Prediction markets: can betting be good for the world?
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- Опубликовано: 21 окт 2024
- Prediction markets enable you to bet on the outcomes of real-world events by buying shares for those outcomes. Share prices can be interpreted as the probability that the underlying event will happen, therefore they provide an aggregate measure of what the market's participants believe. Prediction markets have been found to provide very accurate probabilities, and there have been interesting proposals to use them for improving institutional decision-making. In this video, we'll explore all of this and more. Examples of prediction platforms are: Augur and Polymarket (on the Ethereum blockchain), predictIt, the FTX crypto exchange, and Metaculus.
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Wikipedia on prediction markets (it's pretty good): en.wikipedia.o...
Forecasting Elections: Comparing Prediction Markets, Polls, and Their Biases, by David Rothschild: www.jstor.org/...
Shall We Vote on Values, But Bet on Beliefs? (by Robin Hanson): mason.gmu.edu/~...
Futarchy: Vote Values, But Bet Beliefs (by Robin Hanson): mason.gmu.edu/...
Augur: augur.net/
Polymarket: polymarket.com/
PredictIt: www.predictit....
FTX: ft-x.info/
ElectionBettingOdds: electionbettin...
Metaculus: www.metaculus....
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Script by:
Matthew Barnett
:3
Animation by:
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Narration by Robert Miles: / robertmilesai
Many people say that it's impossible to predict the future. And yet predictions are at the core of science. If a belief says something about the world, then it makes predictions. The more accurate your models are, the better your predictions will be. Under this view, everyone can do magic. Your models of the world are your clairvoyance powers. Your actions, informed by your models, are your spells. The better your predictions are, the more powerful your spells.
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Great video. I noticed the video suggestions popups from youtube, cover up the last slides
@@gabrielfair724 Thanks for the heads up, it should be better now!
@@RationalAnimations Awesome! Again great job team! Wonderful video
Hello there, I recently read this book "A non-random walk down wall street" which is a collection of academic papers, the interesting conclusion being that market prices do not follow random walks but they are still highly unpredictable. Long story short, I was surprised to see so many reference to Mandlebrot, I did not know he did some early academic work on market prices.
Anyway, I recommend these sources to you, I would love to see a video on how Mandlebrot's early work was influenced by market price research, the relation to fractals, and random-walk models. Thank you for your excellent videos!
I 100% agree! I am making a GREAT money on the prediction market Futuur
Great video, though there's one potential downside I wish was mentioned. You mentioned the possibility of *manipulating the market* to achieve a real-world outcome, but I think there's also a risk from *manipulating the real-world* to achieve a market outcome.
For example, imagine a prediction market on the question of _"Will there be a streaker at the super bowl this year?"_ (this has actually happened before). There is now financial incentive to buy "yes" shares and then streak to ensure a profit. Depending on the question, I think increased financial incentive could lead to more socially bad behavior.
Do you see this as a valid concern, and if so, how can we combat it?
Don't allow predictions that are validated by criminal or unethical behavior? Or simply allow them but nullify the betting if foul play was found that violated the standards of the platform.
That would also imply that the "yes" shares were overvalued in price when compared to the price of taking such an action. Meaning, the consequences of committing the crime did not outweigh the benefits of doing so.
This already happens in the real world as we see in the "too big too fail" industries such as banking and oil. Whenever they break the law or endanger people's lives the consequences of committing the crime never outweigh the punishment in doing so. So they are already automatically financially incentivized to socially misbehave. An example would be illegal hidden banking fees making billions but the bank being fined millions once the court resolves the case a decade later.
The realistically simple answer is to simply seize illicit financial gains equal to the financial incentive. The laws already allow for this but we are too timid as a society to actually punish the truly wicked.
But getting away with misbehavior will always persist as can be seen in the currently all-too complicated Bitcoin scaling debate and the historical formation of Bitcoin Cash. People currently deem Bitcoin Cash, a working product version of Bitcoin, a scam while clamoring to buy financial products with no real-world usage such as NFT's and $100 per send Bitcoin (BTC).
Yeah there are a lot of predictions like "will Kanye run for president?", where Kanye could say he has no plans to run for President thus tanking the market, then he buys a bunch of shares then announces his run for presidency.
