This article, which is about legendary Australian gambler Alan Woods, was written by Tony Wilson, and is reproduced from The Monthly, Australia's answer to The Economist.

*

I had my first bet the day I turned five. It was Cup Day 1977, the horse was Reckless, and for a kid on 50 cents pocket money I was too. Reckless. One dollar to win. Two weeks’ wages on the nose.

“Are you going for Reckless too, Dad?”

I knew he was but wanted to check.

“Yes.”

“How come you’re going for Reckless?”

I knew the answer to that one as well.

“Because of Tommy Woodcock.”

I shook down a plastic pig – fat, pink, traditional – while Dad explained once again about Tommy and Phar Lap and how Phar Lap had died in Tommy’s arms and how some people thought it might have been the Americans. Forty-five years later Tommy Woodcock, strapper to a nation, was training one of the country’s top two-milers and everyone, it seemed, wanted Reckless to win. Tommy was the glorious essence of old Australia and his horse was the people’s champion. Battlers made good the both of them. Dad told me that Tommy sometimes let kids ride Reckless before he raced. For me, though, the romance was in the casino maths.

“How much do I get if I win?”

“Reckless is eleven to two so you’ll get six dollars fifty.”

My brain didn’t yet do multiplication but it did do greed. Six dollars fifty. Thirteen weeks’ wages.

“Do you think he’ll win?” I asked, still gripping my dollar.

“Maybe,” Dad said. “You better give me that though. For real bets you have to spend your own money.”

“And here comes Reckless!” A barbecue-worth of people rose out of deckchairs and screamed at the transistor radio. “Come on Reckless!” There was shouting and shushing as people leaned in to catch the commentary. “Gold and Black in front, Hyperno running on, Reckless still coming on the inside!” There was a crack in commentator Joe Brown’s voice. He was barracking too. Reckless was going to do it. For Australia and for Tommy Woodcock and for poor dead Phar Lap; for me, Dad and my dollar. He was just a horse and yet he knew it was my birthday. “Gold and Black a length in front, Reckless grinding away ...” The shushers lost the war and the commentary was drowned in shrieks. Some-where in the belly of the mob was a radio. “Go Reckless!” I whimpered. “You can do it.”

He couldn’t do it. The Bart Cummings-trained Gold and Black held on by two-and-a-half lengths; it was the 7/2 favourite after all. Reckless finished a brave second. “Oh well, at least we get our money back,” a man called Vern chirped into the communal past-the-post sigh. He raised a glass. “Good on ya Tommy.”

I walked over to Dad, palm outstretched.

“Sorry Tone. Reckless didn’t quite get there.”

“But Vern said ...”

There followed a lesson about win and place betting and a stubborn refusal on Dad’s part to give me back my dollar. I cried. It was my birthday. I wanted my dollar back.

“Tony. I can’t give you your dollar because I don’t have it. You lost it to the TAB. The government has it. But you should remember the day you bet on Reckless and lost because that’s what happens when you bet on horses. You lose. You might win for a bit but then you’ll lose, because the system is set up that way.” He bent down to wipe away a few tears. “It’s good that you lost that dollar. The worst thing that can ever happen is to think that you can win on horses. You can’t win. Say it after me – nobody ever wins.”

“Nobody ever wins.”

“That’s right. The odds are against you. Nobody ever wins. Now go and grab yourself a sausage.”

*

It’s September 2005 and I’m sitting in a beanbag on the 32nd floor of a luxury Manila apartment block, structuring a sentence that I suspect is going to end with “if that isn’t a rude question”. I know the man opposite me is worth at least US$150 million, I know the vast majority of his fortune has been won on the Hong Kong races, and I know he dislikes being asked how much he is worth. Nevertheless I have to go for it – because the how-Alan-Woods-became-a-successful-gambler story doesn’t pack the same punch without the how much.

I ask the question and we bathe in its stench for a few seconds. Alan runs a hand through his white game-show host hair.

“Hundreds of millions Australian,” he says. “Much less than a billion.”

I pluck another number and ask higher or lower. Now I’m the game-show host. Alan’s reply is slow and measured.

“To be perfectly honest, I don’t exactly know. I’ve deliberately tried to not work it out ... In terms of net worth, can I say between $200 million and $500 million Australian?”

I swallow. My father lied to me. Lied to a five-year-old and sent him off to eat sausages.

*

For our first meeting I’ve tried hard to impress Alan. I’ve worn a jacket, a stiff-collared shirt and trousers that are only 8,000 kilometres and 14 flying hours away from an award-winning crease. I’m super-polite at the security desk in case that gets back. I haven’t brought a bottle of wine for dinner but I did offer to. I’m aware that Alan, 60, is strictly speaking a racing man. But as founder and chairman of one of the world’s three most successful computer gambling teams, I’m tipping he’s going to be more club blazer than pork-pie hat. And so I arrive at his door shiny and damp and with rivulets of sweat running down my back from the tuktuk ride and subsequent walk, tuktuks being barred in the gated residential complex Alan lives in. But at least I haven’t embarrassed myself by underdressing.

Alan is barefoot, and wears running shorts and a T-shirt. I’m taken to meet him by Olive, a spectacularly sexy 28-year-old Filipina who has performed the door duties. She’s small, barely up to my chest, and a keen smiler. The beam from her teeth coordinates nicely with her dark slender arms and white singlet. She covers the short distance between door and lounge with catwalk hips. She hasn’t overdressed either. Alan introduces himself while Olive retreats to the kitchen to prepare dinner.

