Prediction exchanges should be commercial enterprises and make big profits.

Chris F. Masse December 11th, 2006

Over there, at Overcoming Errors dot com (where the main error is to ban marketing), Peter McCluskey pitches prediction exchanges as the cousins of the think tanks, and says that the most socially relevant form of prediction markets should be run like/by non-profit organizations.

In my view, Peter McCluskey is wrong —just like all the other Robin Hanson’s fanboys who lost touch with Reality —capital “R”.

Think tanks (created to counter-balance the liberalism of Academia) are the cousins of the universities. Think tanks don’t have any customers —only consumers (the policy wonks who read their biased reports). How can you assess the performance of think tanks and universities? You can’t. They are like the dark matter of the universe.

On the other hand, commercial prediction exchanges have customers and competitors. The resulting intense pressure leads to a market leader on each geo-zone (BetFair in the U.K. and Australia, and TradeSports in the U.S.) that delivers quite a good service, overall —and expanding slowly into more interesting topics. I’m impatient too, but what we have today is not that bad —given the circumstances.

Can professor Robin Hanson fry an egg? Could he manage to administer a real-money prediction exchange and make traders happy?

Leave the pondering to Robin Hanson and all the other luminaries (or so they think they are) and leave the executing to David Yu, John Delaney and all the other performing (or so they think they are) exchange managers. God preserve us from prediction exchanges run by Sci-Fi lovers who can’t spell “customer satisfaction” or “industry analysis”.

Prediction exchanges should seek customers —not “wealthy donors”, as dreams Peter McCluskey.

As for the socially relevant prediction markets, let’s educate the team of the most successful prediction exchanges and let’s be patient and resilient.

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All that said with deep respect towards professor Robin Hanson and Peter McCluskey.

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Bomb

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Comments(2)

2 Responses to “Prediction exchanges should be commercial enterprises and make big profits.”

# Jason Ruspini on 12 Dec 2006 at 10:15 am

I am crossposting this comment here:

Yes, IEM hasn’t had a problem for over fifteen years. The next such exchange would likely face greater challenges, but it’s the legal costs more than the legal risks that have stopped people so far. For one thing, a non-profit status would often absolve aggravated/felony gambling charges, and would count as social gambling in many states. The exchange could also block access from states that seemed hostile or where internet gambling was clearly illegal. And this leaves aside the question of whether a skill-based prediction market is even gambling, which could probably be won with sufficient legal firepower.

Not charging trading fees would lead to greater liquidity and more accurate prices. A lack of fees might also be logical in some hedging markets. For example, should dispersed interests hedging against the continuation of some industry subsidy be charged trading fees?

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I would just add that it would be no more difficult to assess the performance of a non-profit exchange vs. a for-profit exchange. Also, many of us are interesting in prediction markets mainly for non-monetary reasons.
# Chris Masse on 12 Dec 2006 at 11:22 am

Perry Metzger has posted a great comment:

http://www.overcomingbias.com/.....l#comments