Now that Triple Crown season has come around again, the eyes of the nation turn toward those economic theorists who specialize in the $2 exacta, the three-way box, and the superfecta.
Like futures traders everywhere, they know how to read and interpret annualreports (past performances as charted in The Daily Racing Form), how to judge inside information (tips from the barn), and, in many cases, when and how to rely on gut instinct instead of rules of thumb (favorites win a third of races, but sometimes in the walking ring, the favorite looks tired or nervous or washed out and another horse, with longer odds, looks relaxed and vital).
Of course, thoroughbred horse racing, an offspring of the British Empire thathas been exported around the world, has a long and unsavory tradition of shadycharacters, financial chicanery, cruelty to humans as well as animals, andfortunes won and lost. It is, in other words, an exact mirror of the miracle ofcapitalism, and any steady racetracker thus has a firmer grasp of the muchballyhooed free market than tenured economists of the Chicago School (who, inmy opinion, should be required to pay for their sins of the last 25 years byearning their bread at the betting windows of Arlington Park).
Here are the rules, Professor Friedman:
The system depends on suckers.
Horses, racetracks, and breeding farms are the definition of high maintenance,and so they rely on money from outside the industry for their continuedexistence. There are two main sources, one old and one more recent.
The traditional source is gambling. People bet on horse races all over theworld, and in fact, horse racing as we know it took shape in the 18th century,when English aristocrats who were breeding thoroughbreds realized that theycouldn't afford their hobby without an infusion of income from elsewhere (andanyway it was much more fun to have prize money than to pass around a fewtrophies, called "plates"). When bookmakers soon thereafter arrived on thescene, owners and trainers of racehorses were eager to cash in on the largeamount of working-class dough that was now changing hands, and they did so bybetting on -- and sometimes against -- their own horses. This is very much likea farmer I used to know who grew grain but also played the commodities market.Of course, the result was that sometimes the temptation to interfere with one'sown horse became irresistible (see No. 2, below), and so the history of Britishhorseracing -- in fact horseracing in every country that primarily usesbookmakers -- is especially colorful, but the suckers just keep on coming,supplying billions of dollars to the industry every year.
After Secretariat was syndicated as a breeding stallion at the end of hisracing career, breeders, too, realized that there was money to be made inselling shares in the reproductive future of good racehorses. But a horse mayhave a breeding career of 20 years or more, or he may keel over at age 4.
When Fusaichi Pegasus won the Kentucky Derby in 2000, he had earned about amillion dollars. When he retired from the racetrack at the end of that year, hewas syndicated for a reported $60 million. That means that many hopeful suckersspent good money on an unknown investment, a horse that might have been fertileand might not have been, a horse that might produce good runners and might not.
And then there are yearlings. A yearling is a horse that has never been ridden,who is sold at an auction to people who have never see him (or her) move fasterthan a walk. Auctions are where suckers (many of them otherwise astutebusinessmen and women) are induced to spend hundreds of thousands -- evenmillions -- of dollars on a untested commodity that they themselves often knowvery little about, so they have to rely on the advice of their new best friendsin the horse business, who are fully aware of the money that is burning a holein the suckers' pockets. Of the ones that are born every minute, at least a fewdrop big money every year at the auctions, intoxicated by the heady aroma ofhorseflesh, big money, and testosterone.
Cheaters prosper.
Disinterested observers may have noticed that the free market did not act toput a halt to the California energy swindle of 2001, that, in fact, thecitizens of California are still paying through the nose for having been notonly cheated and robbed but also insulted by citizens of other states, whoweighed in with disparaging comments about the naïvete of Californians'attachment to conservation as a solution to energy problems.
The many games perpetrated upon Californians that spring happen all the time athorse auctions, where people bid on horses they already own in order to driveup the price for the unknowing bidder across the room, or a horse is sold before the auction and the former owner and the new owner agree to split the profits on selling him to someone else not in on the deal.
Pumping yearlings full of anabolic steroids so that they will bulk up for the sales is standard procedure. It is no surprise to anyone at the track or the training farm whenthe gloss, muscle, and weight fall off the animal in the following month -- thepoint was to sell the horse, not act in his or her best interest. Even a goodhorse often gets sold for too much money; the purpose of any auction is tocircumvent the bidders' better judgment by involving them in an excitingcompetition. The amount the highest bidding sucker pays over and above a fairprice for the horse is called "the winner's curse."
The racetrack itself is a notorious cheating ground. One mysterious fraudperpetrated against several horses and owners in the last several years thathas not been solved is "sponging," where small sponges are pushed high into ahorse's nose prior to a race, making him or her unable to breathe (andtherefore unable to run well).
A well-known method that may have been used with Seabiscuit is a "machine:" Thehorse is trained to leap forward when he is given a shock on the neck with abattery-powered electrical device held in the jockey's hand.