“Guess what my views are on the war in Iraq?”

It comes just after the handshakes and hellos. I glance at the split-level apartment and the acres of glass-topped coffee table, the full-size billiard table, the imperial quality of the lounge leather. We’ve only been going five minutes and Alan has asked the first question. I’m nervous. If he’s a George W. Bush man things could get ugly before we’ve even hit the dinner table. I roll the dice. It’s the weekend’s first gamble.

“Pro?” I say, wincing.

“No!” he says, with a burst of passion. “I’m totally against the invasion of Iraq.” I fall over myself to agree with him, and we spend five happy minutes kicking the shit out of the neo-cons and the Christian Right. It feels better doing it under a chandelier.

“Once upon a time one of my friends described me as so right-wing I was to the right of Genghis Khan ... whereas these days, bizarrely, my views seem to have shifted.”

We make our way to a dining table crowned with prawn salad and pasta. Conversation is relaxed and easy and refreshingly free of small talk. Until now I’ve only known “email Alan”, a man whose bold, staccato replies weave through the body of my messages and who signs off with: “I don’t have an attitude problem, you have a perception problem.” Real-life Alan is friendlier and more expansive. By the end of dinner we’ve discussed Iraq, Roe v Wade, gun control and the day he won HK$20 million. I’m well enough at ease to have eaten 11 prawns to his two.

The table is cleared by another beautiful, twenty-something Filipina who Alan introduces as Ruby. “Ruby’s younger – very sweet but maybe not so bright. Olive is smart, extremely witty and funny, but Olive is an attention whore. I sometimes call her the world’s biggest bullshitter. Whereas Ruby would never tell a lie, unless she’s being corrupted by Olive.”

He invites the girls, whom he calls “The Girls”, to share fruit salad with us. But they are happy in the lounge room, drinking wine and listening to a Spanish pop song – “Gasolina” by Daddy Yankee – on repeat. At some point it becomes clear Alan’s going out with both of them.

*

Alan Woods was born in 1945 in Murwillumbah, New South Wales, 30 kilometres south of the Queensland border. His parents ran a newsagency, then a cordial factory and then a hotel, while Alan lived the country kid’s life of school, sport and, presumably, cheap cordial. He had an early aptitude for numbers – “I could count to a hundred before I ever went to kindergarten” – and rugby league. He was the top student in his primary-school class and ended up at the University of New England, in Armidale, studying mathematics. He remembers going seriously to lectures for only one semester in four years, and after failing final year he was kicked out.

There was almost zero gambling in his early life. Apart from the odd sweep, his first taste didn’t come until he started spending semester breaks playing solo with his parents, brother and sister, who cried whenever she lost. “Usually she’d get her money back that way.” Alan had a knack for it – “instinctively I seemed to take more risks than they were prepared to” – but for the most part he gambled like most punters gamble, badly. Poker machines caught his eye in Armidale and he played them until leaving for Sydney. “I can’t say I gave up poker machines because I was losing ... I think it was because in Sydney they weren’t available to me. Was I aware of the government rake, or the disadvantage I was betting into, in those days? No. I wasn’t. Now, it seems bizarre to me that people can’t be aware of the disadvantage the average punter has.”

Alan pauses his story to go to the bathroom. We’ve been lying on the bed in his spare room, watching the Wallabies struggle against New Zealand. Alan has been smoking as we’ve talked and continuously sipping iced coffee from a handled, silver thermos with the word “Love” printed faintly on its side. Finally his bladder has succumbed. For a huge player there’s a fair bit of medium about Alan – medium height, medium build. He’s got a Kerry O’Brien sort of face that creases in all the right places and looks pink against his tanned arms and legs. He speaks with a gentle Australian accent. He’s not loud or brash but nor is he falsely modest; he has a feel for detail and a stupendous recall of names and numbers. Stories roll out of him rather than erupt. When he returns he has some news.

“We just won a million dollars.” He says it in the sedate tone of someone announcing the Epping train’s arrival on Platform 6. By “we”, I’m figuring he means him and his computer team rather than him and me. “I checked the computer on the way back from the bathroom. We’re up a million on today’s meeting.” I try to ask a few questions but Alan doesn’t want to say any more about it. His betting team, Libertarian Investment Limited, has been branching out into new territories and he doesn’t want competing teams to know where. Instead our eyes swing back to the TV screen.

Alan first bet on horses at university. “I picked the third-favourite, a mudlark, to beat the two best horses in Australia at the time, Sky High and Wenona Girl, on a very wet track. And it won. So unfortunately my first experience on the horses was a winning one, because then I thought: ‘Hmmm, I’m pretty good at this.’” From there a small gambling habit developed. On the horses – unlike solo or poker – he was generally a loser. He knows this because he wrote his bets down. “What I did that was probably unusual is that I kept records of exactly how much I’d spent and how much I’d bet on each horse. As the years went by I knew my cumulative result. And then I lost $100 one day and I just quit ... By the time I got involved in the horses 15 years later, I was an ex-addicted gambler and I had to force myself back into it.”

