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HRN Original Blog:
ThoroughMetrics's Blog

How Much Is Knowledge Worth?

 Major league baseball has been revolutionized by statistical analysis.  To varying degrees, teams have recognized that they simply can’t be competitive without a thorough understanding of the factors that go into winning baseball games.  Because many of those factors are subtle (and surprising) enough that common sense and raw observation doesn’t detect or measure them properly, virtually all teams now employee a number of experts in statistical analysis whose sole job is to find areas where the team can gain a small edge.  This mirrors the direction which successful businesses in many industries are headed, as “Moneyball” has taken hold in all sorts of industries. 

Ironically, the value provided by statistical analysis is greatest in the industries where it is the least widespread.  In baseball, the early adopters (such as the well-publicized Oakland A’s) received the greatest benefits when they were the only teams taking advantage of market inefficiencies.  Now that everybody is doing it, they have to work a lot harder for a much smaller edge.

Based on the lack of public discussion of statistical analysis of pedigrees, I’d have to assume that it’s virtually non-existent in thoroughbred horse racing.  In baseball, there was a twenty-five year stretch where amateurs with no connection to baseball published a wide variety of insightful studies and analyses.  Despite that, those within the sport remained resistant to new ideas, and preferred to rely on traditional wisdom and ‘common sense’ over statistical evidence and measurements.  While I would expect faster adoption of any useful findings in horse racing (due to the much greater number of people in decision making positions in the sport), there still should be some degree of ‘internet chatter’ generated.  To date, there are relatively few people talking about any kind of statistical analysis in the sport, and most of what has been done consists of backward-looking data mining, rather than true studies of predictive analytics.

Those who take the plunge of embracing analysis are going to be rewarded with a wide variety of valuable learnings.  How valuable?  That depends on the size of their investment in the sport.  In 2012, there were 65 buyers of over $1 million of yearlings at public auctions.  For those 65, buyers, even a very modest 5% improvement in their return on investment would have been worth a minimum of $50,000 for the year.  Then consider all the purchases of weanlings, two years, and broodmares, plus all of the private purchases of thoroughbreds.  Add in the farms that are breeding their own races horses.  In all, must be many hundreds of owners operating on a scale where even a slight improvement in their ability to predict racing success would provide them with tens of thousands of dollars per year of value…in some cases hundreds of thousands.  And there are thousands of people involved in the sport in various ways for whom it would be worth $100 or more to have a better understanding of the factors that go into predicting the success of a racehorse based on their pedigree.  It’s uncertain when racing’s statistical revolution will come, but it’s going to be big business when it does.

 

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Older Comments about How Much Is Knowledge Worth?...

Pedigree analysis is based on the WRONG idea...WE have NO idea what traits are IN the sperm or ova and then we do not know what combinations of that same genetic material creates speed , ruggedness, stamina or the like...No wonder it is little better thna chance, 50/50
Nice article.Maybe there are people out there doing it now but don't want to tip off other players in the game. Any idea who is playing in this space?

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