"“If you're some sort of decisionmaker or some policymaker high up in DC, and you have to do something about Israel or Iran, a betting market is plausibly useful,” says Bensoussan."
Talk about just missing the express train.
It is entirely useful for insider trading on politics. Below is just the first thing I found, but whole thing just reeks of wet garbage. "Prediction markets" are not about making saner decisions towards a better world, they're about gambling, which from the start makes the world worse.
I think that's about the level that these things operate at.
I think the econ guys who love these things have a feeling that capitalism produces a natural, stable, rational order, that lazy dummies and criminals try to subvert. There's a willful denial that when there's money involved and the whole thing becomes a game, all sorts of bad behavior is endemic.
When metrics become targets, the metrics become useless.
In a world where someone spent $44 billion on a media outlet then set it on fire to achieve political goals, any assumption that prediction markets for public policy represent rational decision making is permanently dead on arrival.
Individual investors of modest means and billionaires swimming in the same pool is also ridiculous. For most of us a thousand dollars is a serious bet that requires careful consideration, but for a billionaire a hundred times as much is trivial. Most signals will be swamped by a few, which breaks the whole model.
100%. It's not even gambling, it's losing. 92% of people on polymarket lose money. I did a research-intensive deep dive into this recently with all the actual numbers and found out who's actually making all of the money on these. https://youtu.be/qCTBWuY_ut4
I'm not for these markets, especially not for sports betting.
However if these markets were truly useful like was proposed then just because people lose their bets doesn't mean they are losing money.
A classic (and very cherry-picked) example was an investigation into (IIRC) Louisiana large sports betting on Texas events. The betting was determined to be coming from Texas and there was concern this was due to some rigging. They eventually tracked down the better and found it was a guy who ran a mattress store. He said you could buy a bedroom set and if U of Texas (I'm not sure it was not another school) won the national championship then your bedroom set would be free.
This caused him to have a large potential loss (payout) if U of Texas won the national championship. So he laid off this risk by betting on U of Texas to win the national championship. He took (say) 5% of his profits from the bedroom sets sold and put it on Texas to win it all. If Texas wins it all the bets pay out and cover 97% of his costs of refunding the bedroom set money. He only loses 3% of his profits. If Texas doesn't win he reduces his profits by 3.
So he hedged a huge potential loss into a predictable 3% reduction in profit margins.
So basically, this guy wins even when he loses.
Anyway, I'm not saying this is what most do. But in theory, if these markets were useful, then it actually would constitute a significant portion of the bets on these markets. And so even though a lot of accounts were "losers" they weren't really losing at all.
These markets however do not actually work. I'm not sure if they ever will function. Instead they seem to be an outlet for degenerate gamblers. And probably some money launderers too.
That's a really fascinating example. But yes, I have to assume most everyone else isn't putting that level of thought and skullduggery into their gambling addictions.
> It's not even gambling, it's losing. 92% of people on polymarket lose money
That's good! That's part of the purpose. 'Experts' and talking heads today get to spout inaccurate forecasts and advice indefinitely (based on whatever interest or ideology), but in a prediction market you can't, you lose. Bad or biased forecasters keep throwing away money until they can no longer influence the needle or cannot participate at all. Meanwhile the money is funding the .04% of actual experts who are able to research reliable information about the future.
If a ginormous bet is placed before a certain leader is kidnapped, that's not "unfair" insider trading taking advantage, it's a signal, it's the market doing its one job - surfacing information about the future to the public. Their job isn't to be 'fair' to people who want to use it for gambling, the purpose is to find and publish the most accurate information about the future from people actually worth listening to.
Insider trading is generally theft of confidential information from someone's employer, e.g. a government agent selling state secrets is very illegal, but the prediction markets themselves and their users are not wronged by insider trading.
Gambling is a scourge so it'd behove them to ban sports topics. However, it's one thing to make that argument like "in reality people are instead just using them for gambling", instead I swear, nobody I see criticising prediction markets seems to bother learning what they are.
> "“If you're some sort of decisionmaker or some policymaker high up in DC, and you have to do something about Israel or Iran, a betting market is plausibly useful,” says Bensoussan."
