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by dubbel
24 days ago
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> And the people they're both making money from, are people who think they have enough expertise + exposure to function as superforecasters — and who probably could function as superforecasters, in a market with fewer "sharks" in the pool — but who lose out simply because they were slightly less well-calibrated than whoever they were trading with. This seems like a complicated way to say "suckers". Of course they don't usually self-identify as such and think they act rationally. |
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By the conventional use of the term, a "sucker" is always a sucker; suckers suck constitutionally.
But a professional gambler in a skill-based game (e.g. poker), is only going to lose money on net, if they happen to be playing against people with "higher ELO" than them.
And in the case of a prediction market, the "ELO" isn't absolute; people's expertise "rankings" are relative to each particular question. There's no "general factor of expertise" that makes someone able to beat the odds on every question. Each question forms its own market "niche", where only people with expertise will be interested in participating; and so each such niche is to some degree illiquid, with not enough trades to make an efficient market (i.e. the kind you wouldn't expect to find a $20 bill on the ground in.)
To be more concrete: while there are "specialists" (insiders, but also ordinary experts in hyper-specialized verticals) who might clean up by betting on the things they know a lot about, they'll generally be miscalibrated as overconfident on the things outside their specialty (see: any scientist who got famous for their research and now writes pop-science books about topics they know very little about, often making incorrect statements), and so will lose out vs "generalists" who can't successfully make the in-domain bets the specialists make, but who are better-calibrated on multiple topics (or on particular odd intersections of topics) because they spend less time hyperfocused on one niche, and more time flitting between various niches.
Which is to say: there's no "house edge" here to lose against. In a prediction market, everyone's going to be the "shark" for some questions and the "sucker" for other questions. Every question is its own game, and every game has an edge, but with that edge going to a different party. If you actually know what you know, then you can identify which questions you have the edge for (probably a finite number), answer only those, and make some (very small) amount of money. You may lose sometimes because someone knew even better than you (esp. for questions that go beyond yes-or-no, where there are 3+ mutually-exclusive prediction-categories you can buy into, such that others might "hit the bullseye" while you just "hit the ring"); but on average, if you stick to your "field of pre-eminent expertise" (presuming you have such), you would make a small positive gain over time.
That being said, anyone without a "field of pre-eminent expertise", who thinks they can place correct bets purely by being rational + doing the level of research one can accomplish using public Internet sources, is 100% a sucker, yes.