@@MatthewBaka I think shares that go either way would be unpopular to by for predictions that are easy to influence like that.
@@addjutant1931 100$ to send bitcoin not even at the peak of 2017... now it's fairly cheap
Oof, that FTX reference hits different in this future
Predicting that this channel is going to blow up because of the fun quality content :)
How much would you bet?
What about now? 😭😭😭
@@TemporalOnline Still yes, patience young one
It’s a psychological game and humans are already very easy to predict thanks to our forebears. And of course tech
Nice prediction :)
Altough it needs: a time limit: prdicted numbers/growth: and certainty
Holy shit I recognize that voice, I thought I was going crazy for a second. A surprising collab but a welcome one!
feed the algorithm
spread the word of this channel
'feed the algorithm' sounds so ominous, like something a cult would say
This is probably the most underrated channel I know at 44k subscribers. Then again they had like 20k when I subscribed a couple months ago, so its seems like its taking off!
Why can't I live in a world where wizards deliver the news and presidential candidates arm wrestle for status, instead of the current one where wizards ponder orbs and politicians can't make it down a ramp or up a flight of stairs
This channel really is a hidden gem, was introduced by the Grabby Aliens video, but i’ve stuck for the content. Magnificent!
Love every video from this channel
I love how fast the quality of your animations improve
This reminds me of logical induction, where you essentially make a market that predicts how likely logical statements are to be true. It's really cool!
Well on the zero-sum game point the fact people may use the prediction markets to hedge against bad outcomes is a good thing in this context! The premium payed by a large institution hedge as they move the price can act as an implicit subsidy for good predictors. Now hedging would create a drag effect on price discovery but given a large enough market with enough informed traders hedging should be a net positive for such a market.
For example oil futures are frequently used by airlines to hedge against price uncertainty. This hedging produces value for the airline in the form of security against price moves while it produces value for the counterparty in that it increases their expected future bank balance.
While I disagree the philosophical implications of several of your videos I think your videos are very well made and enjoyable. I wish you the best with your channel and look forward to seeing your future content.
Conditional prediction markets sound like an amazing tool for a workers cooperative. They could each be allotted a certain percentage of next years profits and then they can put up these shares to essentially ‚vote‘ on what a factory should focus on producing or who should lead some teams or whatever.
Another ‚downside‘ I see is that decisions that only take effect in the long term aren‘t easily doable with this kind of system. Mostly because of how we devalue future earnings when they are too far away (nobody wants to lock up his money in a prediction that will only be decided in 30 years).
So big infrastructure projects or big systemic changes cannot really profit from this. (Note that this isn‘t really a downside, it is just something they can‘t be used for and means we will still need experts anyway).
"Run workers' co-ops like the stock market" sounds insane on the surface, but on closer reflection this sounds as close to allocating the "real" value of people's labour as any system I've come across so far.
Real worker co-ops suffer from too many disadvantages to be competitive on a large scale. Investors won't invest in companies they have no ownership of as the workers will vote in their own best interests. Which means workers must raise that capital, which makes poor people less desireable to hire.
This is an amazing channel and I make sure to watch every video as soon as they come out, you guys actually talk about stuff that is important and isn't based on stupid shit like profit and algorithms, the truth may sometimes be cringe after all ;) much love and I wish you success in the future because videos like yours will bring success to the world if properly spread! Also I've never even heard of prediction markets and I'm going to look more into them now. Thanks! 😁
Quick, I don't have much time. I come here to adjust your predictions about FTX. I hope it is not too late.
It can predict well, but it is also able to be easily manipulated by anyone with enough capital and will to do so, making it too open to corruption compared to standard analysis methods if it is ever used to determine other, more important decisions. As a stand alone factor, it seems like a good tool to add to wide prediction studies in general, however.
Omg very nice great video, I subscribed
Great animations and very informational! Good job
Manifold Markets started just after this video was published and uses fake money really effectively.
Play money markets are no joke! In Scott Alexander's prediction contest, Manifold and Metaculus beat 506 out of the 508 human participants at predicting the events of 2022. Using fake internet points also solves some of the problems the video rightly mentions: regulation, equal access, hedging, and manipulation.
