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[P]
Betting on the Future

By khallow in Culture
Mon Mar 11, 2002 at 04:13:29 AM EST
Tags: Internet (all tags)
Internet

You think you know how the future is going to turn out? You know what's wrong and what's right? Or maybe you just want to "be prepared". Check out my favorite site, the Foresight Exchange. Here you get to put your money (ok, your play money) where your mouth is.


The Foresight Exchange is a great example of betting markets. The way it works (in theory) is simple. You have some decidable statement about the future, say G.W. Bush gets reelected in 2004 , or a magnitude 8.0 earthquake hits the US west. These statements form the core of an investment "claim". Foresight Exchange (or FX) traders can then invest on a claim buying or selling "YES" coupons. Incidentally, anyone willing to spend their play money can create new claims.

The mechanics is too involved to fully get into here, but it is one of the big turnoffs of the system. Basically, you either are buying a YES coupon or selling a YES coupon (but spending money unlike the stock market). Real details can be found here (preferred), here, or here (a K5 comment of mine).

What is going on here? Well, as new information about the statement (and new users) enter the market, the price of the claim is going to fluctuate. So if you guessed correctly (or had better information) then you can profit from your investment. In a similar fashion, if you make a mistake, then you are penalized by losing value in your investment. The end result is that people who know more or invest better gain credibills and hence have a greater weight on the market. Ie, you are rewarded for being right with greater influence on the market.

Why do it? It gives you a verifiable reputation. For example, there are reoccurring examples of the Media giving attention to people (and organizations) who simply do not have any credibility, but who have an interest (often a large financial interest) in changing public opinion.

In academia, occasionally (some would argue "frequently") new ideas are stifled by the old guard either accidentally or deliberately, or the idea just isn't "in fashion". How does one weed the good ideas from the chaff?

FX gives you a way to make rational decisions about the feasibility or risk of a certain outcome. A collective group trades on the claim. If the idea is valid and works, for example, then those that were right get rewarded, maybe very significantly. So you have a way to make decisions and deal with uncertainty.

Finally, FX provides a way to keep an issue lingering in the public consciousness. For example, the hubbub about small-yield nukes is going to fade into the background noise for most media sources. However, on FX the issue is still there.

Some tidbits for your edification (as of Mar 10, 2002):

Note that FX has some of the same problems as K5 and other sites. Namely, that many of the people and claims are US-centric. However, the focus of the market is global and does have a strong international presence.

In addition to the Foresight Exchange, there are similar markets operating on the Internet. The two best examples that I know of are the Hollywood Stock Exchange which may provide some of the best estimates of movie grosses and the Iowa Electronic Market which trades in small amounts of real money (US dollar) on US national elections. Also, there's been a lot of theoretical work done in these types of markets. Robin Hanson, a professor at George Mason University, has compiled a huge list of articles, web links, email discussions, personal publications, etc. about existing markets and their potential use in democratic societies.

Finally, here's some of the oddities and highlights of the era of the Foresight Exchange and of its predecessor, Idea Futures.