I don't understand what this means. Is he talking about something like crowdsourcing information? Did... Did they reinvent crowdsourcing but except they can get rich off of it and people that are already rich can use it to influence things?
I mean, yeah, but I want some kind of explanation or insight into their thought process, not just, "it's for the greater good." Why do they think- or pretend to think- that setting up a marketplace for predictions on something like a clinical trial could possibly benefit society?
Do they think that if enough people predict the success of a trial that some other actor will then do something to further/improve/hasten the study and/or results? Why? Out of the kindness of the actor's heart?
I don't think they've put that much thought into it, honestly. I can't see a way that gambling on anything with a variable outcome is beneficial to anybody (besides the "winners", I guess).
To regulators they sell the "wisdom of the crowds" puff (which technically isn't even false, if insider trading is allowed too)
To people they sell the "you are smarter than the other suckers, try to fuck them" dream (the leitmotif embedded behind with every betting proposition). Problem is that in this case, if you don't want to make this worse than casino gambling, insider trading cannot be allowed.
The idea as I understand it is that you could have multiple markets for different potential trials and then use the market position to determine which trials are worth going forward with.
I see. You know how Taylor Swift's dad bought like 10,000 copies of her first album so it would chart and start getting played on the radio? And publishers buy numbers of their own books so they'll make the NYT Bestsellers list?
I think the premise is that they'll be relying on the "wisdom of the crowds" in the same way that if you average all the guesses about how many jellybeans are in the jar, it tends to be pretty close.
There are myriad problems with this approach though, like how the crowds don't have any fucking idea whether or not a drug will work or not, they're just betting entirely based on vibes. Or that you're not getting the wisdom of the masses, you're getting a self-selecting portion of the masses who are willing to bet on prediction markets. Or that those people aren't even necessarily betting based on what they think is true, they're betting based on which outcome will make them money.
The premise is that the market will be dominated by people who actually know how to estimate jellybean quantities, because the smart money will flow to them. The other people in the market, betting based on vibes, are effectively a subsidy that pays for the experts’ time.
(This is how it works with stocks and futures, so it isn’t particularly far-fetched to expect prediction markets to work the same way for the same reasons.)
I'm sure the profits will be dominated by "experts" (or insiders) but it's not like you're going to be able to follow someone you've picked out as an expert and copy their positions, that information isn't made public until after the position clears. The prediction pools will almost certainly be dominated by the uninformed majority and just like you pointed out that it'll work like stocks and futures, it will be of little to no benefit to the greater good.
The idea with wisdom of the crowds is that the uninformed majority has no consistency so their bets cancel out, so the net result is just the informed bets.
As with anything else, having more foresight about the uncertainty of the future is always better. In this case, I don't know, more or less confidence on a drug/trial could help allocating grants or efforts for further research in advance.
Of course though this is already what analysts and policy makers do, and the average Joe has no fucking special clues about it.
The purpose of prediction markets is to give the public a probability estimate, based on the information available to market participants, and to provide financial incentives for those people to actually get it right.
Hmm I don't know about the article, but insider information can be useful to gain valuable information.
For example, when Theranos committed their fraud, a lot of people inside the company knew it was a fraud and that they were sending everything to get processed elsewhere.
Her ex teacher also knew that it was a fraud. But most people didn't have anything to gain from exposing it. If they could bet against it, the market would reveal that insider information.
This is why gambling was banned in sports. If someone takes a big enough position, they are going to want to make their prediction come true. In baseball, a gambler might work with (or threaten or whatever) a pitcher to give up a certain number of hits. In basketball, they work on the refs to get calls that will help their bets. But at the end of the day, sports don't really matter. Imagine that same scenario, but instead of working a pitcher or a ref to change the outcome of a game, the gambler is working a tech to contaminate or lose samples.
I say this most every time prediction markets come up, and gambling addicts will never listen, but if you're not an addict, give it some thought:
The conceit of calling them prediction markets, that they produce surprisingly accurate productions through the wisdom of crowds. If you are as good as "surprisingly accurate," then you will lose money at this, because the house takes a cut.
The whole idea of them being good at predicting things means they are good at customers (without inside info) losing money.
Kalshi’s ad featuring noted Knicks fan Timothée Chalamet, released on June 11, was a zeitgeist-capturing moment for prediction markets, akin to the crypto ad boom at the 2022 Super Bowl.
