Video Transcription:
Minor League Baseball Investing & The Future of Sports Gambling (w/ Michael Schwimer)
MAX WIETHE: I'm Max Wiethe here for Real Vision, sitting down here with Michael Schwimer, CEO and founder of jambospicks.com and Big League Advance. Thanks for coming on. MICHAEL SCHWIMER: Thanks for having me. MAX WIETHE: We're here to talk a little bit about you, your investing in minor league baseball players, your sports gambling analytics company, and just where you see the gambling space going. But before we get into that, let's play the game. MICHAEL SCHWIMER: Let's do it. Am I walking into a trap here? MAX WIETHE: I'm pretty good, but you're the oddsmaker. MICHAEL SCHWIMER:All right. MAX WIETHE: Let's play. Michael, thanks for being here today. MICHAEL SCHWIMER: Thanks for having me. MAX WIETHE: I know you have your big release coming up at the end of the month. Why don't we jump right into that? MICHAEL SCHWIMER: I'm super excited about it. We've been free. jambospicks.com has been free for six months, and we're now starting August 27th our first paid subscription. And our Flagship 17-week plan coincides with the football season starting on September 3rd, couldn't be more excited. MAX WIETHE: And can you give just like a brief overview about Jambos Picks, what you guys are? MICHAEL SCHWIMER: We're changing the subscription service or tout space, and we're totally disrupting the industry. We're bringing transparency and financial accountability to the space. Our 17- week plan, it's $3 a pick. And if we can't beat the market, we can't beat Vegas over that 17-week period, we're giving you $10,000 back. This has never been done before. And it's how confident we are in our sports picking recommendations. MAX WIETHE: So if you, say, wanting to short Jambos, you could just-- MICHAEL SCHWIMER: Yeah. If you're skeptical, you're like, hey, you can't beat the Vegas market. There's no way you can do it. You're the number one guy that should sign up. Because if you're right, you make $10,000. If not, you lose $3,000. It's a great bet for you. MAX WIETHE: That's 3:1 odds bout. Yeah. A little better than 3:1. Before we get into the nuts and bolts of Jambos, I wanted to touch on your backstory. You have one of the most unique and interesting backstory as how you got to where you are today. Why don't we start out with that? MICHAEL SCHWIMER: I grew up- I've always been a huge sports fan and math has always come pretty natural to me. I took AP step place at all stackers and went to the University of Virginia on a baseball scholarship, always wanted to be a baseball player, but also interned at a hedge fund as a plan B. If baseball didn't work out, I'd be an analyst at a hedge fund that's actually up here, in the Grand Jury, PAW Partners. Fortunately though, baseball did work out. I got drafted by the Phillies in the 14th round, had a $5,000 signing bonus. And off I was going. And minor league life, man, it's so much different than anybody, anybody can imagine. You get paid $5,500 a year. That's it. And the team doesn't pay for anything else. So your housing, everything you're doing, you're paying for on your own dime. Therefore in the offseason, you have to work. You can't make yourself a better player because you have to make money so you can survive the next season. Kids these days have it easy. They get to drive Ubers. There's no Uber when I was playing. And so I was oathing basketball games, babysitting, doing whatever it takes and minor league gives you overall statistics. There's 7000 minor leaguers, less than 10% will play one day in the major leagues, less than 3% will make millions of dollars. So these people with 90% failure rate are trying to live their American Dream doing this. It's a really difficult thing. And I was fortunate enough to make it. I made my major league debut for the Philadelphia Phillies in 2011. Took me about three years to get through the minor league system, which was actually really fast. If you do make the Major Leagues, of all players that do make it spent on average five and a half years in the minor leagues. And so, making the Major Leagues was the best team in baseball. I mean Roy Halladay, Cole Hamels, Cliff Lee, Brad Lynch, Chase Elliott, Jimmy Rollins, Ryan Howard, the list goes on and on. We're the best team in baseball, 101 wins, won the division. And it was a real honor for me that as a rookie, they named me to be a rep in the Union to represent them. And that's where I fell in love with the business of baseball. And I joined the licensing committee and the executive subcommittee, and really, again, saw like the inner workings of how the business side went. And I had a soft spot in my heart for the minor league players. Again, I grew up. Every major league player does this. I want to make a change. I say, you know what, I'm going to make a change here. I have this plan. I put together this plan of how we're going to fund minor leaguers to make them at least minimum wage. So, if you have $2 an hour, at least get them up to $30,000 a year so they can maybe focus and make the game better. And unfortunately, I went to the Union leader at the time, Michael Wiener, who was maybe the best Union leader baseball's had outside of Marvin Miller, who started a free agency. Unfortunately, he since passed. But going to him and like, he explains this plan to me, that's when I got the cutthroat side of baseball. It's like, look, we're the Major League Baseball Players Association. We cover Major League Baseball players. We don't cover minor league players. Our goal is to make sure major league players make as much money as possible. My argument was, well, all the major league players come from the minor leagues. And so ultimately, the plan didn't go through but that was always a passion of mine to be able to fix this system or help change it a little bit. I get to the major leagues, I play a little, have a little over two years of service time. End up getting traded to the Blue Jays and immediately blowing out my shoulder, I had