Andrew Black - Q&A

On the 7th of December, Andrew “Bert” Black was asked by an online racing chatroom to participate in a Q&A session, with the questions posed by a mixture of the general public and industry insiders. In his inimitable style, he gave a series of remarkably frank and honest answers to the questions submitted, and we have reproduced them here, by kind permission of the Racing Forum (www.theracingforum.co.uk)…

QUESTION

In your time as a punter and more recently as a founder of the world's leading betting exchange you must have come across a vast number of punters, both good and bad. Are there certain attributes that tend to distinguish one from the other in your view?

If I am allowed a supplementary, I would also like to ask you what you think the state of the betting and horseracing industries in Britain will be in, say, 3 years' time?

Keep up the good work!

Prufrock

BERT

Hope you are well.  I've met a lot of big punters over the last few years, and they have been a pretty diverse group of characters.  I think it's one of the great aspects of the betting world - it seems to be a classless ageless society where most people get on with each other.  In terms of success I think that a key attribute is the ability to distance yourself from all emotion.  In my former life as a trader I took the view that my enemies were fear and greed - if I was feeling either emotion then it was time to walk away, and I think the same applies to betting.  As in most things I think it is about putting in the hours - you need application, focus and concentration and an understanding of the nature of probability - most good punters seem to have these attributes.

Betting and horseracing in three years time - tough question.  I hope we continue to progress and I think we will.  I can see us doing more with the bookmakers as time goes on - I'd like us to be doing more with the courses, but this may be difficult.   I can see the High Street losing business to new casinos popping up.  I'm concerned that racing may lose betting share to other sports and gambling pastimes.  I'd like to see the racing industry modernise a little - professional stewards in a central office would be a good start.  I think we'll see more all-weather tracks and the quality of all-weather should also improve.

QUESTION

Thank you for your time, Mr. Black.

The exchanges have proved a revelation in the betting world and have changed the face of it forever. The opportunities they provide for the punter are unparalleled, but they are also effective in highlighting possible ' cheats ', obviously through suspicious betting patterns and the like.

In light of recent events as regard race-fixing allegations, how do you see your relationship and dealings with the Jockey Club progressing over the coming years?

And, if I may add a small extra, where do you see Betfair itself going in the future? Bookmakers can add all of the games and virtual racing they want to try and increase revenue, but what next for the exchanges?

Again many thanks for taking the time to answer our questions.

All the best.

LGR

BERT

We have always had a good and close relationship with the Jockey Club, although we are careful to make sure that we strike the right balance between our customers’ privacy rights and the JC’s requirements to police racing.  I’m happy with us being where we are and I don't see the relationship changing very much.

There have always been undesirables in racing but previously the politics were such that there was no great pressure on anyone to expose them.  The political landscape has now changed to the point where the integrity issues are IMO being overstated rather than understated.  I doesn’t help racing in the short term, but I think (hope…) it will be beneficial in the long term.

I can see a number of interesting ways for Betfair to innovate in the future, but I’d prefer to keep my thoughts private for now.  We haven’t done much in the way of genuine innovation for a couple of years as we have been flat to the boards dealing with the core exchange model – we are getting on top of things now and hopefully the next couple of years will be more interesting.

QUESTION

Thanks for taking the time.

I'd like to know if you're aware of the many problems that users have been encountering since the introduction of the new site - problems such as slow bet processing and the site even freezing completely near the 'off' ?

Also, why was the old site retired when the new one is much slower to use?

Thanks in advance

EC, Nick,

BERT

I loved the old site and architecture – I had personally put a lot of work into it, it had become extremely reliable and had given us sterling service for a couple of years.  It had had its day though – we were running out of ways to scale it up and running out of time.  A lot of people said “if it ain’t broke don’t fix it” – I doubt that those people would have shown us much sympathy if we had waited until it was broke before doing anything.

The old front end was written in VB ASP – a wonderful language that is easy to understand and work with.  We moved to a Java platform called J2EE which is complex and pretty difficult to work with.  It was a painful transition but one we felt we had to make – J2EE (in combination with some other stuff) gives us a lot more control in a number of critical areas.  It is better for scaling up; it gives us more sophisticated security and better defences against DDOS (Deliberate Denial of Service).  Unfortunately we have to take these things pretty seriously.

