What is the difference between an investment and a bet? On the face of it the similarities – information, speculation risk and return – bear striking similarities. ‘You pay your money and you take your choice’ is a motto that might be equally applied to bookmakers’ clients as well as the shareholders in those same concerns. But there is more to it than that.
Make no doubt about it, internationalbetting and gaming concerns like Bet356, William Hill and 32Red have proven to be highly rewarding for their investors in recent years. For example, online bookmakers Bet365 saw its profits surge by more than a third last year; 32Red have reported growth consistently averaging 34% over the past four years. And these are merely representative players in an industry that looks to have captured a perfect balance between sound commercial investment and recreational betting.
So where do we draw the line? If you put your own or your clients’ funds into one of these online success stories, just how does that differ from taking a cool rational view of the odds on offer for the next Grand Prix or the US Open and making an investment based on all of the information available? Isn’t that at the heart of what they do anyway?
Of course, with a bet you’re generally playing for set odds. That looks like one obvious distinction. But spread markets belie that argument from the off, and in truth, you could say the same about any fixed return investment. There is always some minimal risk that your ‘guaranteed’ return my not materialise: fire, plague and pestilence are always lurking somewhere in the offing. The difference, then, is one of the scale, rather than of kind: there is always risk – although this is maybe too fine grained an argument to be much use to us here.
The point we’re heading towards, once we’ve sidestepped these semantic distractions, is that once you’ve put some serious effort into establishing an appropriate level of insight, and are able to make an entirely rational and proportional decision to commit funds into a project, that is where you have crossed the line.
Betting is a mugs game only to the point where the people involved have failed to equip themselves with sufficient knowledge to be able to recoup more than they lay out. The speculative aspect of what is happening is not in doubt. All that remains is the calculation of which way the margins cut, and to what extent they do so. Intelligence – in both senses of the word – is key.
It is on that cool-headed and calculating basis that online gaming organizations such as Bet365, 32Red and others like them are generating one of the global economy’s most striking growth sectors. That is not a matter of some lucky players simply taking a punt. It is, instead, a matter of clear-sighted and expertly informed calculation.
Next time you make a big call, it might be worth asking just how much head and how much heart is involved in your thinking: Too much of the latter and you will be playing on the wrong side of the line.
