In defense of speculation, I propose that we stop demonizing sports bettors, poker players, traders, and others that make their living through calculated betting.
This is because sports betting, poker playing, speculation, and entrepreneurship are one and the same.
In truth, what many people think of as gambling – is actually speculating.
The problem can be in defining terms.
A gamble is defined as a wager, or bet, on an outcome that is uncertain.
While this definition is undoubtedly true, at the same time, it fails to say anything clarifying. By Webster’s definition, simply getting out of bed to drive to work is a gamble.
One has no way of knowing, for certain, the outcome of getting behind the wheel and assuming the risk of the morning commute.
In a complete sense, maybe, a gamble should be considered as a bet whose outcome, on average, is not in your favor.
Said different, if one “gambles” long enough – they will lose. Traditional examples of a true gamble are lottery tickets, slot machines, and bingo.
The point is this: In a true gamble, skill plays no part in improving the odds of a positive outcome.
On the other hand, speculating is different than gambling. Speculating should be thought of as assuming risk in hope of profit.
This seems similar to gambling, but the difference is that there are many people who are objectively better at speculating – and others who are quite poor at it. This is not the case with a true gamble where everyone’s odds are the same.
Poker is a great example of an activity that is thought of as gambling, but actually, falls into the category of speculation.
While the outcome, or winner, of a poker game, is somewhat uncertain, there are many things one can do to improve their odds of winning.
This is undoubtedly true, as the same twenty people make it into the last rounds of the World Series of Poker each year.
Other examples of those who speculate include entrepreneurs, poker players, hedge fund managers, sports bettors, and currency traders.
Randomly choosing to buy or sell heating oil futures may be a pure gamble, but T. Boone Pickens or George Soros choosing to buy or sell heating oil, after months of research, is surely not.
There is a big difference between taking an ignorant and blind risk and taking an educated and calculated one.
For this same reason, virtually the same twenty people are consistently ranked as the top hedge fund managers each year.
There is both time and skill involved in successful poker playing, successful sports betting, and successful trading.
So, let’s not demonize those that play poker, bet on sports, speculate in futures, or risk their capital in starting businesses.
George Soros, said it best when he defended speculative profits by saying:
“You are playing a game that anyone can play and you play by the rules laid down.”