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Augur will probably be used for betting but really it's a prediction market. https://en.wikipedia.org/wiki/Prediction_market https://en.wikipedia.org/wiki/Pred

by hedgew 8y ago

Augur will probably be used for betting but really it's a prediction market. https://en.wikipedia.org/wiki/Prediction_market https://en.wikipedia.org/wiki/Prediction_market Prediction markets are an interesting tool for determining the most likely answer or result for almost any question. Some economists hope that we could use prediction markets to make difficult political decisions. Many companies already use them internally. Sadly there's only one prediction market that's accessible from the US, and it's an academic project with a 10% fee on profits and a 5% fee on all withdrawals. It's also limited in what you can predict or bet about. Augur or some other decentralized solution is probably our best bet for developing prediction markets further. I really think these markets are the key to overcoming our failure to make good political decisions. It is a wild idea, but I don't know of any other solutions that directly incentivize truth-seeking. Vitalik Buterin actually wrote about these concepts in more length https://blog.ethereum.org/2014/08/21/introduction-futarchy/ https://blog.ethereum.org/2014/08/21/introduction-futarchy/

klenwell 8y ago
Have you seen the Good Judgment Project, founded by Philip Tetlock, author of Superforecasting? https://www.gjopen.com/ https://www.gjopen.com/ https://www.gjopen.com/questions/813-before-1-october-2018-will-amazon-announce-where-its-second-headquarters-is-to-be-located https://www.gjopen.com/questions/813-before-1-october-2018-w... https://goodjudgment.com/superforecasting/index.php/2018/06/11/the-crowd-scores-another-win-in-ohio/ https://goodjudgment.com/superforecasting/index.php/2018/06/... It's karma-driven rather than wager-driven but seems fairly active.
- nowarninglabel 8y ago
  I participate in Good Judgment, but I think it will be great to compare Augur's results on certain questions to GJP's results (whenever there is a question that overlaps at least).
kingbirdy 8y ago
What's the difference between using prediction markets for politics and having a direct democracy?
- the_cat_kittles 8y ago
  not sure how they are comparable to begin with, since one is people guessing an outcome, and another is people voting for an outcome. in the first, you are trying to guess how everyone will vote, in the second you say what you want. sorry if thats not what you are actually asking.
  - throwawaylolx 8y ago
    Also one is weighted roughly by number of individuals and one is weighted by the amount of $ that individuals are willing to pay
- IMTDb 8y ago
  In direct democracy, you vote for what you want to happen. In a prediction market you vote for what you think will happen. The whole point is that a sufficiently large and diverse groupe of people is better at predicting the future using those system than an individual. Being able to correctly predicting the future can lead to better decisions.
  - djhworld 8y ago
    Is there evidence of this working though, or is it the same concept as the 'wisdom of the crowds'
    - gowld 8y ago
      Yes, both. For context: https://en.wikipedia.org/wiki/The_Wisdom_of_Crowds https://en.wikipedia.org/wiki/The_Wisdom_of_Crowds
    - packet_nerd 8y ago
      The stock markets are basically prediction markets. Over the short term they are wildly inaccurate and are determined mostly by fear, greed, and crowd psychology. But averaged over the long term they are very accurate.
the_cat_kittles 8y ago
theres definitely more than one prediction market available in the us. for instance, https://www.predictit.org/ https://www.predictit.org/ (assuming you were referring to IEM in your comment)
gcb0 8y ago
prediction markets are not well regarded academically , outside of the cristall ball economics. the academic consensus is that as soon as you create a second incentive (the prediction market itself) you lose all the insight you could gain from external factors. At that point they are no better than simply looking at the stocks (the predicted market). hence prediction markets are by definition, useless. the cristall ball people still trying to make it happen are now trying to see how much they can limit the prediction market itself for it to not affect itself (hence the limitations you don't like on the one you mention)
- ansiton 8y ago
  Do you have citations for this? The academic papers I've read on prediction markets are (broadly) positive.
  - gcb0 8y ago
    you are probably reading crystal ball economists. do they also write about other means to pick stock besides analyzing the company?
    - skilgarriff 8y ago
      Mind suggesting the economists to read, rather than just suggesting he is reading the wrong economists? I'm admittedly naive in this subject, but the name calling doesn't help. On the second point - there is solid evidence that, yes there are ways to pick stock besides JUST analyzing the company - see Momentum investing https://www.aqr.com/Insights/Research/Journal-Article/Fact-Fiction-and-Momentum-Investing https://www.aqr.com/Insights/Research/Journal-Article/Fact-F... I've seen plenty of critics of the efficient market hypothesis, and Fama himself has said that the market is not efficient.
      - skolsuper 8y ago
        Maybe you're agreeing with GP? Analysing the companies would not be a profitable way of picking stocks in a genuinely Efficient Market.
gammateam 8y ago
