The Sports Betting Series: Part 2 – The House Edge

This episode explains a core understanding of gambling: the House Edge. Using consistent mathematical principles, casinos and bookmakers convert the small edges embedded in their games into a massive and guaranteed profit margin. The key ingredient is scale.

The House Edge on a single hand of a single game is a bet only slightly in their favour. But, at the scale of millions of hands played by millions of players, this edge becomes a certain win for the house. This concept is known as the law of large numbers and I review this law in detail, using the example of the insurance industry as further proof of its efficacy.