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Link via Jason Ruspini
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Previously: The InTrade predicton markets on the viability of InTrade won’-t reveal *ANYTHING* about the future of InTrade.
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Link via Jason Ruspini
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Previously: The InTrade predicton markets on the viability of InTrade won’-t reveal *ANYTHING* about the future of InTrade.
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He has offered 2 different explanations.
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EXPLANATION #1: Let’-s blame the Unlawful Internet Gambling Enforcement Act of 2006.
We underestimated the difficulties that current and new customers would experience in funding accounts and partly as a result of this we have reluctantly decided to close TradeSports. While we are not hopeful that funding issues may dissipate soon, should they TradeSports will be back and it is therefore an imperative for us to effect and orderly and goodwill preserving closure for you all.
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EXPLANATION #2: In spite of the InTrade-TradeSports splitting (sold to the gullible people since January 1st, 2007), TradeSports is the gambling stigma attached to InTrade. It is good business to get rid of that gambling stigma.
The closure of TradeSports is a good for Intrade as for too long the legacy association of Intrade to TradeSports has been a negative for Intrade for reasons that have been referred to above.
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Chris F. Masse
– InTrade CEO John Delaney has not yet clarified the death of TradeSports and the viability of InTrade. – UPDATE
– Professor George Neumann has not yet responded to Jed Christiansen’-s objections.
It is impossible for any InTrade trader to know whether the financial accounting of InTrade is sound or not. Any commercial company surrounds itself with secrecy. Let alone an Irish company that illegally (from the DOJ’-s standpoint) exports its services to Americans.
UPDATE: See the comment #1 there.
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It was impossible for the InTrade traders to divine whether Yahoo! CEO Jerry Yang would step down.
(In passing, note that InTrade has expired this contract hours after the breaking news hit the wires.)
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It was impossible for the InTrade traders to divine whether Unlawful Internet Gambling Enforcement Act of 2006 would be voted and enacted.
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The InTrade predicton markets on the viability of InTrade won’-t reveal ANYTHING about the future of InTrade. It will just aggregate InTrade’-s PR output.
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As for the “-business development initiatives”- planned by the InTrade executives, I wish them the best of luck. However, I remain skeptical, since I don’-t see what can replace the 2008 US elections in terms of attractiveness —-now that the SuperBowl has been sacrificed.
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InTrade CEO John Delaney:
Our #1 untapped resource is the vast collective intellect that we have only started to use. Harnessing the “-wisdom of the crowd”- has a very big potential role in improving all of our lives. If we do it, we all have a voice and will feel part of the solution as well as the problem. We can solve some wicked problems, like climate, resource, growth, social, and economic challenges. In simple terms, there exists between us the best information on how we solve our key challenges. If our leader’s embrace and permission new systems like prediction markets to operate in a transparent prudent way I am convinced that we can contribute in no small part to the solution.
Recall, that US Department of Defence believed a prediction market could provide valuable information on growth, risks and social issues. Hundreds of academics, dozens of Fortune 500 companies, and millions of people believe that prediction markets can help provide valuable information on economic, financial, social and environmental issues.
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I have already expressed my deep skepticism for this kind of grandiose discourse.
Today, if I may, I would like to ask these questions to John Delaney:
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Here are my thoughts:
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APPENDIX:
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What Nate Silver predicted:
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What InTrade predicted:
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To the question asked in the title of this post, some have answered by the affirmative (“-Prediction Markets Have a Big Role to Play”-). In my view, it is wrong to overvalue the real social utility of the prediction markets.
As of today, we can plainly see 2 things. Number one, the prediction markets are a tool of curiosity. People have heard about InTrade thanks to numerous news articles (where some prediction market researchers who get the InTrade historical data for free pump up the prediction markets as God’-s right arm on Earth). At crunch time, the people teased by all this publicity flock to the InTrade website to satisfy their curiosity about the state of the horse race. Number two, a subset of the general population (made up of educated people who believe in the virtues of markets) use the prediction markets as a tool of convenience. Instead of spending long hours reading the various outputs by the pollsters and the commentariat, these people just check InTrade on a daily basis, because they know that it is primarily (but not only) an information aggregation mechanism. InTrade sums up the news of the day, so to speak. Hence, these people (in the know about how to benefit practically from the wisdom of crowds) don’-t have to spend time gathering and analyzing the news of the day.
To the question asked in the title of this post, I’-ll answer “-no”- —-unless one of my readers can educate me more about the following issues:
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I Told You So.
by Ed Miracle
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Alex Tabarrok writes that “-someone was manipulating Intrade to boost John McCain’-s stock price”-.
