Mark Cuban’s Gambling Hedge Fund

In case you haven’t seen it yet, Mark Cuban is looking to start up a hedge fund based on the gambling/sports betting industry. He compares and contrasts the financial markets and gambling. He rightly concludes that “gambling is gambling”. I read an interesting explanation of the difference between gambling and speculation a while back. I can’t remember all of the definitions but one critical part was that gamblers gamble for excitement, while speculators treat speculation as a business and are doing it for the money. You can certainly find traders & investors who are nothing but gamblers, just as there are many professional ‘gamblers’ who are actually speculators. Nonetheless, it’s a good article that’s worth reading.

(I need to dig through my books to find that passage about speculating and gambling. I do know that Trader Vic covers those topics very well at the beginning of ‘Methods of a Wall Street Master’)

Comments

  1. Posted by Duru on December 4, 2004 at 4:09 pm

    Thanks for the link. That was good stuff. He stole my heart when he made the analogies with fantasy football. 😀
    I also noticed that he had 160 comments posted to that one piece. You think actually reads all that stuff!
    Finally, Van Tharp talks about the gambler’s fallacy in “Trade Your Way to Financial Freedom“. This fallacy is the belief that “when a trend is established in a random sequence (or in the market for that matter), the trend will change at any time.” But he also talks about how professional gamblers increase bets when they are on winning streaks and that good traders do the same. I think there are lots of references out their comparing trading/investing to gambling.

  2. Posted by chad on December 5, 2004 at 6:32 pm

    my personal favorite concerning the distinction between speculation and gambling came from thomas sowell.
    speculators accept the inherent risk of the wheat farmer for the reward of a short term gain, while when two individuals bet on the outcome of a particular event, they create the risk.

    thats from basic economics – every 13yr old in america should read that book