ENDLESS VEEPSTAKES: Why you should never trade on VP prediction markets, and why their probabilistic predictions are as stochastic as Paris Hilton’s daily dress picks.
Chris F. Masse August 20th, 2008
As I explained in early June 2008, the VP speculations that appear in the Press should never be taken seriously. Most of them (and you don’t know which ones) are a big orchestration of pure lies aimed at creating publicity, or wicked lies in the form of trial balloons. The aims of the political campaigns are to:
- creating suspense (sometimes false) so as to generate free publicity;
- sending a positive message to the supporters of each VP candidate;
- letting the Press do the vetting of the VP candidates;
- flattering the political journalists by leaking to them;
- sending out false leaks so as to preserve the surprise for the scheduled announcement day;
- sometimes, buying time to impose the head of the VP search committee as the most serious VP candidate (remember Dick Cheney in 2000). [Psstt... Funny enough, in the 2008 election, Michael Moore is pulling for Caroline Kennedy.
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All that means that there are no good primary indicators for the prediction markets on the Democratic and Republican VP-candidate selections.
I want to offer 6 remarks:
- Not all prediction markets are created equal. Some have good primary indicators (e.g., the prediction markets on the presidential elections, thanks to polls), while some other prediction markets have unreliable primary indicators (e.g., the prediction markets on who will be on the ticket).
- The prediction exchange executives (like InTrade-TradeSports CEO John Delaney) will never tell you that, because their job is to sell their wares, of course.
- The public needs prediction market analysts, who can judge the quality of the primary indicators of one particular prediction market, so as to separate the grains from the shaft —reliable prediction markets from unreliable prediction markets. (A prediction market analyst has also other functions, which I will blog about later on.)
- A prediction market analyst should have a dual competency —in a vertical (in our example, US politics), and in prediction markets.
- The expertise in the vertical (here, politics) should be a major, and the expertise in prediction markets should be a minor. Take a look at these 2 mainstream media news stories: the one written Jack Shafer in Slate (which I linked to at the top of this post), and the one written by Justin Wolfers in the Wall Street Journal. Obviously, the one that shows the most mastering is the one written by Jack Shafer, an American professional journalist who follows US politics for a living.
- The consequence of that for prediction market journalism is that the writer should be an expert in a vertical, and the editor should be an expert in prediction markets —and not the other way around.
That said, I wish the very best of luck to our good friends Caveat Bettor (who is betting on Tim Kaine) and Nigel Eccles (who is predicting Joe Biden).
UPDATE: My (informal) Democratic VP-candidate bet is on Kathleen Sebelius. Hint, hint.
UPDATE: Gawker says that Joe Biden would be a horrible choice. I agree. Plus, he has denied to be the pick. He could have lied to reporters, though.
UPDATE: New York Times publishes portraits of all VP candidates.
DEVELOPING…
