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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

#81

Post by AureliusMA »

hx8 wrote: 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. *…

The only winners are the market makers and the ones initiating insider trading. You'll always be on the wrong is of the liquidity when trying to ride alongside scammers.

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

#82

Post by mathgradthrow »

pants2 wrote: post #67
mathgradthrow wrote: post #43

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.

Counterparty risk would be more like the betting site going belly-up and not getting money out despite having a profitable trade. This is just regular risk.

You're right, but I was confusing counterparty risk and adverse selection.

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

#84

Post by AureliusMA »

screamingninja wrote: post #62
rmb177 wrote: post #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 r…

Have you heard of the Sucker Effect? Your gains come solely from the those who made the wrong bet. There is no inherent value generation in the prediction markets unlike the stock markets. Yes, there is money to be made, but at a net loss to the society, so many would not consider these bets "opportunities" but rather "gambling".

There is no value generation in trading stocks either beyond IPO, as stocks are then simply second-hand markets and can be completely irrational. The main value is just like the lottery : entertainment, excitment.

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

#85

Post by xorcist »

JohnFen wrote: post #32

Prediction markets are nothing more than gambling. Most people who gamble end up losing. If it were otherwise, running a gambling operation wouldn't be the enormously profitable endeavor that it is.

Unregulated gambling, mind you. Huge difference.

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

#87

Post by hx8 »

ModernMech wrote: post #38
hx8 wrote: 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…

This comment is so patronizing because it's 2008 angst against the financial sector wrapped up in the assumption that the people participating in the financial sector aren't aware of that angst. We're deep in a hacker news comment thread, no one here should be beating the desk about productivity.

I would recommend you look into Bullshit Jobs by David Graeber, where he makes an argument that 50% of American jobs are not only not-productive, but actually harmful. Your argument isn't taken to its logical conclusion yet.

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

#88

Post by bpt3 »

TheRealDunkirk wrote: post #61
yieldcrv wrote: post #51

Earlier quoted context omitted.

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, an…

> the larger economy hasn't failed It's only a matter of time until Social Security starts to fail, right after we've paid all the boomers their full benefits (and just in time for me to be eligible), and then they'll have to implement "austerity measures." After that, groceries, gas, housing, health "care," and higher education will have fully broken the middle class (it's already broken me, and I have a good job an…

When social security "fails" (which I would define as not paying out 100% of its defined benefits), the payment structure will be changed and that's the end of it.

If paying for basic living expenses and higher education for your kids has "broken you", then you either didn't have the good job you thought you did or you aren't making very sound financial decisions (or both). Given that you own a paid off house, I suspect the actual issue is a complete lack of perspective on your part as to how well you have it.

In short, the economy is not failing, you're just a doomer.

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

#89

Post by AureliusMA »

freejazz wrote: post #17

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 provides information that's not accurate.

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

#90

Post by tsunamifury »

AureliusMA wrote: post #84
screamingninja wrote: post #62

Earlier quoted context omitted.

Have you heard of the Sucker Effect? Your gains come solely from the those who made the wrong bet. There is no inherent value generation in the prediction markets unlike the stock markets. Yes, there is money to be made, but at a net loss to the society, so many would not consider these bets "opportunities" but rather "gambling".

There is no value generation in trading stocks either beyond IPO, as stocks are then simply second-hand markets and can be completely irrational. The main value is just like the lottery : entertainment, excitment.

There is strong signal that companies then listen to and act on. The market serves (whether you like it or not) as the final board of executives.
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