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It's worse that people actually believe it is a reliable way to predict the future especially now with the pseudo-intellect speak that people in the crypto spac

by f430 6y ago

It's worse that people actually believe it is a reliable way to predict the future especially now with the pseudo-intellect speak that people in the crypto space resort to. If wisdom of the crowd worked then casinos would be out of business. There's an entire industry on the other side.

jldugger 6y ago
> people actually believe it is a reliable way to predict the future It's comical because I made like 30 percent in the span of a few months by betting against well known biases in IEM -- the investment stakes are too low for informed participants to move the market meaningfully. But it's too low stakes to bother automating arbitrage strategies that would remove some of the bias of the public market.
myownpetard 6y ago
What is the relationship between casinos and wisdom of the crowd? Just about all casino games I am familiar with have known and controlled odds. There is no need for a 'wisdom of the crowd' to compute the probability distribution.
rspeele 6y ago
> If wisdom of the crowd worked then casinos would be out of business. That does not follow. In prediction markets or sports betting, the gamblers aren't betting against the casino. They're betting against each other, and the casino (PredictIt, BetFair, etc) is skimming off the top, just like Duke & Duke in Trading Places. Most forms of gambling where players do bet directly against the house are games of pure chance where no amount of wisdom will help you beat the odds -- odds which are naturally always stacked in the house's favor. Not to say that I think these betting markets are good at predicting future outcomes. They're clearly very bad at it! But I do think in concept they could be at least as good as any other method, since the existence of a betting market essentially sets a bounty for beating that market. What is limiting them is a mix of: obscurity, bet size limits, bet participant count limits, counterparty risk of shady betting sites, cost of fees/taxes making many bets not worth taking. Some prediction markets eliminate parts of that equation but amplify others, like the crypto markets not having the bet size limitations but also being much more obscure and shady. Furthermore, I don't even think those are problems that should be solved, because if none of those problems existed you'd see big traders like investment companies playing in prediction markets with billions of dollars, and then you'd have way bigger problems with insider trading and the market affecting the outcome. Things as mundane as surprise resignations and as shocking as assassinations. People already joke about stuff like that happening on PredictIt, with its $850 investment cap. No way to prove that it did, but it would be very easy for certain employees to do and get away with it. For example, in the 2020 election there was a market for when the GSA would ascertain the winner (releasing funds to the transition team). That was a decision made by one government employee. The market started on Nov 18th and had brackets like "Nov 23 or earlier", "Nov 24-Nov 30", "Dec 1-Dec 7", and so on. By the afternoon of Nov 23, with no news, the "Nov 23 or earlier" bracket was trading at 1c. Then the ascertainment happened and it settled. Now, that could have been a coincidence. It probably was a coincidence. But if you were the GSA administrator you could've made around $70k taking those 1c shares on the 23rd, and nobody would have to know.
- f430 6y ago
  > In prediction markets or sports betting, the gamblers aren't betting against the casino. Are you saying the crowd has an edge over the house? Sports betting platforms, poker sites, they are in the business of profiting off people who think they have an edge (aka ppl believe in the non-zero sum nature of these markets)
  - rspeele 6y ago
    I'm saying the house doesn't even have skin in the game. At least in the prediction markets, the house is just pairing one person who'll bet "Trump wins" against another person who'll bet "Trump loses". Even when the "wisdom of crowds" holds true, the crowd is made up of thousands of individual winners and losers. The house just extracts a cut (fee, commission, vig, juice, take) from the winners' profits. They stay profitable no matter how "wise" the odds settled on by the crowd ended up being. Edit: concrete example. If you want to bet on Andrew Yang winning election for NYC Mayor, right now you'd pay 47c for a share on PredictIt. If he does win the election, you get a dollar. Where does the dollar come from? Well, you didn't really buy your "Yes" share from PredictIt. You bought it from somebody else on PredictIt, who's placed a standing offer to pay 53c for a "No" share. You accepted their offer when you bought your share taking the opposite end of their bet. Your 47c plus their 53c makes the dollar, and whoever wins gets the whole dollar. Except not quite, because PredictIt takes 10% of profits, so if you're right, you actually get your .47 back + (0.9 * .53) = $0.95, PredictIt gets the $0.05, and the loser gets zero. It's good to be the bookie.
  - dragonwriter 6y ago
    > Are you saying the crowd has an edge over the house? No, the crowd is paying the house to bet against each other. > Sports betting platforms, poker sites, they are in the business of profiting off people who think they have an edge In that that's a big part of what motivates people to gamble, yes, but parimutuel gambling—which, in effect, includes prediction markets—the house isn't taking a side against the gambler, it's taking a cut off the top from all the gamblers on all sides, then the winners split the remainder. (Or splitting among winners first and charging a fee to the winners, which amounts to the same thing.)