I think the new site is going well for most people now with just a few issues persisting – we upgraded our network on Monday which should have improved performance further.  I have seen the chatroom threads on slow bet processing near the off - we have people looking into that at the moment.  The old site had teething problems for many months before it finally settled down - I am confident that the new site will stand the test of time and will ultimately prove a better platform than the old.

We did create “loading” problems for many IE6 users with the most recent upgrade – I could go into the fine details of why it happened, but it would be a long and boring explanation.  The short explanation is that we screwed up – I’m sorry for that and we’ll try to ensure it doesn’t happen again.

QUESTION

In the light of the recent collapse of a rival exchange, can we be sure that all monies held in our accounts is safe?

Cheltboy,

BERT

I think you can be very relaxed about the cash we hold for you.  We take our ring fencing seriously – we don’t touch client funds other than to take commission and we don’t trade in our own markets.  I know that Sporting Options said the same things – I think that there are several differences with us.

Firstly we are audited by KPMG, who are one of the biggest accountancy firms around.  Before they sign off on our accounts they go through our banking arrangements and fraud provisions with a fine toothcomb to make sure everything is above board.  Secondly we have no need to try to add liquidity to the site, which inevitably involves taking risk. From there to using someone else’s funds is obviously an additional step, but if you’re not taking risk in the first place you don’t even set off down that road. Thirdly we make money. This should be irrelevant as even if we did go bust your money would be safe, but it is added security.   Finally we have a board comprising a number of independent senior executives from different backgrounds – they are there (among other reasons) to ensure probity within the companies operations, and they take their responsibilities seriously.

QUESTION

Do you think you will have to increase commission rates from 5% in the future to make Betfair more profitable and if so what level to you think would be sustainable?

It has been said by some that you may try to run some markets as high as 10%, to find how much punters will wear before they walk?

Thanks ... Dave.

BERT

The new “market base rate” system allows us to vary commission rates for different markets, and we brought it in because we see ourselves doing a fair bit of that in the future.  We didn’t bring it in as a sneaky way to get commission up though – there are other reasons.

We have to contribute to the sports we run markets on - some sports are heavily reliant on betting revenue whereas others are not.  If we have to pay more to cover a certain sport (perhaps only in certain countries) then we may choose to charge more.  Other markets that we run are unprofitable for other reasons – again if we are not making money then we may bump up the charges a little.

On the other side of the coin we may choose to reduce rates on markets that are easy to run and make good money.  You shouldn’t assume that the net overall effect on commission will be upwards – it probably won’t be.

There are a lot of discussion and negotiations going on at the moment, and we don’t know what we will be paying different sporting bodies as time goes on.  For the time being we are mostly just keeping our options open.

QUESTION

Andrew Black, Congratulations, greatest innovation since the wheel,

This OAP.(yes 65 in Jan. look a lot younger) not being a comp. whiz kid.

please direct me to the markets with 20% better odds

thanks for you trouble. B.D.

BERT

Barry,

Glad to see you’ve got your bus pass, and yes you do look younger than 65 (grovel grovel).  If I look at the six races between 12.20 and 3.00 at Lingfield today (Wednesday) the SP over-round came in between 122% and 127% - as you know our racing markets typically trade to around 102% on the back side, so not an unreasonable claim on that basis.  The 3.30 came in at a scary 134% with three big shorteners, but then it wasn’t the best race I’ve seen this season.

Of course there are all sorts of caveats to this.  There is generally more fat in the longshots and of course we charge commission.  Better races with smaller fields come in at lower course over-rounds than those above.   Our place markets are generally substantially better than the place portion of an each way bet, but this is not so true for 8 runner races with short priced favourites etc.  Bookmaker prices on match odds on football typically come in at around 112%, but peripheral markets such as correct score can be 140%+.  It isn’t going to be a very catchy marketing strap line if it runs to a page of foolscap though.

QUESTION

Now, now Barry - be nice.

Andrew, thanks for taking the time.

Congratulations on the success of your venture. If there has ever been a gap, more shrewdly identified, in any market, anywhere, I'd like to know about it.

My question is this; Betfair has surely grown much, much more quickly, than you could ever have anticipated.

Are you ever overwhelmed by the size of the business you have created, or when these feelings visit with you, do you simply light-up a Monte Cristo with a $100 bill, and pop open another magnum of Chateau Neufe-du-Pape?

