In sports betting it’s sometimes hard to judge where you stand on your way to profits. Is it a matter of good fortune (or bad fortune for that matter) or are you genuinely holding an edge over the bookmaker(s)?
To answer this question a proper understanding of risk and uncertainty helps.
Risk, as first articulated by the economist Frank H. Knight in 1921, is something that you can put a price on. Say that you’ll win a poker hand unless your opponent draws to an inside straight: the chances of that happening are exactly 1 chance in 11. This is risk. It is not pleasant when you take a bad beat in poker, but at least you know the odds of it and can account for it ahead of time. In the long run, you’ll make a profit from your opponent making desperate draws with insufficient odds.
Uncertainty, on the other hand, is risk that is hard to measure. You might have some vague awareness of the demons lurking out there. You might even be acutely concerned about them. But you have no real idea how many of them there are or when they might strike. Your back-of-the-envelope estimate might be off by a factor of 100 or by a factor of 1,000; there is no good way to know. This is uncertainty. Risk greases the wheels of a free-market economy; uncertainty grinds them to a halt.
Translating this into sports betting would simply mean that you need to make every effort to put a (fair) price on every bet you make. If you do this you will know your expectation, you will know your RISK. Put that in contrast to a tipster service you follow. Your tipster is delivering hundreds if not thousands of bets, but you will never be quite sure what the expected value of each bet really is – is it +5%, is it -2%? You don’t know your RISK. You might assume that he (your tipster) knows his stuff due to his ‘brilliant’ track record, but what if he loses his edge? You will not realise this until it’s too late and you have already blown a big part of your bankroll. What you are up against with most tipsters is UNCERTAINTY rather than RISK. This is not what you want as an investor, really!