How I went from punting PCs to betting a quarter billion on Betfair
But failed to convince Warren Buffett...
Interview Former channel man Peter Webb has become one of Betfair's leading customers and bets a quarter of a billion pounds annually on horseracing alone. He also sloshes a good amount on the X Factor market.
The ex Compaq and Medion man finally left the UK's computer distribution channel in 2003 to make a full time go of trading on the betting exchange. He says: “I doubt there's many people earning more than me on Betfair – it's substantial by any terms.”
Webb trades the exchange the way a City trader plays the financial markets. He puts around £20,000 into individual horse races (where even a snowy weekday race at Wolverhampton can attract more than £500,000 on the exchange). As there can be four race meetings in a day and seven races at each of them, it is easy to see how his turnover gets so high.
Here' how it works. Webb will back Dobbin to win (say at 5.0, which is the same as 4 to 1). If, then, the odds to back Dobbin not to win (this is called laying) fall below the back price (say 4.0, or 3 to 1) and Webb makes this bet then he has made a profit no matter what happens in the race.
The exchange keeps track of his net position so he's free to re-bet his capital immediately. If Dobbin's lay price goes up, he's stuffed. Webb makes lots of trade in this manner, on several horses, before a race starts. The odds movements don't tend to be as extreme as this example.
When there's racing in the UK, Australia and the US he'll be up at 2am working the Australian market. The UK business is usually between 2pm and 5pm, and then the US comes online at 9pm until 1pm.
Webb starts trading 10 minutes before a race starts and closes all his bets 10 seconds before the off. “Most of the money arrives five minutes before it starts,” he says. When the race starts, he no longer has any financial interest in its result, he's off to trading the next race.
“When I looked at Betfair all I could see was opportunity,” he says. “I dabbled around on several markets, and with several strategies. Horse racing stood out because of the amount of money that went through it, so I started to work really hard at understanding it.”
Webb's approach has nothing to do with knowing form or horse bloodlines. “My lack of knowledge has really helped. I'm looking at the price of a horse and estimate where the price will go. My role in the market is as an arbiter of value and whatever I do I do before the race starts – I don't believe I'm better at predicting the form than anyone else.”
This sort of thinking might be familiar to anyone who's made money not from taking a view on the absolute merits of a given technology or piece or kit - but rather on how prices are likely to move over time.
Webb will also bet major football matches, where he can put £50,000 to £70,000 through the market, and where the price changes aren't as rapid. There are also 100 dog races a day which he can trade. “Football, horse-racing and tennis are the big three markets. I've also been providing a lot of the liquidity for X Factor - people would be horrified about how much of that market was me.
These opportunities pop out of the woodwork at all times. I think the exchange is beautiful – I look at it and it speaks to me,” he says.
Webb opened an account with Betfair seven days after it first went live in 2000. He heard about it while knocking around the First Tuesday meetings of the original and glorious dotcom boom.
He deposited £1,000 and his first-ever bet (position) was placed with £5. He says he's never had to put more money in, and currently has £250,000 in his account. He doesn't need more because unlike the financial markets, Betfair settles trades immediately. A relatively small sum placed in a market can be leveraged very quickly, by closing its position then rebetting it.
Webb's last proper job was launching the Medion PC brand into the UK and managing accounts selling it such as DSG and Aldi. He builds his own PCs (and uses six monitors to trade), and upgrades them every six months. However, he says Medion is good value and he'd buy them now. “Sometimes you work for companies and think 'I wouldn't touch that',” he recalls.
He started in the distribution business straight from school working for Portsmouth distributor Softly Softly. He worked at Compaq, account managing its retail division, and had an office round the corner from legendary UK boss Joe 'Meat Packer' McNally. “I have worked with most if not all the top manufacturers of consumer technology products and their respective channel partners,” he says. “Dixons, Tesco, Wallmart, Aldi, Toys R Us, Sony, Panasonic, Samsung, Hewlett Packard, Intel, Microsoft.” He's also worked with Tech Data and Netcom Internet.