In England, where betting is controlled by bookmakers and betting shops ratherthan the government (and is therefore a market more truly free), jockeys arealways under suspicion. They can be fined or suspended for appearing to not tryhard enough to win. It is assumed that there is always a possibility that theycan be bribed or threatened into throwing a race because their lives as jockeysare difficult and unremunerative. When purses are small and the bet pool islarge, it is hard to make a living training horses, and even trainers andowners become suspect. In addition, a great racehorse is never a friend to thebookmakers, because even when the odds are short, he destroys their profitmargin by winning over and over again. Phar Lap is only one famous horse whoseconnections felt obliged to cheat when it turned out he couldn't be beaten anyother way.
Cheating is not the result of miscalculations or mistakes, it is an inherentdynamic in any buy low-sell high world, as the audience for the accountingscandals of the last five years surely realizes by now. When the shareholder,or the bookmaker, is king, cheating is justified as a part of the system. Andso what if the suckers lose their money -- caveat emptor, after all, as they sayat Enron. But at the racetrack, more than money can be lost through cheating.When a trainer masks a horse's pain and puts him in a race, he risks the livesof everyone in the field.
The race to the bottom is the point.
Most menial jobs at the racetrack have already been outsourced to citizens ofthe third world who happen to live in the U.S. When a man making $300 a weekhas the care and custody of a horse worth a million dollars, guess whosecomfort is paramount?
Not every thoroughbred is a friend to man to begin with, though many are. But winning a race requires mental rigor on the part of ahorse, not to mention plenty of energy and high self-regard. Often enough thistranslates into irritability or even viciousness. Grooms and hotwalkers ($6 anhour) are always in danger of getting kicked, bitten, jumped on, knocked over,pushed into the wall, or struck. They live at the track, sometimes in their ownquarters, but other times in stalls. Stalls do not have en suite bathrooms.
Exercise riders, who get up on two-year-olds and three-year-olds, run plenty ofrisks, too, since any horse can buck, rear, spook, run off, fall down, get runover by another horse, or suffer an injury at a high rate of speed. There areother race track employees who help with the horses' outriders and pony girlsand boys who keep their own horses and live near them. Those who work with thehorses are served by others like them -- cooks and cashiers in the cafeteria,for example. The backside of a racetrack has a middle class, too -- trainers,veterinarians, farriers. On the front side, a full staff of cooks, dishwashers,and servers keep the restaurants going, gardeners and groundskeepers keep thepaths swept and the flowers blooming, and valets park the cars. A white-collarstaff of officials, secretaries, pr people, accountants, "bet takers," andnumerous others keep the suckers happy and the money flowing. Handle is all. Noone is unionized or paid like a civil servant. Many racetrack workers rely onfaith-based charities to get them through hard times. Or they just disappear.
Engineering failure is inevitable.
Horses are animals, but they are also engineering phenomena, structures ofbone, sinew, muscle with energy delivery systems called lungs and hearts.Everyday at every race track,numerous stress tests are run to see whichstructures survive and prevail and which break down. The nature of thethoroughbred horse shows the evidence of three hundred years of structuraltesting. Almost all living thoroughbreds are sons and daughters of long linesof winners, and people who love thoroughbreds do so because they admire thehorses' vitality, intelligence, and work ethic. Put a thoroughbred on anexperimental treadmill, and he will keep going without much encouragement untilhe gives the scientist all the indicators he wants -- peak cardiac output, peakrespiratory flow rates, maximum muscular effort. And then he will come back anddo it again the next day. Other breeds of horses balk and stop when things getto uncomfortable, but a thoroughbred would usually rather do than not do, gothan not go.
The price of such enthusiasm can be seen at the racetrack, even in big raceswith cherished and well-cared for horses. In the 1990 Breeders' Cup, Go forWand and Baracoa went out in front and battled every step of the way. Theircompetitive spirit made them exploit the utmost strength of every fiber andcell in their bodies. After more than a mile of hard running, Go for Wand brokedown, fell down, stood up, and tried to get to the finish line on three legs.The free market is nothing if not cruel, as people who lose their farms, theirjobs, their pension plans, their health, and sometimes their lives know onlytoo well.
Lucky is better than good.
Favorites win a third of the time, which shows that it is possible to breed,train, race, and bet on good horses with some reliability. An orderly andintelligent racetracker, whatever his job, can master the detail required tomake a living in racing if he works at it. Trainer Charlie Whittingham andjockey Bill Shoemaker had a depth of knowledge and dedication that iscomparable to the greatest talent and expertise in any other field of endeavor.
But two-thirds of the time, the favorite doesn't win. Two-thirds of the time,the favorite gets blocked on the turn and has to go far to the outside, orstumbles at the start, or is bumped by another horse in the stretch. Two thirdsof the time, the unexpected or the inexplicable happens -- a bird flies into thehorse's face as she comes out of the turn, or the horse shies at something anddumps the jockey. Two thirds of the time, there's a downpour just before therace or a longshot puts together the race of a lifetime, or an apprenticejockey sees a hole on the rail and gets there before the old master does. Twothirds of the time, an inexperienced bettor who can't read the Form bets on aname or a color or a famous jockey and wins a lot of money. Thoeries ofhorseracing abound, as theories of the free market abound, but sometimes alucky name like Smarty Jones or a lucky name like Google carries the day, andLion Heart and Lycos are left in the dust.