  • FX has at least two different trading programs operating. Markybot is a collection of perl scripts written by Jay Scott, while Neal Gafter wrote his own which runs here.
  • IBM ships a linux web server, but does so a month after this claim expires. This causes a vast shift in FX from almost YES to certainly NO.
  • The claim, BlOGlb is inspired by the statements of a man who would circumnavigate the world by balloon: "...the thought crossed my mind that maybe a round-the-world flight really is impossible...I've come back to my conviction that circumnavigation is possible. I'd put money on someone doing it 24 months from today." As it turns out, his statement (and BlOGlb) are shown to be false. A new claim, BlOGl2 is created to "fill out" the rest of 1999. It becomes true in two months.
  • O. J. Simpson for some reason warranted several claims (maybe this isn't a shining moment in FX history :-), most of which dealt with the outcome of the notorious trial. The "not guilty" verdict was a big surprise (a little black mark on the predictive power of FX) for the frenetic traders, but the market survived the resulting panic. The server barely handles the resulting load with a transaction occurring (by my watch) about once every 15 minutes rather than one every 10 seconds. The new Foresight Exchange has both better algorithms and faster hardware. This incident was in part one of the reasons for the new server. Another was financial plans that the founders had for the market. The latter which hasn't been realized. FWIW, no similar crush has yet occurred even after such serious events as the World Trade Center terrorist attacks. Yes, some people did trade right after the WTC attack.
  • While it is questionable whether FX would have predicted properly the possibility of an event of the magnitude of the WTC attack, it is interesting that a claim at the time, USTerr (a terrorist attack on US soil kills 200 or more people by 2010) was trading around 40. Ie, FX was saying there was a 40% of a larger attack (before 2010) than any that had been seen in US history. This is a whole lot better than the media which was labeling the attack as "unthinkable".
  • Over a couple weeks after the attack, a claim, BB2002 that the US would balance its budget fell from above 50 to roughly 20.
  • The first claim (no link) to be judged was whether David McFadzean (one of the founders) would get his PhD. He did. There was considerable trading the night before the announcement that he had passed the dissertation defense.
  • SClm (no link) was a self-referential claim created in early December 1994 that would be "YES" if 25 "significant" short term claims were in existence by the end of January, 1995. This indeed came true. See here for a reference. Due to the unusual problem, the judge had to take some time to study the claim. In the mean time, trading continued based on what people thought the judge would decide. Eventually, he decided to judge the claim as a YES unfortunately hinting at his intentions in a mailing list. Afterward, I recall that several of the claims became (and remained) uncapitalized. This claim remains one of the prime examples of bizarreness that can occur in claims around judging time.
  • The final anecdote I recall was that I never made money on Boris Yeltsin. Over the years there were several claims on Boris Yeltsin leaving office early. In each case, I bet that Yeltsin would leave (ill health, etc). However, he had the final laugh on FX. The very last FX claim on Yeltsin leaving office early was due to expire at the beginning of January 1, 2000. He resigned December 31, 1999 the very day before.

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Related Links
o Foresight Exchange
o G.W. Bush gets reelected in 2004
o a magnitude 8.0 earthquake hits the US west
o here (preferred)
o here
o here (a K5 comment of mine)
o still there
o Yucca Mountain
o opens by 2010
o used by 2010
o keep using the Euro
o A female president by 2013
o Human cloned before 2005
o on the road by 2010
o drafts 100 or more people by 2010
o continuous ly through 2025
o Hollywood Stock Exchange
o Iowa Electronic Market
o Robin Hanson
o Markybot
o Jay Scott
o Neal Gafter
o here
o this claim
o BlOGlb
o BlOGl2
o USTerr
o BB2002
o here [2]
o Also by khallow


Display: Sort:
Betting on the Future | 43 comments (38 topical, 5 editorial, 0 hidden)
Two questions. (4.00 / 5) (#2)
by ti dave on Mon Mar 11, 2002 at 12:32:14 AM EST

1. Play money aside, how is this (and by extension, the Stock Market) any different than betting the line in Vegas?

2. Why, if one was skilled enough to do this well, would they spend time doing this, when they could be making real money on Wall Street?


"If you dial," Iran said, eyes open and watching, "for greater venom, then I'll dial the same."

Re: Two questions. (5.00 / 1) (#3)
by khallow on Mon Mar 11, 2002 at 12:43:56 AM EST

1. Play money aside, how is this (and by extension, the Stock Market) any different than betting the line in Vegas?

Well, there are investments in the stock market that aren't automatically intended to fleece the purchaser. The market isn't the house. Sometimes, like in the case of Enron, you can't tell the difference, but there are companies that are honest, and give you more than you put in. Also, the stock markets exist to provide a valuable service - linking investors and capital-hungry companies.

Ideally, an FX market would be the same way. It's meant as an enabler of valuable services rather than a fleecer of the stupid.

2. Why, if one was skilled enough to do this well, would they spend time doing this, when they could be making real money on Wall Street?

This wounds man! Well, to put it nicely, sometimes people can do well at one thing like FX and do, shall we say "poorly" at the other thing. Besides FX has a better range and the people are more interesting. I've rarely gotten into a scintillating discussion with the short seller trolls on some of the investment groups (nor been sufficently drawn to do so), but had real fun on FX.

[ Parent ]

Barring the authenticity of... (5.00 / 2) (#9)
by ti dave on Mon Mar 11, 2002 at 03:37:19 AM EST

Precognition;

sometimes people can do well at one thing like FX and do, shall we say "poorly" at the other thing.

It seems to me that the people who possess the skill-set to conduct research on what are "likely outcomes" for FX, could transfer those skills to research the trends and capabilities of companies. I suppose that's what a Stock Analyst does for a living.

I suppose the research I'm referring to, involves asking hard questions of the right people, not just peering at "charts and graphs".

I suppose it's a fine line between "good research" and "insider information".

