Caveat Bettor,
In my post, I said that I “-respect”- him “-as a Wall Street professional and as a libertarian blogger.”-
How more “-agreeable”- should I have been???…-
On top of that, his name is listed here.
As for responding to him, I will do once he links back to that piece of mine —-and not to an empty Blogger page.
You can keep up with the news about Betcha, the Seattle-based betting platform suffering the continued attentions of the Washington State Gambling Commission through the Betcha blog.
Founder Nicolas Jenkins has the latest update: Now We Know Why That Search Warrant Came So Easy:
We just found out yesterday that —- surprise! —- the Commission wasn’-t exactly forthcoming with the judge when it applied for the warrant. In its answer to our complaint, the Commission admitted that, when it made its application to Judge Paula Casey, it did not mention that we had filed suit against it the day before. In the answer they referred to it as an “-alleged suit,”- but it’-s hard to see what was “-alleged”- about it. I was at the Commission’-s office when our counsel handed Deputy Commissioner Sharon Reese a copy of the complaint, and we notified her again later in the day by e-mail that we had filed it.
Also recently recently posted: Now Louisiana Wants Us —- For Seventy Cents.
Jenkins said that he has heard that the state of Louisiana has filed arrest warrants for him and two of his employees, and is seeking extradition to Louisiana. As of the posting the specific charges were unknown, but he speculates the allegations concern the state’-s law against “-gambling by computer.”- Jenkins comments in response that the Louisiana law won’-t apply to Betcha for the same reason that the Washington law doesn’-t: the Betcha service doesn’-t meet the legal requirements for gambling.
As it turns out, Jenkins reports that in the 30 days the betting platform was in operation, it took exactly 4 bets from a single Louisiana resident. Revenue after Betcha’-s promotional credits? 70 cents.
The Louisiana Gambling by Computer law is available from the website of the state legislature.
PREVIOUSLY on Midas Oracle:
JC Kommer was prompt to comment on my 2006-Senate piece:
Double standard Mr Masse.
Betfair is doing exactly the same thing that Tradesports in the NKM “scandal”, going for the literal reading of the rules as they should.
My Answer To JC Kommer:
I disagree.
NKM Scandal: TradeSports made two grave errors. Number one, they engraved in marble that they would rely ON A SINGLE SOURCE OF INFORMATION (the US DOD) for the expiry of the contract. This is totally crazy. The truth should be established using as many reliable sources as possible or appropriate (including second-hand but reliable sources like the White House, which is fed by the DOD on military issues). What matters is the truth, gathered from multiple sources, not one particular source that could have an irrational or secretive behavior at some specific times. Number two, while establishing this one-single-source-for-expiry contract, TradeSports was not aware of the well known and public fact that the US DOD never issues detailed statements on North Korea matters. Information about North Korea is “-classified”-. Logically, the US DOD did not confirm directly and in a very formal way that North Korea fired missiles. (Note that a case can be made that the US DOD did indeed confirm the North Korea firing of missiles, directly and in an elliptic way, which many observers found it satisfying enough for expiry purpose). So, in my view, as I have described above, TradeSports made two grave errors. They apologized to their traders, but they did not take action to compensate the victims of their two errors. The victims here are the “-yes”- speculators on the NKM prediction market. They were correct in their prediction, but they lost their shirt in the end. Note that the “-yes”- bettors and virtual speculators at BoDog and NewsFutures were justly gratified for their accurate prediction on the NKM topic. Which shows once again that the problems originated from TradeSports, and not from the “-yes”- speculators. TEN CEO John Delaney (managing TradeSports) should have compensated the victims. Instead of that, the first action he took on the Monday when the scandal broke was to retaliate against Chris Masse, who gave airtime to the screwed-up “-yes”- speculators.
2006-Senate Case: There are no “-victims”- here, since BetFair sticks with the ORIGINAL contract —-as CLEARLY written ON DAY ONE on their “-RULES”- tab, and as understood correctly by everybody who can read plain English. NO SURPRISE, NO CONTROVERSY. “Which of these parties will have MORE SEATS in the US Senate following the 2006 US Senate Elections?” is a very different question than “-Which of these parties will CONTROL the US Senate?“-. There is no ambiguity in the first question. In the second question, it’-s understood that you could control the US Senate with your allies (the Independents).
Hello Professor Tyler Cowen and all the commenters,
#1. Professor Lance Fortnow made a specific point: taken one day before Election Day, the TradeSports’-s prediction markets of the individual races for the US Senate were accurate (provided that Virginia and Montana go democratic).
#2. Professor Lance Fortnow DID NOT SAY that the TradeSports’-s prediction market for the control of the US Senate was accurate. Please, don’-t put words in his mouth.
#3. Analysis reports from economists and statisticians are coming, but, please give them time to digest the data…- once the dust has settled.
