  We study the problem of gambling in horse races with causal side information
and show that Massey's directed information characterizes the increment in the
maximum achievable capital growth rate due to the availability of side
information. This result gives a natural interpretation of directed information
$I(Y^n \to X^n)$ as the amount of information that $Y^n$ \emph{causally}
provides about $X^n$. Extensions to stock market portfolio strategies and data
compression with causal side information are also discussed.
