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Freakonomics Radio

653. Does Horse Racing Have a Future?

with Wade Cunningham, Rhoda Ferraro, Sean Feld, Robert Clark, Ann Archer Hinkle, Mark Taylor, Cormac Branick, Emily Plant, Scott Heider, Richard Migliore, Marshall Graham, Thomas Lambert

Published November 14, 2025
View Show Notes

About This Episode

This episode of Freakonomics Radio visits the Keeneland September yearling sale to explore how thoroughbred racehorses are bred, evaluated, and sold, and how record auction prices coexist with a shrinking foal crop and declining racing industry. Breeders, buyers, economists, and horseplayers explain the economics of stud fees, the risk-reward profile of buying unproven horses, and how simulcasting, legal sports betting, and computer-driven wagering have transformed the gambling side of the sport. The episode closes by examining racinos, historical horse racing machines, and regulation as key forces that may determine whether horse racing has a viable future in the United States.

Topics Covered

Horse racing industry Thoroughbred breeding Investing Pari-mutuel betting Sports betting and horse wagering Simulcasting Racinos and historical horse racing machines Data-driven decision-making Gambling addiction and bookmaking Regulation and safety in sports

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Quick Takeaways

  • The Keeneland September yearling sale is the largest and one of the highest-quality thoroughbred auctions in the world, with around 4,700 yearlings cataloged and more than $530 million in sales this year.
  • High seven-figure prices for unproven horses reflect both intense competition for a small number of elite prospects and a shrinking overall foal crop, not a boom in horse racing popularity.
  • Successful breeding decisions hinge on a mix of pedigree analysis, physical inspection, veterinary information, and data-heavy stallion performance metrics, but outcomes remain highly uncertain.
  • Horse racing in the U.S. has seen sharp declines in live attendance, number of racetracks, racing days, and inflation-adjusted betting handle since its early-2000s peak.
  • The rise of simulcasting, online wagering, and legal sports betting has shifted horse betting from on-track crowds to dispersed, often solitary, online play.
  • Pari-mutuel betting means players compete against each other rather than the house, and sophisticated computer-assisted wagering teams now strongly influence final odds, especially in the last seconds of betting.
  • Racinos and historical horse racing machines are now a major revenue source subsidizing race purses at many tracks, raising questions about whether the racing component will survive without that casino-style income.
  • New federal oversight via the Horse Racing Integrity and Safety Authority (HISA) aims to improve horse welfare and safety, though it is described as polarizing and imperfect.
  • Owning a top racehorse can turn into a "living, unlimited ATM machine" through lucrative stud deals, but most investments in horses are not rational on a straightforward ROI basis.
  • Cultural distance from horses across generations is one factor behind declining breeding activity, as far fewer young people grow up around horses than in past decades.

Podcast Notes

Introduction and Keeneland September Yearling Sale

Series context and focus on thoroughbred market

This is the third and final episode in a series about horses, centered on understanding the market for thoroughbred racehorses[1:22]
Keeneland is highlighted as the key place to understand the high-end thoroughbred market[1:28]

Keeneland complex overview

Keeneland is an auction complex in Lexington, Kentucky, holding six major sales a year, with the two-week September yearling sale as the biggest[1:35]
The September sale features unproven yearlings that buyers hope might become champions like Justify, American Pharoah, or Secretariat[2:40]
Roughly 40% of the winners of the biggest U.S. races over the past few decades were bought at Keeneland as yearlings[2:09]
Keeneland's facilities include a racetrack, a training track, a sales pavilion, and 46 barns with 30-40 stalls each[2:23]
Transport on the grounds is mostly by golf cart, and the grounds are extremely well manicured, with the smell of fresh-cut grass throughout the sale[2:33]
This year's September sale catalog includes around 4,700 yearlings and requires a large number of staff and specialists to run[2:42]