Yet attendees at Manifest, a recent festival for prediction markets, hadn’t even heard about it. These conference goers—encompassing academics, startup founders, job seekers, and players in the markets— were much more concerned with the bigger picture and the risks facing markets.
The platforms—which forecasting philosophers see as tools for the greater good—are to most people just a way to bet on sports. It turns out, the very thing that's made prediction markets a global phenomenon could be their undoing.
tepidlymundane | a day ago
"“If you're some sort of decisionmaker or some policymaker high up in DC, and you have to do something about Israel or Iran, a betting market is plausibly useful,” says Bensoussan."
Talk about just missing the express train.
It is entirely useful for insider trading on politics. Below is just the first thing I found, but whole thing just reeks of wet garbage. "Prediction markets" are not about making saner decisions towards a better world, they're about gambling, which from the start makes the world worse.
https://theconversation.com/prediction-markets-are-opening-many-new-opportunities-for-unregulated-insider-trading-and-unethical-bets-in-the-name-of-making-a-game-out-of-politics-284057
Duckbilling2 | a day ago
what if we implemented some sort of "ringer" in order to throw the war, .
Then we legalize prediction markets in order to bet against this guy
Step 3: total loss of faith and trust in the govt
Step 4: chili cookoff, with beans.
tepidlymundane | a day ago
I think that's about the level that these things operate at.
I think the econ guys who love these things have a feeling that capitalism produces a natural, stable, rational order, that lazy dummies and criminals try to subvert. There's a willful denial that when there's money involved and the whole thing becomes a game, all sorts of bad behavior is endemic.
"There's a market here, so all is well."
peacefinder | a day ago
When metrics become targets, the metrics become useless.
In a world where someone spent $44 billion on a media outlet then set it on fire to achieve political goals, any assumption that prediction markets for public policy represent rational decision making is permanently dead on arrival.
Individual investors of modest means and billionaires swimming in the same pool is also ridiculous. For most of us a thousand dollars is a serious bet that requires careful consideration, but for a billionaire a hundred times as much is trivial. Most signals will be swamped by a few, which breaks the whole model.
Pkrudeboy | 22 hours ago
“Assume people are rationally self interested.”
“No, I don’t think I will.”
Dudeman61 | a day ago
100%. It's not even gambling, it's losing. 92% of people on polymarket lose money. I did a research-intensive deep dive into this recently with all the actual numbers and found out who's actually making all of the money on these. https://youtu.be/qCTBWuY_ut4
happyscrappy | a day ago
I'm not for these markets, especially not for sports betting.
However if these markets were truly useful like was proposed then just because people lose their bets doesn't mean they are losing money.
A classic (and very cherry-picked) example was an investigation into (IIRC) Louisiana large sports betting on Texas events. The betting was determined to be coming from Texas and there was concern this was due to some rigging. They eventually tracked down the better and found it was a guy who ran a mattress store. He said you could buy a bedroom set and if U of Texas (I'm not sure it was not another school) won the national championship then your bedroom set would be free.
This caused him to have a large potential loss (payout) if U of Texas won the national championship. So he laid off this risk by betting on U of Texas to win the national championship. He took (say) 5% of his profits from the bedroom sets sold and put it on Texas to win it all. If Texas wins it all the bets pay out and cover 97% of his costs of refunding the bedroom set money. He only loses 3% of his profits. If Texas doesn't win he reduces his profits by 3.
So he hedged a huge potential loss into a predictable 3% reduction in profit margins.
So basically, this guy wins even when he loses.
Anyway, I'm not saying this is what most do. But in theory, if these markets were useful, then it actually would constitute a significant portion of the bets on these markets. And so even though a lot of accounts were "losers" they weren't really losing at all.
These markets however do not actually work. I'm not sure if they ever will function. Instead they seem to be an outlet for degenerate gamblers. And probably some money launderers too.