If you’re hoping there’s a secret recipe for winning hundreds of millions of dollars on the horses and have been reading through the “Gasolina” song lyrics on the off chance it may be provided, there’s good news and bad news. “You can ask, but you won’t necessarily get answers that are meaningful to you or anyone else,” says Alan. “Imagine if someone asks a meteorologist how he calculates future temperatures, or NASA scientists how they calculate the boosts for the spacecraft going up. I couldn’t tell you in a way that made sense to the general public.” Alan smiles and the creases across his forehead deepen. Although he dropped out of university, and later an actuarial course, his mathematical talents are phenomenal. His ex-wife Meredith later tells me that a test was conducted during his actuarial course – “and he was off the scale for mathematical abilities, even amongst them”.

The good news is that the fundamental principles are relatively simple: Alan and his computer team win by capitalising on bad betting by the general public. The bad news is that the key to doing so is having more information than the public. Much more. Alan’s team employs a dozen or so staff to review, analyse and compile data for every horse running in Hong Kong, every time it runs. They are a disparate bunch, scattered across Asia and Australasia, coming together only in the cyber-confines of an email inbox. The data is then plugged into a computer program, and using a formula based on past results that has been refined over many years, a probability for every horse in every race is calculated.

Producing the formula is the tough bit. It has been mathematically chiselled out of all the factors that Alan and his team have determined decide races. Each factor is a coefficient in the formula. Some factors – gender, track, distance, weight, last-start result – are objective and can be collected from the humble form guide. The key is getting the weighting of these objective factors right. For example, early on Alan and his then team partner, Bill Benter, worked out that number of starts was more important than age. Apparently the data bears it out: the more times a nag is flogged around a racetrack, the less enthused it gets about the whole idea. Then there’s form: second in an eight-horse field might not be as impressive as fourth in a 14-horse field. We chat about barrier numbers, and Alan tells me about the time in November 1995 when the computer model stopped working for a month or two. Eventually Alan worked out that the last turn at Happy Valley had been re-cambered – which means the track is shaped to slope upwards from the inside rail – creating a disadvantage for inside horses as the outside horses shifted in. His team adjusted the coefficients relating to barrier position and immediately resumed their winning ways.

Other factors are more subjective, which is why Alan’s team employs expert analysts to watch every horse in every race. “We had a factor called bad rides. We had a factor called not trying. If a couple of horses disputed the lead together, the guys would give it numbers for that. Premature speed – if the horse went too fast too early. Late speed – if it came home very fast in the last 400.” It’s the kind of stuff any experienced punter might consider. What the computer teams do is systemise the process, eliminating sentiment and superstition and minimising human error.

*

Alan hands me a single A4 page. We’re in his home office now, with its view of brown, green and grey shanty roofs. It’s a narrow, air-conditioned room with a desk on either side – Alan sits at one, me at the other – and two flat-screen TV monitors behind us. We’re thousands of kilometres away from Hong Kong’s Sha Tin racetrack. There’s ocean between us and the roar of the crowd, the thunder of the hooves. If some stallion or other is “rock hard in the mounting yard” we’re not going to know. And yet for the first time in my gambling life, I’m staring at an A4 page that is set up to create advantage where usually there is only disadvantage. It’s the form guide they hand out in heaven – except if everyone had one, it wouldn’t work.

Alan’s success depends as much on the misinformation, blind loyalty, poor analysis and binge drinking of the average punter as it does on his own meticulous preparation. Think of the bad decisions punters make: investing in lucky numbers; betting on “Maythehorsebewithyou” because you like Star Wars; plumbing for Reckless because his trainer is a sweet old digger. It’s all misguided moolah being tossed in the pool, and it’s the professionals – like Alan Woods and the other computer teams out there – who own the Kreepy Krawlies.

They do it by searching for what they call overlays. An overlay is any horse that has been under-bet by the public and whose odds, as a result, are inflated. An underlay is a horse that has been over-fancied – one whose odds are too short given its real prospects. In Hong Kong there is a government and Jockey Club rake of 18% – that is, 18 cents out of every dollar gambled is removed from the pool and not returned to punters as dividends. This means computer teams like Alan’s can’t survive solely on small overlays; when Alan sits down at his A4 sheet, he is looking for massive overlays. It’s not that these overlays always win. It’s just that for long-term players they are the value bets. Fortunately for Alan, people are idiots and there is usually at least one per race.

Heaven’s form guide has four important columns: the horse’s number, its current odds, its computer-calculated probability of winning (expressed to three decimal places) and a figure Alan calls its “Win Expectation”. Win Expectation, which is obtained by multiplying a horse’s computer-calculated probability by its current odds, identifies the amount a team can expect to receive for each dollar bet on a particular horse. The formula goes:

E (return) = P (win) x current odds

If the Win Expectation is greater than one, the horse is an overlay – an attractive, potentially profit-making horse. If the Win Expectation is less than one, the horse is an underlay and should be avoided. If the Win Expectation is between 0.82 and 1, the horse is a small overlay but an unwise investment because of the Jockey’s Club rake. For example, if a horse has been calculated by Alan’s team to have a 0.25 probability of winning, and if she is paying $2.00 for a win, then her Win Expectation equals 0.50 (0.25 x 2.00 = 0.5). This doesn’t mean she won’t win. She is fancied for a good reason. It just means she has been over-bet in the market and that, in the long term, a team that consistently bets on horses with such a low Win Expectation number can statistically expect to lose.