labrum surgery. I was a pitcher. And that's when I had this idea of investing in players. So me, as a baseball player, a little bit of background, it should be point blank. I wasn't very good. I was a pitcher. That was a $5,000 signing guy. I threw 92, 93 miles an hour, which is below average. I had four pitches, none of which were above average. MAX WIETHE: How many games did you end up playing in, that you actually appear? MICHAEL SCHWIMER: Oh, it's good question. I think it's around 50 or so. But I ended up striking out more than one an inning and having good numbers. The reason is because I was able to outsmart, outthink hitters. I was actually building models to be able to strike hitters out and get hitters out. And people always ask me, what's your best pitch? And I was like, that pitch the hitter doesn't want to see. I don't have a pitch that's good. MAX WIETHE: They're up there I guess. MICHAEL SCHWIMER: Right, exactly. I should try to figure out the patterns in their swing pass and where they stand in the box and putting all this stuff in a model for basically pitch calling and figuring out what they don't want to see, and throwing that pitch. MAX WIETHE: Catchers must have hated you. MICHAEL SCHWIMER: That wasn't pretty. I'm glad we don't have them. Was one of those shows, you can't cut to a catcher that was shaking their head. There's not-- MAX WIETHE: Lot of shaking off the signs? MICHAEL SCHWIMER: A lot of it. The catchers, I had a good relationship. And after a while with me, they understood. And actually, like, there were times where I'd call the game on the mound. No one knew. I like go like this, or take us out, my glove down, that meant change up, like adjust my head a little bit. And then fastball. So I was actually calling the game from the mound at times. But that was what got me to the major leagues and successful. But I was able to figure out where these hitters' strengths and weaknesses were. And I thought, look, I can figure out which these minor leaguers are going to be good, which ones aren't. And like the ranking systems are so far off, and I want to build this company to invest in some of these players. You give them money upfront, in exchange for a future share of their earnings. So, it's not like, if they don't make it, they keep all the money. So if they fall in the 90% range, they keep all the money, but the money could then be used in the offseason and actually help them get to the major leagues. The one thing what I did not have was money. Exactly. So I have to go raise this money. I went to- the only guy I knew that really had money was the hedge fund I spoke about. And went to him and said, hey, this is my idea. And he looked at me and said, you're crazy. There's no way like- there's 1000 people that can tell me who's good or not, show me, prove it to me. Like build a model and actually show me. I was like, all right, no problem, it's going to take me a month, maybe two months. It will confirm what I already believe. After a month or two, I found out I was wrong. The models and the numbers were so much better than my eye test and the stuff I was doing, and I ended up spending more than a year of my life, 14 to 16 hours a day, just modeling. I end up modeling over 28,000 minor league seasons, any different variable I could have that's in a data set to make what is predictive in terms of Major League success. So after that process was done, I went back to him said, look, here's what the numbers say. And it was just outrageous of how we were able to predict some of these players. He's like, well, now you got something. But now, I got to make a business plan. And so this was 2014. And one thing that a lot of my critics say, and they're right, is I'm a perfectionist. And so I didn't go to an investor until October 2015, took me a year and nine months after I had this goaled model, because I had to write the business plan. And I went always tweaking it, tweaking it, tweaking it, tweaking it. In retrospect, I probably should have brought it to investors earlier. But at the same time, I was 28, 29 years old, no experience running a business and saying, hey, by the way, I'm trying to raise $25 million at a 2 and 20. It was a difficult thing. MAX WIETHE: And what was the breaking point? What opened the door where the money started to flow in? MICHAEL SCHWIMER: I had a first meeting with a group. And they wanted to invest in it, which was great, and it's a group, a big network. Now, the minimum investment was $250,000. So I spent from there until February raising it on my own. And I got about $5 million, I was in 37 cities in four months. It was just on the grind, but a lot of people were in, very few said no. MAX WIETHE: Yeah. Nobody went all in. MICHAEL SCHWIMER: Nobody went all in. It was like, oh, here's 250. Here's 250. And during those meetings is when I really knew this was going to work. Because I was looking at one side, the investors, it wasn't hard for them to understand. These are finance guys, the vast majority of finance guys. They're like, look, yeah, of course, you can build a model to predict who's going to be good. But I don't know, players aren't going to sign this. They aren't going to do these deals. And then I go to the player side, and they say, oh, this is the greatest thing ever. All players are going to sign this deal. There's no way you can figure out which one of us is going to be good. And I was like, I'm writing this Honey Hole. Like I just can convince each other and the other sides but that's when the big break happened. And this is, I believe in a lot of companies, you get these lucky breaks. And this was so lucky me. By chance a friend in Microsoft Health Services was like, "You want to come to this health conference?" I'm like, no, I don't. He's like, "Well, the keynote speaker is Paul DePodesta." I'm like, you have my attention. Yes, I'd like to come. If you guys don't know Paul DePodesta, was featured in the book Moneyball. He was the Jonah Hill character in the movie. But the god of sabermetrics