Book review: Trading Basesby Chris Jaffe
March 11, 2013
A new baseball season means it’s a new baseball book season, and the new tomes are hitting the store shelves and Kindle electronic pages.
One particular work sparked some curiosity from me, Trading Bases: A Story About Wall Street, Gambling, and Baseball (not necessarily in that order) by Joe Peta.
As you might gather from the title, Peta, who is a lifelong baseball fan, has spent pretty much his entire life on Wall Street. When a car hit him while he was crossing the street and he was downsized out of his job in early 2011, he decided to spend his recovery time devising a system for betting on baseball games, which he then tried out during the 2011 season. The book is about his experiences.
Before going any further, I should note a few things. I’m not a gambler. I’ve never done any online wagering on any Vegas websites. I’ve never laid any bets down on a baseball game in my life. Aside from some family football pools and a few loose change poker games in college, it’s passed me by. Perhaps that’s why the book got my attention, since it combines something that I know about (baseball) with something I don’t (gambling).
Peta’s writing style might be the book’s biggest advantage. While you wouldn’t expect a stockbroker to be much of a writer, he has a nice conversational style that flows very well. Thus, no matter the subject, Peta keeps the reader engaged.
That’s nice because, while the book is primarily about baseball, Peta will bounce around and write various chapters focusing on his old life in the stock market, trying to show how the lessons he’s learned prepared him for his baseball betting, and demonstrating how Wall Street can learn quite a lot from sabermetrics. Fortunately, even if don’t know your Dow from your Jones and care not to, these chapters are still interesting. It must be nice to be that good a writer.
Those Wall Street chapters fit in well in this book because, in general, Peta adopts an episodic approach here. While there is the main plot of the development and implementation of his gambling system, some chapters are little essays and vignettes on the side that are designed just to showcase part of his interest in baseball and further flesh out Peta himself. For example, you get chapters on his favorite sports bar and on his family and baseball.
But the main focus of the book remains his betting on baseball. Peta is an advocate of sabermetrics, not surprising since he's based his entire adult life on having hard data. What’s interesting about his betting system is how the basics of what he does are really quite familiar to anyone involved in the sabermetric community.
In many ways, this book is the story of the triumph of the nerd—the sabermetric nerd. He takes some well-worn concepts and bases a gambling system on it that (spoiler!) works pretty well for him. (It sure wouldn’t be much of a book if his system bombed out completely, now would it?)
Peta begins the year looking at a few basic nuggets of sabermetric wisdom to figure out how teams will do and which ones are over/undervalued. Pythagoras projections, WAR, DIPS, third-order wins—these things have been around for years, and they serve as the basis of Peta’s approach.
(Actually, though he seems well versed in sabermetric theory, Peta doesn’t use the term “third-order wins” and seems unaware of it. First discussed by Dan Fox in the 2006 Hardball Times Baseball Annual and then following him over to Baseball Prospectus, it takes Pythagoras a step further. It notes that some teams score or allow more/fewer runs than expected based on clutch hitting, luck, or other reasons not likely to be repeated. Adjust for these factors and Pythagoras, and you should have an idea how much a team over- or underachieved. Peta uses his pet phrase “clusterluck” to describe this phenomenon, which is a nice phrase, but he doesn’t even acknowledge the existence of third-order wins).
The foundation of his system if fairly simple, but Peta really gets involved in its implementation. He uses his system to rate what he thinks the odds are that a team will win each game, compares those odds to the Vegas line, and—based on the difference—decides whether, and how much, to bet.
This is where Peta goes far beyond what a normal reader of sabermetrics would. He has a pretty detailed system for viewing the overall quality of the team, the quality of the starting pitchers, etc., and he’ll do this for every game. As the year goes on, Peta gradually mixes real-season results with his preseason predictions until, by the end of the year, his system is entirely based on what has actually happened rather than on what he expected would happen.
One lesson Peta took from Wall Street with regard to his baseball-betting enterprise is never to risk the principal investment itself. Peta used to work for Lehman Brothers, which went belly-up because it didn’t do that. Peta describes how he designed his system to ensure he doesn’t make the same mistake. He decides a set percentage of his overall principal based on the edge his system gives him on the Vegas line. The largest bet he’ll make is two percent of his principal, and that only happens once or twice a week.
By and large, Peta does well. He ends up betting on a large number of games, and he ends up making money with his system. He’s 1,087-1,008 on the games he bet on during the season, which is only a 52-percent success rate, but that’s all he needs to turn a profit. He does especially well in his bigger bets, which makes sense because those are the ones he thought he should have the biggest edge. Because he does so well in his bigger bets, his return is around 30 percent profit on the year.
What’s more, while writing the book in 2012, the publisher gave him some of the publicity money for this book to bet with, so he went to Vegas and did well for a second straight year.
Peta didn’t turn a profit all the time—he got killed all midseason long in 2011—but he was looking long term, and that paid off.
Purely from a gambling perspective, there are some interesting nuggets. Most notably, Peta does the math to show how betting on baseball by and large has a better return than sports with a point spread like football or basketball, because the house’s take of the action isn’t as much in baseball.
Also, during his summer in Vegas in 2012, he makes some interesting criticisms of the casinos and how they do a terrible job treating their regular customers. That’s one place Peta feels sports betting could learn from Wall Street.
While this book often reads like a triumph of sabermetrics—guy uses it to make money betting games all year round—I don’t know if that means the average sabermetrically inclined fan should try to replicate it. The key thing for Peta is less about having a general understanding of sabermetrics and more about applying it to every team for every game and then setting his bets accordingly.
Surely what he did can be replicated—heck, he pretty much gives all his info away in the book—but what Peta did takes a good chunk of work every day to stay on track. After all, if he was just a little less effective, instead of betting correctly on 52 percent of his games, he’d go under 50 percent and end up the year in the red. The devil is in the details, and that helped Peta win.
In all, this was a very enjoyable book and shows how a guy can use some common sabermetric knowledge to make some money for himself by regularly edging the Vegas lines. If that sounds interesting to you, I bet you’ll really like this book.
History instructor by day, statnerd by night, Chris Jaffe leads one of the most exciting double lives imaginable; with the exception of every other double life possible to imagine. Despite his lack of comic-book-hero-worthiness, Chris enjoys farting around with this stuff. His new book, Evaluating Baseball's Managers is available for order. Chris welcomes responses to his articles via e-mail. Oh, and now he's on twitter.