Mar 12, 2004
How the "take" really works
By: Ray Taulbot
Some people are convinced that the mutuel percentage constitutesan insurmountable barrier
to the racing fan"s financial success at turf speculation. They talk of the deadly, unbeatable
percentage as the one obstable the player can never overcome. But it requires only an elementary
calculation to reveal the fact that a given deduction can never affect the total from which it is subtracted
to an amount over andabove its own percentage of the total from which it is taken.
We suspect that an idea to the contrary has arisen as a result of considering the effect of the mutuel
percentage upon the betting public as a whole,rather than a study of its effect on the individual
player. Naturally, the betting public as a whole must always lose with the mutuel method of wagering. But
this major unit (the betting public) is composed of numerous smaller units (the individual bettors), any
one ofwhich may either win or lose without affecting the inevitable result experienced by the major unit.
To put it another way, while the racing crowd as a whole must always depart from the racetrack with less
money in its collective pocket than when it arrived, it does not mean that each of its component parts must
suffer a similar fate. You must recognize this before understanding the actual effect of the mutuel percentage
upon the individual"s chance for financial success. Therefore, it is desirable for every racingfan to understand the fundamental principle upon which the mutuel method of wagering isbased.
The mutuel method incorporates a plan whereby the bettors at anygive racetrack actually wager among
themselves, rather than with some central bookmaking agency. No bookmaker or bookmaking system of
any kind is involved; and the Racing Association that owns and operates the racetrack does not back or book
the player"swagers. The mutuel department acts in the capacity of a stakeholder charing a fee or commission
for its services. It is this fee or commission that constitutes what we call the mutuel percentage or
"track take." It becomes clear that the modus operandi merely involves the paying off of one group of players with
the money lost by another group-less, of course, the mutuel "take."
With this basic principle in mind, we may now set forth anexample of mutuel operation reduced to its simplest
form, and follow each step in the performance through to its proper conclusion. In this manner, it will be impossible
togain a clear insight into the actual effect of the "take" upon the individual player"s wagering activities.
The least complex example is one which will demonstrate the complete operation through the running of a race
in which only two horses have been entered, and upon which only two wagers have been placed. Since the place
and show payoffsare figured in much the same way as the win payoff, we need to consider only straight betting to accomplish our present purpose.
Our problem is as follows: Horse A is entered to race againstHorse B. You and I are the only players who place
a wager on this race. You back Horse Awith a $10 wager to win. I back Horse B the same way. Now there"s $20
in the win pool.Let"s assume the mutuel percentage at our track is 15 percent. Therefore, the first step is to
deduct 15 percent from the total amount of money wagered. This amounts to $3, which leaves only $17 in the
win pool. There is no other calculation until after the result of the race is known. So with $17 in the pool, the
horses go to the post, and Horse A returns the winner.
Now the second mutuel step takes place. The name of the winneris flashed to the calculators in the mutuel
department, which determines the amount of money that was wagered upon the winner. In our example, $10 was
wagered upon Horse A. This amount is deducted from the pool and set aside so that it may be returned to the winning bettors. This substraction leaves a balance of only $7 in the pool.
All mutuel calculations are based upon two-dollar wagering units. The next step, therefore, entails figuring the
number of two-dollar units wagered upon the winner. This is done by dividing the total amount wagered upon
the winning animal by two. You wagered $10 upon Horse A, so this amount is divided by two, resulting in five-that
is, five $2 wagering units.
The next step is to discover the earnings of each $2 unit. Thisis done by dividing the remaining money in the
pool by the number of $2 units wagered upon the winner. The $7 in our pool is divided by five, which results
in the figures one, four,zero, or $1.40. This amount represents the net earnings of each $2 unit. This profit
is added to the original $2 wagered, and the payoff becomes $3.40.
You are holding five winning units, each of which is valued at $3.40, so when you cash your winning $10
ticket, you will receive five times $3.40, or $17.If there had been no mutuel percentage of breakage you would
have received the entire $10 that I lost. As things are, however, the percentage has cost you exactly $3.Your
profit would have been $10, instead of $7, without the "take."
We now know who pays the mutuel percentage and breakage. It isthe winner. I lost my entire $10 because I
backed the wrong horse. The "track take" was in no way responsible. Poor judgment alone is the factor which
influenced the result, making it evident that the player must win before he can lose anything to breakage. For
this reason, when a person states that the "track take" is the factor which dooms the player to financial
failure, he is saying that backing winningchoices is responsible for the speculator"s downfall. Such a statement
is pure nonsense.
We"re not trying to ignore the real effect of the "track take" upon the player"s possible success. There is an
effect, and it is important.But it certainly doesn"t constitute the primary factor responsible for the average
racing fan"s failure at turf speculation. A brief example will disclose exactly how the"take" injures the player.
Let"s assume a man sets out to the races with a working capital of $500. He initially encounters good
fortune, earning a net profit of $100. He now has $600, but what would he have if the "take" hadn"t been working
against him? Ifhe were at a track where the mutuel percentage was 15 percent, $30 would have been deducted
from his winnings. An unknown sum of breakage would also have been deducted, butlet"s assume it
amounted to another $5. Without "take," the player would have profited to the extend of $135 so far. The take
has deprived him of about $35.
Now let"s assume our player encounters a run of losing investments, which reduces his holdings to a mere
$200. He becomes discouraged and swear soff playing the horses. What part of his loss is attributable
to "track take?"Let"s see. At the peak of his winning period, he had $600. He then lost $400 before
deciding to quit. We"ve already seen that he lost about $35 through the "take."Therefore, poor handicapping
judgment set him back $400, while the "take"deprived him of $35.
The subject can be summed up as follows: the winner bears the cost of the mutuel percentage and
breakage, while the loser remains unaffected by this tax. Hence, before it is possible to lose through the
"track take," the player must first win. Therefore, the only effect of the mutuel tax is to reduce the player"s
profits during his winning periods of wagering.
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