Daily Archives: May 20, 2008

Prediction markets = the future of journalism -said, from day one, Emile Servan-Schreiber of NewsFutures. Emile, if you have balls, lets do it -all together.

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My yesterday&#8217-s post about the Obama&#8211-Clinton prediction markets was the most popular Midas Oracle story of that Monday. Hummmm&#8230- No idea why&#8230- I was not helped by Google Search or by an external blogger. Sounds like our Midas Oracle web readers and feed subscribers liked it &#8230- for some reasons I have yet to discover fully.

Anyway.

  1. I&#8217-m minding a grand &#8220-Midas Oracle Project&#8220-, and you can join it.
  2. Emile believes that prediction markets represent &#8220-the future of journalism&#8220-. I am trying to mind, specifically, what form could take the &#8220-prediction market journalism&#8220-.
  3. The idea is this: We need to put the charts of prediction markets inside news stories, and those stories should incorporate the meaning of the probability fluctuations (a la Justin Wolfers).
  4. If we stay in our armchairs, nothing will happen, because most of the old-school journalists and bloggers don&#8217-t think much of the prediction markets. The prediction market infiltration in the Mediasphere and the Blogosphere is like a weak stream, right now. I don&#8217-t have the patience to wait until &#8220-2020&#8243-.
  5. I don&#8217-t think that much will come out of the prediction exchanges. The BetFair blog and the InTrade newsletter are 2 pieces of crap &#8212-they compete in content quality with the Mongolian edition of the News Of The World.
  6. If you look at the evolution of the media, you see that the old-school, dead-tree publications are slowly dying, and are replaced by professional blog networks &#8212-look especially in the IT industry, with TechCrunch, etc. What you have is writers who publish only for the Web, and who fill a vertical niche. (And, the Washington Post is now publishing content from&#8230- guess who.)
  7. Needless to say, prediction market journalism is costly. Now, go directly to point #8, because that&#8217-s where the beef is.
  8. Yes, I have &#8220-heard of Christmas&#8221- :-D , and I understand Robin Hanson&#8217-s reasoning. [*] That&#8217-s where my funding idea lays. The idea is to think hard about who &#8220-might actually be willing to pay&#8221-. I am thinking of a class or organizations that &#8220-might actually be willing to pay&#8221-, provided 2 things. Number one, that I operate a certain twist on my form of prediction market journalism. Number two, that this project becomes the project of many prediction market people, or, better, of the whole prediction market industry &#8212-not just Chris Masse&#8217-s one. Those 2 things are essential.
  9. So, Emile, wanna join the &#8220-Midas Oracle Project&#8220-?

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[*] APPENDIX:

The &#8220-high IQ&#8221- Robin Hanson:

Chris, you’ve heard of Christmas I presume. Many people circulate lists of items they might like for Christmas. If you did, would you circulate a list of million franc/dollar gift ideas for people to give you? Would you consider that list more honest/logical than a list of gifts of roughly the price you think others might actually be willing to pay?

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HubDubs Nigel Eccles is the man.

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Nigel Eccles
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  1. He didn&#8217-t sign Bob&#8217-s petitions. :-D
  2. He is experienced.
  3. He is well versed into prediction markets and journalism.
  4. Just after HubDub&#8217-s inception, he realized they fucked up their chart widgets. Five months later, they managed to correct that birth defect.
  5. He is a guy humble enough to ask for pointers and feedback &#8212-and he does listen up (see the point #4).
  6. He is quite friendly.
  7. HubDub is already a success.
  8. HubDub serves a purpose for people: it mixes news and prediction markets in a novel way, which should give ideas to InTrade, TradeSports, BetFair, TradeFair, NewsFutures, etc.
  9. In some kind of small ways, Nigel Eccles is pioneering &#8220-the future of journalism&#8220-.
  10. If newspaper and magazine websites were to be interested in prediction markets, HubDub should be in the short list.

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Three things that Scottish guy hasn&#8217-t computed yet, though:

  1. You have to look down into the small prints, towards the bottom of their frontpage, to get the info that they have a blog. (((They master well mass e-mailing, on the other hand.)))
  2. He hasn&#8217-t cracked open prediction market journalism (a la Justin Wolfers), yet &#8212-but I&#8217-m confident that is coming.
  3. He looks like a baby-face schmuck on that pic. :-D

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John McCains grumpy old pal writes to Bo Cowgills boss.