in the modern era, took I think four teams from dead last place to winning the division and then basically conquered baseball by taking the Mets to the World Series in 2015. And now switched overs with the Cleveland Browns now. And I talked to him, and he instantly knew me. He's like, "Hey, what's going on?" Because I pitched for the Phillies when he was the GM of the Mets. And so he just saw me striking out David Wright all the time. But he came to me and he's like, "What are you doing now?" I told him, I've never seen a man's face go white before. Just pure white, he goes, "In 2004, I was going to do this exact same thing. I had the money, I had the money pretty much raised. And had this whole plan and the Dodgers called me and offered me the GM job." MAX WIETHE: It's like a tough gig to pass up. MICHAEL SCHWIMER: Yeah, he goes, "But I'm still 50/50 on it. Like it wasn't a no-brainer to go to the Dodgers because I thought this idea was going to work. But ultimately, I chose the safe route. I chose the Dodgers. I've been waiting 12 years for somebody to come up to me and tell me they're doing something like this." So here I am practically pissing down my leg with excitement over here. He canceled this flight back to Cleveland. We just sit out there and talk. He's like, "Look, I got to be a part of this." Absolutely. So we started talking about this. He goes, "You got to go to this guy, Bill Mueller." And I'm like, the famous Bill Mueller like Macy's? He's like, "Yeah." I'm like, how do you know him? He's like, "Well, through connections, and he's a big baseball guy. And he'd be really interested in his funnies in your backyard. I'm in the DC area. And he's in Baltimore." And so I said, absolutely. So I go up and met with Bill Mueller, and he just instantly got it. Understood the minor league life. He's again this huge baseball fan. He's always wanted to buy the [inaudible] and see if that happens one day. He's like, "I'm in." And he's wrote a very large check. And then within three days, the fund was closed. And I was getting subscription documents from people that I've never really even heard of. Bill Mueller said, ""I'm in." MAX WIETHE: And the first fund, how big was it? MICHAEL SCHWIMER: It was supposed to be $25 million dollar at 2 and 20. I had to go to 26 million because I'd had meetings previously. And they're like, "Well, let me evaluate this opportunity." So we got it out to $26 million. And we were off and running. And so they thought this is going to be five years, I was like, no, I think players are going to like this, could be three years. 18 months later, all the money out the door. We have 77 players in the fund. And we were moving. You could tell by the way players were moving up through the system. Now, 75% of our players are outside the top 300 prospects. So you got to understand, that 10% numbers, that includes all the first round picks. We're not getting first round picks here. So the players we're going after will probably have a 3% chance of getting in the major leagues, but people were just getting to the major leagues, getting to the major leagues. And here I am, and we got to keep going with this thing. I got to raise more money, but I don't want to go raise money every year. So it's like, I want to raise money for five years. I want this $130 million fund and I want to do it at 3 and 30 and like people will back me, like, 3 and 30. You're crazy. MAX WIETHE: Yeah, 2 and 20 is dying. How are you going to get-- MICHAEL SCHWIMER: 2 and 20's dying, how are you going to get 3 and 30? Well, I think this is going to work. I think this is- they are like, "All right, you can go try and then we can cut it down when you're not successful." Well, five weeks later, we raised $182 million. I actually had to return 52 million because there's only so many baseball players. And we're getting now the profile of the investor, was through the roof. We have a dozen owners in sports teams, none in baseball. Had obviously a conflict of interest, investing in the fund, the biggest names in finance, real estate moguls- all these people coming in, individual money coming in, to this space wanting to help us and back us and I had a 3 and 30. Now, we have this management fee. Now, we can really grow this thing and really get people that data scientists, data engineers that can really grow this business. And that's what I want to do. I wanted to create the best private advanced analytic sport minds around- get them in one space. So I called Paul DePodesta, I called Sam Hanky. Sam Hanky's from Philadelphia 70 Sixers, process guy. And so, like, who do we know? Who's the best people in this space? They gave me a few names. We end up assembling this team of a guy from the Detroit Pistons, Los Angeles Dodgers, across all these sports coming in, or like original six, seven guys. One was, and I should talk about him as a machine learning expert. So there's competitions, [inaudible] competition, which grades all these machine learning experts in here. One of the competitions is who can predict March Madness. The NCAA basketball. The guy that won that now works for us. So like, these are the kinds of people we're getting. And I brought it to them. I said, okay, we got this team together. I know we can make money. I don't know how yet. But let's brainstorm some ideas. And they came to me with about 15 different ideas of how we're going to use data analytics in the sports world. And this is what we're going to do. The ideas were outrageous, like horse racing, basically any industry where it's like, you know what, that looks good. I can tell. And like we can use data and numbers, we know we can do it better. Like the horse industry was a great one. Oh, that horse looks like he's going to be fast one day. Well, let's get some measurables out on all these horses and let's try to figure it out. There was like a golf fund because golf is very similar to baseball. You're on these mini tours trying to get to the PGA Tour. It's a similar type of work. eSports growing