Roles of key people at Keeneland

Wade Cunningham is introduced as an auctioneer at Keeneland[2:50]
Rhoda Ferraro is director of the Keeneland Library, described as the only library of its kind and the largest repository of thoroughbred breeding and racing information[2:52]
Sean Feld is a bloodstock agent working the sale, likening his work to "panning for gold" by sifting for standout horses[3:04]
Robert Clark has been painting at Keeneland for over 20 years and says when he is not painting horses, he will be dead[3:21]

Hinkle Farms background and operation

Ann Archer Hinkle introduces herself as manager of Hinkle Farms in Paris, Kentucky[3:26]
Hinkle Farms is run by brothers Tom and Henry Hinkle and Tom's daughter Ann; the farm was bought by Ann's great-grandfather in 1926[3:57]
• Originally the farm did not have horses; it produced bluegrass seed and raised sheep and cattle
• In the 1960s, Ann's great-grandfather bought his first two mares; now the farm is primarily a broodmare operation while still keeping about 200 head of cattle
Unlike many consignors at Keeneland, the Hinkles only sell horses they themselves have bred[4:29]
• Their horses have been on the farm since they were in their dams' bellies, are foaled and raised there, and brought to Keeneland as yearlings; this is described as their niche
Ann says they hope their horses will sell for at least a few hundred thousand dollars, with the dream that one might "break out" and hit seven figures, though that does not happen every year[4:51]

Featured yearling: Not This Time filly out of Stave

Ann singles out a dark bay filly by Not This Time out of the mare Stave as a favorite in their consignment[5:13]
• She describes the filly as really gorgeous and notes that Not This Time is "super hot" with new high-level runners emerging frequently
Not This Time is a stallion standing at TaylorMade Farm, the biggest consignor at Keeneland; they have so many barns that the area is described as a TaylorMade neighborhood[5:37]
Mark Taylor of TaylorMade is seen wearing a hat reading "Not This Time" and explains that when horses with relatives in the sale run well just before the auction, it boosts demand and prices[5:56]
• Taylor notes that Not This Time has had an "incredible run" of good results in the three weeks preceding the sale, which he calls "fantasy land"
Not This Time's stud fee started at $15,000 per live foal and is now $175,000; stallion owners receive that fee but do not share in future sale prices or race purses[6:25]
Taylor says success of a stallion's offspring raises demand across the market, benefiting other consignors selling that stallion's progeny as well[6:36]
Taylor reports that buyer traffic measured as "shows" (visits) is up about 15% versus the previous year before the sale begins, and he hopes the money will follow[7:08]

Keeneland Sales Operations and Global Thoroughbred Market

Introduction of Cormac Branick and his background

Cormac Branick is the Senior Director of Sales Operations at Keeneland and is responsible for running the sale[8:58]
He grew up in Ireland, where horses are deeply embedded in culture; many people own part of a horse or have neighbors who do[9:29]
• His early connection to racing came from his father taking him to the races, and he recalls that some of his first words were racehorse names, including a horse called Gay Fandango
Branick holds an undergraduate degree in biotechnology from Ireland, a PhD in veterinary science from the University of Kentucky, and did six years of postdoctoral work on horse immune systems and vaccines[9:16]
He later started a bloodstock consulting firm and worked at two major stud farms, giving him broad industry knowledge[9:22]

Genetics, naming, and traits of racehorses

Thoroughbreds are described by Branick as kind, trusting, magnetic, and giving more back than they receive[8:46]
The Jockey Club enforces naming rules: names must be 18 characters or fewer, cannot be vulgar or obscene, cannot have clear contemporary commercial or artistic significance, and cannot duplicate existing names[10:08]
Owners sometimes include parts of a famous sire or dam's name in a foal's name[10:23]
Branick says about 35% of a horse's racing ability comes from genetics, with the remaining 65% due to environment, including training and riding[10:27]
• He notes an additional "gray area" of a horse's desire and will to win, which he says separates the good from the less good

