Analysis.

It’s not clear why you believe that the majority of those customers who use Betfair’s forum are unhappy about the introduction of the improved matching logic. The sport this will most significantly benefit is football [soccer], and there’s nothing we’ve heard from our football customers that would suggest they’re unhappy, nor would we expect there to be. Even the thread you refer to has a mix of opinion. We don’t prevent customers posting negative opinions about Betfair (as long as they stay within the forum rules) as you can clearly see from reading the forum, even when the criticism is unfounded. But that does mean that the overall sentiment expressed on the forum is frequently unrepresentative: only a tiny minority of Betfair’s customers post on the forum, and it’s unrealistic to expect that customers would feel motivated to post to say that they’re very happy.

We expect no deterioration in site performance and the consequences of placing a bet in error are the same as if we had more customers placing more bets on a market – you’d be more likely to get a bet matched than to be unmatched, and you’d expect a better price overall. If you were right then that would imply that more customers active in a market is a bad thing (because if you place a bet in error you’re more likely to get matched than to have a chance to cancel). That’s clearly equally incorrect. We expect this to be a benefit to customers overall, even if that’s not obvious to all now. If we get things wrong customers vote with their feet, so we always question whether we can do things better, and if we conclude any change isn’t having the desired effect we’re never too proud to reconsider.

About payments made to the U.K. horse racing industry:

Betfair pays the exact same percentage of our gross profits in levy all other UK betting operators – 10% of gross profits on British horseracing. For the levy year just ended we paid just over £6.9m in levy. So, we agree that we pay our fair share! We don’t believe there is any rational justification to impose an extra charge on Betfair or on our customers. The Treasury conducted an 18 month review (announced by Gordon Brown in the 2004 Budget) into ‘the tax treatment of exchanges and their customers’. The conclusion to that review was ‘no change’. Had there been a justification for imposing a betting duty charge (which the levy traditionally follows) over and above what other betting operators are required to pay, I think we can assume the Treasury would not have passed up the opportunity to increase their tax take.

We don’t believe there is a realistic prospect of Betfair being obliged to pay more because we don’t think we (or our customers) will be singled out for discriminatory treatment, despite what some people would like to happen. On the basis that we won’t be hit by an increased charge, we will have no need to pass on something to customers and/or go off-shore.

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PUT YOUR MOUSE CURSOR ON ONE OF THE WHITE DOTS PRESENT ON THE CHART, AND SPOT THE POP-UP MESSAGE.
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IF YOU’RE READING THIS FROM WITHIN YOUR FEED READER, GO TO THE BLOG POST, ON THE MIDAS ORACLE WEBSITE, BECAUSE THE BETFAIR CHART WIDGET IN QUESTION DOESN’T APPEAR IN THE FEED.
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1. The chart should output the market-generated, implied probabilities expressed in percentages —not those damn decimal/digital odds. (Actually, Boris Johnson is ahead of Ken Livingstone.)
2. The news markers were filled by RIchard Quest, last week-end, during his Central Park escapade, it seems. … I mean, these comments were written in a tabloid way.
3. The blogger who would embed this compound chart would like to write his/her own news markers.
4. Clicking on the “£25 free bet now” area, at the right lower corner, did not open any new browser tab showing the BetFair website because my browser, Mozilla FireFox, “prevented this site from opening a popup window”.
5. The chart widget shows up on the webpage, but not in the feed —most of the blog readership happens in feed readers, nowadays. Just below is a screen shot of the feed of the Midas Oracle .COM blog, where I published one blog post with the BetFair chart widget, and another blog post with the inTrade chart widget. As you can plainly see, the InTrade chart widget can be consumed thru a feed reader, while the BetFair one can’t. (You don’t see that on the screen shot below, but, for your information, all InTrade chart widgets can be seen in a feed reader, including the InTrade compound chart widgets.)

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Robin Hanson:

[...] We rarely seek out advice, and when we do it is usually on much smaller decisions. [...] One reason we avoid getting advice is that it lowers our status relative to those who give advice. Of course this is also makes asking for advice a good way to flatter and supplicate. Not sure if this explains the puzzle though. But all this doesn’t seem to bode well for fielding decision markets on the biggest organizational decisions.

