market that by post time the book's percentage has been erased and the bookmaker becomes a bettor on a large scale. So bookies can lose. But rarely because of a bookmakers's laying off network. Example By A. J. Liebling, "Liebling at Home."


Note: 'Place' and 'show' bets are not mentioned. Bookmakers seldom take 'show' bets, and small payoff for 'place' bets are handled by the same bookmaking procedures.