Dudeman61 | 23 hours ago
That's a really fascinating example. But yes, I have to assume most everyone else isn't putting that level of thought and skullduggery into their gambling addictions.
cat-astropher | 15 hours ago
> It's not even gambling, it's losing. 92% of people on polymarket lose money
That's good! That's part of the purpose. 'Experts' and talking heads today get to spout inaccurate forecasts and advice indefinitely (based on whatever interest or ideology), but in a prediction market you can't, you lose. Bad or biased forecasters keep throwing away money until they can no longer influence the needle or cannot participate at all. Meanwhile the money is funding the .04% of actual experts who are able to research reliable information about the future.
If a ginormous bet is placed before a certain leader is kidnapped, that's not "unfair" insider trading taking advantage, it's a signal, it's the market doing its one job - surfacing information about the future to the public. Their job isn't to be 'fair' to people who want to use it for gambling, the purpose is to find and publish the most accurate information about the future from people actually worth listening to.
Insider trading is generally theft of confidential information from someone's employer, e.g. a government agent selling state secrets is very illegal, but the prediction markets themselves and their users are not wronged by insider trading.
Gambling is a scourge so it'd behove them to ban sports topics. However, it's one thing to make that argument like "in reality people are instead just using them for gambling", instead I swear, nobody I see criticising prediction markets seems to bother learning what they are.
tepidlymundane | a day ago
Outstanding video! Agree 100%
Dudeman61 | a day ago
Thank you!
hoxful | a day ago
Does poly market effectively consolidate wealth distribution and take resources from many and give to few?
frostysauce | 14 hours ago
> "“If you're some sort of decisionmaker or some policymaker high up in DC, and you have to do something about Israel or Iran, a betting market is plausibly useful,” says Bensoussan."
I don't understand what this means. Is he talking about something like crowdsourcing information? Did... Did they reinvent crowdsourcing but except they can get rich off of it and people that are already rich can use it to influence things?
heirloomlooms | a day ago
I read the article and I can't figure out how "taking positions" (betting) on outcomes of clinical trials or similar is somehow for the greater good.
wraithnix | a day ago
Because it's not. People justify the awful things they do all the time, even when it doesn't make sense to anybody else.
heirloomlooms | a day ago
I mean, yeah, but I want some kind of explanation or insight into their thought process, not just, "it's for the greater good." Why do they think- or pretend to think- that setting up a marketplace for predictions on something like a clinical trial could possibly benefit society?
Do they think that if enough people predict the success of a trial that some other actor will then do something to further/improve/hasten the study and/or results? Why? Out of the kindness of the actor's heart?
wraithnix | a day ago
I don't think they've put that much thought into it, honestly. I can't see a way that gambling on anything with a variable outcome is beneficial to anybody (besides the "winners", I guess).
mirh | a day ago
That's always the bait and switch.
To regulators they sell the "wisdom of the crowds" puff (which technically isn't even false, if insider trading is allowed too)
To people they sell the "you are smarter than the other suckers, try to fuck them" dream (the leitmotif embedded behind with every betting proposition). Problem is that in this case, if you don't want to make this worse than casino gambling, insider trading cannot be allowed.
STFUandLOVE | a day ago
Welcome to Who Wants to be a Millionaire?(TM)
where you can phone the audience for help making a decision.
…Except the decisions “should” be made by world experts in that particular field rather than a trivia buff.
Funny enough, the analogy holds in multiple ways.
fortycakes | 8 hours ago
The idea as I understand it is that you could have multiple markets for different potential trials and then use the market position to determine which trials are worth going forward with.
heirloomlooms | 2 hours ago
I see. You know how Taylor Swift's dad bought like 10,000 copies of her first album so it would chart and start getting played on the radio? And publishers buy numbers of their own books so they'll make the NYT Bestsellers list?
That.
ChronicBitRot | a day ago
I think the premise is that they'll be relying on the "wisdom of the crowds" in the same way that if you average all the guesses about how many jellybeans are in the jar, it tends to be pretty close.
There are myriad problems with this approach though, like how the crowds don't have any fucking idea whether or not a drug will work or not, they're just betting entirely based on vibes. Or that you're not getting the wisdom of the masses, you're getting a self-selecting portion of the masses who are willing to bet on prediction markets. Or that those people aren't even necessarily betting based on what they think is true, they're betting based on which outcome will make them money.
heirloomlooms | a day ago
We're going to get so many Vioxxes.
vorpal_potato | 20 hours ago
The premise is that the market will be dominated by people who actually know how to estimate jellybean quantities, because the smart money will flow to them. The other people in the market, betting based on vibes, are effectively a subsidy that pays for the experts’ time.
