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This type of instictive negative reaction to prediction markets is, unfortunately, common, but, I think, misguided. Prediction markets are one of the (or just,

by toth 3y ago

This type of instictive negative reaction to prediction markets is, unfortunately, common, but, I think, misguided. Prediction markets are one of the (or just, the?) best ways of aggregating knowledge from multiple sources and producing the best predictions. Having good legible predictions of impactful events such as LK-99 replication is extremely useful for society - it would be an invaluable input for a savvy policy maker for instance. What I think is silly is that vastly bigger amounts of money are put in betting markets for any mildly important sportsball game. Meanwhile, markets on LK99 replication, one of the most potentially important possibilities in the world right now have only on the order of hundreds of thousands of dollars in them. And there is no scamming involved. If you are participating in a prediction market, either you have some reason you believe you know something the market does not or you should expect you are simply subsidizing those with better information. The latter is a perfectly reasonable thing to do - it's not easy for an average person to "pay off some lab", but if they provide liquidity to the prediction market they are giving an explicit subsidy for anyone that can answer the question.

social_quotient 3y ago
I agree with you and think it parallels the equity market a bit. Stock prices embody the market's collective knowledge, expectations, and emotions about a company's current and future value. And to your point if you are blindly investing or blindly buying via instruments like ETFs you can end up subsidizing those with more/better information.
throw0101a 3y ago
What do these prediction markets produce? Some people are saying "yes" and others are saying "no", and the answer is either "yes" or "no", but why bother spending money on predicting when society can spend money on replicating it? Wouldn't an actual replication attempt be more useful? > The latter is a perfectly reasonable thing to do - it's not easy for an average person to "pay off some lab", but if they provide liquidity to the prediction market they are giving an explicit subsidy for anyone that can answer the question. Is any of this liquidity going to actual (replication) research, because if it is not, again: what are these markets tangibly producing? Moving a bunch of numbers around a ledger does not seem very useful.
- tinco 3y ago
  They're producing the wisdom of the crowd, which is a real and highly accurate piece of information. It's quite difficult and expensive to produce information as fast and reliable by other means. And they don't cost much, it's mostly money being moved around. edit: I interpreted it as asking wether prediction markets in general produce value. In this specific case I'm 100% with you, they're absolutely useless in predicting wether this finding is going to replicate or not. BTW probably 100% useless is going to be better than trusting a single reply in a HN thread. Even averaging out a group of replies on HN is going to be pretty bad, probably worse than averaging out a group of replies on Reddit. The idea of wisdom of the crowd is based on the idea that knowledge about a topic (both false and true) is roughly normally distributed (as many things are in nature), so the averaged result of a large group of answers is likely to be close to the real answer, as long as there are no external factors pushing the whole distribution left or right. Also, the final result is not going to be the answer if it's gonna replicate, but more the odds of it replicating (i.e. the odds of a paper like this being legit). The odds could be 1 in a million, and it still wouldn't affect the reality of LK-99 being super conductive or not.
  - MLH6ft1 3y ago
    "They're producing the wisdom of the crowd" Yeah we saw how wise was the crowd's wisdom with crypto.
    - Regnore 3y ago
      This is correct - the overwhelming majority of people did not get involved with crypto. Even for people and companies who did most put a fraction of their money into it.
  - hutzlibu 3y ago
    "They're producing the wisdom of the crowd, which is a real and highly accurate piece of information." I have strong doubts, that the wisdom of the crowd here is competent in judging whether a revolutionary new superconductor is real, or not.
Retric 3y ago
The issue is there’s zero utility in aggregating knowledge on LK-99 as apposed to simply running these experiments. It’s going to take weeks not decades for someone to replicate it. Markets are useful when people act more efficiently based on the information, but there’s no efficiency to be gained here.
tinco 3y ago
Not to take away from your point, but there is a better way than prediction markets, and that's careful objective research by non-experts (https://goodjudgment.com/ https://goodjudgment.com/). It's been shown that teams of such researchers consistently beat prediction markets on these sorts of topics. Anecdotal evidence suggests it might be that the presence of experts and cultural preconceptions corrupt prediction markets enough to diverge the result from the "wisdom of the crowd" effect.
- seppel 3y ago
  > It's been shown that teams of such researchers consistently beat prediction markets on these sorts of topics. This sounds like free money.