On the topic of "rigging" outcomes for profit, I see two broad categories of solution.
1) the top-down approach: platforms prohibit "riggable" contests or annul "rigged" outcomes.
2) the bottom-up approach: The market prices in the possibility of "rigged" outcomes into their probabilities. This one is more interesting for me.
With bottom-up, each outcome would have a maximum payout that could be extracted from "rigging" it; The maximum payout cannot exceed the total pay-in of all parties.
As the payout rises, we should expect the market to increase the likelihood of the "rigged" outcome. All else equal.
Also, buying tons of "yes" shares in the rigged outcome would increase the price of "yes" shares on the market. That increases your starting capital requirements and hints to the market that funny business is a-foot.
I have thoroughly enjoyed the videos y'all have been making recently. I learned some about ideas/theories I didn't even know existed. So foreign to me, so amazing.
I love the animations throughout the video. Especially when the dog with the pink bow tie grew a beard lol
This feels like a misunderstanding of the stock market...
It's not who will win, it's who will be worth more later
All shares can go up, all can go down.
There need not be loosers or winners in the stock market
Great video! You should have brought up the counter argument to the manipulation point though. If the guy who wants the park built pushes up the price for Yes shares in market, the rest of us can now make more money by betting against him. Doing that also moves the price in the correct direction. I believe there are empirical evidence suggesting that the existence of people who try to manipulate the market generally makes the market more accurate instad of less accurate because they are making the market thicker and attracting smart money.
Didn't get a single idea, anyway... Upvoted, love these animations.
ACX gang who tf up?
Excellent video, and excellent channel! Subscribed.
As an American, I'd like to add a few counterpoints... Financializing everything, and treating more and more stuff like commodities has created a lot of problems in our culture. Medicine and housing for instance. I understand that these things are different than strict prediction markets - but I think there's a general trend where systems that incentivize profit have been used to inform policy, and created a country that functions very well for investors and very poorly for everyone else. Yes, the financial grey beards may be good at predicting the future. But they are also incentivized to invest and make predictions on things that serve to make them money. This changes what we consider valuable, and de-emphasize issues that can't be gambled on as effectively.
Looking at the park example: in my home city, that process is (very roughly speaking) already occurring. Our mayor has made many policy decisions that expand our tourism industry - and businesses have effectively 'bet' on those decisions, deciding to spend the money to open a location in our city or not. As a result, our mayor has focused more on the 'successful' tourism development projects. ...Unfortunately, this has made the city *great* for tourists, and *fall into disrepair* for residents. It's always very obvious when something in our town is intended for tourists or residents to use. For example, the local high school had to evacuate their building due to dangerous pollutants, and instead has been holding classes in a decommissioned shopping mall for the past two years. In that same period, our parks and shopping districts have seen extensive construction and development subsidized by the city. What has happened, is that what is good for *residents* is effectively irrelevant to what is fiscally desirable for the *administration and businesses.* I understand that making money in a prediction market doesn't have to correlate with making money from the issue being predicted - but it centers financial metrics and safely quantifiable measures of success. Your city's ledger is simple arithmetic - but how do you quantify the relative happiness of children, and then classify that value as a success or failure? ...once you figure that out, what if 'failure' stands to bring more money into the city than 'success'?
I think observing markets can be a useful tool, but I don't believe further incorporating it into public policy is wise - or even that different from what we already do. The people most likely to benefit, is that exclusive club of financial greybeards; who will have another invisible casino to play in.
This reminds me of Goodhart's law since financial markets are basically the measure of real economy.
This channel only puts out bangers
Thank you for cleansing my feed with quality content
Thank you for sharing your gift of animating and explaining! I am very interested in the rational movement but have found very hard to get into personally, let alone be able to share its content with those who would not naturally stumble upon it themselves.
Might need a Disclaimer about FTX at 9:20
The hard thing about market differentiate it with hard science: proving a causality. We can't really prove that market going up/ down because a certain event, no real test to verify/ falsify that. It can be because of dumb luck/ randomness.