The thing I don't like about prediction markets is the capped liquidity. I want to put my money where my mouth is but then find out there is only 1 share to buy in the market. What I like about financial/forecasting crypto projects like Pareto Network is that there is no capped upside, and you can still determine the conviction some people have about an outcome A close runner up is Numerai, given that you can tell the 'confidence' someone has, but the capped upside is arbitrarily capped, and the purpose of the project has nothing to do with censorship resistance and is beholden to the whims of the Numerai hedge fund.
- drdeca 8y ago
  I'm confused. With Augur, "complete sets" can, aiui, be created by anyone, so I don't see why there would be a problem with only one share being available? Unless I guess if you want to make sure the trade goes through immediately?
  - gammateam 8y ago
    the problem is the limited amount of money one can make off of a random market. makes it less appealing to some (or many) and less efficient in determining an outcome yes assassin markets and popular political events can now be traded in the US even if the Augur company gets sanctions, but for everything else this is an inefficient system.
    - drdeca 8y ago
      Well, the money has to come from somewhere. In any case, someone has to be willing to take the other side of your bet, whether it is other participants or the people running the market/betting thing. I'm not sure what alternative you are considering to not have that problem, or what it would look like for something to not have that problem.
      - gammateam 8y ago
        > I'm not sure what alternative you are considering to not have that problem, or what it would look like for something to not have that problem. I gave two examples. One isn't in production yet so we'll see
anoncoward111 8y ago
There is a much larger global prediction market that comes with its own set of nuances and quirks, and that of course is the stock market. You can even get involved with no fee at all through Robinhood, but you will have to fill out some annoying and potentially costly IRS forms. If I could paraphrase Charlie Munger, in the stock market, the only people who are successful long term are those who bet massive sums, very rarely, when they are sure that the price of a security is severely and unproperly valued. If Tesla is currently trading at $355, and you have evidence for yourself that it should be worth something like $0 or $3,000, then this would be an example of the current market prediction being extremely wrong. A stock's price is really just a prediction of the company's future cash flow in the event of profits, losses, sale of assets, so on.
- hendzen 8y ago
  Actually, there are also people [0, 1, 2, 3, 4, 5] who are very successful betting small sums (relative to their total investable capital), very frequently, on securities they believe are slightly over or under valued. [0] - https://www.rentec.com/ https://www.rentec.com/ [1] - https://www.twosigma.com/ https://www.twosigma.com/ [2] - https://www.citadel.com/ https://www.citadel.com/ [3] - https://www.mlp.com/ https://www.mlp.com/ [4] - https://www.deshaw.com/ https://www.deshaw.com/ [5] - https://www.worldquant.com/ https://www.worldquant.com/
  - yellow_postit 8y ago
    Depends deeply on the time period and this list is most likely due to survivor bias. See Warren Buffet's hedge fund bet as a good semi recent example.
    - kirillseva 8y ago
      He was daring a human-managed fund to outperform S&P500. I don't think Warren is an authority on market's microstructure and quant trading, which these companies exploit. Basically on very quick trades machines outperform humans. For long term investment a prediction market (stock market index) outperforms humans and machines.
gamblorrrr 8y ago
So, what you’re telling me, is that the stock market, and indeed most of the underpinnings of modern economics is really a form of gambling?
dragonwriter 8y ago
> Augur will probably be used for betting but really it's a prediction market. A prediction market is an attempt to leverage a hypothesized predictive power of aggregated betting, so being used for being is essential to being prediction market. > Some economists hope that we could use prediction markets to make difficult political decisions. Political decisions aren't verfiable fact questions, so they aren't really subject to prediction markets. You could use them as a tool to get possible answers to fact questions supporting policy decisions, but there is no real compelling case for them being better than the best available other methods in most domains for that, and in any case getting answers on fact questions related to policy decisions isn't even the hard part of getting good policy decisions.
- arthur_pryor 8y ago
  > > Some economists hope that we could use prediction markets to make difficult political decisions. > Political decisions aren't verfiable fact questions, so they aren't really subject to prediction markets. You could use them as a tool to get possible answers to fact questions supporting policy decisions, but there is no real compelling case for them being better than the best available other methods in most domains for that, and in any case getting answers on fact questions related to policy decisions isn't even the hard part of getting good policy decisions. i wish this comment/POV had gotten more traction in this thread. i am increasingly of the opinion that building consensus on values and goals is more of a problem in politics than is building consensus on facts.
dillonsettle 8y ago
The iCash team is working to solve the governance issues in blockchain. Their work towards creating an automated & self-sufficient economy has really impressed me. Especially being their work is in the prediction market space and covers a lot of the current limitation issues we face. Source Link: https://medium.com/@iCash.io/processes-for-arbitration-on-smart-contracts-a9a20905dbfe https://medium.com/@iCash.io/processes-for-arbitration-on-sm...