  - tinco 3y ago
    Running prediction markets is probably more free money than that. Building and maintaining research teams like that is not easy or cheap, if it would be then Good Judgment Inc. would be rolling in cash. Edit for context: Good Judgement Inc. is a sort of consultancy firm formed based on the results of an experiment called "The good judgment project" where psychologists challenged a community to predict (geopolitical) events. By structuring it as a team based tournament they figured out a list of qualities/rules that would make an individual or theme very good at accurately predicting events. The teams that followed these rules outperformed prediction markets. Following the rules is basically a full time commitment. The list is here, go get your free money: https://goodjudgment.com/philip-tetlocks-10-commandments-of-superforecasting/ https://goodjudgment.com/philip-tetlocks-10-commandments-of-...
    - seppel 3y ago
      > Running prediction markets is probably more free money than that. Building and maintaining research teams like that is not easy or cheap, if it would be then Good Judgment Inc. would be rolling in cash. You get your money from the prediction market if you are better at predicting.
- 3y ago
Turskarama 3y ago
LK-99 is a brand new material that almost nobody knows anything about. The market is not a knowledge aggregate, it is vibes based.
- japoco 3y ago
  You are severely underestimating how good vibes from a lot of people are at giving good estimates.
  - Turskarama 3y ago
    There has to be _some_ level of knowledge to base it off though, this is just hope.
  - evgen 3y ago
    They are actually only good if the members of that crowd have some sort of empirical experience with the problem they are being asked to solve. Guess the number of coins in a jar? People know coins and have experience packing things in a limited volume to the crowd has a hope of being wise. Guess an obscure materials science and physics result? Not a chance, the crowd is worthless.
  - polygamous_bat 3y ago
    > You are severely underestimating how good vibes from a lot of people are at giving good estimates Anyone else remembers how people were selling and buying doge coin at 70 cents based on good vibes? No? Ok.
dist-epoch 3y ago
How about this scenario: I am the PI of a laboratory. I buy up the market and (falsely) announce that I succeeded in replication. Sell and make profit. Then a couple of days later I announce that I made a terrible mistake. How do you prevent this scenario? I did nothing illegal, I just "not noticed the mistake I made".
- alchemist1e9 3y ago
  A version of that probably happened last night with Lk-99, the “Iris” replication claim. Why do think it’s such a problem? Those are the risks of speculating and the market adjusted back downwards in very short order. If Iris was a manipulator the gains were minimal and fleeting. The anti-markets comments all over this are so unfortunate and misguided. By your own logic don’t you just prove that a real lab is now potentially motivated to investigate and even replicate? If I’m working in a lab and it looks like it is working, why not let me place money on yes and speculate? I have excellent information.
  - TehCorwiz 3y ago
    But a fraud was perpetrated and the scammer got away. The markets are supposed to ignore that? Money was taken out of the market by a bad actor. If anything this encourages quick fraud over slow honesty.
    - alchemist1e9 3y ago
      Markets don’t ignore it, they learn from it. They don’t need you or any authority to protect them. Edit: Understand that the scammer has to buy, then release the false information, and then sell. They only “scam” the buyers that don’t critically assess this new information, such as it’s provenance and quality. This means that over time only the best analysts survive and thrive. Smart speculators likely sold the spike, limiting the number of buyers the manipulator could find. This scenario is actually an argument FOR prediction markets.
      - morelisp 3y ago
alchemist1e9 3y ago
Absolutely and people might be interested that in this case the prediction market for LK-99 is reacting in real time to new tweets from people trying to replicate. The “yes” spike to 32c yesterday was in response to a twitter account posting an image of a levitating grain in a tube. The credibility of that replication attempt was then evaluated by many and the market backed off afterwards. There is always a subtle anti-markets theme on many HN debates, likely from highly educated ans literate posters. I believe we still in this age simply don’t provide proper education on the massive benefits that markets bring to so mang problems. They are literally the nervous system of our incredible global organic economy. In this case, why in world would you have something against prediction markets? Is it fascinating the risk of a nuclear weapon detonation by December 31st of 2023 is accessed to be around 9%? If anything we need to liberalize laws around prediction markets. Currently they are relagated to off shore and various backwaters. The CME should be listing tbese types of markets ideally and institutional money hiring top analytical talent would then participate.
- mellosouls 3y ago