How buyers assess yearlings and what the catalog provides

Branick expects most buyers to cite athletic appearance as the most important assessment factor: good lines and angles, and being strong, sound, and fast enough[11:14]
Pedigree and veterinary soundness are also major components in buyer decisions[11:26]
The traditional print catalog is produced weeks before the sale and is somewhat out of date by sale time[11:41]
The digital catalog has become dynamic, with walking videos, photographs, and updated pedigree information, a shift accelerated by COVID-19[11:53]

Inspection process, sale structure, and pricing tiers

The entry deadline is May 1 each year; Keeneland's sales team then splits into two teams of three to inspect more than 3,200 entered yearlings across about 410 farms[12:26]
• The goal of inspections is to identify and place the best physical athletes forward in the sale, not just rely on pedigree
Sellers can set a reserve price; a common adage is to set the reserve at two-thirds of the horse's estimated value (e.g., reserve of $99,000 if valued at $150,000)[12:53]
Reserves are not disclosed unless the seller chooses; some consignors push high reserves, others set none[13:06]
Sellers submit a wish list indicating desired placement of each horse; Keeneland organizes the sale into "books" (pairs of days) where median price typically halves from one book to the next[13:34]
• In a good year, book one might have a median price around $450,000, then drop to low $200,000s in book two, then to $100,000, $50,000, and so on
The book structure helps buyers target days aligned with their budgets; for example, a $30,000 budget buyer will likely come during a later book rather than early high-end days[13:42]

Buyer base and Keeneland's mission

About two-thirds of buyers are domestic U.S. buyers; leading foreign buyer countries include Ireland, Japan, and Saudi Arabia[14:42]
Keeneland charges a 5% commission on sales and positions itself as a partner with sellers, sharing a goal of a strong overall sale[14:50]
Branick says the sales team aims to put the better horses forward early to create the right impression of the crop[15:00]
The sale uses 1,600 stalls to move horses in and out; each horse may be shown 100-120 times to prospective buyers, sometimes multiple times per buyer[15:30]
Keeneland is technically for-profit but has a non-profit mission; profits are reinvested into purses, safety and integrity measures, and local philanthropic efforts[1:47]

Scale and evolution of the September sale

The September sale evolved from being a secondary sale to the premier yearling sale; July once hosted the most elite sale[15:57]
Breeders came to prefer September because yearlings are older and more mature, which matters significantly percentage-wise[16:11]
The largest September sale was in 2007 with 5,550 yearlings in the catalog; more recent years show breeders being more selective, especially after the 2008 crash[16:15]
This year's catalog is the largest since 2010, and Branick believes the quality from top to bottom is the strongest in his memory[16:33]
He notes strong global participation and that American thoroughbreds have seeded stud books around the world, with particular demand in Middle Eastern markets that race on dirt and value American speed[16:56]
Last year's Keeneland yearling sale grossed $411 million through the ring and $428 million including post-sale transactions[17:10]

Risk, Reward, and Data in Thoroughbred Investing

Emily Plant's path into thoroughbred research and consulting

Emily Plant grew up a horse-crazy competitive rider in Kentucky, worked as a banker, and entered an MBA program but found she did not love the business world[18:05]
Her advisor, Bob Dahlstrom, told her to choose a research topic she could obsess over for life; she realized horses were the only thing she cared that much about[18:22]
Living in Lexington, she had never attended a thoroughbred auction, but wandered into Keeneland in 2006 on an opening night[18:47]
• She saw a horse sell for around $5 million while her own horse experience involved $5,000-$10,000 animals, and the idea of millions for an untried baby racehorse "flipped" her brain and felt like destiny
Plant is now a marketing professor at the University of Montana and runs a thoroughbred consulting business with racing analyst Bill Oppenheim[20:00]
She publishes the Stallion Spectator Rating, a several-hundred-page volume of detailed stallion performance statistics, and the Thoroughbred Market Report, a monthly magazine for investors in the business[20:03]