by hedgew 8y ago

klenwell 8y ago

Have you seen the Good Judgment Project, founded by Philip Tetlock, author of Superforecasting? https://www.gjopen.com/ https://www.gjopen.com/ https://www.gjopen.com/questions/813-before-1-october-2018-will-amazon-announce-where-its-second-headquarters-is-to-be-located https://www.gjopen.com/questions/813-before-1-october-2018-w... https://goodjudgment.com/superforecasting/index.php/2018/06/11/the-crowd-scores-another-win-in-ohio/ https://goodjudgment.com/superforecasting/index.php/2018/06/... It's karma-driven rather than wager-driven but seems fairly active.

nowarninglabel 8y ago
I participate in Good Judgment, but I think it will be great to compare Augur's results on certain questions to GJP's results (whenever there is a question that overlaps at least).

kingbirdy 8y ago

What's the difference between using prediction markets for politics and having a direct democracy?

the_cat_kittles 8y ago
not sure how they are comparable to begin with, since one is people guessing an outcome, and another is people voting for an outcome. in the first, you are trying to guess how everyone will vote, in the second you say what you want. sorry if thats not what you are actually asking.
- throwawaylolx 8y ago
  Also one is weighted roughly by number of individuals and one is weighted by the amount of $ that individuals are willing to pay
IMTDb 8y ago
In direct democracy, you vote for what you want to happen. In a prediction market you vote for what you think will happen. The whole point is that a sufficiently large and diverse groupe of people is better at predicting the future using those system than an individual. Being able to correctly predicting the future can lead to better decisions.
- djhworld 8y ago
  Is there evidence of this working though, or is it the same concept as the 'wisdom of the crowds'
  - gowld 8y ago
    Yes, both. For context: https://en.wikipedia.org/wiki/The_Wisdom_of_Crowds https://en.wikipedia.org/wiki/The_Wisdom_of_Crowds
  - packet_nerd 8y ago
    The stock markets are basically prediction markets. Over the short term they are wildly inaccurate and are determined mostly by fear, greed, and crowd psychology. But averaged over the long term they are very accurate.

the_cat_kittles 8y ago

theres definitely more than one prediction market available in the us. for instance, https://www.predictit.org/ https://www.predictit.org/ (assuming you were referring to IEM in your comment)

gcb0 8y ago

prediction markets are not well regarded academically , outside of the cristall ball economics. the academic consensus is that as soon as you create a second incentive (the prediction market itself) you lose all the insight you could gain from external factors. At that point they are no better than simply looking at the stocks (the predicted market). hence prediction markets are by definition, useless. the cristall ball people still trying to make it happen are now trying to see how much they can limit the prediction market itself for it to not affect itself (hence the limitations you don't like on the one you mention)

ansiton 8y ago
Do you have citations for this? The academic papers I've read on prediction markets are (broadly) positive.
- gcb0 8y ago
  you are probably reading crystal ball economists. do they also write about other means to pick stock besides analyzing the company?
  - skilgarriff 8y ago
    Mind suggesting the economists to read, rather than just suggesting he is reading the wrong economists? I'm admittedly naive in this subject, but the name calling doesn't help. On the second point - there is solid evidence that, yes there are ways to pick stock besides JUST analyzing the company - see Momentum investing https://www.aqr.com/Insights/Research/Journal-Article/Fact-Fiction-and-Momentum-Investing https://www.aqr.com/Insights/Research/Journal-Article/Fact-F... I've seen plenty of critics of the efficient market hypothesis, and Fama himself has said that the market is not efficient.
    - skolsuper 8y ago
      Maybe you're agreeing with GP? Analysing the companies would not be a profitable way of picking stocks in a genuinely Efficient Market.

gammateam 8y ago

The thing I don't like about prediction markets is the capped liquidity. I want to put my money where my mouth is but then find out there is only 1 share to buy in the market. What I like about financial/forecasting crypto projects like Pareto Network is that there is no capped upside, and you can still determine the conviction some people have about an outcome A close runner up is Numerai, given that you can tell the 'confidence' someone has, but the capped upside is arbitrarily capped, and the purpose of the project has nothing to do with censorship resistance and is beholden to the whims of the Numerai hedge fund.

