How the "Take" Really Works
Some people are convinced that the mutuel percentage constitutes
an 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 and
above 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 of
which may either win or lose without affecting the inevitable result experienced by the
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 racing
fan to understand the fundamental principle upon which the mutuel method of wagering is
The mutuel method incorporates a plan whereby the bettors at any
give 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's
wagers. 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 an
example 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 to
gain 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 payoffs
are 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 against
Horse B. You and I are the only players who place a wager on this race. You back Horse A
with 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
Now the second mutuel step takes place. The name of the winner
is 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. This
is 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 is
the 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 winning
choices 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? If
he 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, but
let'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 swears
off 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.