Good points though.


"If you dial," Iran said, eyes open and watching, "for greater venom, then I'll dial the same."

[ Parent ]
Is Precognition that far fetched (none / 0) (#22)
by Randall Burns on Mon Mar 11, 2002 at 01:20:08 PM EST

>Precognition;
>
It seems to me that the people who possess the
skill-set to conduct research on what
are "likely outcomes" for FX, could transfer
those skills to research the trends and
capabilities of companies. I suppose that's
what a Stock Analyst does for a living.
>>>>>>>>>>>>>>>>>>>>>>
We have no evidence that this is the case. FX players frequently do poorly in real money trading and professional traders don't seem to do well on FX

I suppose the research I'm referring to, involves asking hard questions of the right people, not just peering at "charts and graphs".

Keep in mind, the margins by which successful traders in real money markets beat the market is, very, very small typically. All kinds of strategies are used by professional traders.

My own working hypothesis is that the FX odds are a reasonable but imperfect approximation of reality. Few people seem able to beat the odds-and FX tests things that financial markets don't touch.



[ Parent ]

Do you have any of these people.. (none / 0) (#39)
by Wah on Tue Mar 12, 2002 at 02:48:24 PM EST

..it sounds like they may make a good impression there.
--
Choas and order, flowing down the drain of time. Ain't it purdy? | SSP
[ Parent ]
Sure (none / 0) (#40)
by khallow on Thu Mar 14, 2002 at 01:47:09 AM EST

As a mathematician and FX trader, I have the training and incentive to find patterns in numbers. As one of the highest scored traders on FX, I have cause for that particular optimism.

I must take exception to the phrase in the article "can detect the next step in any sequence that lacks a perceptible pattern." After all, these sequences were generated chaotically and hence had a pattern. The subjects in question did fail to predict random sequences which after all lack perceptible patterns.

[ Parent ]

Wall Street doesn't trade the same stuff as FX (4.50 / 2) (#13)
by Randall Burns on Mon Mar 11, 2002 at 06:15:46 AM EST

Basically, the range of stuff that Wall Street bets on is different, and isn't nearly as interesting to me personally. FX has stuff on things that are directly important to me life-like the likeyhood of a nuclear war or the chance that Smallpox gets reintroduced as a disease. That is far more interesting to me that this dance of mergers and acquisitions going on in corporate America today.

[ Parent ]
Wall Street types don't do well on FX (4.00 / 1) (#17)
by Randall Burns on Mon Mar 11, 2002 at 12:44:39 PM EST

The other thing we've noticed, is that professional traders typically don't do well on FX. We have had quite a few professional traders that have tried their hand at FX. I haven't seen any of them do especially well.

What I suspect may be happening here: these folks are used to investing in well developed markets, and leveraging different kinds of information to make their money.

Some of the same rules apply on FX as apply on wall street, but trading on FX is more like trading on the US stock market in the 1700's, when there just weren't that many people trading yet.



[ Parent ]

psst. (3.50 / 2) (#5)
by ODiV on Mon Mar 11, 2002 at 02:12:20 AM EST

If anyone's looking to sign up and needs a tip, I've got a feeling that the claim Cent is way undervalued.

I'm just telling you this to help you out, you understand.

--
[ odiv.net ]
Problems with FX (5.00 / 1) (#8)
by cameldrv on Mon Mar 11, 2002 at 02:55:51 AM EST

The major thing I don't like about FX is that you can't trade on margin. This means that everyone has a fixed capital stock that they can use to bet. The problem is that this leads to the "fifty cent bias", where claims that have a high or a low probability trade towards fifty cents because the contrarians don't have to spend as much to move the market. This is particularly true in the longer-term claims. It is very frustrating to be in a long-term claim which you know is trading at the wrong price, but you have to hold it for ten years to be proved right. A prime example of this is Infl. I currently hold -473 in this at a BEP of 0.13. For this claim to be true, Inflation over the next eight years would have to be over 15% per year. The last time inflation was over 15% was 1920. There was also super-15% inflation in 1917 and 1918. Other than that, inflation hasn't been over 15% since at least 1913. Therefore, you have to add in some correction factors to convert FX price to probability. Unfortunately to complete this, you need a belief variance factor and an interest rate. It is difficult to emperically determine a belief variance factor, so I don't think FX is so good for predicting future events.