drdeca 8y ago
I'm confused. With Augur, "complete sets" can, aiui, be created by anyone, so I don't see why there would be a problem with only one share being available? Unless I guess if you want to make sure the trade goes through immediately?
- gammateam 8y ago
  the problem is the limited amount of money one can make off of a random market. makes it less appealing to some (or many) and less efficient in determining an outcome yes assassin markets and popular political events can now be traded in the US even if the Augur company gets sanctions, but for everything else this is an inefficient system.
  - drdeca 8y ago
    Well, the money has to come from somewhere. In any case, someone has to be willing to take the other side of your bet, whether it is other participants or the people running the market/betting thing. I'm not sure what alternative you are considering to not have that problem, or what it would look like for something to not have that problem.
    - gammateam 8y ago
      > I'm not sure what alternative you are considering to not have that problem, or what it would look like for something to not have that problem. I gave two examples. One isn't in production yet so we'll see

anoncoward111 8y ago

There is a much larger global prediction market that comes with its own set of nuances and quirks, and that of course is the stock market. You can even get involved with no fee at all through Robinhood, but you will have to fill out some annoying and potentially costly IRS forms. If I could paraphrase Charlie Munger, in the stock market, the only people who are successful long term are those who bet massive sums, very rarely, when they are sure that the price of a security is severely and unproperly valued. If Tesla is currently trading at $355, and you have evidence for yourself that it should be worth something like $0 or $3,000, then this would be an example of the current market prediction being extremely wrong. A stock's price is really just a prediction of the company's future cash flow in the event of profits, losses, sale of assets, so on.

hendzen 8y ago
Actually, there are also people [0, 1, 2, 3, 4, 5] who are very successful betting small sums (relative to their total investable capital), very frequently, on securities they believe are slightly over or under valued. [0] - https://www.rentec.com/ https://www.rentec.com/ [1] - https://www.twosigma.com/ https://www.twosigma.com/ [2] - https://www.citadel.com/ https://www.citadel.com/ [3] - https://www.mlp.com/ https://www.mlp.com/ [4] - https://www.deshaw.com/ https://www.deshaw.com/ [5] - https://www.worldquant.com/ https://www.worldquant.com/
- yellow_postit 8y ago
  Depends deeply on the time period and this list is most likely due to survivor bias. See Warren Buffet's hedge fund bet as a good semi recent example.
  - kirillseva 8y ago
    He was daring a human-managed fund to outperform S&P500. I don't think Warren is an authority on market's microstructure and quant trading, which these companies exploit. Basically on very quick trades machines outperform humans. For long term investment a prediction market (stock market index) outperforms humans and machines.

gamblorrrr 8y ago

So, what you’re telling me, is that the stock market, and indeed most of the underpinnings of modern economics is really a form of gambling?

dragonwriter 8y ago

> Augur will probably be used for betting but really it's a prediction market. A prediction market is an attempt to leverage a hypothesized predictive power of aggregated betting, so being used for being is essential to being prediction market. > Some economists hope that we could use prediction markets to make difficult political decisions. Political decisions aren't verfiable fact questions, so they aren't really subject to prediction markets. You could use them as a tool to get possible answers to fact questions supporting policy decisions, but there is no real compelling case for them being better than the best available other methods in most domains for that, and in any case getting answers on fact questions related to policy decisions isn't even the hard part of getting good policy decisions.

arthur_pryor 8y ago
> > Some economists hope that we could use prediction markets to make difficult political decisions. > Political decisions aren't verfiable fact questions, so they aren't really subject to prediction markets. You could use them as a tool to get possible answers to fact questions supporting policy decisions, but there is no real compelling case for them being better than the best available other methods in most domains for that, and in any case getting answers on fact questions related to policy decisions isn't even the hard part of getting good policy decisions. i wish this comment/POV had gotten more traction in this thread. i am increasingly of the opinion that building consensus on values and goals is more of a problem in politics than is building consensus on facts.

dillonsettle 8y ago

The iCash team is working to solve the governance issues in blockchain. Their work towards creating an automated & self-sufficient economy has really impressed me. Especially being their work is in the prediction market space and covers a lot of the current limitation issues we face. Source Link: https://medium.com/@iCash.io/processes-for-arbitration-on-smart-contracts-a9a20905dbfe https://medium.com/@iCash.io/processes-for-arbitration-on-sm...