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Joe Lieberman:

May 19, 2008

Dr. Eric Schmidt
Chairman of the Board and Chief Executive Officer
Google, Inc.
1600 Amphitheatre Parkway
Mountain View, CA 94043

Dear Dr. Schmidt:

YouTube is being used to share videos produced by al-Qaeda and other Islamist terrorist groups. The purpose of this letter is to request that Google implement its own policy against this offensive material, remove these videos from YouTube, and prevent them from reappearing.

Today, Islamist terrorist organizations rely extensively on the Internet to attract supporters and advance their cause. The framework for much of this Internet campaign is described in a bipartisan staff report released last week by the Senate Committee on Homeland Security and Governmental Affairs (“Committee”), which I am privileged to chair, titled Violent Islamist Extremism, the Internet, and the Homegrown Terrorist Threat. The report explains, in part, how al-Qaeda created and manages a multi-tiered online media operation that produces content intended to enlist followers in countries all over the world, including the United States. Central to this media campaign is the branding of content with an icon or logo to guarantee authenticity that the content was produced by al-Qaeda or allied organizations like al-Qaeda in Iraq, Ansar al-Islam (a.k.a Ansar al-Sunnah) or al-Qaeda in the Land of the Islamic Maghreb. All of these groups have been designated Foreign Terrorist Organizations (FTO) by the Department of State.

Searches on YouTube return dozens of videos branded with an icon or logo identifying the videos as the work of one of these Islamist terrorist organizations. A great majority of these videos document horrific attacks on American soldiers in Iraq or Afghanistan. Others provide weapons training, speeches by al-Qaeda leadership, and general material intended to radicalize potential recruits.

In other words, Islamist terrorist organizations use YouTube to disseminate their propaganda, enlist followers, and provide weapons training – activities that are all essential to terrorist activity. According to testimony received by our Committee, the online content produced by al-Qaeda and other Islamist terrorist organizations can play a significant role in the process of radicalization, the end point of which is the planning and execution of a terrorist attack. YouTube also, unwittingly, permits Islamist terrorist groups to maintain an active, pervasive, and amplified voice, despite military setbacks or successful operations by the law enforcement and intelligence communities.

YouTube posts “community guidelines” for users to follow, but it does not appear that the company is enforcing these guidelines to the extent they would apply to this content. For example, the community guidelines state that “[g]raphic or gratuitous violence is not allowed. If your video shows someone getting hurt, attacked, or humiliated, don’t post it.” Many of the videos produced by one of the production arms of al-Qaeda show attacks on U.S. forces in which American soldiers are injured and, in some cases, killed. Nevertheless, those videos remain available for viewing on YouTube. At the same time, the guidelines do not prohibit the posting of content that can be readily identified as produced by al-Qaeda or another FTO.

I ask you, therefore, to immediately remove content produced by Islamist terrorist organizations from YouTube. This should be a straightforward task since so many of the Islamist terrorist organizations brand their material with logos or icons identifying their provenance. In addition, please explain what changes Google plans to make to the YouTube community guidelines to address violent extremist material and how Google plans to enforce those guidelines to prevent the content from reappearing.

Protecting our citizens from terrorist attacks is a top priority for our government. The private sector can help us do that. By taking action to curtail the use of YouTube to disseminate the goals and methods of those who wish to kill innocent civilians, Google will make a singularly important contribution to this important national effort.

Thank you for your immediate attention to this critical matter and I look forward to your response.

Sincerely,

Joseph I. Lieberman (ID-CT)
Chairman, Senate Committee on Homeland Security and Governmental Affairs

Building Exits into CFTC Regulation

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Much of my draft paper, Private Prediction Markets and the Law, focuses on nuts-and-bolts fixes for the legal uncertainty that currently afflicts private prediction markets under U.S. law. I&#8217-ll say more about those in later posts to Agoraphilia and Midas Oracle. The paper also dicusses a more theoretical and general issue, though: The benefits of designing regulatory schemes to include exit options.

