I Championed Prediction Markets. Look What They've Become

Their track record is not great, and I don't think they fully realise that the issue is them: the principles and axioms they rely on don't lead to good results.

> I don’t claim to know the exact right policy answer for America.

Perhaps start by reversing your positions, and throwing support behind those trying to undo the damage you caused.

> I don’t claim to know the exact right policy answer for America. But I know we never even had a grown-up debate.

If you've seen the destruction caused by something and can't figure it out, maybe you have a problem?

And let's be honest: the idea of "debating" things that are obvious is often one of the primary ways by which indefensible things are legitimized.

But it also reminds me that prediction markets are one of those things that are transparently a terrible idea because they create problematic incentives, and not just because people ruin their lives gambling. If you can make $1 million by triggering something that or getting somebody to trigger something that basically has no business happening, whether it's stripping on the Senate floor, causing a volcano to erupt, or crops yields to reduce by secret herbicide dusting, or any other bologna, somebody will do it if the balance makes it worthwhile. Likewise, they give people reasons to vote that are negative - "I have $100 on prop XYZ passing, of course I support it." (Though side note: the ubiquity of betting being super terrible for society because people can't handle gambling at all is one of those things that I've been super surprised by that seems to have good evidence now. I guess because gambling mostly just doesn't do it for me to the degree that I find it shocking just how addictive it is and just how much it exacerbates bad situations for many people.)

And I can't see how there's any benefit that's bigger than the problems. If prediction markets are better than Nate Silver, why is it worth all the problems to society for that extra accuracy margin? I can see why individual actors might find value, but I don't see how their value accrues to society in any way that makes it worth it.

What neither I nor the author anticipated was that the easiest way to make the markets "efficient" was to rig them.

In hindsight it's obvious, but optimism is one of the most powerful blinders out there.

Insurance was illegal at different times in history because it was considered gambling. Ditto for commodity trading.

Even you look at the structure of a futures contact, the basics look really similar to a bet that can be traded with someone else.

The main differences are the regulatory environment, and the intention the actors in the market have.

Commodities, options, and futures are all legitimately used to hedge against future outcomes. The "gamble" (placing money on a future outcome) is a mechanism for the main goal: protection against instability.

When you look at stocks and - in particular - derivatives, it starts to look a lot closer to how gambling is structured. I'm pro stock market, but that doesn't mean I won't admit that the line between it and gambling is pretty hard to draw. It's a lot more grey than people give credit for

Think about whether the spirit of the domestic/foreign emoluments clause would be okay with this. I'm sure some will argue there's enough layers of BS in this scheme that it's totally fine.

Ethics and judgement aside, I think startup founders can learn a lot from this administration as to how "successful" people twist things in their favor. The industry is full of it.

The corrupting influence they are having on society has been obvious from the start and was predicted by anyone with any familiarity of the effects of "traditional" gambling on people. Except the author apparently, because they had seen precisely what gambling can do to people and still pushed this.

"The dream was that markets would surface useful information"

The dream was that the markets would make the people who owned them stupid amounts of money like any casino owner. Pretending otherwise is self-delusion at it's finest but the author seems good at that.

He is already so beyond the pale this doesnt even move the needle.

In retrospect their misuse as a loophole for sports gambling was an obvious outcome. Seems like every promising new technology inevitably is used for evil. Cryptocurrency is mostly used for criminals. Social media displaced more meaningful forms of connection. We're already starting to see this with AI (psychosis, slop, assisting bad actors) but I'm afraid it will get much worse.

Anyone who is not an insider is a loser.

Wow, no you built an avenue for corruption, insider trading and problem-gambling, and you should have known this beforehand. Would have known it beforehand if you'd bothered to consult with non-economists.

It would be dishonest to ban prediction markets without banning stock markets.

The best which can be done, under the current system, is to punish unfair information asymmetries, which is practically impossible to do reliably... And even if we could find a way to punish it reliably; what would happen is that most rich people would end up in jail. Information asymmetry is almost never fair and it's how people make big money these days.

I think the best solution is to create conditions to allow people to earn big money in other ways; ways which create value. If there were other ways to make big money besides unfair information asymmetry, then skilled people would find it easier to do that instead...

Unfortunately, skill/talent does not allow you to gain an information advantage; only social connections do. So the current system is really bad in terms of wasting specialized skills/talents... Current system takes talented people and re-orients them towards adversarial games of deception where they're just a number in a sea of increasingly desperate untalented people who are better at playing the deception game... And the talented folks eventually lose their talents through lack of practice; they're so focused on learning ways to trick people and algorithms, that their actual talents atrophy; by the time they become well known, if they ever do (most don't), they've become mediocre; corrupted by their participation in the process of trying to become relevant; their main talent always takes the back seat.