I've been introduced to forecasting and such markets three years ago. I haven't practiced that much yet, but I find the concepts quite fascinating.
If we're talking about adoption having to be led by liquidity, shouldn't this topic fit well into insurance and /or risk management departments of corporations as early adopters? And when it is less "fringe" or "niche", broader adoption in organizations such as the United Nations or European parliament would have an impact?
(Maybe that would be more of a strategy for polymarket & Co, as I see you do more consulting/workshops, etc. And less market making and structuring? But it seems at least very complementary)
Sorry for the slow reply, Pierre! I'm really glad you enjoyed the interview. I think judgmental forecasting probably is a natural fit for insurance companies and risk management departments, because they're making financial decisions that clear depend on probabilistic risk. It's often much harder to design and answer questions that are useful for policy makers at organizations like the UN or the European Parliament; it probably requires working closely with the policy makers themselves.
Have you guys tried Polymarket? There are lots of liquid markets on everything! The final and long expected breakthrough in this technology has finally arrived. Over the last 30 days I was able to trade the Indonesian, Dutch and Taiwan elections. Just imagine that. Betfair is quite okay, but it is years behind already. Polymarket is totally transparent you see a full track record for each account. I seriously wonder why would anyone listen to a forecaster without a proven track record of at least 500k $ in Polymarket volume.
Less than $9000 had been bet on the Indonesian election on Polymarket as of right now. The market on the Republican nominee for Vice President is similarly small. The bid-ask spread on the current favorite is 18 cents (on a contract which is worth a dollar if it pays out). These are not liquid markets.
Dec 3, 2023·edited Dec 3, 2023Liked by Robert de Neufville
Liquid markets aren’t necessarily good for traders, arguably the slightly illiquid markets are the most preferable. The spreads on these 2 particular markets will get better for sure as we move closer into 2024. I agree with you, compared to the total number of the regular stock market gamblers, prediction market community is really a “fringe minority”. This shouldn’t be the case! There have been some early attempts to construct a credible rating of the predictive power of individual forecasters such as Betmoose Hall of Fame or Polymarket Leaderboard. The position in such rating can still be “gamed”
I agree that thinly traded, inefficient markets can be an opportunity for smart, leveraged players. The point, I think, that Michael is making is that they may not be a good tool for approximating the "true probability" of whatever event is being traded. The broader issue is that they they have to be some combination of extremely fun—like betting on major sporting events—and valuable to people with a lot of money—like investment banks and hedge funds—to attract enough capital to reliably produce accurate forecasts. There are plenty of Indonesians who might want to bet on Indonesian elections, but I'm skeptical prediction markets on less important, less interesting events are likely to be very useful.
Great content, thank you both !
I've been introduced to forecasting and such markets three years ago. I haven't practiced that much yet, but I find the concepts quite fascinating.
If we're talking about adoption having to be led by liquidity, shouldn't this topic fit well into insurance and /or risk management departments of corporations as early adopters? And when it is less "fringe" or "niche", broader adoption in organizations such as the United Nations or European parliament would have an impact?
(Maybe that would be more of a strategy for polymarket & Co, as I see you do more consulting/workshops, etc. And less market making and structuring? But it seems at least very complementary)
Sorry for the slow reply, Pierre! I'm really glad you enjoyed the interview. I think judgmental forecasting probably is a natural fit for insurance companies and risk management departments, because they're making financial decisions that clear depend on probabilistic risk. It's often much harder to design and answer questions that are useful for policy makers at organizations like the UN or the European Parliament; it probably requires working closely with the policy makers themselves.
When can I get it on podcast addict?
Thanks for asking!vI think it should be available here: https://podcastaddict.com/podcast/talking-about-the-future/4777969
Have you guys tried Polymarket? There are lots of liquid markets on everything! The final and long expected breakthrough in this technology has finally arrived. Over the last 30 days I was able to trade the Indonesian, Dutch and Taiwan elections. Just imagine that. Betfair is quite okay, but it is years behind already. Polymarket is totally transparent you see a full track record for each account. I seriously wonder why would anyone listen to a forecaster without a proven track record of at least 500k $ in Polymarket volume.
Less than $9000 had been bet on the Indonesian election on Polymarket as of right now. The market on the Republican nominee for Vice President is similarly small. The bid-ask spread on the current favorite is 18 cents (on a contract which is worth a dollar if it pays out). These are not liquid markets.
Liquid markets aren’t necessarily good for traders, arguably the slightly illiquid markets are the most preferable. The spreads on these 2 particular markets will get better for sure as we move closer into 2024. I agree with you, compared to the total number of the regular stock market gamblers, prediction market community is really a “fringe minority”. This shouldn’t be the case! There have been some early attempts to construct a credible rating of the predictive power of individual forecasters such as Betmoose Hall of Fame or Polymarket Leaderboard. The position in such rating can still be “gamed”
I agree that thinly traded, inefficient markets can be an opportunity for smart, leveraged players. The point, I think, that Michael is making is that they may not be a good tool for approximating the "true probability" of whatever event is being traded. The broader issue is that they they have to be some combination of extremely fun—like betting on major sporting events—and valuable to people with a lot of money—like investment banks and hedge funds—to attract enough capital to reliably produce accurate forecasts. There are plenty of Indonesians who might want to bet on Indonesian elections, but I'm skeptical prediction markets on less important, less interesting events are likely to be very useful.