In reading about tonight’s BCS College Football Championship Game I came across the Vegas odds line from the sports bookies. Now, the actual line (who’s favored to win and by how many points) isn’t what’s important. What’s important is understanding how bookies work.
Sports bookie lines aren’t designed to pick the winner but rather to ensure that bookies make money.
For startups, there’s an important lesson: a marketplace of buyers and sellers can provide a “good deal” where one party still always money. The marketplace always makes money.
Whenever a friend says they should bet on a game because the line doesn’t make sense, I always think that the line moves based on the bets for the house to make money, not based on the particularities of the teams that are playing (the line does start out trying to be reasonable based on the teams playing).
Groupon always makes money. eBay always makes money. Is there an opportunity for your startup to be a marketplace?
David Cummings on Startups 