No…-!!!…-
John Delaney said that that firm has been hedging on InTrade —-a normal and beneficial activity on the other (larger and more liquid) financial markets.
InTrade is not liquid enough to weather (quickly enough) the impact made by the hedging activities, at this time, but will in the future, if growth continues.
Manipulation is bad.
Hedging is good.
– InTrade CEO John Delaney has conducted an investigation on the alleged manipulation. The suspicious moves in prices were in fact caused by the buying and selling made by an “-institutional”- trader (a hedge fund, I presume) who has been managing “-certain risks”- (hedging).
– Jason Ruspini, who wrote before this report came out, does believe that manipulations “-non-informational”- trades have been prevalent on InTrade. (We will see whether Jason changes his mind in light of InTrade’-s debunking report.)
John Delaney states rightfully that the prediction markets are a mechanism that aggregates information dispersed among the population. Then, he goes on at full throttle and states that prediction markets can help “-avoiding future [financial] crisis.”-
Jesus, Mary, Joseph, that’-s quite an extraordinary statement.
John Delaney writes that crucial information is buried deep in the accounting books. That’-s true, but that’-s up to the financial analysts to decipher this problematic —-our event derivative traders can then just pick up on what those experts conclude. The financial experts were unable to prevent the current financial cataclysm. Adding more event derivative traders and more prediction markets won’-t solve any problem.
Prediction markets are only a reflection of the current knowledge of the best experts in town. At best, they are the best umpire you can get between, on one hand, the mass media or the politicians and, on the other hand, the best experts. But when nobody knows anything (or when nobody listens to Nouriel Roubini), the prediction markets are of no help.
What the prediction market industry needs right now is not an ill-informed, bragging rant.
What the prediction market industry needs is a way to discriminate between accuracy and utility.
What we need is more of Robin Hanson.
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UPDATE:
InTrade:
Transparency is an Imperative, but so are Speed, Access and Understanding
Tuesday, Oct 14, 2008
TRANSPARENCY IS AN IMPERATIVE, BUT SO ARE SPEED, ACCESS AND UNDERSTANDING
Prediction Markets Have a Big Role to Play
Historic volatility, unprecedented coordinated bailouts, nationalizations, and bankruptcies of some of the doyennes of the financial elite are just some of the new realities we are all faced with.
Many may well be impressed with the speed and scope of the response to this crisis. I am, but it seems to me that Intrade and all in the prediction market industry have an increased obligation and opportunity to contribute to solutions in avoiding future crises.
Since Enron, WorldCom, Tyco et al and again since this crisis ignited we are being told that maximum transparency, disclosure, and better risk management tools are the answer. These solutions are exactly what prediction markets look to and can deliver.
But is something really transparent if it is buried within a 200 page document or if you need a degree in accounting to decipher it? Likewise, if the costs of producing or gaining access to the information is such that only a few benefit, is that maximum transparency and disclosure?
The Sarbanes-Oxley Act (SOX) introduced after the Enron / WorldCom debacles is considered a success by most. However, in light of recent events and comments from Henry Paulson, John Thain and even former AIG chief Hank Greenberg, who all believe SOX threatens the US competitive position in the global marketplace, it hardly seems a panacea.
This is where prediction markets can really help now and in the future. We offer real-time aggregated collective intelligence that is easy to access and interpret. E.g. recession, tax rates, unemployment, offshore drilling, OPEC actions, bank failures, etc. Prediction markets provide a single number —- the probability or risk of something happening. Right now there seems to be a 75% probability that the US will be in recession in 2009.
To get the best predictive information barriers to entry for participants and providers must fall so that adoption and diversity can grow. To contribute their maximum to society (which we expect will befit Intrade and other leaders in our industry) prediction markets need to be embraced, encouraged, and considered part of a solution to managing risks and change. Only when this happens will there be such diversity and adoption that the markets can reach their full potential in aggregating information on the most important issues.
In addition to new and revised regulations, the time is right for expanded coverage of those regulations to include prediction markets and the innovative solutions they offer. If ever there was a time to embrace innovative solutions for assessing and managing risk it seems that time came before I started to write this short note.
Prediction markets are far from perfect, but they typically deliver incentivized real-time, efficient, aggregated probability estimates on uncertain future risks and events. They have never had a more important role and potential than right now.
I welcome your comments.
John Delaney
CEO
Intrade
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Previously: What John Delaney told the CFTC.
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