Bw Reads: The roots of a sports betting revolution

Welcome to Bw Reads, our weekend newsletter featuring one great magazine story from Bloomberg Businessweek. Today Kit Chellel writes about how a bored nuclear engineer made millions in Las Vegas in the 1980s using an algorithmic prediction system. You can find the whole story online here.

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Mike Kent, probably the first person to bet on sports using a computer, began his career testing top-secret nuclear reactor designs at a Westinghouse facility in West Mifflin, Pennsylvania. In the early 1970s, that involved pushing punch cards through a reader connected to a mainframe computer. The strips of paper came out coded, marked with tiny holes.

Although Kent was short-sighted, overweight and asthmatic, he was fiercely competitive, known to drub his 5-year-old nephew at chess and tear at his clothes in frustration while watching his beloved Pittsburgh Steelers. He was also a proud member of the Westinghouse softball team and a trained coder who’d learned the programming language Fortran at Christian Brothers University in Memphis. So, around 1972, he decided to use the company computer to rank the strength of the corporate league teams beyond simple wins and losses. Kent didn’t ask his bosses for permission to use what was then a state-of-the-art machine. He just did it—mostly, as he later told friends, because he was extremely bored.

Kent eventually did the same thing with college football and NFL games, entering performance data into his algorithm using thousands of Westinghouse punch cards. The system returned a power rating that told him who was most likely to win a matchup and by roughly how many points. Soon he began comparing the computer’s predictions to the odds offered by “Primo” and “Bobo,” black-market bookmakers in Pittsburgh. Sports betting was then technically illegal in every state except Nevada, but the authorities tended to ignore it. Kent already enjoyed making the odd wager. He thought the computer might help him do better.

At first, his ranking system wasn’t particularly sophisticated. He fed it data on wins and losses, weighting recent results as more significant and adding considerations such as whether a team was playing at home or away. Since no one else in the market had access to a computer, the analyses were sophisticated enough.

Kent started out by betting a few dollars, gradually increasing the stakes as his confidence grew. When Primo and Bobo realized how well he was doing, they cut him off. Kent persuaded colleagues and family members to bet for him instead. By 1979 he was spending 20 to 30 hours a week honing the program. That year he quit his job, stuffed $100,000 into a brown paper bag and moved to Las Vegas.

Find out how he caught the attention of the mob and the feds.

On the Podcast

This week on Everybody’s Business, hosts Max Chafkin and Stacey Vanek Smith take stock of the US-Israel war on Iran and its economic and political consequences. Plus: taxes, AI and why a bag of Doritos might be the canary in the US consumer coal mine.

Listen and subscribe on Apple, Spotify, iHeart and the Bloomberg Terminal.

More Bw Reads

• The new US-Iran talks look a lot like the old US-Iran talks.
• NATO allies showed some spine in resisting Trump’s demands to jump into the Iran conflict.
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• Elon Musk is steamrolling racial equality rules in South Africa.
• How to rebuild Cuba’s crumbling economy.
• Hikers are using helicopters to reach the world’s most remote trails.
• Trumpworld’s growing sway over arms sales was on display at a NATO-Africa summit.

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