Alan’s team works out a Win Expectation for every horse, then makes similar calculations for exotics such as the quinella, trio (box trifecta) and Triple Trio (box trifecta, three races in a row). These exotic pools are attractive because they generate massive jackpots, but they are also trickier because the computer must consider probabilities in combination as well as predict dividends.

Naturally tips, which are so beloved of the mug punter, rarely produce overlays, for the simple reason that if someone is telling you then it is likely other people know too, and so the horse will be over-bet. Alan remembers one Thursday night when he bounced around three different discos and received tips for four different horses in one race. Of course, the public was hearing these tips too, and so those four horses became significant underlays, enough to push Alan’s computer towards the other three. The race was run and the computer’s selections finished first, second and third. “You could say,” says Alan, sitting on the floor, legs tucked into his chest, “that our whole theory behind betting on horses is to take a contrarian approach to whatever the public is doing.”

It’s a philosophy that has also worked for him playing the stock market. In the crash of 1987 he made his first million by shorting (that is, betting that stock prices will fall) the Hong Kong stock exchange. A few months later he lost it trying to short the Nikkei. In the late 1990s, convinced the dot.com boom couldn’t last, he attempted to short the Nasdaq – and at the height of his losses he was down US$100 million. Luckily horses kept running and Alan kept winning. Sometimes it pays to be different.

*

“Oh, Alllaaaaan. You are so great Alan! You are master of universe!”

Alan is playing pool with Olive’s younger brother Antony and cousin Steve. With each ball he pots, Olive and Ruby offer their raucous support: “Alllaaaaan!” The black drops to bring the score to three games all. “Alan Woods! You are the champion!” The Girls are draped over him like it’s a Bond film. The whole scene is performed with a touch of vaudeville. Alan hams it up too, giving them each a big victory hug. I remember what Alan said about Olive being “the world’s biggest bullshitter”. She calls Alan “master of the universe” again. It makes me smile, because during the rugby that afternoon Alan told me that Tom Wolfe’s Bonfire of the Vanities is among his top five novels. I think of the central character, Wall Street raider Sherman McCoy, who constantly refers to himself as a “master of the universe”. Olive may be a bullshitter but she sure knows her stuff.

The pool games provide a glimpse of a more boisterous, social Alan Woods. Afterwards he sits down on the couch, and The Girls sit down too, taking to Alan’s toenails with white nail polish. There’s a flirtatious buzz to the conversation. Olive teases Ruby for being stupid. “She doesn’t even now her ABC. Ruby, say your ABC.”

Ruby flicks back her hair and starts with “Zzzzay”. Olive laughs. Alan gently teases Olive for being crass. His nails continue to get whiter, one by one. “This is a first for me. I’m not usually in the habit of painting my toenails.”

The Girls and I drink Baileys while Olive’s relatives rack up game after game of pool. Alan is still sipping iced coffee from his mini-thermos. He very rarely drinks alcohol at home, and as he almost never leaves home, he very rarely drinks at all. For no good reason – maybe it’s free association on the topic of nails – I ask him if he is a recluse like Howard Hughes.

“Certainly I am a bit of a recluse, given that I don’t go out very often. I tend to hate the heat. In the six months I’ve been living here I haven’t even been to the mall. How far away is it – 300 yards?”

Generally he leaves his apartment only to swim and to sunbake, which explains the trim torso and tanned legs that stretch out from his running shorts. Occasionally, however, Alan brings the world to him. “I have some of the most fantastic parties, totally inconceivable to most males. Anyway, they are assisted enormously by e. They wouldn’t happen without it in the same way at all ... I do have a fondness for the drug. I don’t do it very often.” Alan’s Manila parties are smallish affairs, but back in Hong Kong he and his friends hosted bashes that were nothing short of legendary. Invitations were handed out to anyone in the discos who he or his friends thought looked appealing. Often Alan would dodge the crowds at his own mega-dos, avoiding the heat and the hundreds and staying in his air-conditioned bedroom.

Eventually Olive and Ruby head off to get changed. We’re going out to the girlie bars in the Makati red-light district. Initially I’m surprised that The Girls are coming, and my surprise doubles when my host tells me that Olive, in particular, enjoys flirting with the dancers, helping to choose the ones to pick up, to take home. Alan tables cards that most interviewees would clutch firmly to their chest. I suspect it has something to do with his philosophies for living life. He is an avowed libertarian, a believer in free will, a loather of interference from governments and interest groups. His favourite book is Ayn Rand’s Atlas Shrugged. He dislikes wowsers, such as those on the Christian Right, and says the three principles he tried to teach his children – he has a son and a daughter from his first marriage – were to tell the truth, to have a positive outlook and to take a realistic view of themselves.

“I once asked a best friend how often he made love, and he said ‘once a month’. Once a month! This was bizarre to me. I suspect I have a much higher sexual desire, even at age 60, compared to guys aged 30. One of the differences is they go to work each day and so they come home at night and they’re tired, whereas I don’t have to go to work ...

Not having to go to work is a great libido-enhancer in terms of making love.”

We catch a taxi to the red-light district, stepping out of the air-conditioned cabin and into a corridor of neon. Apart from the odd stray convenience store, it’s very much a single-commodity strip: “Girls”, “Sexy Girls”, “Karaoke”. As soon as our feet hit the footpath, the clamour begins from the spruikers on the doors of the various bars.

“Alan Woods! Over here! Alan Woods!”