Economics and risk profile of buying unproven horses

Plant says that viewed purely as a rational return-on-investment, buying horses is not explainable or rational[21:04]
However, there is a small chance of huge success that can be life-changing, effectively turning a horse into a "living, unlimited ATM machine" if it becomes a top stallion[21:16]
She stresses non-monetary benefits: owners enjoy seeing their colors on jockeys, watching their horses run, and participating in a social activity[21:38]
Plant outlines two segments of the industry: the racing side and the breeding side, with horses moving between them as they age[22:01]
Top male racehorses can generate huge money as stallions; she cites stallion deals worth around $100 million for a top prospect, valued based on projected stud earnings in roughly the first four years[22:36]
• Competition among farms to buy a promising colt as a stallion prospect can begin after a single high-profile race win, sometimes leading to expensive deals that later look foolish if the horse proves a dud
She notes that even on the stallion side, which can appear more straightforward, risk remains high if a colt underperforms and ends up standing at a low fee in a lesser market[22:03]

Using data to guide breeding decisions: Hinkle Farms example

Plant says her clients range from major breeders to smaller farms; she has a longtime client relationship with Hinkle Farms[23:44]
She and Oppenheim meet annually with Hinkle to discuss data as it applies to their mares and to help plan mating decisions for the next season[24:03]
At Keeneland, Plant walks to the barns to speak with Ann Archer Hinkle, who values their annual data discussions to make sense of the metrics[24:20]
Ann says finding the right stallion for each mare is a puzzle, and Plant asks what stud fee Hinkle paid for Not This Time when breeding the filly out of Stave[24:21]
• Ann estimates the fee at around $150,000 and admits she is bad at remembering exact breeding fees because the matings occurred three years ago
The star filly has no registered name yet and is known as Hip 144; buyers usually name horses and register with the Jockey Club before first race[25:02]

The Sale of Hip 144 and Perspectives of Seller and Buyer

How the live auction works at Keeneland

Branick explains the live auction: all horses are on the grounds, and each is brought into the ring to be bid on in front of seating for about 500 people[25:24]
People can bid from the back near the chutes using bid spotters; each horse is typically in the ring for about 60 seconds, ranging from 40 seconds to 3 minutes[25:38]

Auction of Hip 144 and final price

The auctioneer introduces Hip 144 as a dark bay or brown filly by Not This Time out of Stave by Ghostzapper, noting Not This Time's leading two-year-old sire status[25:54]
The filly's dam is described as a stakes performer at Fair Grounds, and her second dam's family includes Westwood, who was third in the Grade 1 Santa Anita Derby and later broke his maiden at Del Mar[26:09]
Bidding escalates rapidly into the hundreds of thousands and then past $1 million, eventually reaching $2 million before the hammer falls[26:47]
Hip 144 sells for $2 million, and the auction immediately moves on to the next horse[26:58]

Hinkle Farms' reaction and financial context

After the sale, the Hinkle team celebrates with champagne at the barn, including grooms and handlers[30:27]
Ann says she feels like $2 million and that the result was beyond their expectations[30:40]
In the days leading up, heavy activity and repeat interest in the filly indicated she might bring seven figures; earlier that day, a colt by the same sire sold for $1.6 million[31:21]
Ann describes a good sign as big buyers physically following the horse through the pavilion, showing continued interest and intent to bid[31:03]
She had thought the filly might bring around $1.5 million, so seeing bidding quickly surpass that and reach $2 million was thrilling[2:31]
Ann explains that $2 million is extremely significant for Hinkle Farms because operating a farm requires tremendous capital[31:46]
• She cites annual stud fees alone exceeding $1 million, plus large labor, veterinary, and maintenance expenses on the farm
• She hopes this sale signals that the farm will be profitable for the year