Re: Problems with FX (5.00 / 1) (#11)
by khallow on Mon Mar 11, 2002 at 03:54:37 AM EST

I used to think the same thing about FX. Ie, that with margin, you could counter the 50% bias and other weirdness that occasionally comes. However, in truth, the economics of selling in long term claims are very questionable *if* you earn money fast enough. Why loan money to someone to buy a 1-2% return claim when you can earn at least that much yourself?

To give an extreme example, at one point around 1997. I was investing only in things that had an expected annual return of 20% (my mileage varied but I exceeded that rate over a year I think). Eight year claims make no sense in such an environment. You'd have to get a return of a little more than a factor of 4 to be interested. That of course is assuming that you can continue to earn that kind of money - which was a big mistake on my part.

The analogy is with the high tech stocks. In the glitzy period 1998-2000 (in particular), people were looking at growth rates of 50% for five, ten years. Maybe 10-20% growth rates for decades. Stocks were priced accordingly. One effect is that future plans were neglected. If the growth rates were correct, then this neglect would have been rational. Your portfolio is growing so fast, you don't need to think about the future. You certainly aren't going to invest in long low interest investments. Of course, reality didn't match perceptions. Hence we got the crash. And those low interest investments are worth more than the high fly stocks are. Such is life.

In a similar fashion, FX has been collectively learning. IMHO, long term claims are falling into line slowly. One prime example is the trading program Markybot. At one point it had 10-20% more networth than it started with. Later it dropped to under 80% - Jay Scott the designer deliberately allowed it to lose money. Now it is inching back over 80% of its original networth, but despite improvements in the algorithm, Markybot just isn't making money like it used to. I believe that in part this is an indication that the market has gotten smarter.

So I guess my claim is that long term claims only become valuable in an efficient market. Further, I hypothesize that FX is improving in efficiency (cough) most of the time. Hence, long term claims will progressively become more accurate with time. Now maybe allowing trading on margins will make the markets more efficient. I'm not so sure, since there's the bankrupcy problem when you owe credibills and have no assets to pay off the loans. Well anyway, that's that.

[ Parent ]

Margin (4.00 / 1) (#29)
by cameldrv on Mon Mar 11, 2002 at 05:09:11 PM EST

Well, obviously it's hard to argue with someone with a score of over 5.0. That said, I think that margin could be workable if you required continuous solvency. That is, you calculate the salable value of all of the claims held by the user, and if it ever gets close to zero, automatic liquidation begins. Salable value is defined as the ability to immediately convert claims into cash based on the offered prices on the board. Unfortunately, FX claims aren't as liquid as say, the stock market, so the salable value would be much less than the computed value based on the last trade price.

That said, say you have a claim trading at .10. The salable value of no claims will generally be a much higher fraction of the last-trade value than yes claims because there is generally good resistance on either side of the last trade price, however, the size of the slack is generally proportionatly greater on the low side.

[ Parent ]

Re: Margin (none / 0) (#37)
by khallow on Mon Mar 11, 2002 at 11:32:13 PM EST

Well, obviously it's hard to argue with someone with a score of over 5.0.

Heh, good thing you said that because I was starting to think you were right and I was wrong. :P

That said, I think that margin could be workable if you required continuous solvency. That is, you calculate the salable value of all of the claims held by the user, and if it ever gets close to zero, automatic liquidation begins. Salable value is defined as the ability to immediately convert claims into cash based on the offered prices on the board. Unfortunately, FX claims aren't as liquid as say, the stock market, so the salable value would be much less than the computed value based on the last trade price.

I don't think FX will be able to do loans like this correctly for a single reason. It's too centralized. The amount of computational power required for continuous solvency isn't that extreme, but FX simply doesn't have the resources to do it right. Instead, I think that a sucessor to FX would farm off the functions that aren't core to FX. This process would also lessen the responsibilities of FX.

These processes include the user's interface to the market (a default one would be good, but other people could probably do a lot better); keeping track of the user's net worth, loans, and outstanding book orders (ie, have brokerage entities who are responsible for insuring that a user can meet his obligations); keep track of currencies and quantities of various securities (either a brokerage or bank could do that); and finally the actual transaction aspect can be handled directly by the market. It seems to me to be a rational division of responsibility.

Then margin loans and other securities make sense. You have the trader register with one or more banks. Each bank in turn insures that the trader has enough resources at that location to pay for any obligations that are made. If for some reason, a trader cannot meet his or her obligations, then the bank becomes responsible for meeting them.