Alan ignores them and we walk into a place called Billboard. Inside, the gimmick is that some of the staff are wearing colourful, cotton, all-in-one construction suits. Further in, there’s another group who are not.

If racing were just an industry it would be on

the finance pages. It would have the warmth of merchant

banking and the literary traditions of insurance.

All that can make racing beautiful, all that ever elevates

it above dull commerce, is the horse. Take away the

horse and you have no hero, no theatre. You are left with

a zombie inserting a “gambling dollar” into a machine.

(Les Carlyon, True Grit)

*

For Alan, racing is not a sport. It’s a marketplace.

He last attended a race meeting in 1985. When asked to name horses he remembers from more than 20 years of betting in Hong Kong, he comes up with two. One was called Maryland, and he remembers it only because of a betting anomaly. The great advantage he has in this marketplace is that it’s full of romantics: punters bewitched by the majesty of the beast, heads in the clouds and pockets ripe for the raiding, people who tear up when they hear Bill Collins’s call of the 1982 Cox Plate.

“And Kingston Town can’t win ...”

“Alan, do you mind if I place some bets too?”

Alan doesn’t reply. He’s at his desk again now, concentrating. He’s still in running shorts, but now he’s wearing reading glasses and an “I Am The Boss” T-shirt.

“Alan, if I give you the money, could you put a few bets on for me too?”

This time he does hear me. The answer is no. He’s apologetic, but his team out there has 708,000 other wagers to worry about. Somewhere in China, Libertarian Investment Limited associates are using CIT machines to connect to the Jockey Club phone-lines and place today’s bets. The meeting is being run at Sha Tin racecourse and they are targeting a HK$32.7 million jackpot for the Triple Trio. Back in Manila, Alan keeps in touch with team directors via instant messaging and Skype. As he scribbles away, a spreadsheet of the day’s betting pings onto the monitors. The team will bet on all nine races: total outlay, HK$14 million (A$2.4 million). More than one-third will be invested in the Triple Trio, where punters have to pick the first three finishers in races four, five and six. It’s a $4.6 million wager to win $32.7 million.

“If you like, you can bet with me,” Alan says, sensing my disappointment. He has played bookmaker before, most notably when he made more than HK$3 million taking wagers from Asian punters on the 1992 European Cup soccer tournament. He doesn’t seem to fear my 500-pesos-a-pop action.

Alan enlarges a video feed on the first monitor. The horses are moving into line. I puff my chest out so he can see the writing on my T-shirt: “The Flux Capacitor – It’s the Thing that Makes Time Travel Possible” appears below a three-pronged device that looks like a Mercedes symbol. I hope Alan’s seen Back to the Future II, the one where evil Biff makes his fortune with the assistance of a racing almanac and a time machine. I’ve worn the T-shirt to celebrate what I’m witnessing. Alan Woods is Biff, a generous, congenial Biff, and he’s done it without the time machine. He’s the gambler who can’t lose.

He loses on the first. Several hundred thousand Hong Kong dollars. I study his face for signs of pain or distress, but there are none. It’s all part of his meticulous approach. His team selects the overlays. Bet-size is determined according to Kelly’s Criterion, a theory devised by John L. Kelly in 1956, which says that to maximise profit, a gambler bets to win a percentage of bankroll that is equal to his percentage advantage on a particular wager – so, for a Win Expectation of 1.05, you bet to win 5% of total bankroll. Because betting 100% Kelly can lead to a frightening, roller-coaster existence, Alan’s team bets closer to two-thirds Kelly, which is calculated to reap around 90% of maximum profit. At one six-race meeting a few years ago they dropped HK$23 million.

“It’s just a matter of probabilities. We couldn’t possibly win on every race or we’d bankrupt the whole horseracing industry.”

I hadn’t thought of that. I’m not sure the writers of Back to the Future II thought of it either.

*

Alan’s so excited about his HK$3 million win on Race 2 that he goes off for a sleep. He’s never been a sound sleeper; indeed he sometimes gives his sleep disorder credit for his spectacular success. After marrying Meredith in 1972 he worked for a firm of consulting actuaries. Later, with two young children to help support, he was an investment analyst for a merchant bank. “I had a sleep problem which caused me to be unable to get up to go to work on time or sometimes to make it to work altogether. So if we had a 9 o’clock start, I often wouldn’t arrive before 11 or 12. And sometimes if there were too many late starts I’d be embarrassed and wouldn’t turn up at all. So I got fired.”

He did, however, learn how to win at blackjack. In 1972 a friend named Richard Heenan was given the job of calculating the casino edge for every game at Hobart’s soon-to-be-opened Wrest Point Casino. Alan sat near him and watched. The calculation for blackjack was the one that interested them, and after many months with a calculator and pen Richard worked out that the house edge on blackjack – with four decks and English rules – was 0.7%. It seemed clear-cut. The house had an advantage and, as Alan still maintains, gamblers don’t win when the house has an advantage At least in the long run Shortly afterwards some bridge-playing Canadian friends told Alan he was wrong. You could win playing blackjack, they said, if you played correctly. Alan argued that you couldn’t, that he’d seen the mathematical proof.

The Canadians then explained how to count cards – how you add to the count for a low card, subtract for a face card, bet minimum when the count is low and maximum when it’s high. Ten of Alan’s friends went to Hobart to play blackjack and test the theory. The eight who were not card-counting lost their $500. The two that were doubled their stake to $1,000. Another test during the 1973 Australian bridge championships won Alan’s team $6,000. By September 1973 he was a believer.