Thanks again

Grasshopper,

BERT

I had great belief in Betfair right from the start – it was one of those ideas that was either going to be huge or be nothing at all, and I’m generally an optimist in life.  It’s the only company I’ve ever been in at the outset so I haven’t got anything to compare it to – it has been quite an adventure though and I sometimes feel a bit awed in my quieter moments.

I’m still drinking beer and smoking Marlboro Lights, but I may get a taste for the finer things in life as I grow older.  Then again maybe not…

QUESTION

Andrew, thanks for taking the time to answer our questions.

Is Betfair considering a presence on the high street so that the many punters who go into a bookmakers but don't or won't use PC's, can take advantage of exchange betting?

A couple of weeks ago my p.c. went belly-up, it would have been great to have had an internet-betting cafe to have used, complete with ATR/RUK & any Soccer on in the background.

Insomniac,

BERT

I don’t think a high street presence is realistic or likely in the immediate future – it’s very costly and it isn’t really what we do.  I could see us having space in Casinos if the law changed and we can be on kiosks in various places.  Maybe one day but probably not at the moment – you can always use the phone.

QUESTION

What role do you think the Betfair chatrooms play, and are you happy with how they have evolved over the years?

and

After the success of your horse Captain Hurricane in 2004 do you have any plans to branch out further into racehorse ownership? How is the good Cap'n, and am I right in saying that you also have an interest in the promising General Jumbo and that he is due to race abroad before long?

Pru,

BERT

Back for more eh… I have a love/hate relationship with the chatroom.  I fundamentally believe in its existence as I believe we should try to be totally transparent and allow people to have their say publicly – it keeps us on our toes and keeps the company in touch with the sentiments of the userbase.  Some of the threads can make great reading and can be very informative.  There is also a downside.  We come in for a lot of stick in there from time to time, and some of it can be very unfair - it isn’t our policy to go in there so we just have to live with it.  There are often threads that seem libellous to other parties and are brought to our attention for us to remove them more slowly than they might like, and we get a lot of complaints and letters from lawyers.  On the whole though people take it in good heart. I think it’s an important part of our culture – long may it live.

My main syndicate is with Ed Wray and his brother Jeremy (the Comic Strip Heroes).  We bought two more yearlings a month ago – Johnny Alpha (by Namid) and Twilight Avenger (by Dr. Fong).  I’d like to think that we’ll grow our ownership as time goes on, but it is a collective decision.

The Captain is in great form – he’s really filled out and looks a different horse now to a couple of months ago.  I still have big hopes for him – rule him out of the Guineas at your peril.  I don’t think we made the most of him this season – we probably shouldn’t have run in the bottomless ground at Deauville and he seemingly hadn’t recovered from that when the sales race came around, but he’ll be back.

Sadly we’ve now sold General Jumbo to a syndicate in the States.  He is a lovely horse – absolutely huge with a great attitude.  We got a decent price for him although it won’t look too clever if he goes and wins the grade 1 – I doubt he’ll run over here again which is a shame.  We’ve got two others.  Stedfast McStaunch won his maiden and has had a lay off – he is very decent but probably not a worldbeater – he should be back soon.  We have a 3yo called Matouraka who we claimed in Deauville – she is a fantastic looking filly, big and skinny with a long easy stride.  She could go places but has had a knee problem – I’m still very hopeful.

QUESTION

I'm not a Peter Ustinov and don't have that many questions, unless you'd like to comment on some of the above - hmmm, oh well maybe one - What's the next innovation, and will you have a hand in it, or is the energy used up ?

Gamble,

BERT

Hope you are well – good to see you are still working the chatrooms.

In truth I’ve always been a bit detached in the company.  Even in the early days Ed was at the helm and I was in the engine room which is where I prefer to be.  As time has gone on and we have progressively filled out the company my executive role has got smaller and smaller – I’m happy with that as it gives me more time to think.  I think I’ve always been pretty open with my views – the journalist for the profile piece just asked different questions.

I was probably over the top with my comments on Flutter.  They had gone down one road and we had gone down another – it was a bit of a rude shock when they decided to turn round and follow us.  I was angry at the time at what I saw as a pretty blatant piece of copying – I’m a lot more sober about that sort of thing now.

It was a shame about the BUG – I liked the idea but a lot of politics got in the way.  Maybe we can rejuvenate it one day.

I’ve still got a few shots in my locker on the innovation front - it’s just a question of getting the work done.  I still keep pretty busy – there is always a lot going on.  I have done the copy on a number of our ads recently which was fun.  I’m involved in a few other things, but I’ll keep them under my hat for now.