Buyer perspective: Scott Heider

The buyer of Hip 144 is identified as Scott Heider, who runs an investment firm in Omaha and has invested in thoroughbreds for about 30 years[32:25]
Heider mostly buys fillies, preferring their residual broodmare value despite generally being slower racehorses than colts[32:37]
He describes thoroughbred investing as the intersection of intellect and instinct, stressing that both are necessary and that instincts are honed through trial and error and learning from mistakes[32:46]
At Keeneland, thousands of buyers study the same horses and draw different conclusions based on physical attributes, bloodlines, or advanced biomechanics analysis[33:12]
Hip 144 was the only horse Heider bought at this year's sale; he sat in the pavilion and bid live himself[33:23]
He initially valued the filly around $1.5 million and found the bidding stronger than expected, but decided she was the filly his team really wanted for both racing and future broodmare duties[34:48]
He set an internal hard cap of $2 million and resolved not to bid beyond that; once his final bid was in, he just wanted the hammer to drop[3:13]
• He notes that round numbers like $1 million and $2 million act as psychological walls in auctions, sometimes stopping bidding, and he hoped $2 million would stop others, which it did
After winning the filly at $2 million, he told his team, "let's hope this filly's really fast" because he had stretched financially to secure her[34:48]
Heider acknowledges that $2 million is a lot for a one-year-old filly, but views her as a potential future cornerstone broodmare if she proves successful on the track[34:54]

Overall sale results and record figures

Hip 144 was not the most expensive horse in the sale; a colt by Gun Runner sold for $3.3 million[35:19]
More than 3,000 yearlings sold for a total over $530 million, setting a world record for a thoroughbred auction[35:15]
Fifty-six horses sold for more than $1 million each, also a record[35:19]

Shrinking Foal Crop, Cultural Shifts, and Welfare Concerns

High prices amid shrinking supply

Mark Taylor argues that record auction prices do not signal a racing boom; instead, they reflect a shrinking supply of good horses[35:32]
He notes that the current thoroughbred foal crop is smaller than it has been in a long time[35:45]

Historical and cultural changes reducing horse familiarity

Taylor connects foal crop decline partly to cultural shifts away from equine familiarity over generations[35:49]
• His grandfather, born in the 1890s, used horses daily for work hauling supplies between Kentucky cities and naturally gravitated to racing
• His father, born in 1924, grew up raising horses and working the land, served in World War II, then entered the thoroughbred business; most classmates rode horses to school
• Taylor graduated high school in 1987 and estimates maybe 25% of classmates had some horse familiarity; his son graduated four years ago with perhaps only 10% having any familiarity
He sees this long-run reduction in everyday contact with horses as part of why breeding activity has declined[37:08]

Attitudes toward horse welfare and HISA

Taylor acknowledges public concern about horses being raced for human enjoyment and a history of some horses being mistreated or exploited by trainers[38:01]
He believes horses are "born to run" and notes that foals stand and move quickly after birth, running alongside their mothers and racing each other unprompted[38:24]
He says the industry is not perfect but has made strides on horse care and protection, rallying around safety initiatives[38:58]
Taylor cites HISA-the Horse Racing Integrity and Safety Act and the Horse Racing Integrity and Safety Authority-as new federal oversight for safety, medication, and testing[39:03]
• He describes HISA as very polarizing and imperfect but believes it helps ensure horses are sound and able to compete safely, with measures like limiting whip (crop) use and certifying track surfaces
He says there will never be zero fatalities, but if horses could choose between not existing and participating in the sport, he believes they would choose to participate[39:52]

Decline of Racing Popularity and the Horseplayer's Perspective

Richard Migliore on shrinking attendance and track closures

Former jockey and current TV analyst Richard Migliore says racing is not as popular as it once was[40:20]
During his prime, Aqueduct in New York might have 20,000 people on a weekday, with six days of racing per week; now it's five days during Saratoga and four days most of the rest of the year[40:39]
He lists several racetracks he rode at that have since closed, including Hollywood Park, Suffolk Downs, Garden State, and Atlantic City, noting this is only a partial list[40:57]
Migliore attributes part of the decline to technology: people can wager remotely without attending, reducing on-track crowds[41:11]
He worries that current off-site bettors will eventually die out or lose interest and that there may not be a new generation of fans if people do not experience racing in person first[41:23]