He didn’t become a serious gambler until Meredith left him in 1979. The intervening years were spent parenting, studying, and sleeping through alarms, with just the occasional bet. When Meredith was in hospital for the birth of their second child Alan was at Wrest Point Casino. “He must have come back for the birth,” Meredith laughs, “and then disappeared after I had her. He came back from one of those visits with $12,000 in cash, which in 1975 was quite a bit.” If there was any bitterness it has disappeared with time. “He was a very family sort of person,” says Meredith, “and he still is. He’s a person with a lot of integrity. I can’t remember him telling a lie.”

When the marriage broke up, Alan found himself unemployed and choosing between three possible careers – professional bridge in Sydney (which paid $5 an hour), options trading or card-counting. He chose the latter, returned to Hobart and won $16,000 in four months. From there it was on to Las Vegas, where almost immediately he began earning US$4,000 a week. Within six months he had won US$100,000. He remembers thinking he was king of the world.

And so Alan Woods began the 1980s travelling the world as an itinerant card-counter. He played with teams in Europe, Asia, North America and Australia. He lived and breathed the life. He knew when to hold them. He knew when to fold them. Legal casinos, illegal casinos. Sometimes he wore disguises when he thought an establishment might try to kick him out for counting. In Korea he donned a false moustache and glasses but was spotted by a host who recognised his walk. In Atlantic City he frizzed his grey hair into an afro. He was cheated in an illegal Sydney casino – the deck had been stacked with an alarming number of fives and sixes – and by a shifty dealer in Indonesia. He’d win cash in serious quantities and then face the problem of moving it to the next destination. Sometimes he used telegraphic transfer. When there was a serious risk of interrogation or confiscation, he used socks.

“I was leaving Korea, and as I remember it I had US$60,000 in cash and travellers cheques. I couldn’t sleep the night before worrying about this. By the time I go through customs I’ve calmed right down. The guy pats me down, pats my ankle exactly where I have some $10,000 wrapped up – but having done it thousands of times a day, day after day, he doesn’t notice. So I breeze through.”

Another time Alan seconded the use of someone else’s sock. “I ask this young Australian guy in Manila if he’s willing to carry US$20,000 in his sneakers. Then once we get on the plane he can give it to me.” As it turned out, the young man forgot his suitcase and he and his cash-stuffed sneaker had to race back to the hotel. “Time is running short, and given the traffic in Manila I’m worried he’s not going to make the plane. I’m waiting and waiting. Then we have to board the plane and he hasn’t turned up. I board and they’ve closed the doors ... and I can virtually never remember them being opened again once that’s happened. Then after three or four minutes, suddenly the doors open up and these two guys are let on.”

Alan breathed a sigh of relief. “I wasn’t so much worried about him stealing the money. It was just how was I going to find him back in Sydney? By the time he’s in Sydney he doesn’t know me from a bar of soap. Maybe he starts talking to some friends. Various thoughts can go through his mind, can’t they?”

In 1982 Alan retired from card-counting. He was about to marry his second (and last) wife, a woman called Linda, and he was tired of living out of a suitcase. In 1984 his mug shot finally made the “Griffin Book” of cheaters and card-counters, which is provided to casinos every year by the Griffin Detective Agency. They were two years and several hundred thousand dollars too late.

*

Alan returns from his sleep to discover that Able Prince has won Race 3. It’s a 1.83 Win Expectation, so the team has supported it heavily. I ask Alan if he’s happy. He shrugs. “I’d probably prefer that I lost today.”

Computer teams, you see, are in the habit of being nervous around journalists, about going public with big wins. In the 1980s and ’90s a New Zealander named Bob Moore ruffled feathers by boasting to the world about how much he was winning. “Once Bob had shouted about what a great punter he was, the world’s greatest professional and all that, there were far more Australians coming to Hong Kong. Far more competition.”

Bob Moore stories are legendary. One tells of how, at a bar in Surfers Paradise, he was told by the manager to wait in line for a game of pool. So he marched into the owner’s office, bought the bar, marched out, forced the manager to rack up the balls and then sacked him on the spot. He reneged on the deal the next day. Alan can’t confirm that story, but he was there the day Moore threw a similar tantrum in a Hong Kong pool bar called the Flying Pig. The Flying Pig had two pool tables. Whenever he was annoyed, Bob threatened the owners that he would buy the Chinese restaurant downstairs and open up a bar with three pool tables. One night, he flew off the handle and did it. “He turned it into a bar-type disco with three pool tables,” Alan remembers. “It cost him millions.”

Until the 1990s many professional punters misjudged Hong Kong. It was considered a difficult market because the living and set-up expenses were enormous. And yet Hong Kong had several things going for it: a small horse population, a limited number of races, a limited number of horses per race and very, very big pools. It was the size of the pools that attracted Alan. It’s a huge benefit for professional punters to bet into big pools, because when their action hits the tote it has less impact on a horse’s starting odds. In the smaller, state-based pools of Australia, for example, a horse might look an attractive overlay only to shorten, with a single big professional bet, into an underlay. For a short while Hong Kong and its megapools were a well-kept secret.