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The big picture:

1. The insurmountable obstacle to the implementation of any “decision market” (in Robin Hanson’s original concept – PDF file) is the decision maker’s ego. CEOs, board administrators and heads of states are honchos who will never outsource decision-making to conditional prediction markets. That will never happen.
   
2. Let alone the impossibility of overhauling our democracies.
3. The concept of decision markets (PDF file) in itself is superb, though —and that makes Robin Hanson a great thinker.
4. Great inventors seldom make great innovators. Innovators borrow ideas from inventors and apply them in ways that inventors never envisioned. In the future, Robin Hanson’s concept of decision markets might inspire applications in digital communities of libertarians (like Second Life), for instance.
5. As for decision-aid markets (a derivative, which most people confuse with his original concept), they make full sense —provided that you talk in decision makers who are already convinced by the no-ego, free-market, information-aggregation, secondary-information-source philosophy. There is only a fistful of them, out there. In that regard, Robin Hanson’s best use of his time would not be blogging incessantly about decision markets for his little clique of fanboys, or touring the world to plug futarchy to gullible audience, but to consult with the 1% of the Fortune-500 companies that could be truly interested in that radical market-based solution. Or maybe Robin Hanson should start up his own enterprise, all managed in accordance with his radical concept(s).
6. The next frontier is prediction market marketing —a bottom-up approach focused on quantifying in all dimensions the small population segment that can derive full joy from reading our prediction markets. That is ungrateful hard work, which our prestige-seeking, publicity-thirsty, acclaim-drunken, Earth-shattering propeller heads are not interested in, I suspect.
7. And that wraps up our “Robin Hanson Watch #23,173″. Stay tuned for our next episode, sometimes later.

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Robin Hanson’s comment:

I don’t recall ever turning down a chance to consult on prediction markets for a Fortune-500 company. If you know of an opportunity that I’m missing, do let me know.

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Fred Wilson (a famous NY-based venture capitalist, a “VC”):

Really think about if you need that $15,000 a month PR firm. – There are some really good PR firms out there and if you can get one of them to work with your company, then it may be worth considering it. But a mediocre PR firm is not worth it for sure. I encourage our portfolio companies to hire a person inside the company to be an “evangelist”. That job includes blogging actively, reading and commenting and linking to other blogs, reaching out to the media and industry analysts and gurus, going to conferences and events, and generally getting the word out. That person can be young and not particularly expensive, certainly nowhere near $15,000 a month. And they have two things that a PR firm cannot offer. They work for you and they represent your company exclusively.

Exactly.

As of today, the BetFair blogging is appalling and works in reverse. The BetFair blog is a digital cockroach that repels the prediction market aficionados. Over the time, the BetFair blog will generate bad publicity for BetFair-TradeFair.

As for InTrade-TradeSports, their little “bulletin” is totally uninteresting. It’s not awful, but it’s not clever either. It’s money wasted.

1. The CO-AUTHORS plugin, which does what it says. One specific post or page can be assigned two or more co-author(s) by the blog editor. Very interesting. (I don’t get why the plugin developer forbids the co-authors to “edit” the post/page, though. Mystery, which I will try to clear up with the software architect of this plugin.)
2. The ROLE MANAGER plugin (not listed in the official WordPress plugin directory), which changes the standard WordPress matrix of roles and capabilities. It can redefine the capabilities of one category of users (i.e., one “role”), and can change the capabilities of one individual, but won’t assign common capabilities on a post/page-by-post/page basis (unlike the CO-AUTHORS plugin). To put it in another way, the ROLE MANAGER plugin can be used to extend (or restrict) the capabilities of the blog authors. Right now, they can only publish a post, not a page. In this instance, they would be allowed to write and edit pages —without the need for the blog administrator to promote these authors as full editors (which would be tricky since those multiple editors could then edit their peers’ posts –not acceptable in a big group blog with 71 blog posters).

Very interesting.

On Midas Oracle, one could have:

• Authors Mike Giberson and Adam Siegel writing together a post on “How Great An Exchange Inkling Markets Is“.
• Authors Chris Masse, Mike Giberson, David Pennock and Jason Ruspini writing together a page on “The Ultimate Prediction Market Definition“.
• Etc., etc., etc.
• If plenty of co-authors collaborate on a post/page, then my hope is that Midas Oracle could become more than just a “blog”, and be also a vertical encyclopedia on prediction markets. (Of course, participation inequality remains an issue.)