Marshall Graham: economist, horseplayer, and teacher

Marshall Graham, an economics professor at Rhodes College, calls horse racing like "joining a cult" and identifies himself as a horse player, owner, and breeder[41:57]
He teaches a course called the economics of racetrack wagering markets, which had 75 students in spring 2022, likely the largest course on his small campus[42:06]
Interest in his course is linked to broader enthusiasm for gambling, especially after the Supreme Court decision legalizing sports betting in 2017[42:51]
Initially he avoided focusing on betting, framing topics as small-sample decision-making, but now feels less need to downplay the gambling aspect[43:03]
He says most of his early students were men, mirroring demographics of sports bettors and participants in major horseplayer tournaments[43:24]

National Horseplayers Championship (NHC)

Graham will attend the National Horseplayers Championship (NHC) for the 11th time; about 800 participants gather in a ballroom at the Horseshoe Casino in Las Vegas[43:39]
The NHC uses mythical $2 win-place bets across many tracks; payouts are based on actual tote board prices, so players must balance picking winners and finding decent prices[44:10]
He compares the structure to a poker championship: players use play money but compete for real prize money based on their performance[44:05]
The contest spans about 57 races, which Graham says is not a large enough sample to reliably identify the very best players, making outcomes something of a crapshoot[44:53]
Despite the variance, he values the NHC as a "horseplayers convention" that brings together people with a shared obsessive interest, alleviating the loneliness of betting from home[45:29]
He notes that many people today are unaware of horse racing beyond the Triple Crown, despite the sport's historic popularity in the U.S.[45:34]

Appeal of racing and Graham's personal trajectory

Graham finds nothing more exciting than a race, citing the pageantry, competitiveness, and the feeling of owning a horse for the duration of a bet[46:04]
As a child he watched the Kentucky Derby, discovered racing through newspapers filled with numbers and charts, and read Andy Beyer's books on speed figures[46:24]
He likens the statistical appeal of racing to baseball's appeal to many boys, but emphasizes that horse racing allowed him to be an active participant through betting[46:53]
Upon turning 18 he drove to Pimlico, bet a horse named Quail Ridge Swap, and the horse won, cementing his interest[47:02]
His research career shifted from banking regulation to betting markets after discovering a substantial academic literature related to racing; he built data sets to study wagering markets, which "made" his academic career[47:58]
From horseplaying he eventually moved into claiming horses, partnerships, breeding, and racing ownership, all stemming from his original interest as a bettor[48:10]

Betting Economics, Computer Teams, and Future of the Wagering Market

Graham's betting results and variance

Graham recounts his best year in 2020 at the Breeders' Cup Betting Championship, where he turned a $7,500 bankroll into $170,000 in two days and won $350,000 in prize money[49:03]
He acknowledges having losing years as well, describing the experience as driven by occasional outlier big scores that can define a year[49:25]

Pari-mutuel betting versus house-banked sports betting

In sports betting, players wager against the house, and successful bettors are often limited or cut off by bookmakers[49:33]
In horse racing, pari-mutuel betting means all bettors' money goes into a pool; the house takes a fixed "takeout" and redistributes the rest to winning ticket holders[50:32]
Favorites have many winning tickets and thus lower payouts; long shots have few winning tickets and higher payouts[50:32]
The pari-mutuel system was developed by French perfumer Pierre Oller to protect bookmakers by ensuring a fixed takeout and eliminating bookmaking losses[50:38]
Because the house's profit is fixed by the takeout, racetracks do not care if an individual bettor wins or loses, only that people keep betting, giving sophisticated bettors more freedom than in sports betting[51:08]