  There is always a subtle anti-markets theme on many HN debates, likely from highly educated ans literate posters. I believe we still in this age simply don’t provide proper education on the massive benefits that markets bring to so mang problems I think we are all too aware of markets and their benefits and disbenefits. It's not clear why you think the "education" is missing only in one direction.
  - alchemist1e9 3y ago
    You don’t observe a frequent knee jerk like anti-markets reaction from comments across HN? What are good examples of their “disbenefits”?
    - mellosouls 3y ago
      You don’t observe a frequent knee jerk like anti-markets reaction from comments across HN? I find HN one of the most balanced online forums on most subjects. What are good examples of their “disbenefits”? The race to the bottom is all around us.
scotty79 3y ago
> Prediction markets are one of the (or just, the?) best ways of aggregating knowledge from multiple sources and producing the best predictions. They would be true if people with most money and appetite for risk were also the most knowledgeable and smart. They are not. As you can easily tell from recent coverage of idiocy of even the richest people who have propensity for big bets. It has been researched and discovered that people with more money do not make smarter bets than those with far less. So at best, looking at prediction markets, gives you exactly as much knowledge as polling random people on the streets and asking them what would they bet on.
- danparsonson 3y ago
  This exactly - the idea that a whole load of well informed people are driving a prediction market is about as realistic as saying that crypto investors are all experts in economics.
amelius 3y ago
Counterargument. Prediction markets could also be used to hedge. E.g. if you invest in technology around LK-99, and then use prediction market to prevent going bankrupt in case you were wrong. THUS: it doesn't mean that prediction markets give good predictions. By the way. Do you have some data on that? I.e., statistics of prediction markets being right vs wrong?
- twoodfin 3y ago
  The hedge is still a signal of the degree of risk you ascribe to the possibility your technology won’t work.
  - amelius 3y ago
    If I invest in technology (hoping it will work) but use the prediction market to hedge in case the technology won't work, how does that tell anyone watching the prediction market that people have net positive feelings about the technology?
    - twoodfin 3y ago
      If you were 100% confident you wouldn’t hedge at all. If you’re 80% confident you’d hedge less than if you were only 60% confident. This all translates into an price signal if the market is functioning and liquid.
      - deleted 3y ago
        [deleted]
      - amelius 3y ago
        You should explain how this works then. How exactly do you derive a prediction from the price? Also if the people with deep knowledge of the technology use the prediction market for hedging, and all the "outsiders" use it for speculation, then the signal is disturbed anyway.
renlo 3y ago
> If you are participating in a prediction market, either you have some reason you believe you know something the market does not or you should expect you are simply subsidizing those with better information. Sometimes people just vote for "their team", similar to a sportsball fan placing a large bet on their favorite team winning, without any insider knowledge. I've seen it a couple of times on PredictIt for the more contentious predictions (presidential election being one, control of the house / senate, etc). While in the end those with better information will usually come out on top, in those kinds of markets the favored prediction doesn't align well with the data.
crispyambulance 3y ago
> Having good legible predictions of impactful events such as LK-99 replication is extremely useful for society - it would be an invaluable input for a savvy policy maker for instance. How? Would it not be better for the "savvy" policy maker to JUST WAIT until this discovery is confirmed, definitively, by multiple legit research institutions? And even better, wait until it shows some promise of practical application? Policy, as we know it, almost never reacts within hours to anything, let alone a scientific discovery. What exactly can a policy maker even do with faster than hot-off-the-press knowledge about this stuff? Prediction markets are really just for people that hustle in markets or who are looking for a news scoop. There's nothing intrinsically wrong with that, though some might argue it contributes to needless volatility.
- zone411 3y ago
  For example, if I'm deciding right now whether to fund a mine for one of the materials needed to create this supposed superconductor, knowing how likely it is to be real helps me make a better decision or hedge my investment.
  - crispyambulance 3y ago
    Right, there's nothing wrong with that, but it's appropriate for someone who is hustling the market. Not a policy-maker. Even if it's a government doing the funding, a response time measured in hours doesn't really help anyone. If anything, it is likely to introduce extreme volatility, jacking up prices because of speculation.
andrepd 3y ago
>Prediction markets are one of the (or just, the?) best ways of aggregating knowledge from multiple sources and producing the best predictions. That's an extraordinary claim with zero evidence behind it. Do you have any evidence that "prediction markets" provide more accurate predictions than e.g. specialist surveys or other mechanisms? I don't see any empirical evidence nor any logical reason for that to be the case.

