I had dinner last night by absolute accident with the president of Santa Anita. He says that there are two or three betters who have a credit arrangement with them, now that they have off-track betting, who are actually beating the house. They’re sending money out net after the full handle – a lot of it to Las Vegas, by the way – to people who are actually winning slightly, net, after paying the full handle. They’re that shrewd about something with as much unpredictability as horse racing.
"And the one thing that all those winning betters in the whole history of people who’ve beaten the pari-mutuel system have is quite simple. They bet very seldom.
"It’s not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it – who look and sift the world for a mispriced be – that they can occasionally find one.
"And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.
"That is a very simple concept. And to me it’s obviously right – based on experience not only from the pari-mutuel system, but everywhere else.
"And yet, in investment management, practically nobody operates that way..."
From "A lesson on elementary, wordly windsdom as it relates to investment management & Business" by Charles Munger , USC Business School , 1994.