QUESTION

In your profile in My Business . co. uk you say that you won £ 25000 for a £ 20 stake on a horse . May I ask what type of bet that was?

Bimble,

BERT

I had a £20 spring double in 1992 on High Low and Party Politics – I took 40s and 25s and there was a 20% bonus (at Hills) for getting the spring double up.  It was a life changing win as (for better or worse) it gave me enough money to give up work and go gambling for a while.

QUESTION

Do correct me if I'm mistaken, but I gained the impression from your profile interview (tonight was the first time I'd read that particular item about you) that you regret the extent to which you ceded equity in Betfair, firstly, to Ed Wray, then to investors and then to Flutter's worthless founders (and maybe, in your eyes, equally worthless employees - myself included).

Indeed, I once read you own 16% of Betfair, a percentage which deservedly makes you a very wealthy man, both on paper and no doubt in reality once Betfair floats, but still seems modest given Betfair was not only your concept brainchild but you also physically built the initial prototype yourself.

You add that you take a back seat at Betfair nowadays - I read my former Flutter colleague, the capable and thorough Tom Johnson, is now Head of Product Development - and you also say that if you go into business again you'll do so alone.

All of this conveys the impression to me that, despite Betfair's runaway success, you are not 100% content with how things have worked out for you personally.

Betfair could hardly have been more of a success commercially but, putting the material gains to one side, if you had your time over again, is there anything you would do differently - e.g. do you regret not contriving to own a controlling interest in what was, after all, your ''baby?''

I'd like to stress that this is in no way a loaded question - I'd think it a slight shame if the answer to my question was an unconditional ''yes.''

Live long and prosper (somehow, I suspect you've comfortably achieved the latter already), old chap.

Ian,

BERT

I’m don’t regret having gone 50/50 with Ed when we started out.  I think I could have cut a better deal for myself and I thought about it at the time – I decided that our partnership should be a full on thing and I proposed the terms to him.

The fact of the matter is that Ed was always destined to succeed in business – I was not.  I am a good thinker, but I am much too much of an idealist to be a businessman.  Ed is dogged, determined, extremely hard working and very clever – he also sets himself very high moral standards and has always safeguarded my interests.  I could hardly have found myself a better partner.

I don’t regret the Flutter deal in any way either – it was an extremely successful merger and it took us to the next stage.  It transformed the business(es) and made us think much bigger, which was the right way to be thinking at the time.  David Yu came in and built out our technology department at breakneck speed.  We had 10 people in engineering at the time of the merger - we now have over 70 and we need every one of them.  I don’t think we’d have had any chance at all of coping with the enormous traffic we see these days without David’s skill and dedication.

I think I have to step in and defend Flutter’s founders at this point.  I have only really got to know Josh well, but I think a great deal of him.  I imagined before the merger that I wasn’t going to like him, but I was wrong – I struck up a rapport with him almost immediately.  He is now on our board – his contributions are always considered and intelligent and he is big on corporate governance.  He has a dry and slightly wicked sense of humour and he makes me laugh – I couldn’t dislike him even if I wanted to.  His sister works for us and she is doing a fantastic job.

In short I really couldn’t care less about the equity dilution I have taken.  I want Betfair to be a big and successful company – I want to take my piece of the pie and I want the other contributors to have pieces as well.  I still love working there – if I wasn’t happy I’d pull out.  If I ever do do anything else in business I probably will do it alone – it will probably lose money and I don’t want to be shackled by commercial reality.

QUESTION

In the pipe stable jockey market why is that still running as its obvious that at present there is to be no stable jockey and therefore the money traded on that around 65k I think is laying idle with your bankers.

bet 365 for example and others refunded all stakes on the market.

Seagull,

BERT

I take your point and voiding the market and returning all stakes might seem like the obvious solution, but it’s not that simple.  If I am on Timmy Murphy at odds of 9.0 (currently 4.0 to lay) I probably won’t be very happy being told I am getting my stake back just because Betfair doesn’t have the patience to wait for something that will probably happen at some point. Likewise if I’ve laid Johnson at 2.5.

Saying that, I will raise the point internally.  Betfair has a horse with Martin Pipe (it just won as I was writing this reply) and I'll give him a call later and bend his ear.

