Excerpted fromFortune's Formulaby William Poundstone. Copyright 2005 by William Poundstone. Published in September, 2005 by Hill and Wang, a division of Farrar, Straus and Giroux, LLC. All rights reserved. Prologue: The Wire Service The story starts with a corrupt telegraph operator. His name was John Payne, and he worked for Western Union's Cincinnati office in the early 1900s. At the urging of one of its largest stockholders, Western Union took a moral stand against the evils of gambling. It adopted a policy of refusing to transmit messages reporting horse race results. Payne quit his job and started his own Payne Telegraph Service of Cincinnati. The new service's sole purpose was to report racetrack results to bookies. Payne stationed an employee at the local racetrack. The instant a horse crossed the finish line, the employee used a hand mirror to flash the winner, in code, to another employee in a nearby tall building. This employee telegraphed the results to pool halls all over Cincinnation leased wires. In our age of omnipresent live sports coverage, the value of Payne's service may not be apparent. Without the telegraphed results, it could take minutes for news of winning horses to reach bookies. All sorts of shifty practices exploited this delay. A customer who learned the winner before the bookmakers did could place bets on a horse that had already won. Payne's service ensured that the bookies had the advantage. When a customer tried to place a bet on a horse that had already won, the bookie would know it and refuse the bet. When a bettor unknowingly tried to place a bet on a horse that had alreadylost...naturally, the bookie accepted that bet. It is the American dream to invent a useful new product or service that makes a fortune. Within a few years, the Payne wire service was reporting results for tracks from Saratoga to the Midwest. Local crackdowns on gambling only boosted business. "It is my intention to witness the sport of kings without the vice of kings," decreed Chicago mayor Carter Harrison II, who banned all racetrack betting in the city Track attendance plummeted, and illegal bookmaking flourished. In 1907 a particularly violent Chicago gangster named Mont Tennes acquired the Illinois franchise for Payne's wire service. Tennes discreetly named his own operation the General News Bureau. The franchise cost Tennes $300 a day He made that back many times over. There were more than seven hundred bookie joints in Chicago alone, and Tennes demanded that Illinois bookies pay him half their daily receipts. Those profits were the envy of other Chicago gangsters. In July through September of 1907, six bombs exploded at Tennes's home or places of business. Tennes survived every one of the blasts. The reporter who informed Tennes of the sixth bomb asked whether he had any idea who was behind it. "Yes, of course I do," Tennes answered, "but I am not going to tell anyone about it, am I? That would be poor for business." Tennes eventually decided he didn't need Payne and squeezed him out of business. Tennes's General News Bureau expanded south to New Orleans and west to San Francisco. This prosperity drew the attention of federal judge Kenesaw Mountain Landis. In 1916 Judge Landis launched a probe into General News Bureau. Clarence Darrow represented Tennes. He advised his client to take the Fifth Amendment. Judge Landis ultimately ruled that a federal judge had no jurisdiction over local antigambling statutes. In 1927 Tennes decided it was time to retire. He issued 100 shares of stock in General News Bureau and sold them all. Tennes died peacefully in 1941. He bequeathed part of his fortunePoundstone, William is the author of 'Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street' with ISBN 9780809046379 and ISBN 0809046377.