by toth 3y ago

social_quotient 3y ago

I agree with you and think it parallels the equity market a bit. Stock prices embody the market's collective knowledge, expectations, and emotions about a company's current and future value. And to your point if you are blindly investing or blindly buying via instruments like ETFs you can end up subsidizing those with more/better information.

throw0101a 3y ago

What do these prediction markets produce? Some people are saying "yes" and others are saying "no", and the answer is either "yes" or "no", but why bother spending money on predicting when society can spend money on replicating it? Wouldn't an actual replication attempt be more useful? > The latter is a perfectly reasonable thing to do - it's not easy for an average person to "pay off some lab", but if they provide liquidity to the prediction market they are giving an explicit subsidy for anyone that can answer the question. Is any of this liquidity going to actual (replication) research, because if it is not, again: what are these markets tangibly producing? Moving a bunch of numbers around a ledger does not seem very useful.

tinco 3y ago
They're producing the wisdom of the crowd, which is a real and highly accurate piece of information. It's quite difficult and expensive to produce information as fast and reliable by other means. And they don't cost much, it's mostly money being moved around. edit: I interpreted it as asking wether prediction markets in general produce value. In this specific case I'm 100% with you, they're absolutely useless in predicting wether this finding is going to replicate or not. BTW probably 100% useless is going to be better than trusting a single reply in a HN thread. Even averaging out a group of replies on HN is going to be pretty bad, probably worse than averaging out a group of replies on Reddit. The idea of wisdom of the crowd is based on the idea that knowledge about a topic (both false and true) is roughly normally distributed (as many things are in nature), so the averaged result of a large group of answers is likely to be close to the real answer, as long as there are no external factors pushing the whole distribution left or right. Also, the final result is not going to be the answer if it's gonna replicate, but more the odds of it replicating (i.e. the odds of a paper like this being legit). The odds could be 1 in a million, and it still wouldn't affect the reality of LK-99 being super conductive or not.
- MLH6ft1 3y ago
  "They're producing the wisdom of the crowd" Yeah we saw how wise was the crowd's wisdom with crypto.
  - Regnore 3y ago
    This is correct - the overwhelming majority of people did not get involved with crypto. Even for people and companies who did most put a fraction of their money into it.
- hutzlibu 3y ago
  "They're producing the wisdom of the crowd, which is a real and highly accurate piece of information." I have strong doubts, that the wisdom of the crowd here is competent in judging whether a revolutionary new superconductor is real, or not.

Retric 3y ago

The issue is there’s zero utility in aggregating knowledge on LK-99 as apposed to simply running these experiments. It’s going to take weeks not decades for someone to replicate it. Markets are useful when people act more efficiently based on the information, but there’s no efficiency to be gained here.

tinco 3y ago

Not to take away from your point, but there is a better way than prediction markets, and that's careful objective research by non-experts (https://goodjudgment.com/ https://goodjudgment.com/). It's been shown that teams of such researchers consistently beat prediction markets on these sorts of topics. Anecdotal evidence suggests it might be that the presence of experts and cultural preconceptions corrupt prediction markets enough to diverge the result from the "wisdom of the crowd" effect.