It makes me wonder why Alan is participating in this interview at all. When I ask him, he mentions the Party Poker website, which recently floated on the FTSE for around US$8 billion; apparently, until it started advertising, it was running second to another online poker site. Hong Kong’s betting pools have been declining for some time. Alan is expanding into other unnamed territories. He’s 60 and, for reasons he won’t disclose, he’s left the racing hotspot of Hong Kong to live in Manila. Suddenly I have a vision of who I am. I’m the guy with the microphone outside Angus & Robertson. And I’m spruiking a very expensive book.

I slap 1,000 pesos ($A24) on the table and try to look the business. In Race 4, the first leg of the Triple Trio, I’m backing Knight Templar because the jockey is wearing mauve. Master Marauder wins by a length and a half. He’s neither wearing mauve, nor an overlay (Win Expectation 0.35). Alan’s Triple Trio outlay of HK$4.6 million is 14.1% of the total pool. Which means that if Libertarian Investment Limited has more than 14.1% of the total remaining live tickets, then it is doing better than the general public and the race is effectively a “win”. An update flashes through – Alan has just over 15% of remaining live tickets. There’s also the added bonus of my 1,000 pesos.

By the end of Race 5 I’ve kicked in another 500. The winner is Happy Together and I always ignore a horse with “happy” in its name. Despite being a slight underlay (WE 0.78) it’s a favourite, and so it still features in plenty of Alan’s combinations. For Race 6, the final leg of the Triple Trio, I back Gallant Knight because Melbourne’s own Brett Prebble is aboard and he used to go to the same gym as a friend of mine.

Alan receives a printout of all his live Triple Trio tickets – all 70 of them – but it’s difficult to tell exactly which combination to barrack for. Eventually he catches my enthusiasm for Gallant Knight as it dives for the line. It’s a beautiful moment: bookmaker and punter, both cheering for the same mount. “Gallant Knight gets out and chases for Prebble. Win Again a length. Gallant Knight continues to stay but Win Again is too good, and wins well.”

A few minutes later, Prebble does the right thing and protests first against second. But the final trio in the Triple looks settled: Win Again, Gallant Knight, Lucky Stravinsky. Alan’s team has one winning $10 ticket out of a total of five winning tickets. It translates to a collect of HK$8,364,000 (A$1.453 million) – an 82% return on investment.

Prebble loses the protest. I’m down another 11 dollars Australian.

*

Several gambling landmarks in Alan’s life have coincided with the end of relationships. In 1979 he began card-counting after his break-up with Meredith. In 1982 Linda left him for a member of his Australian betting team. Within a week he had moved to New Zealand to pursue a turf ratings system. And in 1984 he shifted to Hong Kong, mainly because of the size of the pools – although “some of my friends say the whole Hong Kong thing was to escape the prospect of living with this girlfriend in New Zealand.”

A founding partner in the Hong Kong venture was Bill Benter, the originator of computerised betting systems, who had devised a program at home that calculated a roulette ball’s speed as it spins around and predicted which quadrant of the wheel the ball would fall in. Alan provided 60% of an initial US$150,000 bankroll and was in charge of selections through a “favourites system”, where the team bet on the horse judged most likely to win. They soon discovered they would win more if they bet only on overlays. Bill had a 30% stake and came up with the idea of building a computerised probability model. A third player, Wally Sommons, was in for 10% and did much of the early work compiling a database of past results.

For the first two years the team struggled, wiping out their $150,000 bankroll. Alan injected another $40,000 and they wiped that out too. Then another $20,000. It was enough for Wally to lose his nerve but Bill and Alan, who had by now evaporated more than half his total net worth, persevered. The computer model started winning in 1987 – US$100,000 for the season – the same year that the Alan-and-Bill alliance broke up. Among various differences, Bill wanted a greater say in determining the size of each bet while Alan wanted to keep his own firm hand on the bankroll. It was a bitter split. Almost immediately, Bill set about making his own computer model, one that Alan concedes would later become a more sophisticated and successful version of his own.

“He came back to Hong Kong for the ostensible reason of discussing our partnership ... But his real reason was to hijack all my data, because otherwise he was going to be missing a year or two’s worth of data, and to program a self-destruct thing into my software.” I almost fall off my chair. It sounds like something out of a Mission Impossible movie, but Alan recounts it all with a certain casualness. “Bill wasn’t a really malicious person. He did warn me about this, and gave me time to fix the problem.”

Alan’s software did anything but self-destruct. In 1987-88 he won HK$3 million. The next season $7 million. Then 11. Then 19. One of the things that kept him motivated was his rivalry with his two peers – Bill Benter and a mysterious Australian called “J”. In 1990 Bob Moore, the loudmouth New Zealander, betrayed Alan to go work for Bill. At the time, Alan and Bob had been sharing an apartment together. Later, to return the favour, Bob betrayed Bill, approaching Alan and offering to sell him back-data that Bill had paid Bob to supply. “We were sitting in a Sydney restaurant,” says Alan, “and I’m sure I told him at least twice: ‘Bob, it’s not yours to sell.’” Nevertheless Bob did sell, and Alan bought. “Years later, by which time he’s threatening to kill me, I referred back to this episode – Bob’s betrayal of Bill – and Bob shouts at me: ‘If you were a true friend, you wouldn’t have allowed me to do it.’”

Alan laughs and shakes his head at the strangeness of it. Bob killed himself in 1997, depressed and isolated, on a night when Alan was hosting one of his famous parties. As for Bill, Alan believes he has retired from actively managing his computer team – and it is rumoured that Bill’s team was even more successful than Alan’s. He lectures occasionally on the computer model and devotes his time to philanthropy and politics.

