Wednesday, October 08, 2003


I overheard some people today remarking that they could not believe Arnold won the California election. I presume they did not check out a prediction market which put Arnie's chances at around 85% yesterday (IIRC). Current odds on Arnie becoming President -- 10%.

One thing I like about the exchange is that the abstracted act of putting a wager on a pundit-esque outcome, while considering whether the current bid/ask spread puts your hard earned after-tax dollars at risk at favorable odds, alienates you to precisely the most useful degree when considering a political event (or prediction) that may make your blood boil. Sometimes your thinking does become clearer when it is just numbers on a screen instead of flesh and blood people.

The whole thing makes me think of U Chicago judge extraordinaire Richard Posner's book on the poor quality of public intellectuals, his argument being that demand for quality in pundits was low so the market did not supply any. A public list of bets, along with a win/loss history strikes me as being just the sort of thing you would want to judge the quality of your pundit of choice.

Consider the advantages of such a system: 1) you have a permanent record of positions and statements without requiring personal obsessiveness or the pundit's honesty, 2) less chance of claiming to be misunderstood, 3) a focus on pragmatism (if your insight does not translate into a bet, does it matter?), and 4) an acceptance that life is probabilistic, not deterministic, and it is the cumulative tally of wins and losses that matters, not perfect alacrity every time. By calculating actual wins, you would see if the pundit actually held contrarian (undervalued) views that signal greater insight and understanding -- which is presumably why they think people should pay attention to them in the first place.

I visited Neal Stephenson today who was signing copies of his new book Quicksilver, which kinda seems like a sciencey version of Pynchon's excellent Mason & Dixon. Stephenson is incredibly dull in person, incredibly. If the guy droning on in front of me did not match the picture on the back of his books, I would not believe it was the same fellow. A surprising disappointment given how rich and thoughtful his books seem to me. But (for some reason) it did get me thinking about how, over the past few years, the Internet has gone from being this wonderful groupfest to this kinda scary place which is 75% crazy and wants to destroy everything you hold dear. I wonder if people felt similarly dislocated in the early days of advertising when they were suddenly told to "buy soap" by some guy on a screen, so they did. Just as everyone ignores adverts now, I wonder if, in a few years, online screeds on how the current evil baby eating administration is destroying everything will seem quaint, like those retro ads for instant cake mix, and be tolerantly ignored. Of course, a public record of gains (or losses) on prediction market would be a healthy innoculant too.


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