[External Reading: For the life of you, don't miss this blog post by Tim O'Reilly on Wikipedia.]

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UPDATE: The creator of the CO-AUTHORS plugin writes back to me:

Not allowing all of the co-authors the ability to edit a page is not by design; I just have to do more research on WordPress permissions to find out how to do so, if even it is possible.

I wonder whether using the two plugins together is the solution…

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UPDATE: My current thought is to give each Midas Oracle author the capability to create, write up and edit his/her own page(s). And then to assign co-authors to some post(s) and page(s), on a case-by-case basis.

The skills you need to succeed

One of the most important changes of the last 30 years is that digital technology has transformed almost everyone into an information worker. [...]

I also place a high value on having a passion for ongoing learning. When I was pretty young, I picked up the habit of reading lots of books. It’s great to read widely about a broad range of subjects. Of course today, it’s far easier to go online and find information about any topic that interests you. Having that kind of curiosity about the world helps anyone succeed, no matter what kind of work they decide to pursue.

Thanks to Lord JC Kommer for the link.

Abstract

We present a system for predicting price fluctuations in Prediction Markets, such as TradeSports and the Iowa Electronic Markets. Our approach utilizes both market history and public news articles, published before the beginning of trading each day, to produce a set of recommended investment actions. Since there is evidence that prediction markets are very good indicators of future events, we hypothesize that the converse is true: past/present events can potentially assist in predicting future prices in these markets. We empirically show that these markets are surprisingly predictable, even by purely market-historical techniques. Furthermore, analyzing relevant news articles captures information independent of the market’s history, and combining the two methods significantly improves results. Capturing this signal from news articles requires some linguistic sophistication – the standard naïve bag-of-words approach does not yield predictive features. Instead, we use part-of-speech tagging, dependency parsing and semantic role labeling to generate features that improve system accuracy.

We evaluate our system on eight political markets from 2004 and show that we can make effective investment decisions based on our system’s predictions, whose profits greatly exceed those generated by a baseline system. Additionally, our market prediction system can be applied to any Prediction Market with a known end date and for which a set of relevant entities (people, places, or things) can be defined.

Previously: Today’s prediction markets are far from being efficient.

[The IEM prediction] markets were not even weakly efficient.

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Hillary Clinton – IEM vs. Linguistic analysis of news articles

Rudy Giuliani – IEM vs. Linguistic analysis of news articles

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NEXT: Reading the Markets – Forecasting Prediction Markets By News Content Analysis

Carol Kauffman, an assistant clinical professor at Harvard Medical School: “When you’re really engaged in a hobby you love, you lose your sense of time and enter what’s called a flow state, and that restores your mind and energy.” [...] “That positive emotion builds your cognitive and social skills. If you follow your bliss [*] for a little while, it really gives you a surge of energy.”

Dr. Gabriela Corá, a psychiatrist who is managing partner of the Florida Neuroscience Center and president of Executive Health and Wealth Institute: “Making time for enjoyable activities stimulates parts of the brain associated with creative and positive thinking. You become emotionally and intellectually more motivated.”

Gail McMeekin, a psychotherapist and owner of Creative Success: “Any time you take a break from routine, you develop new ways of thinking”.[...] “You have to do some market research first and make sure you could earn a living doing your hobby. You also take the risk that making your hobby your career [*] will take all the fun out of it.”

[*] His “bliss” right now is to chronicle the Writers Guild America’s 2007 strike on Inkling Markets and Midas Oracle .COM.

[**] Told him 10 times!!!!!!!

RECOMMENDED READING: RGGI auction design flaw: Separate sealed-bid auctions for substitute goods poses needless risks for bidders – by Michael Giberson (at Knowledge Problem)

“RGGI” is short for the Regional Greenhouse Gas Initiative (North East and Mid-Atlantic). They want to create a multi-state cap-and-trade program with a market-based emissions trading system. Economist Michael Giberson has found [links to Crampton's paper that highlights] “one serious flaw that threatens the efficiency of the auction: they proposed to auction two goods which are asymmetric substitutes in separate, simultaneous sealed bid auctions.”

Mike, are there lessons here to learn when it comes to prediction market designs?

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Psstt… The best sentence that Mike has ever told me is this one (from memory):

Maybe there’s a method in your madness.