I explained the basic principle of the Kelly Criterion in another article.  Now it is time to show it's impact.

We will take an experienced 'capper with a proven long term track record of picking  53% winners against the spread.  The makes his bets at a book that gives him reduced juice at -107.  What should his average bet size be?

f = (bp-q)/b

p = 0.53  (q= 0.47)

b = 100/107 =  0.9346

f = [(0.9346)(.53) - 0.47]/0.9346

f =  2.71% of his bankroll

His bankroll growth, then will be a function of the number of bets he makes.  Let us assume he is able to make 100 bets per month with this 53% edge on the books.  Whenever he wins he adds 2.532766% (7.71% * 0.9346) to his bankroll.  Whenever he loses he subtracts 2.71% from his bankroll.  Using a Google Spreadsheet (column A) we can run run a simulation of a typical month to check the expected growth of this bettor's bankroll.  Starting with a $1000 bankroll I ran 53 wins and then 47 losses.  (The order of wins and losses does not matter when the bet size never changes.)  At the bottom of column 1 we can see that our bettor adds approximately 3.5% to his bankroll in a month.  This might seem trivial at first glance, but lets look at the overall effects.

In column C of the Google Spreadsheet I extrapolate a 3.5% gain out month over month for a year.  After twelve months our capper is up 51.1%.  This is a staggeringly good investment.  Using Column E to show the annual return at 51.1%, starting with just a $1000 bankroll our capper would become a millionaire in just under 18 years.  After 20 years he could retire to a Greek island.

There are quite a few unrealistic factors built into this scenario, of course.  At some point his average bet size would surpass the maximum bet allowed at any book.  He would likely want to skim some profit at some point to take his wife on a nice vacation.  His book would probably refuse his custom at some point.  Etc.

The scenario does, however, demonstrate some very important sports betting principles:

1.  Even a small advantage is a good advantage.  53% is not a miraculously high number of winners.  Its barely staying ahead of the juice.  Yet, even with that small advantage you can produce some very substantial returns.

2.  It's a marathon not a sprint.  The expected bankroll growth after a month was nothing to get excited about.  Yet, grinding out that result month over month produces a great return on investment.  This is the part that most sports bettors just do not understand.   Sports betting forums are littered with gamblers looking for the big score.  Slow and steady wins this race.

3. Discipline!  Discipline!  Discipline!  My simulation was of a bettor with just a slight advantage, but inhuman discipline.  He never in 20 years varied his adherence to betting only the games where he knew he had an advantage.  Never in 20 years did he chase after a bad run or alter his style in any way.  Yet he produced incredible results.  You, too, can produce incredible results if you have a slight advantage and maintain a strict discipline when applying that advantage.