[ Parent ]

FX Limitations (5.00 / 1) (#12)
by Randall Burns on Mon Mar 11, 2002 at 06:11:03 AM EST

I don't find the lack of margin accounts to be a terribly big problem with FX. What I do find to be a problem is that the game doesn't include real world financial instruments or real equivalents. Typically a stock trading game will be done in play dollars. In the case of FX, IMHO it would be interesting to allow claims to be denominated in currecies or financial instruments. Part of the issue here: choosing the denomination of a claim is tricky: you wouldn't want a claim about the demise of the US government to be in dollars (gold might be a better theoretical choice there). I agree that having some kind of interest bearing instrument would make long term claims more interesting.

Part of the problem though, this is not a well developed market. You didn't have margin trading until stock markets got a degree of development. At least it is a start though. I think that an interest in these kinds of markets might spur on real money equivalents, though I expect for regulatory reasons, reputational markets will always have a niche.

What I can say here: trading on FX is a humbling experience for many of us. I'm not such a bad player, but my score isn't all that high. A good trader in wall street typically beats the market by a small margin-and the same seems true for FX-with a few, notable exceptions.



[ Parent ]

Not That Relevant (4.40 / 5) (#14)
by levsen on Mon Mar 11, 2002 at 06:34:48 AM EST

Like someone else pointed out already, instead of investing time here, make real money with it. Apart from paying your rent, it'll also give you real fame and credibility, which the article says are what people are on on FX for. I never liked these "stock market games" where people do investments scenarios with fake money as in a game of Monopoly. The truth is, these don't say anything about the reality, people always take a higher risk, after all you can't lose anything.

But making money from the crystal ball is by no means limited to stocks. Futures, options and other derivative are fun to begin with, but in fact you can bet on the same stuff you do at FX in real life. Go to better's heaven, England, where bookmakers such as William Hill will gladly do business with you. Check out their "specials". Some real quotes: The Democrats winning the 2004 elections versus the Republicans: 2.00 vs. 1.74. Or a 20% chance on Hillary Clinton ever becoming president. They are also accepting bets on whether Elvis is still alive etc. (Saw this on TV.) This is stuff people bet real $$$ on.

FX is nice in the same way that Monopoly is a fun game. For 60 Minutes. Call me back when this warrants a more serious investment of my time.
This comment is printed on 100% recycled electrons.

How different are real money markets really? (3.00 / 1) (#20)
by Randall Burns on Mon Mar 11, 2002 at 01:10:49 PM EST

One major question here is how different/better are real money markets? There is a wealth of literature on other forecasting methods(i.e. the delphi method) that suggest FX should have some statistical accuracy.

As far as the bookies that you are mentioning: part of the issue is these folks typically have rather wide margins on their bets, in that type of situation, the house always bets. What FX gives us is odds that are continually updated using a market process.



[ Parent ]

Insurance is where the big money is (4.00 / 2) (#25)
by Randall Burns on Mon Mar 11, 2002 at 01:47:53 PM EST

Bookies like Mr. Hall are small potatoes compared to insurance firms like Lloyds. The Lloyd's folks will insure things like the chance of nationalization of a plant in Jamaica. The problem IMHO is these folks don't have very good mechanisms in place around stuff like terrorist incidents, nuclear war and a major bioterrorist incident. In case you haven't heard, the reinsurance network is in a real mess since 911 and the government has stepped in to guarantee the payment of claims.

Part of the issue here is how the currency in which a bet is in affects the odds. A claim on the likelyhood of the demise of the US government in terms of US dollars might have low odds, which the same claim in terms of gold in a Swiss bank account might have high odds. Why? Because if the US government goes belly up, dollars might become worthless so that distorts the price of two real money claims relative to each other.

For most claims, this would make a difference, but some of the ones where is does make a difference may be important areas.



[ Parent ]

Where is this? (none / 0) (#30)
by khallow on Mon Mar 11, 2002 at 05:09:36 PM EST

Two comments. First, I couldn't find anything other than sports betting on the William Hill site.

Second, what is the bookmaker's cut of the action? Ie, if I buy equal payouts of Democrat gets elected in 2004 and Democrat doesn't get elected in 2004 (say both pay 1000 pounds if true), what's my cost? In comparison, there's no transaction fees on FX, and the New York Stock Exchange has a transaction fee of something like a few cents per 100 shares traded. My guess is that the bookmaker has a transaction fee equivalent of 20-50 pounds for those two 1000 pound bets (assuming normal casino take).