Historical arc of racing's gambling monopoly and erosion

Horse racing has long been legal in the U.S.; a religious movement around the early 1900s pushed prohibition and led to many track closures[51:23]
During the Great Depression, racing made a comeback as a state revenue source, becoming a legalized gambling monopoly outside Las Vegas from the 1930s to 1970s[51:33]
Graham cites 1968 as a high point: Aqueduct had 139 racing days with average attendance of 30,000, outdrawing the Mets, Rangers, Yankees, and Knicks that year[57:29]
Racing's betting handle peaked around 2002-2003 at about $15 billion annually and has since fallen to about $11 billion, a 57% decline inflation-adjusted[57:21]
Erosion of the monopoly came via state lotteries starting in 1964, New York's off-track betting in 1971, and the proliferation of casinos and other gambling outlets[55:21]
The 1961 Wire Act restricted sports betting but was amended in 1978 to allow interstate pari-mutuel wagering, enabling full-card simulcasting across tracks, OTBs, and later online[55:54]
By the 1990s, people could bet horse racing online, while sports betting online only became widely legal in the past five years[56:11]

Role of computer-assisted wagering teams and last-second odds shifts

Graham notes that improved access and technology make it easier for bettors with an edge to exploit it, with opportunities to wager on races globally around the clock[56:59]
However, casual players have been drawn away to sports betting and slot machines, leaving a market increasingly dominated by sophisticated "sharks" and computer teams[55:44]
Computer-assisted wagering teams use historical data and current odds as crucial inputs; Graham cites Bill Benter in Hong Kong as an early modeler who recognized the public's collective wisdom[56:35]
These teams effectively engage in arbitrage between their modeled probabilities and the tote board odds, betting heavily at the last click and causing dramatic late odds movements[56:28]
It is now common to see horses shift from 8-1 to 5-2 in the final flashes of betting due to such last-second wagers[57:21]
Dubner raises the possibility that teams might "faint" (manipulate early odds) and then bet heavily late, but Graham says there is no hard evidence, though some would argue it occurs[57:39]
He underscores that the pari-mutuel system was designed when all betting occurred on track; last-second online bet surges were not foreseeable in that original design[58:02]

Pricing, takeout, and industry focus

Graham argues that racing has not adapted well to new competition and still has high takeout rates for retail players-between 18% and 30%[57:17]
By comparison, he says sports betting is much cheaper for bettors in terms of effective takeout, making racing less competitive[57:21]
Changing the pricing structure is difficult because racetracks must work through regulatory boards; Graham says the industry spends as much time lobbying politicians as focusing on its fan base[1:00:25]
Racing interests lobby for more race days, better revenue splits, and tax incentives for maintaining historic facilities[1:00:40]
In some states, horse racing has obtained a share of new online sports betting revenues, meaning bettors on NFL or NBA games indirectly support horse racing purses[1:01:11]

Racinos, Historical Horse Racing Machines, and the Future of Racing

Thomas Lambert on racinos and HHR machines

Economist Thomas Lambert describes the dominant business model as the "racino"-a racetrack co-located with a casino or, in Kentucky, a facility with gaming machines but not full casinos[1:01:21]
He explains that in Kentucky, historical horse racing (HHR) machines are the major revenue source for many tracks and are used to supplement live race purses[1:01:11]
HHR machines function similarly to slot machines, but their outcomes are based on historical records of horse races going back to 1990[6:12]
• Players bet on outcomes of anonymized past races via a video interface, but are not given enough information about horses, jockeys, or tracks to look up the race and "cheat"
Lambert states that in Kentucky, HHR machines now generate much more handle than live race betting[1:01:59]

Long-term outlook for different tiers of tracks

Lambert poses the key question: if racinos make so much money from casino-style operations, why not expand those and discontinue horse racing?[1:01:43]
He believes premier racetracks such as Churchill Downs, Belmont, and Pimlico, along with high-profile events like the Breeders' Cup, will continue due to strong popularity[1:03:10]
He is uncertain about the future of lower-tier tracks and suggests their survival is a major open question[1:03:35]

