269 sats \ 5 replies \ @ek OP 10 Dec 2023 \ parent \ on: Prediction markets: can betting be good for the world? (2021) oracle
Good question since it gets asked regularly but I think I never took the chance to explain what I think about this:
Two things might be true:
a) there is no incentive if you have no insider knowledge: "if you don't know what you're doing, maybe don't do it"
B) you have no insider knowledge but the public information available is still enough to give you enough of an idea what might be the correct outcome. Or at least what is the most probable outcome :)
So with b) I want to say: insider information don't necessarily need to completely swing probabilities in the other direction. Maybe insider information is just a confirmation of what everyone is already supposed to known given only public information?
Also, you always have the option to include everything you don't know in your prediction.
Is this a company where likely some insider information exists? (betting on the future of Coinbase)
Is this an event where insider information probably isn't that important? [Bitcoin price, assuming there are no hidden market forces that can literally swing the price however they want, lol :) ]
Now, we could even try to go further: what are the things you don't even know that you don't even know? :)
Writing this from mobile right now so don't want to write anything further.
Let me know if this answers your question :)
An extension of b) is that you might spot an inconsistency or other error in the public information that people seem generally unaware of.
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I would consider that to be under the umbrella of insider.
The participants are those who believe themselves to have unique information, whether or not they actually do
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good point, i think this became so obvious to me, i don't even think about it this anymore, lol :)
like ... that's the whole point of prediction markets, no? lol :) to finally take things seriously and actually do some due diligence like your life depends on it. a few sats can mean a lot in the future :)
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Another way to think about it is: you don't need insider knowledge, you can get an advantage in all kinds of ways. For instance, there are innumerable biases in how people think about stuff -- you can find lists of them all over the place. If you can manage to be less biased than other market participants, that's an advantage. You have access to the same info as everyone, you just use it better because you're less biased.
If you can bring information to bear that the market doesn't include, that's an advantage regardless of whether or not it's 'insider' knowledge. It's often the case that key info is sitting out there in plain sight, but for one reason or other -- often due to the aforementioned biases -- people don't include it in their worldviews. That's alpha for you.
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Just to be clear, I'm fully supportive of prediction markets :). I think people should be able to bet on whatever they want.
I think it could work better if participation was incentivized. So that the expected return of participating is positive (not a zero sum game). This requires the organizer of the market to have an innate interest in generating a market based prediction... But this could be better than paying for an expert opinion, potentially
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