This weekly roundup thread is intended for all culture war posts. 'Culture war' is vaguely defined, but it basically means controversial issues that fall along set tribal lines. Arguments over culture war issues generate a lot of heat and little light, and few deeply entrenched people ever change their minds. This thread is for voicing opinions and analyzing the state of the discussion while trying to optimize for light over heat.
Optimistically, we think that engaging with people you disagree with is worth your time, and so is being nice! Pessimistically, there are many dynamics that can lead discussions on Culture War topics to become unproductive. There's a human tendency to divide along tribal lines, praising your ingroup and vilifying your outgroup - and if you think you find it easy to criticize your ingroup, then it may be that your outgroup is not who you think it is. Extremists with opposing positions can feed off each other, highlighting each other's worst points to justify their own angry rhetoric, which becomes in turn a new example of bad behavior for the other side to highlight.
We would like to avoid these negative dynamics. Accordingly, we ask that you do not use this thread for waging the Culture War. Examples of waging the Culture War:
-
Shaming.
-
Attempting to 'build consensus' or enforce ideological conformity.
-
Making sweeping generalizations to vilify a group you dislike.
-
Recruiting for a cause.
-
Posting links that could be summarized as 'Boo outgroup!' Basically, if your content is 'Can you believe what Those People did this week?' then you should either refrain from posting, or do some very patient work to contextualize and/or steel-man the relevant viewpoint.
In general, you should argue to understand, not to win. This thread is not territory to be claimed by one group or another; indeed, the aim is to have many different viewpoints represented here. Thus, we also ask that you follow some guidelines:
-
Speak plainly. Avoid sarcasm and mockery. When disagreeing with someone, state your objections explicitly.
-
Be as precise and charitable as you can. Don't paraphrase unflatteringly.
-
Don't imply that someone said something they did not say, even if you think it follows from what they said.
-
Write like everyone is reading and you want them to be included in the discussion.
On an ad hoc basis, the mods will try to compile a list of the best posts/comments from the previous week, posted in Quality Contribution threads and archived at /r/TheThread. You may nominate a comment for this list by clicking on 'report' at the bottom of the post and typing 'Actually a quality contribution' as the report reason.
Jump in the discussion.
No email address required.
Notes -
This story went viral A prediction market user made $436k betting on Maduro's downfall.
In the comments, one thing I have observed is the willingness of people to defend insider trading. Here is the highest-upvoted comment on Hackr News:
"Using insider information is how you are supposed to win these. Otherwise it's just random gambling. This is not the stock market. There are no public reporting rules for the weather, song lyrics, what Kim Kardashian eats tomorrow."
Does this sound insane to anyone else? Why isn't everyone doing this, if they aren't already? Just create a market about things you know in advance, using proxies and crypto mixers to hide your identity and money trail if needed. An Nvidia employee could make a prediction market about an upcoming chip, or an Apple employee about an upcoming iPhone. More specifically, shill accounts would create markets pretending to be an outsider, and the employee and his accomplices would place the correct bets leading up to the deadline. Wash trades by accomplices could be placed to create hype and volume to lure unsuspecting traders.
My comments of course were downvoted. They always are. I could make a comment along the lines of the "Pizza tastes great" and I would be downvoted by every pizza hater on that site and no upvotes by everyone else who enjoys pizza, as is the counterintuitive nature of online voting patterns. Writing good comments is an art in and of itself.
I feel like the defenders of insider trading and the boosters of prediction markets more generally are ignoring two massive elephants in the room. In fact they are so massive I feel like "elephant" is underselling their massiveness. More like brontosauri in the room.
Brontosaurus #1: Buying "shares" of a prediction, is not an "investment" in the way that buying a "share" of Amazon or Raytheon is. It's more like buying a lottery ticket, or enrolling in a multi-layer-marketing scheme. Yes there is the possibility of a big pay out, but it is a very small one, and the in mean time the owners of the prediction market have your money. Money that you could have spent on other things. It is a fundamentally parasitical relationship.
Brontosaurus #2: Conflict of interest. The assumption that perfect information for all players is always a net good relies on an assumption that none of the players will ever be direct conflict or competition with one another. This assumption is obviously false, so we must ask whether the purported benefit of having a prediction markets is even a benefit. Is making more information available desirable? I can easily think of cases where it would not be.
For instance, if I am a player on the Packers Offense, I do not want the Bears' defensive line to know what play we're going to run before we run it. It's not just the players themselves either, if I'm a coach, or a fan, or just some guy who "bet the over" on the game, I also do not want the Bears to know what play the Packers. If a bet involving two teams in a discreet game with mostly legible rules is already this messy, imagine how messy it can get when you have three teams in a continuous game with far less legible rules? Say instead of Packers vs Bears we have Ford vs Chevy vs Dodge. Even then that's still a relatively trivial example. I don't even want to think about all the weird and perverse incentives that would arise from things like Judges to "betting" on which way they are going to rule in a legal case, or any of other innumerable other chances to defect and/or make-a-buck that people would surely come up with were this to become normalized.