Dubner's reflections on horses and the series

Dubner summarizes that thoroughbred racehorses are getting more expensive but not faster, there are fewer races to run in, and overall U.S. handle on racing has declined sharply[54:49]
He admits he began the series with little knowledge and a slight anti-horse bias, having found horses big and scary growing up[1:03:49]
He recounts a frightening incident where a rented horse in New York City bolted down Central Park West with his then-girlfriend on its back, narrowly avoiding harm[1:04:05]
Despite remaining unlikely to become a horse person, he says he loved making the series and learning about the economics, science, and "soul" of the horse industry[1:04:24]
Dubner thanks numerous contributors, particularly economist Constance Hunter, whose chance conversation at a conference inspired the series and who is involved with GallopNYC, a therapeutic riding charity[1:04:57]
He invites listeners to share their thoughts about horses via email and notes that transcripts and show notes are available on Freakonomics.com[1:06:11]

Lessons Learned

Actionable insights and wisdom you can apply to your business, career, and personal life.

1

High-variance opportunities, like investing in unproven racehorses, require setting clear valuation limits and being disciplined enough to walk away when bidding exceeds them.

Reflection Questions:

  • • What is one high-uncertainty opportunity in your life or business where you need to define a hard maximum you're willing to invest?
  • • How could you pre-commit to specific walk-away thresholds so that emotion in the moment doesn't override your prior judgment?
  • • This week, where can you practice setting and sticking to a clear limit-whether in time, money, or attention-to avoid overextending yourself?
2

Combining rigorous data analysis with on-the-ground inspection and intuition leads to better decisions than relying on any single approach.

Reflection Questions:

  • • In what area of your work are you relying mainly on gut feel without enough data-or vice versa?
  • • How might you build a simple process that forces you to look at both quantitative evidence and qualitative signals before making a major decision?
  • • What is one current project where you could add either a data review or a hands-on inspection step to improve your confidence in the outcome?
3

Industries built on regulatory privilege or monopoly conditions must adapt early to new competition instead of assuming their historical advantages will persist.

Reflection Questions:

  • • Where in your industry or organization are you implicitly counting on rules, habits, or legacy advantages to protect your position?
  • • How could you stress-test your current business model against new competitors, technologies, or changing consumer behaviors?
  • • What concrete experiment could you run in the next quarter to explore a more open, competitive version of your current environment?
4

Scarcity can drive up prices even as underlying demand for an activity or product erodes, so headline numbers alone can mislead you about the health of a system.

Reflection Questions:

  • • Which metrics are you currently using as success indicators that might actually be masking deeper weakness or decline?
  • • How could you supplement top-line numbers (like price or revenue) with measures of participation, diversity of customers, or pipeline strength?
  • • What is one situation where you should dig beneath the impressive surface figures to understand what is really happening?
5

Communities and shared experiences keep niche passions alive, especially when technology makes participation more solitary.

Reflection Questions:

  • • What important interest or goal of yours currently feels too solitary or isolated?
  • • How might finding or creating a small gathering-virtual or in-person-change your motivation or learning curve in that area?
  • • Who could you reach out to this month to start building a micro-community around a project, hobby, or problem you care about?
6

Risk management in any domain involves accepting that some level of harm or failure is unavoidable while still working systematically to reduce preventable problems.

Reflection Questions:

  • • Where in your work or life are you expecting perfection instead of defining an acceptable level of risk and focusing on mitigation?
  • • How can you separate unavoidable downside from preventable mistakes in a current project or system you manage?
  • • What specific safeguard, check, or standard could you implement this week to make your processes safer or more resilient without freezing action?

Episode Summary - Notes by Sage

653. Does Horse Racing Have a Future?
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