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NBA Superstar Giannis Antetokounmpo announces that he is now a shareholder in prediction market Kalshi. Looks like prediction markets are finally breaking into the mainstream. Let's see what the normies think of this:
Some of these comments are also in response to the Kalshi CEO's now infamous quote that, "the long-term vision is to financialize everything and create a tradable asset out of any difference in opinion."
Turns out people hate this. Scott posted a partial mea culpa last month when he realized that the most common use of prediction markets is negative-sum sports gambling. I don't think the rationalist community has fully internalized how bad this makes us look. Not that we should be overwhelmingly concerned with optics, there are a lot of good things that are very unpopular, but I do wish that when the theory of prediction markets was being hashed out we had gotten more objections like, "theory implies that this machine will systematically extract money from stupid people. Are we prepared to deal with the social consequenses of that?"
My brother and friend, I was making these exact objections back then: when money is on the table, prediction markets will be warped towards "how can I profit off this?" and not "how can we best arrive at Truth?"
I never believed in them as a tool for setting policy or the wisdom of crowds or whatever other pipe dreams were out there. That kind of market might work so long as it was small-scale, for very maths-oriented, nerdy people who liked deep-diving into questions. But put money in, and try to make it mass-market because you believe in your innocent little heart that this will be the bestest way of finding solutions to social, economic, and policy problems, and it'll blow up in your face.
I don't think Kalshi are any more evil than anywhere else, I just think the whole idea of prediction markets suffered from - pardon me here - being promulgated by the eggheads with little to no experience of what happens with ordinary people and the likes of the stock market and gambling. "We need to get people involved, so we need to provide rewards and incentives to participate, so money is a good way of doing that". Yeah, and the love of money is the root of all evil: the money becomes the end in itself, not whatever goal you had with regards to widescale adoption of prediction markets.
EDIT:
Some people are sufficiently tough-minded to go "yeah, and so what?" about things like legalising drugs, gambling and so on. Their idea is that there should be few to no restrictions on what an adult can do with their own life, and if someone becomes a drug addict or loses all their money betting, that's on them. Society is not responsible for idiots being too stupid to take care of themselves. Your lack of ability should not restrict my freedom.
I've seen some of that around rationalism, so I think there are indeed a sub-set who considered that, and put it aside as "not our problem if 90 IQ low value human capital get themselves into trouble, the benefits for the rest of us far outweigh any downsides".
Prediction markets are really an idea from 15 years ago, smack dab in the middle of the conjunction of 'software will save the world' tech optimism and 'profit incentives are the best way to solve an optimisation problem' liberal economics.
Kalshi didn't propose mass-market betting because they were too naive to realise that
but because they believed the literal exact opposite, for better or for worse.
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How is that a harm of prediction markets, as opposed to just normal gambling? People have been gambling for thousands of years, they're not going to stop now. This is an innate part of the human condition. How much wealth has been squandered by 'people buying crap they don't need' syndrome? A good chunk of world GDP is wasted from that angle, people go bankrupt and suffer tremendously because of this. But we don't shut down capitalism because people lack self-control.
Even accounting for these statistics being fudged to draw headlines, that's still pretty high. Consider storage too, that's apparently a $40 billion market in the US, storing crap that they probably don't need and can't even fit in their houses! People need to learn to accept a reasonable level of responsibility for their actions.
The solution to sports gambling being bad is to just ban it, ban Ladbrokes and whatever else that it's being done with. That will reduce the problem. But we shouldn't pretend that this is in any way new or a problem with prediction markets. The issue is with stupid and weakwilled people being stupid and weak-willed. They'll find some other way to be stupid and weakwilled, abuse different financial products or mobile games. Also, there is an issue with unclear and inconsistent gambling regulation.
This is key. The stats are based on a survey from a company called Clever Real Estate, whose thing is a discounted commission. They appear to have literally called it "Reckless Spending Habits 2024". The range of reliability for these numbers is "entirely made up" to "bogus".
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The criticism of prediction markets is mostly valid but also largely applies to existing derivatives markets. The platform held bets about whether Israel would bomb Gaza? Commodities traders make those bets every day in far larger and more liquid markets.
Ban prediction markets from sports-related contracts (and ban fanduel and sports betting apps too) because making it too easy for working class men to gamble away their income and savings is probably bad for society and call it a day.
Society has to protect most people from taking extreme risks at least some of the time. Unlike, say, limiting all credit for poor people by capping rates, making gambling harder has few downsides.
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Prediction markets probably have no good things. The author of The Laws of Trading wrote about why prediction markets can't deliver what they promise. A bit technical on the trading side but should be navigable by laypersons.
This would seem to dovetail nicely with my observation that prediction markets aren't really "markets" in the "market economy" sense of the word so much as Casinos cosplaying as markets.
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The fact that prediction markets got tethered to sports betting is terribly unfortunate. It's like if Kalshi took its crypto elements as an opportunity to "diversify" into crystal meth. There's a lot of value in being able to see the odds of elections or political events at-a-glance. I hope the entire ship doesn't go down as a consequence of stupid people doing stupid things, and then society blaming the platform while holding the stupid people as helpless victims.
Why is it unfortunate?
If we are going to allow people to bet on the outcome of an election or a war, why should it be treated any differently from betting on the Super Bowl?
Oh don't get me wrong, they should be allowed to from a default libertarian point of view. If dumb people want to make dumb decisions, they should be allowed to within reasonable bounds as long as they're not harming anyone else.
The problem is, as I said in my post, the political ramifications. People love to blame the platform that allows stupid people to make stupid decisions rather than the stupid people themselves, and this jeopardizes the good thing (political bets).
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One difference is that people can act on predictions of real-world events like elections. The information that the prediction market reveals has value. There's not really anything you can do with knowing which football team will win the Super Bowl.
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I've said it before but Reddit has become so bad I just can't log in anymore. It used to be longer takes, with more reasonableness than Twitter. But now it's like 90% one liner, gut reation posts.
No amount of explaining does the trick either. They just downvote and ignore. I once tried to defend Palantir as being not the source of pure evil it's purported to be. Literally nobody even knows what it does. But literally nobody cares either. They've classified it as evil and that's the end of the story.
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Redditors aren't normies. They're barely even people. Prediction market rationalists did entirely fail to realize that the most compelling consumer use case was circumventing restrictions on ultra-degenerate gambling, but, eh, there are a lot more people gambling on Kalshi than there are seething on "r/nba".
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Specifically, he said "Degenerate gambling is bad", citing this article from a different person.
In turn, that person cites and rejects a pro-betting counterargument from a third person.
I've seen people's happiness and welfare increasing in correlation with them going out to concerts. Never as a result of buying new iPhones on multi-year credit plans or taking up sports betting.
I have little patience for highbrowed arguments that actually betting is just another form of consumption. Degenerate gambling, quite evidently, is bad.
'Being addicted to things' seems like the sort of thing that only afflicts other people, i.e. normies and people far outside my social range, until I recall all the thousands of hours I've dumped into various video games. I don't need to study these people like foreign specimens or rely on formal statistics, I can simply judge based on my own experiences, which tell me these sorts of addictive consumption goods are and were a detriment to my life.
This is an area where the standard economist's model, with its ideas like preference and consumer choice, breaks down. Their axioms are a path towards the total commodification of everything in whatever manner most maximally and cheaply provokes dopamine release. That should be regarded as a nightmare scenario, not an increasingly realized goal.
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I spend probably about 50 bucks on sports betting annually. It’s consumption for me (kind of a fun “try to beat the house” sorts thing). For me it’s consumption.
I do recognize it only exists because others can’t control themselves.
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