rapidly. Maybe we can use data analytics to figure out how to- exactly right. Then sports gambling came up. And it wasn't through the lens of sports gambling, it was actually through the lens of they were looking at it as we can do best. We can predict outcomes of games. We can predict outcomes of games. We think we can do it better than anybody else. But the best way to judge that is a scorecard. The scorecard is the Vegas line and where the market line is. None of these guys are sports betters. I had been a sports better since I was 13 years old, my dad bringing home the pool of like pick a side with a spread and you're just picking fun team and watching it go- a very unsuccessful sports better, I should say. Entertaining. It's very hard to win. You're just watching the game. MAX WIETHE: Just adds a little value. MICHAEL SCHWIMER: And they're like, no, we can't win. I was like there are professional betters out there that win. And I guarantee you, the seven of us in this room are a lot smarter than the guys that are winning professionally. They're like "Well, okay." I say, you know what- and then this is where I got to give myself a little credit here. I stepped in, I said, this is what we're going to do. All these other ideas are great. And I think we can make a lot of money with them. But this is the holy grail of the sports gambling space, because it's just going up. The Supreme Court passed a ruling, it's going to be blowing up in the United States. If we can figure this out one, a goldmine. Now, you're right, we may not be able to figure it out. And then we can just go to one of these other options. But let's give it a two to three-month trial on it. After the two to three-month trial, trial of modeling a college basketball, what we found was shocking. The market, the Vegas-based sports betting market was so much less efficient than we had ever imagined. MAX WIETHE: Why don't we start with like how a book works and how was sports have worked in some of those inefficiencies? MICHAEL SCHWIMER: Yes, that's exactly right. So the sports books, what happens is they're trying to get equal action on both sides. So they're not trying to figure out where a line should be, they're trying to figure out where a line should be so that you can get equal amount of money on both sides. So how it works in sports betting is an average bet is minus 110. Meaning you have to risk $110 to win 100. So if the Cowboys are playing the Giants, and the spread is three points, if you like the Cowboys, you got to risk 110 to win 100 over three, if you like the Giants, you got to risk 110 to win 100. So you get a million dollars on both sides, the sports book's guaranteed to make $100,000 no matter who wins. That's how all sports books are run. We want to get equal action on both sides. We're going to make the money in the juice. Vig, whatever term you want to call it. And so that leads to scenarios where money is coming in on sides that it shouldn't be, lines move, and it gives opportunities for people to come in and be like, wait a second, the line's seven, it should be three. Let's take that. MAX WIETHE: It's the dumb money versus money. MICHAEL SCHWIMER: Exactly right. And so looking at how books work like that, we saw we were getting edges all over the place. I mean just all over the place. I said, we got to raise a fund. We got to raise this fund, and we're going to bet millions of dollars on these games, and we're going to be billionaires. It's going to be great. And so I was like, well, let's prove it first and go to Vegas. I'm like, all right, we're going to go to Vegas, go there for 16 days. Took me 16 days before I was cut out of every book. I didn't realize you could do this. MAX WIETHE: Yeah. They can refuse service to anyone. MICHAEL SCHWIMER: They control everything. And if I say shut out, I don't mean like you can't place a bet, they go down to posted limit, there's about $300. Some places, 500. But instead of betting $10,000, or even $100,000 or $1million a game, you can only bet $300. And so that's what the professionals do, is they say, okay, I can bet 300 bucks a game. I'm going to set up shop in Costa Rica, Cayman, wherever it is and I'm going to be on- yeah, I'll be $300 a game. But if I can spread that over 100 different books, now, you're getting somewhere. But at Jambos and the people we have behind us, Marvin Bush, chairman of our board and the investors that we have behind us, that's not the area we wanted to go in. So I'm sitting here, we're cutting this out, how we're sitting on the goldmine with this information. How are we going to make money off it? And that's when I had this revelation. And I said, you know what, they can shut, I can't bet $300,000 on a game. But 1000 people can bet $300 on a game. They can't shut that down. So that got me into okay, let's sell our picks, sell our data, sell our information. And that's what got me into this subscription service space. And that space, there aren't enough words to describe how bad and disgusting, really heartbreaking. I mean really heartbreaking when people are falling for of the- 64 and 12 in my last 76 picks, buy my stuff. This is my red lead pipe block five star play, buy it for 50 bucks, and people are doing this. There's estimated to be about 100 million dollars of people buying picks. None of it works. No one's transparent with their record. The units are off and by units, I mean how much you're betting on a game. And that's important. So one of these tasks might be 4 and 8 and they say oh, this pick's- for this last pick of the week, it's worth 10 units. They went out, we went 14 and 8 this week. I'm like, no, you didn't. MAX WIETHE: Yeah, they were going to have a losing week and they knew you had a 10 to one or if it's a 50/50 game, then put 10 units on it and you're going to have a winning week. Either way, you'd have a losing week if you miss it. MICHAEL SCHWIMER: And If they have a losing week, guess what? They'll erase the record. MAX WIETHE: Yeah, they won't even publicize it. MICHAEL