[ Parent ]

Standard Vegas Odds (none / 0) (#32)
by leviramsey on Mon Mar 11, 2002 at 08:42:14 PM EST

At least with sports betting, the vig is approximately 1/22, meaning that out of every $22 bet (assuming the book is balanced), the sportsbook will make $1. This is because the payouts are 10-11, ie an $11 bet gets the winner $21. If the book is balanced, then there was $11 bet the other way.

Compare this with state lotteries, where the vig is effectively 50-60%.



[ Parent ]
thanks (5.00 / 1) (#35)
by khallow on Mon Mar 11, 2002 at 11:00:43 PM EST

So this is at the high end of my estimate. A 1000 pound purchase has a vig (or effectively a transaction fee) of just under 50 pounds. Thanks for the information. I had forgotten about the liquidity aspects too - definitely a problem with sportsbook betting.

State lotteries are immense scams. Aside from the problems you mention above, the money is slated to go to some feel-good thing like education. Sure.

[ Parent ]

Re: State Lotteries (none / 0) (#38)
by leviramsey on Tue Mar 12, 2002 at 08:28:49 AM EST

When you look at state lotteries, it's easy to see why sports betting is illegal in most states: the government doesn't want competition!



[ Parent ]
Again, the Specials (none / 0) (#33)
by levsen on Mon Mar 11, 2002 at 09:23:17 PM EST

Go to the web site, click specials, scroll down the list. But these specials are only what's available online, you can bet on a lot more if you walk into a store or call them. (Seen on TV.)

About the bookie's cut, yes it's a point, but just a few % as someone else pointed out. A bigger problem is that you can't trade your bets as easily as with shares on the stock market or the FX thingies. While it's probably legal to sell your betting ticket to your neighbor before the bet comes true/false, there isn't a big market for that.


This comment is printed on 100% recycled electrons.
[ Parent ]

43-45%? Get outta here... (4.50 / 2) (#15)
by cyberdruid on Mon Mar 11, 2002 at 07:59:36 AM EST

Nuclear weapons used by 2010: 43-45%"

That seems like a very high estimate. I think people have fallen for the act that every government has to put on.

  1. It is benificial for a nuclear power to come of as if it is run by irrational leaders, that might at any time launch a nuclear attack/retaliation without consideration of the consequences. This makes your enemies wary to cross you. Case in point - The Nixon administration executed a massive disinformation campaign to convince Russians that President Nixon had lost his mind. The campaign included stories that Nixon was alcoholic and wandered the halls of the White House in the wee hours in his bathrobe, muttering to himself and poking at a big red (imaginary) button. The goal was to convince the Russians to back down on a nuclear missile placement dispute. [source: Daniel Ellsberg] This is, of course, also why the recent "secret document" on US nuclear strikes, was leaked. What is the point in having plans for nuclear strikes, if your enemies are not aware of them? The latent threat of nukes is the most important strategic gain. Simple game theory.
  2. It can also be beneficial to convince your own population that the enemy is "insane and just might snap at any moment". This can then be used to motivate all sorts of decisions (e.g increased military budget and worsened social benifits) on the basis that "we must all sacrifice ourselves for the common good, to beat our hideous enemy". The government has most power in times of war, when martial law is declared, thus they always need a light war going. If real wars are deemed to costly, you can always start a war against something else - terrorism, drugs, etc. This gives the governing body a state of emergency to lean back on.
So, in conclusion, the probability of nuclear war will, by nature, always be greatly exaggerated. This is what you are seeing in the numbers above. Nobody wants to be known to history as "that guy who gave his own people a death sentence, by using nukes". If it was about real money, I would easily invest some risk capital at those odds.

Good bet to take on margin. (4.00 / 3) (#16)
by Lonath on Mon Mar 11, 2002 at 08:45:48 AM EST

After all, if you're wrong, noone will be left to try to collect your money. :P

[ Parent ]
All it takes is one nuke (4.00 / 2) (#19)
by Randall Burns on Mon Mar 11, 2002 at 01:04:52 PM EST

to satisfy the conditions of my claim. Please keep in mind, that there are now small nukes designed to be delivered by cannon. Also, with the fall of the Soviet Union, some sources were claiming that a significant number of nukes were on the black market(which is one of the reasons I wrote the claim nuke to start with).