Science test the idea about causality with other weapon: repeatability. Unfortunately, we can't repeat history/ market event... except if you have a time machine.
Amazingly structured video! Well done to Matthew! Subscribed!
I love the animation and the information on you videos :3
Amazing new video I love learning something new every time I watch this channel
You didn't mention an aspect of prediction markets which directly harm the ability of accurate predictions of the future. The issue with prediction markets is... well, it's a market.
The costs of participating within a prediction market compete with the costs of living and other expenditures, such as internet, data, or a phone. The average amount of disposable income the average population has determines their ability to participate within any market, including prediction markets. This can be harmful in multiple ways:
- This biases the pool of individuals participating within prediction markets by filtering who can enter them to a specific subset of individuals.
- This could incentivize bad actors to attempt to exploit income inequality to manipulate the prediction market.
- This increases income inequality as individuals who cannot afford to regularly participate within prediction markets, on average, lose money to more experienced people... who on average have more money.
Overall, prediction markets can be a useful tool. However, they are not perfect in the context of the wider socioeconomic landscape.
I like the basic concept of the prediction market idea. But a few things come to my mind:
1. Buyers are causally linked to the events themselves. The assumption here is that through ne numbers of betters and amount of information intake a nearly perfect (or at least extraordinary well) prediction can be made. But the share price itself for example can influence a buyers decision (for example hyping a share).
2. Predictions where profits equal probability of an event work in a zero sum game. Probability of 90% = 90ct on a 1$ return. But trading fees screw with this maths.
3. What happens if shares are sold over 1$? let's say people fear inflation and will bet in a 1$ payout with 1$5ct because they assume they'd lose more other way.
4. Rooting (political) decisions on a prediction market inverts the causality part way. I have to think a bit more abut the consequences of this but let's just assume someone pushes the price of the pro.market share on purpose to make it true? maybe even someone who builds parks as his job.
Edit: I should finish the video before commenting next time :3
I'm quite familiar with this topic (both from LW and from occasionally betting on the prediction markets), but the video is very nicely done and a good refresher/a way to introduce the concept to people unfamiliar with it. :)
This is such a nice video! Such fun emoting and all.
5:00 I'm not entirely sure about that.
I really love this channel
Fun fact on your last caveat, I know a current member of congress who has hedged their election results before on a betting market. They were in an open primary at the time, I don't know if they're still doing this tactic.
Great video! Keep it up.
Great themes! Just keep up ❤❤❤
Such pleasant surprise hearing Robert Miles narrating.
Love the animation style so much
I’d love for a prediction site like metaculus but with money and way more questions with covering a way broader range of topics.
Very interesting valuable. Thanks for sharing.
great points!
The new tier was invisible because it was covered by end cards.
Yeah, that was a fuck up. 11 videos in, end cards continue to outsmart us. Edit: but now I've changed their position.
Very interesting
How is this video underperforming it's the best one they've made so far
yeah
Awesome video!
Nice video! Very informative!
Who's watching this aftr downfall of FTX?
The problem is the relationship between predicting failure and causing it, and between predicting success and causing its (mere) appearance.
A related problem is the informational asymmetry required to make these markets profitable. See Joseph Stiglitz for that ... or Aaron Schwartz. People have a right to not be sold lemons, and that entails that they have a right to equal access to information. Societies that ignore this right badly enough and long enough ultimately undermine themselves.
So basically buy low and sell high.
Of course, all the biggest probability markets are in the insurance industry.
This channel is amazing, It will definitely reach million subscribers in future!
The ftx subtle publicity and finance support aged like milk
11:45 I think buying stock in that not building the park will result in low likelihood of tourism increasing should the park not be built, thus if the park is built they will get their money back. Thus they can influence the chance that the park is built, and the more effective they are the more likely they won't lose anything.
So that is much more of a problem compared to them buying shares that the park will increase tourism.
Vegas bookies and prediction markets are sometimes quite at odds with one another. Makes arbitrage possible. Also predictict sometimes waits weeks or months long after an outcome is apparent before making payouts you can sometimes pick up winning votes to for a few cents less than the payout treating it as a short term loan.
the market most peaople use to win is the corner and most precisely the plus 7.5 goals
What about actors that invest in the outcomes of said predictions. Guaranteeing their profits.