(This is how it works with stocks and futures, so it isn’t particularly far-fetched to expect prediction markets to work the same way for the same reasons.)
ChronicBitRot | 19 hours ago
I'm sure the profits will be dominated by "experts" (or insiders) but it's not like you're going to be able to follow someone you've picked out as an expert and copy their positions, that information isn't made public until after the position clears. The prediction pools will almost certainly be dominated by the uninformed majority and just like you pointed out that it'll work like stocks and futures, it will be of little to no benefit to the greater good.
ThePaulBuffano | 19 hours ago
The idea with wisdom of the crowds is that the uninformed majority has no consistency so their bets cancel out, so the net result is just the informed bets.
mirh | a day ago
As with anything else, having more foresight about the uncertainty of the future is always better. In this case, I don't know, more or less confidence on a drug/trial could help allocating grants or efforts for further research in advance.
Of course though this is already what analysts and policy makers do, and the average Joe has no fucking special clues about it.
snark42 | 22 hours ago
> on outcomes of clinical trials or similar is somehow for the greater good.
I don't know if it's for the greater good per se, but it's a good way to hedge investments in the company doing the trials.
vorpal_potato | 20 hours ago
The purpose of prediction markets is to give the public a probability estimate, based on the information available to market participants, and to provide financial incentives for those people to actually get it right.
solid_reign | 20 hours ago
Hmm I don't know about the article, but insider information can be useful to gain valuable information.
For example, when Theranos committed their fraud, a lot of people inside the company knew it was a fraud and that they were sending everything to get processed elsewhere.
Her ex teacher also knew that it was a fraud. But most people didn't have anything to gain from exposing it. If they could bet against it, the market would reveal that insider information.
heirloomlooms | 19 hours ago
Are these folks purposefully ignoring that someone or something with vested interest in a certain result may try to effectuate that result?
solid_reign | 19 hours ago
Betting on the outcome of a clinical trial does not change the outcome of a clinical trial.
heirloomlooms | 19 hours ago
This is why gambling was banned in sports. If someone takes a big enough position, they are going to want to make their prediction come true. In baseball, a gambler might work with (or threaten or whatever) a pitcher to give up a certain number of hits. In basketball, they work on the refs to get calls that will help their bets. But at the end of the day, sports don't really matter. Imagine that same scenario, but instead of working a pitcher or a ref to change the outcome of a game, the gambler is working a tech to contaminate or lose samples.
AlsoIHaveAGroupon | 20 hours ago
I say this most every time prediction markets come up, and gambling addicts will never listen, but if you're not an addict, give it some thought:
The conceit of calling them prediction markets, that they produce surprisingly accurate productions through the wisdom of crowds. If you are as good as "surprisingly accurate," then you will lose money at this, because the house takes a cut.
The whole idea of them being good at predicting things means they are good at customers (without inside info) losing money.
Chief_Kief | 12 hours ago
This is the crux of it. Unless you’re in the know, you’re probably going to lose money
New-Instruction-1342 | 10 hours ago
your reply makes no sense
the house taking a volume based fee doesn't mean you lose money, it means you make very slightly less
gibbles0731 | 7 hours ago
“Prediction Market Philosophers” lends them a level of credibility and importance that rattles my brain.
[OP] wiredmagazine | a day ago
Kalshi’s ad featuring noted Knicks fan Timothée Chalamet, released on June 11, was a zeitgeist-capturing moment for prediction markets, akin to the crypto ad boom at the 2022 Super Bowl.
Yet attendees at Manifest, a recent festival for prediction markets, hadn’t even heard about it. These conference goers—encompassing academics, startup founders, job seekers, and players in the markets— were much more concerned with the bigger picture and the risks facing markets.
The platforms—which forecasting philosophers see as tools for the greater good—are to most people just a way to bet on sports. It turns out, the very thing that's made prediction markets a global phenomenon could be their undoing.
Read the full story at the link above.
Well_Socialized | 23 hours ago
Keep prediction markets and ban sports gambling