SCHWIMER: Exactly right. And it's a brutal, brutal and no one's financially accountable. If your picks lose, you know what they say? Sorry, buy more picks. The next one's a win. I mean I wanted to disrupt and change it all. And that's what we did. So we started on this plan to be able to do this. And we had to know like, okay, people have to trust what we're doing. And so that's why we're going to give it out for free to everybody. We're going to timestamp every pick, we're going to cite the book that it's available at so anyone can check because the line archives are available. So you can go to MGM and be like, okay, at 11:46 when we released the pick, the line was minus three minus 110. And so you can, on our site, go through and check every single individual pick of when we released them in a sports book that we cite to know. It's, again, fully transparent of what we're doing. And our record is fully transparent. We have never deleted anything. That's what we do. MAX WIETHE: And you have your great predicted outcome calculator so everybody can see if the math works out, this is how much I would make based on this bet. And there really is transparency there. MICHAEL SCHWIMER: Yes. And that's for when people are paying, or this is I was talking a little bit more about the historical side there. But yes, absolutely right. Like if you want to know, maybe I don't want to bet $300. Again, I want to get $500 or $100. Well, this is how it would work out for you, depending on how many units that were up. And so that's where we're again launching on August 27th. And then the 17-week one starting coinciding with the football season. But that transparency is so critical, and so key to this endeavor. And so people understand and can trust it, we actually had a beta test where we charged $1500. And if we weren't right over a five-week period in college basketball, we'd give you $3500 back, we ended up 22.5 units, and our recommended bet amount is $300. Because again, everyone can bet that because that's the posted limit. And so we end up 22.5 units, meaning if you're betting $300 a game, you made over $5,000 profit doing this. And so now, okay, we got the money coming in, all the systems work. We're now ready to go live here on August 27th. We're really excited about it. And we have plans as one week for 250 bucks, minimum of 50 recommendations. But that only gives you back $300 if we lose. So every plan, if we lose, we're paying you extra money. But we're way more likely losing a 50-game sample than we are in 1000-game sample. MAX WIETHE: Yeah. Love large numbers. MICHAEL SCHWIMER: Exactly. Sample size is our friend. Exactly right. And so that's why all our packages are still that way, four-week one where it's 900 bucks, you get 2000 back, so it's more than two to one odds on just four weeks. So, people can pick and choose what they want. But the best part is you register, you get all free pick Thursday. So if you're like I want to see how this works out. But I don't want to pay any money. Just register for the site, you get to see all our historical picks. Everything graded. The day after a game, you get to see all what we have the day before. MAX WIETHE: You get the reports. MICHAEL SCHWIMER: You get the full report day before, how we would have done and on Thursday, you get all the emails so you can see, okay, this is how would work for the rest of the week. So, that's the game plan. MAX WIETHE: That all sounds well and good. But I want to talk about your confidence in your models and we briefly touched on that, that $10,000 back versus the $3,000 payment. So, there's this opportunity there. For all the skeptics, if you don't believe in Michael, you can sign up for $3,000 and if they lose, it's a $10,000 payout for everybody, fully audited and transparent. But I want to hear a little bit about your confidence because it clearly that's confidence. MICHAEL SCHWIMER: First of all, let me correct you, it's not trusting me, it's trusting Jambos. It's not me. We got a lot of smarter people than me doing these models. And also I should tell you, I named the company Jambos after our top six analytics. It's an acronym, each one of them. Because look, they're doing all the work, we should at least name the company after them. At least that's what I think. And everybody that works for us also gets equity on our company. So I run it a little differently than others but a little bit of sidetrack there. If you think that this is not going to work, then you just short us. It's just plain and simple. No subscription services ever said that, you say, well, you know what? I don't think your picks are going to win. How about you pay us? Every tout will be like, no, of course not. We're saying absolutely. And we're going to give you ridiculous odds. Why? Because our internal numbers think over 1000 picks, it's way less than a 5% chance that we lose. Now, is there still a chance? Yes, there is. But we'll pay you for that chance. Think about this, we've been paying $300 a game and we're down 20 units, you're making money. You're making money, you're profitable after the $10,000 back. And so that's it. We are this first subscription service that's giving positive expected value to its subscribers. It's really hard to do. Ryan Goldberg at Deadspin wrote this great article about these counselors, how bad it is. And even if tell service is good in picking winners, you can't beat the fees that they're paying. It's just always negative expected value, this is a positive expected value situation for the subscribers. Just never happened before. MAX WIETHE: And one thing I wanted to touch on is, it's not based on the record of the better. If they don't take all the games, they're at their own-- MICHAEL SCHWIMER: They're at their own mercy. They don't have to take any of them. We say, here are the picks, everything's worth one unit. So if we win, we win plus one, if we lose, we lose minus 1.1. MAX WIETHE: Yeah, so it's based on your record, and not the record of the better. MICHAEL SCHWIMER: So, you might say, you know what, I'm a Giants fan. You're telling me to bet on the Cowboys vs. Giants. I'm not going to take that one. Sure. Or I want to bet other games. Sure. Or I want to bet 1000 on this one and 200 on that one, do whatever you want to do. Our record and the money you get back is based on every single pick you bet $300 on. And that's what we're basing everything on. So that's what we're recommending betters to do to follow along. But at the end of the day, you don't put the bets to us, we are simply just saying this is what we're recommending, and you do whatever you want to do with it. So that's the game plan. MAX WIETHE: If this is as successful as you hope it will be, you're going to move markets. Aren't you worried about that? MICHAEL SCHWIMER: I think we are. And I think it's going to take time for it to do that. And I am worried about it. First, that's why I think our subscription service might have a pretty short shelf life, depending on how many people getting our picks and how many people are putting them out. If a line's minus three, and we like to favor it and everyone's betting. It could go to minus four minus five. And now, someone bets it late, like they get the email and they bet it in two days later, the line might be minus five even though we're basing ours at minus three, because that's what we sent it out. I think that we are going to be successful and the lines are going to move because we just discussed how sports books run, they want to get equal action on both sides. And so I do think there's a shelf life for this subscription service. It might only be a couple years. It might be this like really niche opportunity, that right now to take advantage of the system. But at that point, think about that what means for Jambos as a company. We are the worldwide market, we set the worldwide market. The possibilities are truly endless. There's sports books, think about how important that is, instead of running it equal action both ways and killing your handle. Because handle- forget about how much dollars are being bet. The amount of handle- people don't realize this, the amount of handle that has been taken is probably five to 10x when it could be. There are more people that want to bet than there are people taking bets. So what if you start a sports book, you trust the data, you trust the numbers, you trust somebody like us, and you ran it more like a prop trading desk? And hey, we can take asymmetrical risk. We're going to take huge volumes of bets, and we're going to trust the model. Yeah, we could lose a couple million bucks on a game. But we've got a x hundred million dollar backstop. And it's a situation where we know over time and over multiple games, we are going to come out on top. That's a huge area for growth. MAX WIETHE: Are you worried about the established players? The big casinos, the big sports books in Europe? Talent flight is always a risk when you start a company, is that something that you're worried about? MICHAEL SCHWIMER: I'm not because everybody that works for us has equity. And obviously strong non-competes. Strong, strong non competes. And we're a family at Jambos. And we all work with each other, cross sport modeling and models travel. If you have a good model for college basketball, and it's not like, oh, he's just a basketball better, or he's just a baseball better. If you have a good model one sport, you're far more likely to have good models throughout all sports, because it's about the process. Really in terms of picking games, if you want to get down to it, it's figuring out what's signal and what's noise. And what's a random event and what's a skilled event. So like in football, for example, a punt return for a touchdown, or a tip pass interception for a touchdown. That's worth seven points. But it's not for us. That's worth like, maybe one point, because that's not a repeatable event. Getting eight yards on first down, very repeatable event. You look at the Patriots, it's what they do. So we actually model it out in a way that every single play in football- I'm just going to football here. Every single play, points are being scored. They may not be on the scoreboard. But every single play, points are being scored. That eight-yard play might be worth .03, whatever it is. And that's how we model it out. And you look at it over time, historically, you can figure this stuff out. And again, I'm not going to get into the deep details of our player ratings and all the sample size we have and we're able to pay. What separates us from other betters is we're able to pay, we pay about $3 to $5 million a year for people in data. If you're a sports better, you're making $2 to $3 million a year. You're by yourself. The professionals out there are- there's I know a guy that's a psychology major in Nevada, that runs his- it is a professional and does well. There's a guy at Yale Economist, by himself. Not this team of PhD statisticians mixed with people with team experience buying these data sets that nobody else can buy, because they're extremely expensive. And that's what really sets us apart. And we make our own data, we have exclusive rights on data, there's a lot of things we do that build the moat. And are there other companies may be doing this? I don't know of any that are really looking at predicting outcomes of games. Now, there are other companies, really smart people trying to get a different piece of this gambling world. So like Cisco Hana, for example. They're starting an exchange, a betting exchange. And so what that means is, you like the Cowboys, I like the Redskins, you match us up? And so instead of both of us paying 110, we might only pay one cent minus 101 to the exchange because they know, then there's no risk on that side. They're just matching people up, which is a beautiful thing to do assuming the market is fully liquid. Problem is right now, it's not. It's never worked in the past. But as it gets legal, it could work. I hope it's the way the future, because now, we go back