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Huge Mechanical Computers Used To Calculate Horse Racing Odds (hackaday.com)
szczys writes: The Pari-Mutuel system revolutionized how wagers were made on horse races starting in the late 1800s. It moved away from gambling against the house, and adjusted the odds based on how many people were placing wagers on a particular horse. Calculating and publicly displaying the changing odds was slow and labor intensive until engineers took a crack at the problem. They created Tote Boards; large mechanical computers which connected to each betting window with levers and cables. Each pull of a lever recalculated the odds which were displayed on large mechanical displays for all to see. Tote Boards were built all over the world and used until digital computing displaced them.
Well, that means you are playing 3rd derivative performance estimation.
The track is playing 2nd derivative performance estimation by being a dynamic neutral party in the mass betting of people both less and significantly more informed than anyone running the track.
The guys who read all the stats and make the big bets are playing 1st derivative performance estimation, taking observed numbers and comparing estimates based on repetition of historical behavior.
The jockeys and horses are the raw data, and sometimes smelly.
You won't win big by betting on the likely outcome, but if betting is just part of the fun of watching the races, it'll work out in your favor much more than purely random or directly contrarian betting.