There are tales of Alan giving away money too. “We went out for [their son] Anthony’s 22nd birthday and he gave me an envelope,” Meredith recalls. “I opened it and found a cheque for a million dollars. I nearly fell on the floor. I’d had a terrible year with work and a family illness. I haven’t worked since.” She’s now in the Australian women’s bridge team. He offered his children A$1 million if they completed an economics degree by the age of 25. Daughter Vicky succeeded and has been given her million. “She hasn’t touched it, to the best of my knowledge,” says Alan. “It’s just sitting in an account somewhere.”

When he lived in Hong Kong, Alan and his staff would stuff red lyceepackets with between HK$500 and HK$2,000 at Chinese New Year and distribute them throughout the discos. In October 1987, on the day he made his first million, he celebrated by walking the streets and dropping $20 notes in the laps of Filipinas sitting in the gutter. Alan has given extensively to mental health research, and he’s donated at least a million to Australian bridge. In terms of donating to the taxman he is harder to pindown. For starters, it’s an arguable point as to whether gambling winnings are taxable. It changes country by country, and the problem governments have is that if winnings are taxable, losers will want to deduct their losses. Then there’s the question of residency.

‘I’m not resident here [in the Philippines],” he says. “Theoretically I’m not resident anywhere, given I come here on a tourist visa. And my plan has been for some years not to be resident of any particular country for the rest of my life.”

*

For the second-last race, my bookmaker decides to extend some generosity to me in the form of punting advice. He pulls out his magic A4 sheet and points to Lotzatow in Race 8. “We’ve got a big overlay there. It’s a 0.22 probability that is paying $10. So it’s a 2.21 Expectation.”

Conceding that blind superstition has done me few favours, I jump on board. Lotzatow never looks like losing. We’re both on a collect – A$79 for me, and Alan to the tune of A$850,000 (minus $79). He insists on paying me my winnings, even though I’ve leached food and drinks from him all weekend. I thank him, reminding myself that generosity is still generosity, even when your host’s betting team has just collected A$1.77 million over a nine-race card.

When a sum like that is being won on a mutual totaliser, somewhere else it’s being lost. I ask Alan whether he ever has any moral pangs about what he does. “I tend not to think about it too much. I would view it more that the public is going to lose the money anyway. Bill Benter thought aboutit fairly seriously about ten years ago and decided that what we did made us pariahs. I choose to look at it differently. There will be addicted gamblers who mess up their lives through gambling, just as you’ll find people who mess up their lives through alcohol or food.”

He packs up his thermos and the printout of results. Before the next meeting, the data from today will be plugged into the probability model and played through. If it justifies a change in the weighting of any of the probability coefficients, it will be made permanently. With each race the computer gets “smarter”.

As for Libertarian Investment Limited, the team is expanding into other countries. It is already betting in one new market and about to start in another. I’m not allowed to know where. Most likely they are racing environments similar to Hong Kong – big pools, small fields, a limited number of horses. Most probably the product of their enormous labours will be still more money. I ask Alan if being one of the world’s three richest gamblers has led to a happy life.

“Generally, yes. Probably less so now than in years gone by. There’s a cliche that says getting there is much more fun than arriving. If my ambition was to get enough money not to have to work, or to get enough money and then rest and relax – well, the more money you have the more work it creates.” His voice is weary, and in line with his usual post-races practice, he heads upstairs for a snooze.

*

Another Cup Day, another birthday, another people’s champion. God I hope she wins. Three in a row. The impossible. Up in the direction of the sun, a skywriter is etching the last stroke on the “A”. Makybe Diva is on the track and in the sky. The problem is she’s an underlay. Twenty-eight years ago a child with a pink piggy bank may not have cared, but I’ve met Alan Woods. I understand these things now. What did Alan say about that “number of starts” coefficient? Maybe she’s had too many. She’s paying $3.60 a win. Definitely an underlay.

I pull out a $20 note. My wallet is black and Italian and beautifully supple. I’ve moved on from the piggy-bank days. On a Jeune seems a reasonable bet. I don’t know for sure, but something tells me he’s an overlay. Good breeding, son of a Cup winner. Reasonable form. Terrific value at 70/1. I get to the front of the queue. The three hapless fools in front have all backed the Diva. The woman at the till doesn’t smile.

“Can I help you?”

“Twenty dollars on Makybe Diva.” I can’t help it. A stupid sentimental fool. Still, there’ll be no confusionbetween heart and wallet. My barracking will be loud and pure.

The last words anyone hears are: “And here comes Makybe Diva.” She crushes her opposition in 20 devastating strides, and at the clock-tower people are already embracing. Two minutes later, jockey Glenn Boss drops the F-word for the second successive year and nobody has let go. This is sport, not gambling. Although having said that, I’m $52 richer and I’ve got there by ignoring all that I’ve just learnt. I wonder what Alan Woods would say?

On the inside of the track, results and dividends flash up for those who can see through the tears. Makybe Diva first, paying $3.60 and $2.00. On a Jeune second, paying $14.60 the place. The word “overlay” isn’t actually written there, but I think I have my answer.

 

This article originally appeared in The Monthly. Alan Woods died in Hong Kong in January 2008. He was 62.