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"Intrade’s system was designed to evoke sophisticated investment, not a casino or a horse track" I resent the supposition that there is not sophisticated inves

"Intrade’s system was designed to evoke sophisticated investment, not a casino or a horse track" I resent the supposition that there is not sophisticated investments being made on horse racing. There are many professional investors all over the world, making sophisticated investments in horse racing. One company I'm involved with, essentially a one man band, pays between £10,000 - £15,000 per annum just to access horse racing data, both daily races and historic results. They then use this raw data to produce complex ratings for daily races and to perform historic data analysis. Their toolset is mostly R and Python based. This is just one small company in the UK. If you looked at other jurisdictions, such as Hong Kong, there are multi-million dollar syndicates crunching numbers to make sophisticated horse racing investments.

jameshart 11y ago
No matter how you dress it up, betting on an outcome is not an investment, it is playing a game. You can invest in applying sophisticated tactics to a game to swing the odds in your favor (look at a formula 1 or NFL team for an example of this taken to extreme), but you are still playing.
- phillc73 11y ago
  To pull another quote out of the article: “Lots of ordinary financial things are gambling,” says Robin Hanson, an economist at George Mason University. “But they are carved out in the public mind.” Life is playing. Everything you do is an investment of some type - time, energy, emotion, money. Every decision you make is "betting" of a kind, it just depends how you decide to dress it up.
  - davmre 11y ago
    There's a very reasonable distinction to be made between "gambling" bets, which are zero sum, and investments, which are not. If I invest emotional energy in a friendship, that's certainly a risk which might not always pay off. But unlike playing horses, no one else has to lose in order for me to win.
  - gojomo 11y ago
    One important missing dimension-of-distinction here is 'zero-sum'/'negative-sum' vs. 'possibly-positive-sum'. The lines can seem fuzzy in practice, but it does make good sense to reserve the term 'investment' for deploying resources, with the hope of gain, in domains where a net-positive-sum outcome for all is possible. Meanwhile, pure 'gambling' reshuffles value in a net-zero-sum or even net-negative-sum process, and in many cases only persists because some participants ('suckers', 'marks', 'degenerates') have equally-persistent behavioral/decision-making problems. Another related dimension-of-distinction is whether the randomness is an inherent product of a chaotic/complex/natural process, or synthesized precisely with intent to confuse. Coming to understand (and either control or hedge) the randomness in nature or in complex hard-to-predict systems can be a very positive-sum process, and even generate spillover benefits for others (positive externalities). But engineering a game with fixed completely-deterministic odds, rigged against most players and (designed-to-be) just beyond the ability of their usual rules-of-thumb to model, is essentially predatory. People generally shouldn't play such games, or confuse them with the other more-reasoned 'bets' made in other domains. Of course people will sometimes make the 'bad' bets, because they're not always easy to distinguish and everyone has to learn. But the end of that process would ideally be to better discriminate between kinds-of-bets, not to lump them together as 'all just gambling'.
  - jameshart 11y ago
    So the distinction, to me, between an investment and a bet, is that an investment actually affects the subject. Placing a bet, notionally, has no impact on the event the bet covers; the fact you have entered into a bet over the outcome of a horse race is completely independent of the outcome. On the other hand, if you put your money into training a horse, and win back a share of its prize money, or stud value, or whatever, that is an investment, because your money contributed to the overall realization of value. Insurance, I'll grant, is a bet, but it's a bet where you have skin in the game - a bet against yourself, to hedge against loss outside your control. A bet you want to lose.
- jfoutz 11y ago
  Derivatives and futures are outright gambling?
  - joosters 11y ago
    To put it another way, you can model a traditional bet as a kind of derivative - the payoffs operate in broadly the same way.
  - jameshart 11y ago
    Futures are not outright gambling, no, they're temporal arbitrage - same as loans and bonds. Derivatives - well, depends on the market, but in one sense they're basically insurance, which is maybe a form of gambling, sure.
- comrh 11y ago
  Aren't all investments "betting on an outcome"? Betting the stock will be worth more, betting my house will be worth more, betting my car will maintain more of its value versus a different model or betting its better to buy now against the outcome of inflation? Even a date is betting my time that the outcome will be me getting along with stranger.

jameshart 11y ago

No matter how you dress it up, betting on an outcome is not an investment, it is playing a game. You can invest in applying sophisticated tactics to a game to swing the odds in your favor (look at a formula 1 or NFL team for an example of this taken to extreme), but you are still playing.

phillc73 11y ago
To pull another quote out of the article: “Lots of ordinary financial things are gambling,” says Robin Hanson, an economist at George Mason University. “But they are carved out in the public mind.” Life is playing. Everything you do is an investment of some type - time, energy, emotion, money. Every decision you make is "betting" of a kind, it just depends how you decide to dress it up.
- davmre 11y ago
  There's a very reasonable distinction to be made between "gambling" bets, which are zero sum, and investments, which are not. If I invest emotional energy in a friendship, that's certainly a risk which might not always pay off. But unlike playing horses, no one else has to lose in order for me to win.
- gojomo 11y ago
  One important missing dimension-of-distinction here is 'zero-sum'/'negative-sum' vs. 'possibly-positive-sum'. The lines can seem fuzzy in practice, but it does make good sense to reserve the term 'investment' for deploying resources, with the hope of gain, in domains where a net-positive-sum outcome for all is possible. Meanwhile, pure 'gambling' reshuffles value in a net-zero-sum or even net-negative-sum process, and in many cases only persists because some participants ('suckers', 'marks', 'degenerates') have equally-persistent behavioral/decision-making problems. Another related dimension-of-distinction is whether the randomness is an inherent product of a chaotic/complex/natural process, or synthesized precisely with intent to confuse. Coming to understand (and either control or hedge) the randomness in nature or in complex hard-to-predict systems can be a very positive-sum process, and even generate spillover benefits for others (positive externalities). But engineering a game with fixed completely-deterministic odds, rigged against most players and (designed-to-be) just beyond the ability of their usual rules-of-thumb to model, is essentially predatory. People generally shouldn't play such games, or confuse them with the other more-reasoned 'bets' made in other domains. Of course people will sometimes make the 'bad' bets, because they're not always easy to distinguish and everyone has to learn. But the end of that process would ideally be to better discriminate between kinds-of-bets, not to lump them together as 'all just gambling'.
- jameshart 11y ago
  So the distinction, to me, between an investment and a bet, is that an investment actually affects the subject. Placing a bet, notionally, has no impact on the event the bet covers; the fact you have entered into a bet over the outcome of a horse race is completely independent of the outcome. On the other hand, if you put your money into training a horse, and win back a share of its prize money, or stud value, or whatever, that is an investment, because your money contributed to the overall realization of value. Insurance, I'll grant, is a bet, but it's a bet where you have skin in the game - a bet against yourself, to hedge against loss outside your control. A bet you want to lose.
jfoutz 11y ago
Derivatives and futures are outright gambling?
- joosters 11y ago
  To put it another way, you can model a traditional bet as a kind of derivative - the payoffs operate in broadly the same way.
- jameshart 11y ago
  Futures are not outright gambling, no, they're temporal arbitrage - same as loans and bonds. Derivatives - well, depends on the market, but in one sense they're basically insurance, which is maybe a form of gambling, sure.
comrh 11y ago
Aren't all investments "betting on an outcome"? Betting the stock will be worth more, betting my house will be worth more, betting my car will maintain more of its value versus a different model or betting its better to buy now against the outcome of inflation? Even a date is betting my time that the outcome will be me getting along with stranger.