to our original idea, and just how's that. But that's like an angle they're taking like a European angle. And what they're looking at in the sports books, they're saying, they're all about the software, and they're all about the-- MAX WIETHE: Is blockchain coming into it. I feel when you think about direct peer to peer money transactions, that's the first thing that comes to my head. MICHAEL SCHWIMER: 100%. That's an exchange, blockchain is going to be a huge thing involved in that space. But there's problem with the exchanges. There are big problems. A, again, I could go four in one. Let's say I want to bet five games in $10,000 a game. I go four in one, I lose a ton of money. Why? Because the four games I want to bet at 10,000, I only get matched at 1000. And the one game I lost, I get matched for 10. That's tough for the better. Also, the people making the bet are always at a disadvantage. You almost have to be at your computer all the time. If I like the Patriots minus three, I need to be at my computer until someone matches it. Why? Well, Tom Brady hurt his knee in practice. Now, the line goes to plus five, but your line's right there at minus three. You're not at your computer. Someone's hammering the other side. So there should be an advantage to the person putting out the bat. And currently, there's not. It's a hard problem to fix. I think it could get fixed in the long run. But right now, there's just no answer for it. But I hope Cisco Hana, there's other smart people that are doing this, can figure it out. Because again, I think that'd be great for the sports betting landscape. But I think more so, it's going to be these established books and established companies saying, you know what, I want to make money in sports betting. Because right now, it's almost a concierge service. Jim Murren, the CEO of MGM, I sat down and talk with him at length. And he's like, "Look, the sports book is important to us. But it's not close to the revenue we're bringing in from slots and table games. And we have it because other companies have, other casinos have it, it's more like a concierge service." MAX WIETHE: If you were to compare it to a bank, it's almost like a safety deposit box. It's a legacy service that you have to have to maintain clients if somebody wants it. But you're not actually- that's not what's making your company a super profitable company. It's almost a cost. MICHAEL SCHWIMER: Absolutely. And Jim Murren's way ahead of the game here at MGM. Because he's getting that, he has a data rights in MLB and NBA. So actually, I think he's doing a really good job of like seeing that future and where it's going and making pretty good long term plays. I don't know what that means for- I'm not the guy, the expert, like a short term MGM stock a lot. That's not me. But I can tell you what the data stuff he's doing there, it's pretty, pretty smart in my view for the long term in this space, but that's just one area. MAX WIETHE: Yeah. And you've clearly got like a boots on the ground look at the gambling space. We've already touched on the deregulation, and where you see opportunity in exchanges. Where else do you see the gambling space moving as things start to become deregulated, and more states come online? MICHAEL SCHWIMER: I think the world will have then this- it's pretty negative connotation sports betting right now. And it shouldn't be. Because again, it's about predicting outcomes of games in a market. If you have an advantage, you can find an inefficient market and take advantage of it. That's a good thing. You see the stock market world, that's great. But all of the sudden, for sports betting, it's not great? Like it doesn't make too much sense to me. Mark Cuban, who I know has been on Real Vision, is way ahead of the game here. The best NBA better [inaudible] hire him. Because here's what he thinks. And this is true, if you can best predict the outcome of a game, you know more about what it actually takes to win that game than anybody else. It's just plain and simple. It's a fact. And so if he know- what does he know about betting that can then you can reverse engineer and say, oh, because we're running so many high picking roles. If we did this instead, or whatever the case may be, we actually improve our chances of winning instead. Instead of 62%, maybe we have a 75% chance to win that game. And that's what sports betting can do. And being able to predict outcomes of games can do. So I think ownership is going to take a big look at these professional betters these companies that can really predict outcomes of games and say, hey, we need your- again, we saw it already with Mark Cuban in Dallas Mavericks. But I think in soccer and really all the sports, you're going to have these guys wanting to hire these people to help them give- how do we give our team the best advantage to win? That's the name of the game. And if you can predict it, what's going to happen? I think that's a huge step moving forward in terms of ownership, sports ownership in teams and how franchises run. I think that's going to have a major impact. MAX WIETHE: I know you appear on the daily wager on ESPN all the time, where do you see gambling content moving forward? MICHAEL SCHWIMER: I think there is a huge move to be made for media companies when it comes to gambling content. And I mean huge. I don't think people understand how big this is going to be. It goes all the way from analysis of the game, from like Sunday Night Baseball to in-game broadcasts to how we look at games. Right now, you have a lot of experts going on and saying, I think this is going to happen. I think that's going to happen. The best part about sports betting, there's a record. There is a record of success. And people are going to start keeping track of this stuff. So whereas the old model and how everything's worked at ESPN and Fox has always been- how can we get more eyeballs? We need more entertainment. So for example, if like, Pardon the Interruption is just as good versus a Fox show. It's a matter of