Capitalism is fun.
Before I started going to the racetrack, I didn't have a nice thing to sayabout capitalism. I was a fan of the family farm, for example, anddisinterested pharmaceutical research and the minimum wage, not to mentionenvironmental protection and affordable healthcare. I didn't like it when mycousin said of people whose factories closed in the late eighties, "It's notlike they deserved those jobs" (and I said, "It's not like you deserved yourinherited millions.").
Now I've been to the racetrack and I know that Capitalism is fun. Even the cheapest races can thrill, if the horses are tryingand the unexpected happens, whether or not you have a bet. If you do have abet, that sense of being honored and blessed when your horse comes in is aflooding, physical pleasure, igniting endorphins for the rest of the day. Andeven the cheapest racetracks are beautified by the presence of the horses,their alertness, their grace, their intensity. Any 10 guys chewing cigar buttsare redeemed by a single horse prancing toward the starting gate.
Racetracks run on hope and desire.
That is their bane and their boon. Even socialists feel happier at theracetrack. Even women feel safe in the grandstand, because racetracks arefriendly. At the end of every race, something good has happened to someone. Atthe beginning of every race, everyone is thinking that something good mighthappen to him or her. Crime and violence take place at the racetrack, ofcourse, because crime and violence are endemic wherever there is money to bemade, but there are no tides of testosterone-fueled riots or shootings atracetracks, because mobs never form there -- everyone is too busy interpretingthe Form, adding up winnings or losses. Racetracks are hotbeds of self-interestthat at least feels enlightened, even when it isn't. And on the backside, thehorses come first. For some people, horses are the only larger thing theybelieve in, but the habit of considering the horses, whether out of fear or oflove or of keeping up appearances or even of mere utilitarian common sense is aredemptive one.
Does this mean, for the moralists among us, that racing can be good? I doubtit, but it does mean that goodness can and does coexist with the other aspectsof racing, and that racing can be made better. Every day at every racetrack inAmerica, owners, trainers, jockeys, exercise riders, grooms, and others aremaking choices that are not in their own short-term, or even long-term economicself-interest because they feel responsibility and connection to the horses andeach other. Every day, they are choosing not to cheat even when the bottom lineurges them to do so. And even if, in some cases, they are choosing to cheatafter all, it's possible that a little nudge, a little change in rules orenforcement, would stop them.
Government regulation is your friend.
In the United States, the government asserts its interest in keeping racing asclean as possible by taking out part of the parimutuel handle and using it forvarious regulatory purposes, for purses, for track upkeep, etc. the takeout inmost states runs about seventeen or 18 percent, and it jeopardizes to somedegree the ability of the dedicated handicapper to make a profit.
In Britainand Australia, there is some betting "on the tote," but much more throughbetting shops and bookmakers and racing is in considerably more trouble inthese countries than in the United States. In the United States, purses arebigger, racing is cleaner, and even though racing is not a hugely popular sportlike football, it supports itself economically fairly well. British bookmakersobject to turning over more than about 1 percent of the handle to the industry,and when they are threatened, they threaten back -- they will get out of racingentirely, taking their money with them. So far, the British haven't called thebookmakers' bluff, and as a result even the queen's trainer has a hard timemaking a living. Gambling on inside information, cheating in many differentways, and one scandal after another are far more endemic to English racing thanto US racing.
When an investor reads his Wall Street Journal these days, there's little he can do to divine whether reported profits are real or faked, whether a company is honestly run or corruptly run. The free unregulated market operates as it must -- by roping in suckers and trading in false information. But when an investor opens his Daily Racing Form, he knows that the statistics he sees there are true -- all the split times a horse has run in all or most of his past races, all the times he worked in and what the track was like, how he stacks up in general speed measures, and what the experts think about his last races and his chances, what his jockey's form is like and how his trainer is doing in the standings.
He knows who the horse's parents and grandparents are and how muchhe was sold for as a yearling or a 2-year-old and who he has run against andwhat kind of medications he is taking. The racing industry has made sure thatthe betting public gets accurate and complete information, and racing inAmerica, with training done in public at the track, does not rely on touts orsecret agents, who sneak peaks at horses training far out on the downs, as inEngland. It has done so because suckers in America would be less likely tobring their money if racing fell through certain floor of honesty and accuracy,and the governments that benefit from gambling would lose what money they getfrom the industry.
There was a time, say in the '70s, when racing and capitalism existed in theirproper relationship -- one reliable and one suspect but exciting. The end ofgovernment regulation has turned capitalism back into the monster it was in thebeginning -- rapacious, greed-driven, destructive of morals as well as ofsociety, democracy, and the natural world. We can lament that and we can votefor something different, and, thank God, we can also go the racetrack and lookaround at how it could be.
Jane Smiley has owned and bred several racehorses. She never pretends that sheis not a sucker.