[ Parent ]

People said US terrorist incident odds too high (none / 0) (#18)
by Randall Burns on Mon Mar 11, 2002 at 12:59:40 PM EST

What this author is saying about the odds of a nuclear weapon being used were also said about a terrorist incident on US soil. Folks were saying the odds were way too high, even after we saw an incident that would have satisfied conditions of the claim had it taken place a little sooner(the flight in which the Egyptian captain was accused of deliberately causing the plane to crash).

Now, saying that if this was real money you could make money at this, strikes me as pure empty bragging. The fact that reputational points are involved makes is easier and less risky_ for you to get in the game-all you are risking is a little learning curve figuring out how to play.

Now, if you can make a few dozen significant trades and get a score above 1, I'll say you actually know something here, until then, I'll just assume you are blowing smoke. I know that I have personally found it hard to beat the odds at Ideosphere--and this is true for most people that try-including professional traders



[ Parent ]

Perhaps they were? (none / 0) (#28)
by cyberdruid on Mon Mar 11, 2002 at 05:03:47 PM EST

What this author is saying about the odds of a nuclear weapon being used were also said about a terrorist incident on US soil.

That is different. I gave very exact reasons why it is likely that people in general will give to high estimates of a nuclear incident. Your evaluation should be based on the actual content of the post, not by what someone or other said about terrorism or by wondering whether I am an authority on the matter. It is an argument for a position, not a statement of facts.

Now, saying that if this was real money you could make money at this, strikes me as pure empty bragging.

I never said that I could make money at prediction in general. I have no secret knowledge of politics or whatever. The note about "real money" just meant that I thought that in this case the odds were enough in my favour so that I would have dared risking it IRL. In what way is this bragging?

In your other post you mentioned smaller tactical nukes. Yes, these are certainly more likely to be used. But even so, looking back to the 90's, how many international incidents were there involving a nation with access to tactical nuclear weapons, where you feel that these were even close to being used? They are strictly forbidden by the Geneva convention (added in 1971, I belive) and so western countries will be reluctant to use them, even when the risk of retaliation is insignificant.

[ Parent ]

buy up then :) (4.00 / 1) (#26)
by khallow on Mon Mar 11, 2002 at 03:44:26 PM EST

Cyberdruid,

This is one of the key benefits of FX. Before, your greater knowledge and wisdom was squandered in the masses. A candle under a basket. A sequoia hidden by a mass of shrubs. Now, you can invest in FX and profit from that exquisite brainpower and be a bright beacon of reason and common sense to the darkened world! Sweet deal, huh? :-)

[ Parent ]

Shockwave Rider (none / 0) (#21)
by dachshund on Mon Mar 11, 2002 at 01:15:31 PM EST

IIRC, this idea was used in John Brunner's "The Shockwave Rider". Unfortunately, once people started putting money on it, the government could help but manipulate the odds a little bit.

Governments distort reality in other areas too (none / 0) (#23)
by Randall Burns on Mon Mar 11, 2002 at 01:26:11 PM EST

John Stockwell, the former CIA station chief in Angola claims that a significant portion of of scholarly literature available on topics like what happened right before the Sandinista revolution in Nicaragua, is purposely created disinformation.

The thing about manipulating a market like FX, it would cost money to do so. I suspect that it might be possible to do this in areas that are of relatively little interest. I also suspect that a governmental agency could make money by purposefully making things happen in key areas(the ultimate insider trading).

These types of issues may argue in favor of the preditive value of reputational markets over real money markets in some key areas. The only way to really tell here is to run some data over time.



[ Parent ]

Various Methodologies (4.00 / 1) (#24)
by Randall Burns on Mon Mar 11, 2002 at 01:35:37 PM EST

One thing that hasn't been done is a good comparison of reputational markets vs. real money markets vs. delphi method polling.

My sense is that these all have their place in the world of forecasting. Real money markets are hard to set up. It also isn't clear that folks may not be able to make money in one area by distorting markets in another area.

There is a real question here about the predictive capability of people with money vs. people with high fx scores.

I personally suspect that Delphi polls don't really work well compared to market mechanisms,but are applicable in areas in which there isn't enough interest to get a market really working. According to Frank Knight of U of Chicago, it takes about 20 active traders for market mechanisms to really work well. We have lots of claims on FX where there are not 20 active traders-and for that matter there are real money markets that are kind of thin too.

I'm not saying that FX is the be-all/end-all, but we were doing stuff like an estimate of the likelyhood of a major terrorist incident in the US when the real money people just plain weren't.