The Commodity Futures Trading Commission recently issued a request for comments about whether and how it should regulate prediction markets. In earlier papers, I explained why the CFTC cannot rightly claim jurisdiction over many types of prediction markets. I recap that view in my most recent paper, but add some suggestions about how the CFTC might properly regulate some types of prediction markets. In brief, I suggest that the CFTC build exit options into any regulations it writes for prediction markets, allowing those who run such markets the same sort of freedom of choice that U.S. consumers already enjoy, thanks to internet access to overseas markets like Intrade, with regard to using prediction markets. Here&#8217-s an excerpt from the paper:

Those practical limits on the CFTC&#8217-s power should encourage it to write any new regulations so as to allow qualifying prediction markets to operate legally, and fairly freely, under U.S. law. . . . Ideally, the CFTC would offer prediction markets something like these three tiers, each divided from the next with clear boundaries.

  • Designated Contract Markets. Regulations designed for designated contract markets, such as the HedgeStreet Exchange, would apply to retail prediction markets that offer trading in binary option contracts and significant hedging functions.
  • Exempt Markets. Regulations for &#8220-exempt&#8221- markets, which impose only limited anti-fraud and manipulation rules, would apply to prediction markets that:
    • offer trading in binary option contracts-
    • thanks to market capitalization limits or other CFTC-defined safe harbor provisions do not primarily support significant hedging functions- and
    • offer retail trading on a for-profit basis.
  • No Action Markets. A general &#8220-no action&#8221- classification, similar to the one now enjoyed by the Iowa Electronic Markets, would apply to any market that duly notifies traders of its legal status and that is either:
    • a public prediction market run by a tax-exempt organization offering trading in binary option contracts but not offering significant hedging functions-
    • a private prediction market offering trading in binary option contracts, but not significant hedging functions, only to members of a particular firm- or
    • any prediction market that offers only spot trading in conditional negotiable notes.

Notably, regulation under either of the first two regimes would definitely afford a prediction market the benefit of the CFTC&#8217-s power to preempt state laws. It remains rather less clear whether the third and lightest regulatory regime would offer the same protection, though the cover afforded by its two &#8220-no action&#8221- letters has allowed the Iowa Electronic Markets to fend off state regulators. Markets that by default qualify for the third regulatory tier described above thus might want to opt into the second tier, so as to win a guarantee against state anti-gambling laws and the like. So long as they satisfy the first two conditions for such an &#8220-exempt market&#8221- status, public prediction markets run by non-profit organizations or private prediction markets that offer trading only to members of a particular firm should have that right. Why offer this sort of domestic exit option? Because it would, like the exit option already open to U.S. residents who opt to trade on overseas prediction markets, have the salutatory effect of curbing the CFTC&#8217-s regulatory zeal.

The footnotes omitted from the above text includes this observation: &#8220-Because they fall outside the CFTC&#8217-s jurisdiction, markets offering only spot trading in conditional negotiable notes could not opt into the second regulatory tier.&#8221-

Please feel free to download the draft paper and offer me your coments.

[Crossposted at Agoraphilia, Technology Liberation Front, and Midas Oracle.]

Previous blog posts by Tom W. Bell:

  • Let’s Tell the CFTC Where to Go.
  • Let Prediction Markets Fight Terrorism.
  • Protecting Private Prediction Markets
  • Insider Trading and Private Prediction Markets
  • Getting from Collective Intelligence to Collective Action
  • Quake Markets
  • Presentation of Private Prediction Markets’ Legality Under U.S. Law

Yet another guy, writing about prediction markets in the mainstream media, who does not master what he is talking about.

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Via Adam Siegel of Inkling Markets,

John McQuaid of Wired.

  1. It&#8217-s incoherent to start a rant against prediction markets by this upbeat line, &#8220-Prediction markets can be spookily accurate.&#8221-
  2. He blames the New Hampshire upset on poor liquidity. Where is the scientific evidence of that? Total invention by our good friend Barry Ritholtz. The New Hampshire prediction markets were wrong because the advanced, primary indicators (the polls) were wrong. As simple as that. [For why the polls were wrong, see: The New York Times, Zogby, Rasmussen, Gallup…]
  3. Prediction markets &#8220-have a lot of political junkies but few real insiders or outsiders, so they&#8217-re not very good at catching something the polls might miss.&#8221- Hummm&#8230- Most of the &#8220-real insiders&#8221- don&#8217-t keep scoops for themselves (if and when they have some), they are too happy to act as a source for some thirsty journalists or bloggers, so as to have their name printed somewhere. Hence, the political junkies would be able to aggregate any kind of extraordinary information &#8212-if that were to happen.
  4. How could the prediction markets &#8220-get out ahead of conventional wisdom&#8221-? It&#8217-s impossible, other than by reversing our psychological arrow of time (remembering the future, instead of the past). At the contrary, the job of the prediction markets is to quantify exactly that so-called &#8220-conventional wisdom&#8221-. They won&#8217-t go further, and we&#8217-re happy to run with that, because, that way, we are not prisoner of the bias of a handful of experts. Plus, prediction markets give us an objective probability of event outcome &#8212-a thing that individual experts can&#8217-t give us.