seppel 3y ago
> It's been shown that teams of such researchers consistently beat prediction markets on these sorts of topics. This sounds like free money.
- tinco 3y ago
  Running prediction markets is probably more free money than that. Building and maintaining research teams like that is not easy or cheap, if it would be then Good Judgment Inc. would be rolling in cash. Edit for context: Good Judgement Inc. is a sort of consultancy firm formed based on the results of an experiment called "The good judgment project" where psychologists challenged a community to predict (geopolitical) events. By structuring it as a team based tournament they figured out a list of qualities/rules that would make an individual or theme very good at accurately predicting events. The teams that followed these rules outperformed prediction markets. Following the rules is basically a full time commitment. The list is here, go get your free money: https://goodjudgment.com/philip-tetlocks-10-commandments-of-superforecasting/ https://goodjudgment.com/philip-tetlocks-10-commandments-of-...
  - seppel 3y ago
    > Running prediction markets is probably more free money than that. Building and maintaining research teams like that is not easy or cheap, if it would be then Good Judgment Inc. would be rolling in cash. You get your money from the prediction market if you are better at predicting.
3y ago

Turskarama 3y ago

LK-99 is a brand new material that almost nobody knows anything about. The market is not a knowledge aggregate, it is vibes based.

japoco 3y ago
You are severely underestimating how good vibes from a lot of people are at giving good estimates.
- Turskarama 3y ago
  There has to be _some_ level of knowledge to base it off though, this is just hope.
- evgen 3y ago
  They are actually only good if the members of that crowd have some sort of empirical experience with the problem they are being asked to solve. Guess the number of coins in a jar? People know coins and have experience packing things in a limited volume to the crowd has a hope of being wise. Guess an obscure materials science and physics result? Not a chance, the crowd is worthless.
- polygamous_bat 3y ago
  > You are severely underestimating how good vibes from a lot of people are at giving good estimates Anyone else remembers how people were selling and buying doge coin at 70 cents based on good vibes? No? Ok.

dist-epoch 3y ago

How about this scenario: I am the PI of a laboratory. I buy up the market and (falsely) announce that I succeeded in replication. Sell and make profit. Then a couple of days later I announce that I made a terrible mistake. How do you prevent this scenario? I did nothing illegal, I just "not noticed the mistake I made".

alchemist1e9 3y ago
A version of that probably happened last night with Lk-99, the “Iris” replication claim. Why do think it’s such a problem? Those are the risks of speculating and the market adjusted back downwards in very short order. If Iris was a manipulator the gains were minimal and fleeting. The anti-markets comments all over this are so unfortunate and misguided. By your own logic don’t you just prove that a real lab is now potentially motivated to investigate and even replicate? If I’m working in a lab and it looks like it is working, why not let me place money on yes and speculate? I have excellent information.
- TehCorwiz 3y ago
  But a fraud was perpetrated and the scammer got away. The markets are supposed to ignore that? Money was taken out of the market by a bad actor. If anything this encourages quick fraud over slow honesty.
  - alchemist1e9 3y ago
    Markets don’t ignore it, they learn from it. They don’t need you or any authority to protect them. Edit: Understand that the scammer has to buy, then release the false information, and then sell. They only “scam” the buyers that don’t critically assess this new information, such as it’s provenance and quality. This means that over time only the best analysts survive and thrive. Smart speculators likely sold the spike, limiting the number of buyers the manipulator could find. This scenario is actually an argument FOR prediction markets.
    - morelisp 3y ago

alchemist1e9 3y ago

Absolutely and people might be interested that in this case the prediction market for LK-99 is reacting in real time to new tweets from people trying to replicate. The “yes” spike to 32c yesterday was in response to a twitter account posting an image of a levitating grain in a tube. The credibility of that replication attempt was then evaluated by many and the market backed off afterwards. There is always a subtle anti-markets theme on many HN debates, likely from highly educated ans literate posters. I believe we still in this age simply don’t provide proper education on the massive benefits that markets bring to so mang problems. They are literally the nervous system of our incredible global organic economy. In this case, why in world would you have something against prediction markets? Is it fascinating the risk of a nuclear weapon detonation by December 31st of 2023 is accessed to be around 9%? If anything we need to liberalize laws around prediction markets. Currently they are relagated to off shore and various backwaters. The CME should be listing tbese types of markets ideally and institutional money hiring top analytical talent would then participate.

