The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [60]
“Then what I would do is read all these books. I sent away to a place in Chicago on North Clark Street where you could get old racing forms, months of them, for very little. They were old, so who wanted them? I would go through them, using my handicapping techniques to handicap one day and see the next day how it worked out. I ran tests of my handicapping ability day after day, all these different systems I had in my mind.
“There are two kinds of handicappers. There are speed handicappers and class handicappers. Speed handicappers figure out the horse with the best times in the past. The fastest horse will win. Class handicappers feel that the horse that’s run against ten-thousand-dollar horses and done well and now is running against the five-thousand-dollar horses will beat them. Because, they say, the horse runs just fast enough to win.
“In horse racing it pays to understand both types of handicapping. But back then I was basically a speed guy. I was a quantitative guy to start with.”
As he tested, thought, and observed, Warren discovered the Rules of the Racetrack:
1. Nobody ever goes home after the first race.
2. You don’t have to make it back the way you lost it.
The racetrack counts on people to keep betting until they lose. Couldn’t a good handicapper turn these rules around and win?
“The market is a racetrack too. But I was not developing elaborate theories in those days. I was just a little kid.”
Betting in Washington was ubiquitous.
“I would go down to my dad’s office fairly often, and there was actually a bookie in what was then called the Old House Office Building. You could go to the elevator shaft and yell ‘Sammy!’ or something like that and this kid would come up and take bets.
“Now, I used to do a little bookmaking too, for guys who wanted to bet on the Preakness or something like that. That’s the end of the game I liked, the fifteen percent take with no risk. My dad, you know, was struggling somewhat to keep this under control. He was amused by it to some extent, but he could also see how it could veer off in the wrong direction.”
During summer vacations, Warren returned to Omaha and went stooping at the Ak-Sar-Ben track, this time with his friend Stu Erickson.3 Back in Washington, he found a new friend to go to the racetrack with, someone who could advance his handicapping skills. Bob Dwyer, his high school golf coach, a potbellied, enterprising young man, made far more than his teacher’s stipend by selling life insurance and ice chests and other things during the summer when school was out.4 The other members of the golf team viewed Dwyer as tough and crusty, but he took a shine to Warren, who had a way about him and played enthusiastically despite his glasses always fogging up.
One day Warren asked Dwyer to take him to the races. His coach said he needed permission. “The next morning,” Dwyer says, “bright and early, he came prancing in with a note from his mother, saying it was all right to go to the races.” So Dwyer wrote Warren some phony excuse to get out of class5 and then they took the Chesapeake & Ohio from Silver Spring, Maryland, over to the racetrack in Charleston, West Virginia. Going to the races with a teacher polished Warren’s sophistication about handicapping. Dwyer taught Warren advanced skills in reading the most important tip sheet, the Daily Racing Form.
“I’d get the Daily Racing Form ahead of time and figure out the probability of each horse winning