QUESTION

To increase integrity in ante-post markets would you consider voiding all bets, on non runners, on the day that a horse was withdrawn? This would stop insider trading a few hours/minutes before the information hits the public domain.

Adrian,

BERT

We have discussed this in the past.  It is a difficult area. Although people speculate that bets struck before the withdrawals were struck with knowledge of the non-runner, they are as often as not placed on the basis of rumour rather than fact.  Non-runners are often announced by the stable well before they are officially taken out, and in those instances we have no option but to wait for the official announcement, because trainers have been known to change their minds.  My feeling is that it has to be caveat emptor and we have to stick with the current rules – but I’ll bring it up at our next horse racing meeting.

QUESTION

There are obviously a few countries where the racing establishment are opposed to the exchanges.

France is one which interests me.

What are the rules governing exchanges in France (for all sports, not just racing) and what are you doing to promote the idea of betting exchanges there?

Steve

BERT

The PMU has an official monopoly in France and the French in general are not that keen on exchanges.   One of the principles of the EU however is the free movement of goods and services. Gambling facilities are just another service which means we should be allowed to offer our product to anyone in the EU. That’s the theory at least - the reality is that most EU state monopolies view with suspicion any betting operator looking to access what it sees as its turf.  I think any concerted attempt we made to break into the French market would be viewed accordingly.

I think that “Sharp minds Betfair” is a grammatically correct if you assume that “Betfair” is a verb.  It isn’t of course, but that is a minor point…

QUESTION

Hello Andrew, thanks for your time, regards the security issues, i think the plan being put in place to ask for proof of who you are has to be a good thing.

But there are people who have yet to be convinced that this is a good thing, how can you reassure them that giving such details is a positive way of looking after things and is to their own benefit.

Cheers Phunter

BERT

I think the KYC checks are a good thing.  It is quite tough convincing some people – we have worked hard at getting the message right.  People don’t like the apparent “big brother” mentality, but it is necessary progress.

QUESTION

I see you've got back into horse ownership this year. You're previous best horse was Glide Path by all accounts. I'll never forget the day Richard Hills got on him for the first time - 20/1 rag (40+ on the goat) in the Old Newton Cup and hosed up, landing a right touch for yours truly.

My question is: Have you deserted Hills? If so why, if not should we take the hint when he gets on one of yours for the first time?

Glenn,

BERT

I trust you are well.  I’ll, er, sort out that other thing soon…

Did you really get 40’s on Glide Path?  I’m gutted – I took 20’s like everyone else.  Richard rode a godlike race on him that day, and like you I’ve always rated him.  He doesn’t generally ride for my current trainers unfortunately.

QUESTION

I am a new to Betfair and have heard of something called a"Bot" do these thing's exist, and if they do, what is your view on using them and other computer software on Betfair

Cheers

EW

BERT

The so called "bots" do indeed exist.  When you communicate with Betfair you do so through an internet browser.  Your browser communicates with our servers -you use it to request web pages and submit bet orders, and it codes up your submissions and decodes ours.  A bot is a programme that uses all of the communication components and protocols that a browser uses to speak to our servers, but does not need to use the browser itself.  Bots are used for all sorts of different purposes.  Some punters will come up with simple betting strategies that they think will make money over time - they don't want to sit there all day long entering bets, so they set up a programme to do it for them.  Other punters have form based odds compilation programmes that run automatically and they use bots to automatically bet on the perceived value.  Others may just want something to feed into their own profit and loss systems.  We don't really know what the various bots out there are doing and why they are doing it, but we know that they are there.

I've never been that comfortable with bots because they can do us damage.  They generate a huge amount of traffic for us to deal with - some charge around all over the site looking at different markets, others cancel 19 out of every 20 bets they place etc.  We decided a while back that we want the bots coming in through different servers so that we can keep a closer eye on them, so we have built an API (Application Programmer's Interface).  The API makes it easier for someone to build a bot to work on Betfair.  It gives them all the commands they need to log in, access data, place bets etc. and a bot using the API doesn't break when we make changes to the site.  There is a support team to help developers - from our perspective we want to make sure that we don't get "rogue bots" on the site which go loopy and start hammering us with millions of requests.  As a result of the API, some people have built trading type programmes that they are now trying to sell to the Betfair userbase.  I have no problem with this - I am sure we will see some quite creative

If you have any other questions you would like Bert to answer please send these to editor@betfair.com. A selection of the questions to the editor will then be answered next month.