I know, I know. Warren Buffett is a much maligned character in the Bitcoin space for all the uneducated and negative things he has said about Bitcoin. That doesn't mean we can't study and emulate his investing style to turn our degeneracy into "thoughtful degeneracy" on Predyx.

If you have not heard of Predyx, it is a sats denominated, lightning integrated, prediction market made by our friends and fellow stackers @mega_dreamer and @emre. If you haven't checked it out yet, give it a whirl https://beta.predyx.com/

Early in his career Warren Buffett was well know as a deep value investor. Following the playbook of his former professor, Benjamin Graham, he sought to find stocks he deemed deeply undervalued based on their fundamentals (book value, earnings per share etc) as compared to their current trading price. Part of the strategy included Cigar Butt investing, which is seeking to invest in companies that are struggling and may go out of business (getting the last puffs off the cigar butt) but are trading at very low prices. Many of these companies would trade at prices below the book value of the assets they owned. To explain this simply, imagine Microstrategy was valued at 20B in terms of market cap but their Bitcoin holdings, net of debt, were worth 40B.

After partnering with Charlie Munger, another Bitcoin enemy, Buffett began to change his investing style and think longer term. He had done well with deep value investing but Charlie convinced him to focus more on Quality companies with consistent growth potential and to buy them at a Fair Price. Now granted "fair" is a very subjective word, but Buffett used a number of fundamental analysis (earnings growth, return on equity, debt/equity, price to earnings etc) metrics to determine what he deemed "fair" or even "undervalued". This strategy allowed him to make long term (multi decade) bets on persistent high quality businesses that through the magic of compounding provided massive returns.

He supercharged this strategy by purchasing insurance companies that carried a lot of float (money collected from policyholders that has yet to be paid out) which provided huge amounts of cash that needed to be invested.

While is it certainly possible to find deeply under valued outcomes on Predyx, I don't think hunting for them is a good strategy or worth your time. Sure, you can probably find a lot of outcomes that are trading below their true market odds but Predyx does not have enough users or liquidity to make this a viable strategy. You may find an outcome that is trading at only a 2% probability but market odds suggest it should be 10%. Great, but if no other users are trying to exploit this mispricing, you will just be sitting with a lot of undervalued shares that are highly unlikely to be the final outcome. I do think it is feasible to find more likely outcomes that are underpriced and make allocations to them even though they aren't the most favoured outcome but I consider that buying quality not searching for cigar butts. So while possible, I wouldn't recommend the Cigar Butt strategy on Predyx.

Quality at a fair price on the other hand, in my opinion, is a great strategy to use to inform your bets on Predyx. Seeking out probable or reasonably possible outcomes that are trading at or below their comparative market odds leaves you a lot of room for profit potential if your outcome hits or if its price gets bid up by other users who think it will hit or feel they are under allocated to it. (As a side note, to determine if an outcome probability is fair, overvalued or undervalued compare it to how it is trading on traditional betting markets or more liquid prediction markets. You can use an odds probability calculator to convert moneyline odds from betting markets into a probability).

You will find the best opportunities for Quality at a Fair price in longer term multi option markets where you can add to probable outcome positions when you feel they are good value. I am mostly focused on the sports markets, so I find it best to execute this strategy in the championship futures markets. You can take positions in the teams most likely to win the championship early on and then add and subtract from your position as the season and playoffs play out.

The idea is fairly simply. Over the course of the MLB season I would rather methodically add to a position in a team like the Dodgers, who are likely to be competing for the championship come playoff time, rather than trying to find lightning in a bottle with my very low priced Blue Jays. I may still do both, but my position sizing in terms of sats invested will be far greater on the Dodgers.

As mentioned earlier, Buffett has the benefit of access to Insurance Company float. It is unlikely any of us own insurance companies but I think there are a few ways we can create a similar dynamic.

So, there you have it folks. That's how you can degen like Warren Buffett would degen.

Please note, I don't always follow my own strategy, as I simply cannot resist YOLOing into my biases like the 49ers winning the Super Bowl or the Leafs continuing their annual playoff blow up streak. I am optimizing for both fun and profit after all.

Sats for all, GR