Thanks for your attention,
Chris Masse
(A note from AK: So, in case you haven’-t noticed, Chris has proposed email interviews as a way to get a bit more participation on MidasOracle. I’-m happy to start off by answering his questions to me.)
Chris Masse: What is the best public explanation of prediction markets? As “-stocks”- (Hollywood Stock Exchange, Washington Stock Exchange), as “-event futures”- (InTrade), or as “-event derivatives”- (HedgeStreet)?
Alex Kirtland: Considering that most people have probably never heard of derivatives, that most of the rest don’-t know much about futures, and that almost everyone has heard of the stock market, I’-m going to say that treating prediction market contracts as stocks is probably the best way to go for the general user.
For example, saying “-They’-re like stocks, but different,”- is easier for most people to understand than: “-You’-re buying a futures contract on the likelihood of an event occurring that pays out either 0 or 100 depending on the result.”-
Starting with something familiar, and then introducing complexity, rather than trying to be accurate right off the bat, is usually a better way to go.
That said, if the majority of your users are traders in pork belly futures, then using the stock market as your metaphor to explain prediction markets may just confuse them.
CM: What is the best trading model from a usability perspective: one single class of securities ala TradeSports (where selling means short-selling the “-yes”- contract) or two classes of securities ala Iowa Electronic Markets (where selling means selling the “-no”- contract)?
AK: I don’-t know the answer to that, and I’-ve actually pondered over this for some time. I’-d like to do usability testing/user research to try and figure this out. Just from an academic point of view I think understanding this would be fascinating. But also I think that this has implications beyond prediction markets. Certainly brokerage houses and exchanges might be interested in understanding how to make trading easier for people who may not know how to trade, or are less familiar with trading.
My hunch is that both models work (in fact both models do work), but which one is better is a question of context – who is the user- what is their experience trading- what is the market- is margin involved- if so, how do we communicate that to the user- and so on.
I know there is a large body of research on behavioral economics, which I’-m not as familiar with as I should be, but I don’-t believe anyone has ever researched this specific question.
CM: What is the best pricing model from a usability perspective: a continuous price (HSX) or a 0-100 price (TradeSports)?
AK: It depends on the situation. Sometimes they’-re clearly inappropriate – a linear contract for a binary question, for example. One is not inherently more usable than the other. It’-s more important how it’-s presented to the user.
CM: Should the designer of a new trading screen be innovative or be subordinated to the users’- mental model (if any)?
AK: This is a fascinating question. First understanding a mental model and being innovative are not incompatible things. The mental model is usually a starting point from which innovation can spring forth. This is why you do user research: so you can understand how your users think (or even if they do) about the task you want them to perform.
So, it’-s not so much that innovation (or, better, interface design), is subordinate to the user’-s existing mental model(s), but how do you take advantage of an existing mental model(s) to get the user to more easily do what you want them to do on your site.
Secondly, a lot of readers are probably asking, “-what the hell is a mental model?”- Briefly (and quite vaguely), a mental model is a mental representation of something. For example, most everyone has a mental model of how a restaurant works. You go in, there may be a host, you sit, you order, they bring you food, you eat, you agonize over whether you’-re going to get desert or not, you pay, and then you leave.
There’-s a lot of subtlety to this mental model. Things can change drastically depending on whether you’-re at a diner, a food cart on the street, or a five star restaurant. But the basic process is the same.
It’-s important to note, though, that in and of itself a mental model has nothing to do with the interface of an application. It is usually a hodge podge of heuristics, tasks and sub tasks, and so on, all jumbled together. They don’-t necessarily need to be a true representation of the world, but they need to help the person act in the world.
Referring to the above example, my mental model of a restaurant allows me to go to all sorts of restaurants I’-ve never been to before, have appropriate expectations about what will happen there, and act accordingly.
As an experience designer we’-re not necessarily interested in shaping our interfaces to someone’-s mental model – we don’-t want all interfaces to be exactly like McDonalds – but we do want to be aware of them and take advantage of them …- and not violate them either. We don’-t want to build a restaurant and not serve any food, for example. Once you violate someone’-s mental model of some thing, then they’-ll have no idea what to do next.
Donald Norman’-s book, The Design of Everyday Things, is a good place to learn more about mental models and how they should used when designing an inteface.
CM: Should prediction exchanges set up corporate blog(s) and why? (And if “-no”-, why not???)
AK: Trendio, The Public Gyan, and TradeSports, for example, actually use their blogs quite nicely. These blogs, generally speaking, tell people about contract expirations, changes in margin, new contracts, and so on. They’-re very useful to the people who trade on these sites.
Other prediction exchange corporate blogs are nothing more than self-promotion. That’-s not a bad thing, but it’-s less useful for traders on the site, and more useful for the person promoting the site (or the blogsters covering that site).
Prediction exchange blogs shouldn’-t be treated differently than any other blog: they should publish on a timely basis, and write about something that is of interest to their users. If they can’-t manage that, then they shouldn’-t keep the blog.