Found my tutorial! (5.00 / 1) (#27)
by khallow on Mon Mar 11, 2002 at 04:51:58 PM EST

I found my tutorial hiding in a mailing list archive. The first half again discusses the basics of trading. I'd skip this part because the links in the main story are better than this. It's the second half that's interesting. That part is meant for people who've figured out the FX basics, how to trade, where to find information, etc.

While some of it sounds like your mother talking ("don't do this", "you should do that") or one of those financial advisors on TV ("diversify your holdings"), it's based on mistakes that I've done and seen others do.

As far as I know, this is the single document of its kind available on the net.

Site seems focused on political/technology events (none / 0) (#31)
by skim123 on Mon Mar 11, 2002 at 08:27:40 PM EST

I guess this could be assumed, seeing as sites like these tend to attract the engineers, comp scis, and other college educated geeks of the world. It would be nice to see some sporting events to bet on (added one myself, but had to add it to the Misc category), although I guess if one truly wanted to bet on sports, they can do so for real money in Vegas (or with their friends). Neat concept, though.

Money is in some respects like fire; it is a very excellent servant but a terrible master.
PT Barnum


That's because it is (none / 0) (#34)
by khallow on Mon Mar 11, 2002 at 10:47:21 PM EST

The site focuses on that sort of thing. Back when it was formed, FX decided to focus on claims that have a relevant outcome, and where there wasn't already heavy competition from bookmakers. Those guys have sports betting down cold. So most sports claims are banned from the site. However, there are sports claims that are relevant. For example, we have claims on sports betting, women's presence in male-dominated sports (eg, baseball or hockey), whether major league baseball teams would move or not.

Possibilities that occur to me are whether China can run a clean Olympics (apparently there were boasts to this effect from that side of the room), the market share of various sports avenues (soccer versus baseball versus whatever). Other possibilities include whether any professional sports permits any performance enhancing drugs for common use.

[ Parent ]

So you want to make a claim... (5.00 / 1) (#36)
by khallow on Mon Mar 11, 2002 at 11:12:41 PM EST

The cat is out of the bag. People are making claims all over the place. There is a mailing list fx-propose@ideosphere.com that discusses new claims. People prefer that you talk your claim idea over on that list first before you create it.

Some remarks on making claims. You need to have 50 credibills in cash. You spend it to make the claim. If later you decide to retract the claim (you can do this anytime before a judge approves the claim), you get the 50 credibills back. When the judge finally issues a judgement, he gets 25 credibills. The other 25 is lost forever (shrug).

There is always a week long waiting period. Ie, you can't create a claim and have it actively trading minutes later. Sorry. There's been some valid complaints here, but I haven't heard a good solution for the problem.

Certain types of claims are not allowed. No claims on the outcome of sports events (eg, "so-and-so wins the super bowl in 2003"). Also, claims where the outcome is effective determined by whether or not a particular crime takes place (eg, Joe Schmoe gets assassinated by June, the 7-11 on Market St, Phoenix AZ is burnt to the ground). Claim restrictions are inforced at the whim of the FX administrators. So it may be that they decide to keep claims that violate some of these criteria.

Site Blocked at a Stock Exchange!!!!! (none / 0) (#41)
by hughk on Thu Mar 14, 2002 at 04:39:19 AM EST

When I took a look from my work PC, I got this (maybe a real exchange doesn't like competition):

Access to the requested page has been denied by Smartfilter. Should you need access to these pages for business reasons, please send an email to SmartFilter.Adm@xxxx.com stating the URL of the respective page you need access to.

Please note:

Processing of data derived from the Internet may lead to liability with respect to civil and/or criminal law. This may pertain both to employees and employers, regardless of whether the contents were being accessed on purpose or accidentally. For this reason, access to pages with content related to the following categories is being denied:

Gambling
Drugs
Criminal Skills
Hate Speech
Cults
Sex
Extreme or Obscene

For your information: Attempts to access filtered pages are not registered or controlled.


bizarre (none / 0) (#42)
by khallow on Thu Mar 14, 2002 at 09:37:01 PM EST

It must be the intense competition. :-) I suspect that "Smart"Filter nabbed them because they are "gambling". Not the first time that a web filter has had interesting behavior.

[ Parent ]
Human Clone (none / 0) (#43)
by cem on Sun Apr 14, 2002 at 04:29:42 PM EST

As you might have read, the human clone is probably reality ... not a pleasent thought.


Young Tarzan: I'll be the best ape ever!
Betting on the Future | 43 comments (38 topical, 5 editorial, 0 hidden)
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