I love playing daily fantasy baseball at Fanduel.com. The game that has rapidly evolved over the past few years is thrilling. I have always loved playing Texas Hold 'Em poker, but moved to a city far away from the nearest decent casino. Daily fantasy baseball filled the game of skill game in my heart for a short period of time, made all the better by my love of baseball.
I am quitting daily fantasy baseball.
Why? I had long suspected that a great number of players on Fanduel were professional gamblers, but their true impact on the game stunned me this week. The best part about a game of skill is that the best players can win money. The house (Fanduel in my case) takes a rake and provides the infrastructure, but you are fundamentally competing against other people on the site. If you're smarter and better than those people, you win money. If not, you lose money. Like poker, daily fantasy baseball is beautifully meritocratic in a way that traditional casino games, including spread betting on sports.
The reality is that the vast majority of winnings on daily fantasy sites go to a very small number of players. Unlike (in person) poker, the best DFS player can enter as many lineups as his bankroll can support. You might have a shark or two at your 10-person table at the Tropicana, but those sharks are spread out. However, the sharks in DFS baseball can play in every single game, or even multiple lineups in each game. And they do, via Bloomberg:
These limits seem almost laughably nonrestrictive until you understand how top players operate. Analysis from Rotogrinders conducted for Bloomberg shows that the top 100 ranked players enter 330 winning lineups per day, and the top 10 players combine to win an average of 873 times daily. The remaining field of approximately 20,000 players tracked by Rotogrinders wins just 13 times per day, on average.
Take a second to contemplate those numbers. The sharks are absolutely trouncing the vast majority of DFS players. This is the equivalent of Johnny Chan playing at every poker table. In fact, it might be equivalent to Johnny Chan playing in 3 seats at every table. I started playing DFS assuming that I was a pretty good player. I understand baseball. I don't make emotional bets on my favorite players. I dedicate a decent amount of time to research, including learning all of the key DFS strategies. But I'm outmatched:
Saahil Sud is a fake-sports apex predator. He enters hundreds of daily contests in baseball and football under the name "maxdalury," and he almost always trounces the field. He claims to risk an average of $140,000 per day with a return of about 8 percent... He says he's made more than $2 million so far this year...
He spends between eight and 15 hours working from his two-bedroom apartment in downtown Boston; the range reflects his uncertainly over whether to count the time watching games as work. During baseball season he puts about 200 entries into tournaments each night, and he can play more than 1,000 times in the weekly contests during NFL season.
The first step is scraping data from various public resources online and plugging the numbers into his custom-built predictive models, which generate hundreds of lineups based on his forecasts. There are publicly available tools that do some of this work for daily fantasy players, but Sud created bespoke software to make sure no one else can access his data. He also has a technique for identifying athletes who aren’t going to end up on a lot of other team’s rosters, which is important, because there’s a particular advantage in choosing players no one else has noticed.
When you enter a DFS game, you can look at your opponents' profiles. It is common, maybe likely, to click on the profile and see them entering hundreds of thousands of games. This is true even in the small-dollar games. Unlike poker, where a $1/2 table in a casino isn't worth the high-quality pro's time, the sharks can enter these tiny games with a click of the mouse.
And now they might not even need to click a mouse. Again, via Bloomberg:
The daily fantasy industry spent the summer engaged in a debate over automation. Critics took issue with how some players, including Sud, used software to change hundreds of lineups in response to last-minute injuries and other developments. DraftKings and FanDuel issued clearer policies and now require players to get permission before running scripts.
In effect, automation makes it even easier for the Johnny Chans of the world to sit at every table. Draftkings and Fanduel are allowing high-frequency trading in fantasy sports. I'm sure some hedge funds are already chasing returns in DFS baseball, but that will inevitably increase with automation. The second I read that paragraph, I decided to quit.
A game that I would play
I want to play daily fantasy baseball, but I don't want to play a sucker's game. Suckers think they can beat the house at blackjack or roulette or spread betting. But unlike our own William Tasker, who wrote about DFS a few weeks ago, I have no problem with games of skill. I love them. The problem is that a meaningful game of skill requires some separation between the best and the worst. No one would want to watch a baseball league where the New York Yankees played against your local high school team. I have no problem letting the hedge fund guys play against each other. But keep them away from me.
I would play on a DFS site with something along the lines of a very small limitation on the number of games that a player can enter every day and a complete ban on any kind of automation. Make me fill out a CAPTCHA or something before I enter each contest. I'd play the hell out of that game.
Of course, the incentives aren't there for the major sites to limit the number of games that a player can enter. The sites make their money on volume. They take about 10% off the top of all entries, so they want as much money entered as possible. In effect, they are in a silent partnership with the sharks. They spend huge amounts of money on marketing to bring in new dumb money. These new fish are thrown into the tank, and players like Sud eat them up. Rinse, repeat.
This is why we're so overwhelmed by ads for Fanduel and Draftkings. The latter has become a top-5 a buyer in the country in 2015, which is incredibly considering that the other four are Warner Brothers, AT&T, GEICO, and Ford. Fanduel and Draftkings need to keep finding new money to bring to their ecosystem, because very little stays in the hands of the vast majority of players.