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The excerpt below is good enough, though:

[…] But forecasting also needs more so-called noise traders, who do business with almost no information. Noise traders boost accuracy by increasing volume and the potential profits of informed traders. Diversity helps, too. If you can get different types of people to play, experts say, not only do you get a bigger pool and more information, but differing random guesses will cancel each other out, leaving real signals to rise above the noise. Plus, if you have a critical mass of investors with a variety of backgrounds, locations, and interests, they are less likely to move as a herd. […]

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Previous blog posts by Chris F. Masse:

  • A second look at HedgeStreet’s comment to the CFTC about “event markets”
  • Since YooPick opened their door, Midas Oracle has been getting, daily, 2 or 3 dozens referrals from FaceBook.
  • US presidential hopeful John McCain hates the Midas Oracle bloggers.
  • If you have tried to contact Chris Masse thru the Midas Oracle Contact Form, I’m terribly sorry to inform you that your message was not delivered to the recipient.
  • THE CFTC’s SECRET AGENDA —UNVEILED.
  • “Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.”
  • Meet professor Thomas W. Malone (on the right), from the MIT’s Center for Collective Intelligence.

Ubber finance blogger Barry Ritholtz believes in magic. He believes that, with more volumes on the event derivative markets, comes the Omniscience -capital O.

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Our good friend Barry Ritholtz.has persuaded himself that our real-money prediction markets suffer from an irremediable and fatal problem: liquidity on political event derivative markets is too thin for smart Wall Street people like him to take their market-generated probabilities seriously. Barry Ritholtz is keen to tout oranges&#8211-apples comparisons: the NYSE volume versus the Obama&#8211-Clinton volume at InTrade. It&#8217-s a bullshit argument, but he managed to persuade some gullible journalists writing for some clueless mainstream media that thin liquidity was responsible for the New Hampshire upset &#8212-and else.

Barry, if you had 1,000,000,000 trades on the New Hampshire prediction market, you&#8217-d still have an inaccurate prediction. The polls were wrong, and there&#8217-s nothing &#8230- NOTHING&#8230- that the InTrade and BetFair traders could have done to get this election right. Get over it, Barry. Traders are not magicians. :-D

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[For why the polls were wrong, see: The New York Times, Zogby, Rasmussen, Gallup…]

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BetFair Malta outputs a simplistic prediction game (about the 2008 European soccer tournament). Im not impressed at all.

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  1. Simplistic enough. Sounds more like a promotion trick than a real game.
  2. The Sporting Exchange has outsourced the development of this game (and others) to a Swedish team.
  3. The Swedish people won a &#8220-multi-year&#8221- contract. I don&#8217-t understand which partner is responsible for the creation of future games. Probably both, but it&#8217-s not clear. To get new game ideas, I would rather bid for them around the planet (just like book publishers and movie producers are looking out for good scripts) &#8212-as opposed to have a &#8220-multi-year&#8221- contract with someone, even a talented someone. (And in the case under my very nose, I can&#8217-t see any talent, here.)
  4. In both Internet Explorer and Mozilla FireFox, there are usability problems, as you can see in the screen shot. This BetFair site (just like their corporate site) was not designed to be fluid. A shame.

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Previous blog posts by Chris F. Masse:

  • Become “friend” with me on Google E-Mail so as to share feed items with me within Google Reader.
  • Nigel Eccles’ flawed “vision” about HubDub shows that he hasn’t any.
  • How does InTrade deal with insider trading?
  • Modern Life
  • “The Beacon” is an excellent blog published by The Independent Institute.
  • The John Edwards Non-Affair… is making Memeorandum (twice), again.
  • Prediction Markets = marketplaces for information trading… and for separating the wheat from the chaff.