mellosouls 3y ago
There is always a subtle anti-markets theme on many HN debates, likely from highly educated ans literate posters. I believe we still in this age simply don’t provide proper education on the massive benefits that markets bring to so mang problems I think we are all too aware of markets and their benefits and disbenefits. It's not clear why you think the "education" is missing only in one direction.
- alchemist1e9 3y ago
  You don’t observe a frequent knee jerk like anti-markets reaction from comments across HN? What are good examples of their “disbenefits”?
  - mellosouls 3y ago
    You don’t observe a frequent knee jerk like anti-markets reaction from comments across HN? I find HN one of the most balanced online forums on most subjects. What are good examples of their “disbenefits”? The race to the bottom is all around us.

scotty79 3y ago

> Prediction markets are one of the (or just, the?) best ways of aggregating knowledge from multiple sources and producing the best predictions. They would be true if people with most money and appetite for risk were also the most knowledgeable and smart. They are not. As you can easily tell from recent coverage of idiocy of even the richest people who have propensity for big bets. It has been researched and discovered that people with more money do not make smarter bets than those with far less. So at best, looking at prediction markets, gives you exactly as much knowledge as polling random people on the streets and asking them what would they bet on.

danparsonson 3y ago
This exactly - the idea that a whole load of well informed people are driving a prediction market is about as realistic as saying that crypto investors are all experts in economics.

amelius 3y ago

Counterargument. Prediction markets could also be used to hedge. E.g. if you invest in technology around LK-99, and then use prediction market to prevent going bankrupt in case you were wrong. THUS: it doesn't mean that prediction markets give good predictions. By the way. Do you have some data on that? I.e., statistics of prediction markets being right vs wrong?

twoodfin 3y ago
The hedge is still a signal of the degree of risk you ascribe to the possibility your technology won’t work.
- amelius 3y ago
  If I invest in technology (hoping it will work) but use the prediction market to hedge in case the technology won't work, how does that tell anyone watching the prediction market that people have net positive feelings about the technology?
  - twoodfin 3y ago
    If you were 100% confident you wouldn’t hedge at all. If you’re 80% confident you’d hedge less than if you were only 60% confident. This all translates into an price signal if the market is functioning and liquid.
    - deleted 3y ago
      [deleted]
    - amelius 3y ago
      You should explain how this works then. How exactly do you derive a prediction from the price? Also if the people with deep knowledge of the technology use the prediction market for hedging, and all the "outsiders" use it for speculation, then the signal is disturbed anyway.

renlo 3y ago

> If you are participating in a prediction market, either you have some reason you believe you know something the market does not or you should expect you are simply subsidizing those with better information. Sometimes people just vote for "their team", similar to a sportsball fan placing a large bet on their favorite team winning, without any insider knowledge. I've seen it a couple of times on PredictIt for the more contentious predictions (presidential election being one, control of the house / senate, etc). While in the end those with better information will usually come out on top, in those kinds of markets the favored prediction doesn't align well with the data.

crispyambulance 3y ago

> Having good legible predictions of impactful events such as LK-99 replication is extremely useful for society - it would be an invaluable input for a savvy policy maker for instance. How? Would it not be better for the "savvy" policy maker to JUST WAIT until this discovery is confirmed, definitively, by multiple legit research institutions? And even better, wait until it shows some promise of practical application? Policy, as we know it, almost never reacts within hours to anything, let alone a scientific discovery. What exactly can a policy maker even do with faster than hot-off-the-press knowledge about this stuff? Prediction markets are really just for people that hustle in markets or who are looking for a news scoop. There's nothing intrinsically wrong with that, though some might argue it contributes to needless volatility.

zone411 3y ago
For example, if I'm deciding right now whether to fund a mine for one of the materials needed to create this supposed superconductor, knowing how likely it is to be real helps me make a better decision or hedge my investment.
- crispyambulance 3y ago
  Right, there's nothing wrong with that, but it's appropriate for someone who is hustling the market. Not a policy-maker. Even if it's a government doing the funding, a response time measured in hours doesn't really help anyone. If anything, it is likely to introduce extreme volatility, jacking up prices because of speculation.

andrepd 3y ago

>Prediction markets are one of the (or just, the?) best ways of aggregating knowledge from multiple sources and producing the best predictions. That's an extraordinary claim with zero evidence behind it. Do you have any evidence that "prediction markets" provide more accurate predictions than e.g. specialist surveys or other mechanisms? I don't see any empirical evidence nor any logical reason for that to be the case.