Every investment is uncertain. That doesn’t make them all lotteries or MLMs.
Prediction market “shares” are transferable contracts. They entitle the holder to a payment if and only if something turns out true. This makes them more like options. And like options, they’re a useful vehicle for gathering information. Sometimes that’s appropriate, sometimes it’s not.
Something being uncertain is not what makes it "gambling", and something making money is not what makes it an "investment".
When you invest you are (again in theory at least) acquiring an asset. That asset may appreciate or depreciate in value, but that asset is explicitly yours, and you do not manifest any gains nor losses until you choose to sell. This is notably not how prediction markets work, or even how options work for that matter. Even after ruining the Duke brothers you still have to sell the orange juice.
The point is that prediction markets do not generate wealth so much as they extract it from their participants. That's why I describe the relationship as "parasitical".
More options
Context Copy link
More options
Context Copy link
This makes no sense to me. What is the key difference that matters in your opinion? Is it the probability of payoff? Prediction shares are binary, so if one side has low probability, the other one has high probability. Start-up equity has low probability of success: are they in the same category? Is the issue that they hold your money until the event? We could imagine a type of prediction markets where we put shares of VOO instead of cash. Would that change your view on them? The shares are going to be held anyway, so there is no inefficiency there.
You don’t need to assume that perfect information is good to think prediction markets are good. That’s a strawman if I ever saw one. You might be able to make a strong case for banning prediction markets based on negative effects of too much information, but it won’t be a strong case unless you explain why it wouldn’t be better to, say, have their players contracts prohibiting this and enforcing it.
Re: #1 see my replies to @netstack above and to @2rafa below.
Re: #2 I disagree that this is a strawman. Pretty much every justification for the positive value of prediction markets that I have ever come across can be boiled down to a single supposition; "More information is always better". If you think that's an unfair characterization, please provide an alternative.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
...same with a bank.
Incidentally, this is the exact reason Kalshi pays interest on money they hold for you, so you aren't losing out (much) by stashing cash there.
https://news.kalshi.com/p/interest-cash-open-positions
In this case, the 'chances' of the payout and the size of it are pretty hard to miss, though.
The incentives run both ways, actually.
If there's an outcome you really WANT to make happen because it pays out immensely for you, you can open up an extremely large position against it happening, in hopes that someone with the ability to influence the outcome will see the opportunity and act on it.
This is how 'assassination' markets would work, in practice, speaking of perverse incentives.
"I bet 1 million dollars on a 99% chance that [Victim] will be alive one month from now."
Potential assassin sees this, buys the other side of the bet, then goes and kills the target.
But of course, lets say [Victim] notices the bet, hires on more security (who are compensated with shares of the "Alive" side of the market, they only get paid if he lives), and bets heavily on his own survival.
Who wins the bet? Well, its the skill and motivation of the assassin vs. the skill and motivation of the security team, I guess. An extremely confident security team will buy more contracts heavily in favor of their guy's survival. Which means the prediction market should settle on something like an 'accurate' likelihood of the person being alive when the contract terminates.
But of course we probably DO want to ban these sorts of markets. Question is whether we also want to ban markets that are too close a proxy for them.
More options
Context Copy link
Yeah, I don't know how someone can wave away the fact that it's possible to, on stock markets, bet against a company, and that it's trivial for a CEO to ruin a company in a sudden, stroke-of-a-pen way that makes frontrunning everyone on benefitting from the collapse guaranteed. The individual incentives becomes to wreck every single company.
In an alternate world where the only regulatory change were the legality of insider trading, a CEO who tried such a thing would still be abandoning his fiduciary duties to his shareholders and still be vulnerable to civil suits and criminal prosecutions relating to various crimes ranging from wire fraud to different types of securities fraud. His trading would also still be monitored by his company's compliance department and subject to regulatory reporting.
Except that the shareholders would be out millions of dollars. Dollars that the perfidious CEO can now use to hire an army of lawyers and legislators to ensure that the shareholders never see a cent and that he never goes to jail. Also why would you expect the CEO's trades to be "subject to regulatory reporting" if the regulations no longer exist? Wasn't removing them the whole point of this exercise?
Even on just the civil side, large shareholders can bring class action civil suits on behalf of all shareholders who wish to join in, and the pockets of large shareholders can be far deeper than those of a given CEO. The SEC can do so as well alongside or in the absence of shareholder lawsuits. This already happens in our current world.
Nope, as I explicitly mentioned, the exercise just involved flipping the legality of insider trading. While a lot of compliance and regulatory reporting requirements were originally motivated by insider trading concerns, they can exist in the absence of insider trading being a criminal act.
In any case, in countries like the States, there are a lot of laws and regulations concerning corporate officer behavior, fraud in general, and securities fraud where insider trading is far from a load-bearing pillar, to the extent insider trading is even a consideration much less a pillar.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
Are you familiar with the Bankrupt series of documentaries from Bright Sun Films? There are some firms that seem to have built their entire business model around this.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link