The graphs always move to the right.
9:20 FTX Oof, aged like milk
Cool video, though personally, I will always see the stock market in a bad light, since any success means the fall of others...
I do not undestand why they are so unpopular. I just heard about them recently. WHile sportsbetting, poker, trading stocks is popular.
What about market manipulations? Pump and dump what comes to mind. My nightmare is the case when dependencies reverse and the only reason why something has happened is because prediction markets predicted so.
Ducking underrated
I find the idea of *Gendo Ikari* being a professional market predictor amusing.
2:35 OK DUDE I GET IT, I KNOW MATH
🤓
If you wonder why this video has so few views compared to the others, it is because it has the word "market" in the title and the RUclips algorithm does not recommend this kind of video because it has been abused by cryptocurrency and binaries options scams.
Wouldnt such markets be speculative, because you can sell of your stocks? So the market reflects what people think what people will think about the events, it doesnt reflect what people actualy thing about the event.
I love the thumbnail- S T O N K S
What a great video
Nice information
Love the idea of prediction markets and I've tried participating in them. Seems to be an infinite way of applying them but I do wonder what is the minimum threshold for a prediction seem viable.
Thanks!
"can betting be good for the world?"
before watching the video - no
after watching the video - no
I agree with you. It’s very addicting too. Especially sports betting
the amount of shibe screentime is trending toward 100% of the videos
Sci-fi: What if we build a future-predicting AI out of a hyperintelligent hivemind using the internet?
Prediction markets: I'm already 150k shares on 'Souljaboy deletes a bunch of tweets this week' ahead of you
There's a lot of issues with prediction markets that weren't mentioned.
The first is they're subject to human rationality. The video uses the example of 2008 on how the betting markets outpredicted Nate Silver... But no mention of 2020 where they failed miserably. So miserably, they were still predicting a significant chance (around 20%) of Trump still winning even as Biden was declared the winner by multiple outlets.
The second issue stems extends from that. A prediction market's predictive power is limited by the knowledge of its participants. This can create a massive blindspot with knowledge only held by 1.those who simply do not have the funds to participate and 2. Those so risk adverse that they'll never participate in a betting market.
2 ties with 1 because that massive error was caused directly by the demographic shift of bettors between those two elections: the nature of elections post 2016 brought in bettors that often used magical thinking compared to 2008's election being less emotionally charged for those participants.
That ftx comment aged poorly
I knew I recognized his voice. :)
When traders expect other traders to try to manipulate prices, that makes the prices MORE accurate on average, not less.
Folks, Kalshi is the first regulated prediction market in the US.
FTX doesn't offer much except laughs these days 😂
Prediction
Yes
No
Is that Carmen San Diego in a Cameo during this video?
how did i missed this one video of yours.
I think the biggest problem with predicitve markets comes with the fact that every trader wants to invest in a "sure thing," like housing for example. Unfortunately the demand in any "sure thing" will artificially inflate its value, and any "sure thing" can only ever actually be sure if the commodity it represents is actually a necessity, thereby inflating costs of things people *need.* Ofc this is where nationalisation of human necessities and natural resources, and market regulation are aupposed to come in but don't
One problem this only works if people are rational actors or are closer to truth then experts and i think psychology has something to say about that
it could be possible that a prediction market is more accurate then experts but human bias is gonna make it a close battle i predict ;)
A flaw I find in conditional predicion markets is that if there is no consequence of loosing a stake on the prediction then that would affect the risk behavior of the betters. e.e.g. with no consequences, betters might get more risky with their bets and that would affect the real ratio of predictions.
Polymarket is a centralized market pretending to be a decentralized exchange and they are currently getting investigated by the CFTC for it
Ah yes, FTX.... that didnt age well
never could've predicted it :(
Real estate value only goes up!
Seems like voting with extra steps
This sounds a lot like jim bells essay
I see prediction market use case possibilities in the law enforcement arena. Like the wild west and bounties. Also voting and polling. Coinbase delisted Auger. It's a shame because I think it could bring accountability back to the world