by f430 6y ago

jldugger 6y ago

> people actually believe it is a reliable way to predict the future It's comical because I made like 30 percent in the span of a few months by betting against well known biases in IEM -- the investment stakes are too low for informed participants to move the market meaningfully. But it's too low stakes to bother automating arbitrage strategies that would remove some of the bias of the public market.

myownpetard 6y ago

What is the relationship between casinos and wisdom of the crowd? Just about all casino games I am familiar with have known and controlled odds. There is no need for a 'wisdom of the crowd' to compute the probability distribution.

rspeele 6y ago

> If wisdom of the crowd worked then casinos would be out of business. That does not follow. In prediction markets or sports betting, the gamblers aren't betting against the casino. They're betting against each other, and the casino (PredictIt, BetFair, etc) is skimming off the top, just like Duke & Duke in Trading Places. Most forms of gambling where players do bet directly against the house are games of pure chance where no amount of wisdom will help you beat the odds -- odds which are naturally always stacked in the house's favor. Not to say that I think these betting markets are good at predicting future outcomes. They're clearly very bad at it! But I do think in concept they could be at least as good as any other method, since the existence of a betting market essentially sets a bounty for beating that market. What is limiting them is a mix of: obscurity, bet size limits, bet participant count limits, counterparty risk of shady betting sites, cost of fees/taxes making many bets not worth taking. Some prediction markets eliminate parts of that equation but amplify others, like the crypto markets not having the bet size limitations but also being much more obscure and shady. Furthermore, I don't even think those are problems that should be solved, because if none of those problems existed you'd see big traders like investment companies playing in prediction markets with billions of dollars, and then you'd have way bigger problems with insider trading and the market affecting the outcome. Things as mundane as surprise resignations and as shocking as assassinations. People already joke about stuff like that happening on PredictIt, with its $850 investment cap. No way to prove that it did, but it would be very easy for certain employees to do and get away with it. For example, in the 2020 election there was a market for when the GSA would ascertain the winner (releasing funds to the transition team). That was a decision made by one government employee. The market started on Nov 18th and had brackets like "Nov 23 or earlier", "Nov 24-Nov 30", "Dec 1-Dec 7", and so on. By the afternoon of Nov 23, with no news, the "Nov 23 or earlier" bracket was trading at 1c. Then the ascertainment happened and it settled. Now, that could have been a coincidence. It probably was a coincidence. But if you were the GSA administrator you could've made around $70k taking those 1c shares on the 23rd, and nobody would have to know.

f430 6y ago
> In prediction markets or sports betting, the gamblers aren't betting against the casino. Are you saying the crowd has an edge over the house? Sports betting platforms, poker sites, they are in the business of profiting off people who think they have an edge (aka ppl believe in the non-zero sum nature of these markets)
- rspeele 6y ago
  I'm saying the house doesn't even have skin in the game. At least in the prediction markets, the house is just pairing one person who'll bet "Trump wins" against another person who'll bet "Trump loses". Even when the "wisdom of crowds" holds true, the crowd is made up of thousands of individual winners and losers. The house just extracts a cut (fee, commission, vig, juice, take) from the winners' profits. They stay profitable no matter how "wise" the odds settled on by the crowd ended up being. Edit: concrete example. If you want to bet on Andrew Yang winning election for NYC Mayor, right now you'd pay 47c for a share on PredictIt. If he does win the election, you get a dollar. Where does the dollar come from? Well, you didn't really buy your "Yes" share from PredictIt. You bought it from somebody else on PredictIt, who's placed a standing offer to pay 53c for a "No" share. You accepted their offer when you bought your share taking the opposite end of their bet. Your 47c plus their 53c makes the dollar, and whoever wins gets the whole dollar. Except not quite, because PredictIt takes 10% of profits, so if you're right, you actually get your .47 back + (0.9 * .53) = $0.95, PredictIt gets the $0.05, and the loser gets zero. It's good to be the bookie.
- dragonwriter 6y ago
  > Are you saying the crowd has an edge over the house? No, the crowd is paying the house to bet against each other. > Sports betting platforms, poker sites, they are in the business of profiting off people who think they have an edge In that that's a big part of what motivates people to gamble, yes, but parimutuel gambling—which, in effect, includes prediction markets—the house isn't taking a side against the gambler, it's taking a cut off the top from all the gamblers on all sides, then the winners split the remainder. (Or splitting among winners first and charging a fee to the winners, which amounts to the same thing.)