opinion. Oh, I like listening to these guys, or I like listening to these guys. There's not like a fact. I can't say this show is absolutely better than this show. And so the ESPN platform is great. And they're able to get people on and they produce great shows. But the difference is soon people are going to start keeping track and record to this. Not that people already are. And you can have great entertaining content. And if you're giving out losing picks over the long haul, versus somebody else who's giving out really smart strategic analysis picks that win, I think over time, the eyeballs are going to go to B. MAX WIETHE: And that's the bet we're making here in Real Vision with financial content. It's that giving real smart people. The platform is ultimately going to win out over entertainment. MICHAEL SCHWIMER: And right now, it's not. Right now, it's who do I want to listen to? You've got Bar Stool out there, and they make fun, they do it great. They're hilarious. Lock this thing up, I got my big mug. And they're good. It's funny. But overall, they're not going to win, you cannot- I don't believe you can beat the sports betting market without deep modeling or inside information. Oh, I know this player's girlfriend. This guy's sick or is not going to be healthy. Nobody knows that. That's good information, you can win on that stuff. But over the long haul, I don't believe you can win without extremely sophisticated models. And using those models to pick winners. And over time, again, these records are going to come out. It's going to be transparent. Anytime someone comes on one of these shows, you're going to see the record underneath them. And if you have these normal Fox or ESPN personalities with losing records, that's tough for people to understand and listen to that versus another show that's going to go deep into content, maybe spend 5, 10 minutes instead of a one minute explaining, breaking down every little thing mathematically, I don't know. I think there's a huge market for that. I really think there's a gigantic market for people always want to get more in depth information. You can't get more in depth than through the lens of gambling. You can't do it. Because that you may have your experts that, oh, I played the game. Okay, I'll take you on right now and let's predict who's going to win a game over the course of the season. I guarantee you we win. And so who actually knows more? I would argue that if you can predict the outcome of the game, you actually know more. And so that is what I think people are going to want to watch and pay to watch. And that's what I think is going to separate itself. But right now, that doesn't exist. So right now, it's who can be the most entertaining. It's the Dominoes and the Pizza Hut. Because the New York style doesn't exist yet. I think it will. I think it's coming soon. And I think it's going to completely take over the media market here in pretty short order- a year, maybe two. MAX WIETHE: So all that makes sense from the analysis side, that's going to be part of the content world, certainly. But what do you see as new content, things that don't exist? MICHAEL SCHWIMER: Possibilities are endless in new content in the gambling space, but I see a world where- look, you look at where we're at right now. People are watching people play video games, by the hundreds of thousands. This didn't happen when I was a kid. Everyone wanted to play, not watch somebody play. But it's happening. I think DirecTV and AT&T, they own the NFL Sunday package. I think it would get extremely great ratings, you have another channel that's paid for that you're watching the games, because you got to be able to film the games here. And you're watching somebody, one of these professionals, live bet throughout the game, and you're losing vicariously, always got 10,000 on this and then the interception happens, now you bet 8000 this way, and you can see a scroll of the picks and where he's at with all the lines, I think that would be extremely exciting and fun content. Now, people are trying to do that, but you can't show the game. And I don't think people want to watch people react to something. They still want to watch the game. That's why I think TV rights are so critical being able to show the game so then you can have a separate channel, even on the broadcast of a live better going through while watching the game, instead of watching the person. I think that's going to be a major area and then also, you're going to start seeing 24/7 gambling news outlets. Like before, like 24/7 news back in '90, or '80 something wherever it was, that was unheard of. And now there's 24/7 news all over the place. I think you're going to get a 24/7 gambling network because lines move all the time. You'd have different experts coming in and weighing in. I think it's just going to take over a lot more than people think. MICHAEL SCHWIMER: I'm putting myself in a big favor right now. I like my spot. MAX WIETHE: You like your spot? MICHAEL SCHWIMER: You'll like my spot. MAX WIETHE: How many units did you get? MICHAEL SCHWIMER: See now, you just made that and you're just going to giftwrap it to me. He's going to giftwrap it. MAX WIETHE: I wasn't even looking. I wasn't even looking. MICHAEL SCHWIMER: Winner, winner. MAX WIETHE: There we go. And Michael Schwimmer is champion. Well, Michael, you won the game with your minor league investing 3% of the players that you're looking at on statistically should be making it to the league. And you're right over 50% you're gambling picks, you're giving 10 to three odds that you guys are going to be right. Clearly, you've got great numbers to back up what you're saying. I think everybody should be paying attention to what you have to say about the gambling space and where it's going. Thank you so much for coming on today. MICHAEL SCHWIMER: Thank you very much. I really appreciate you having me. And I love what Real Vision has been doing. You guys are setting the mold in the media space and it's really cool to see.
