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Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

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Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#51
post #12

I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. I learned some things about the market during this time, but did not succeed in my detection algorithm. * Polymarket is a bit more transparent with who placed what bet, so it's a good place to go to study winners. *…

This is the trap of modern society. Think about what you're doing: instead of anything productive, you thought a good use of your time was sitting there staring at numbers, hoping to find a pattern to make money off of people; who in their own right are using insider information to game a system; which itself is set up to capitalize off the fact that the larger economy has failed, and now all that's left is to just m…

Finance has always been the largest sector on the planet through every economic environment you have been alive for, I don't really understand why there is a current of this community that acts so divorced from its perpetual and all encompassing existence their whole lives

Despite you being an individual, you reflect an aberration of sentiment here that makes no sense

For example, the larger economy hasn't failed, another view is that this is price discovery of a mispriced agent in the market. A wage worker whose actual productivity isn't valued accurately, and a market based solution has been developed that allows for closer accuracy. More profits to the insider and the copy trader, their available capital and liquidity is derived from their utility to the employment sector and their potential profits with that capital and liquidity is derived from the event's actual utility to the market.

Additionally, the productivity of all agents isn't known, you don't know what they were doing with their time before and it likely was suboptimal already - as in doomscrolling on social media or vegetating on the couch.

Finally, you have no way of quantifying if those lazy things were suboptimal uses of time, or if a completely active other activity was suboptimal or optimal, as this goes into relative utility and schools of ethics.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#52
I thought the entire point of prediction markets was to attract insiders with a way to turn their knowledge into cash. Doesn't that imply that everybody else is going to be net negative?

That's why death pools were supposed to be equivalent to assassination markets. Somebody would kill the person to win.

The only way (I would think) to make money if you're not an insider is to take advantage of the fact that most people believe in the Law of Averages and consistently err to moderation, so they overestimate small chances and underestimate large chances. Just bet with the crowd when the crowd (and reason) is overwhelmingly on one side. That depends on the vig being low enough not to obliterate that little bit of expected profit, though.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#53
post #12

I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. I learned some things about the market during this time, but did not succeed in my detection algorithm. * Polymarket is a bit more transparent with who placed what bet, so it's a good place to go to study winners. *…

This is the trap of modern society. Think about what you're doing: instead of anything productive, you thought a good use of your time was sitting there staring at numbers, hoping to find a pattern to make money off of people; who in their own right are using insider information to game a system; which itself is set up to capitalize off the fact that the larger economy has failed, and now all that's left is to just m…

We should be happy to live in a world where a significant fraction of people can conclude that "doing something productive" is not a hard requirement for survival.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#54
post #24

Earlier quoted context omitted.

> I learned some things about the market during this time, but did not succeed in my detection algorithm. What failed? Was it too late to follow the trend by the time one was identified or something else? It seems much more transparent than trying to reason about say dark pool trades.

I am unfamiliar with working with such signal-to-noise ratios. * I only had the example trades in the news as 100% confirmed positive trades. * There are hundreds of millions of dollars in trades a day in Polymarket. * In Polymarket you can just spin up a new account. If an account spins up, makes a $50k bet and wins, and then has no other activity, was that an insider trader or just someone with a behavioral pattern…

> In Polymarket you can just spin up a new account. If an account spins up, makes a $50k bet and wins

You'd probably want to use some form of bayesian ranking, like say add 1k of total bets and 500 in total winnings to the raw scores.

But your bigger problem is just that people spinning up new accounts may be doing it to avoid your tracking. The kind of person with lots of evidence that they're good should be smart enough to know about copycat traders. The evilest among them might use a small bet to lure copycats and then trade against them in alts.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#55

Alternative is archive.is Text-only, no Javascript, no CAPTCHA, no DDoS on blog, no geo-blocking, HTTPS optional: https://assets.msn.com/content/view/v2/Detail/en-in/AA22jnEi...

Can these asset links be determined programmatically (or via an API) from the original URL, or is scraping required?

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#56

Everytime someone loses money on a bad bet in a prediction market, it's an opportunity for them to learn something about ~~counter-party risk~~ adverse selection. You could easily make the argument that the more people are losing in prediction markets, the more learning is happening.

Betting venues can make money on transaction volume rather than holding an edge against their customers on the actual bets.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#57
I realize I'm an N of 1, but I've participated in prediction markets since 2019 and am just above 5 figures in profit. Not life-changing money, but it certainly doesn't hurt.

I'm pretty conservative in my predictions and just think there is a lot of free money on these sites. Maybe that just supports the sentiments of this article and most of the negative comments on this post.

There are certainly cases where I got run over by the steamroller picking up nickels, but in general that's few and far between. A good example is getting trump losing the 2020 election at 90% after the election in November. If you find those types of markets and compound the earnings it's a pretty nice savings account.

I've also been burned by insider trading and vague rule interpretations but at this point, you chalk it up to the nature of prediction markets. I now try to stay away from markets that are more manipulative (e.g. mention markets).

I don't understand the hostility to prediction markets. There are definitely hedging opportunities and we're all adults.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#59
post #12

I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. I learned some things about the market during this time, but did not succeed in my detection algorithm. * Polymarket is a bit more transparent with who placed what bet, so it's a good place to go to study winners. *…

This is the trap of modern society. Think about what you're doing: instead of anything productive, you thought a good use of your time was sitting there staring at numbers, hoping to find a pattern to make money off of people; who in their own right are using insider information to game a system; which itself is set up to capitalize off the fact that the larger economy has failed, and now all that's left is to just m…

The real trap of modernity is treating "productivity" as some sort of quasi-religious moral imperative.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#60

People keep saying they provide the market with information, and that's the benefit of allowing the insider trading, but no one has pointed out how in any way society has benefitted from the insider trading instances so far...

It's useful for things like elections, where though popular media might push one line of thought primarily, the markets will adjust to be closer to the reality. Pretty visible in the 2024 elections where if you followed mainstream media at all, you probably wouldn't realize the markets had Trump at a 60% chance to win just before the election. But for so many things, there's just too many sources of insider info. Rea…

> It's useful for things like elections, where though popular media might push one line of thought primarily, the markets will adjust to be closer to the reality. Pretty visible in the 2024 elections where if you followed mainstream media at all, you probably wouldn't realize the markets had Trump at a 60% chance to win just before the election.

But what exactly is the use of that? And as another example from the 2024 elections, every media outlet was pushing the validity of some stupid Iowa poll that only insiders even knew about, and was obviously just a random survivor that happened to get a few things right in a row. The prediction of a Harris landslide entirely flipped the odds in the prediction markets; if you had insider knowledge about that poll, you would have been able to make a fortune. If you had helped market that poll, you could have made a fortune.

The problem with prediction markets as predictors I think is that that they assume there will be a lot of insiders, rather than a very few. It gets confused with normal price discovery in a large, diverse and competitive market. Instead, prediction markets just match the (opinion) x (perceived trustworthiness) of the media landscape. If anything, insiders have a motivation to push the markets to be more inaccurate. They want to bet against them.

edit: but to restate my initial question - what's the use of polls that converge to the correct answer about 10 seconds before the actual votes come in? I asked the same thing when people were lusting over Nate Silver, and I still haven't gotten an answer. I understand using polls to guide your election expenditures; I do not understand the intense interest in them among spectators, or when the election is already mostly run.

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