To me it just seems like understanding the competitive nature of the prediction markets.
In our bubble, prediction markets are celebrated as a way to find truth collectively, in a way that disincentivizes bullshit. And that’s what they are… from outside.
But it’s not how it works from the perspective of the person who wants to make money on the market! You don’t want to cooperate on finding the truth; you actually wish for everyone else to be as wrong as possible, because that’s when you make most money. Finding the truth is what the mechanism does as a whole; it’s not what the individual participants want to do. (Similarly how economical competition reduces the prices of goods, but each individual producer wishes they could sell things as expensively as possible.) Telling the truth means leaving money on the table. As a rational money-maximizer, you wish that other people believe that you are an idiot! That will encourage them to bet against you more, as opposed to updating towards your position; and that’s how you make more money.
This goes strongly against our social instincts. People want to be respected as smart. That’s because in social situation, your status matters. But the prediction markets are the opposite of that: status doesn’t matter at all, only being right matters. It makes sense to sacrifice your status in order to make more money. Would you rather be rich, or famous as a superforecaster?
This could be a reason why money-based prediction markets will systematically differ from prestige-based prediction markets. In money-based markets, charisma is a dump stat. In prestige-based ones, that’s kinda the entire point.
To me it just seems like understanding the competitive nature of the prediction markets.
In our bubble, prediction markets are celebrated as a way to find truth collectively, in a way that disincentivizes bullshit. And that’s what they are… from outside.
But it’s not how it works from the perspective of the person who wants to make money on the market! You don’t want to cooperate on finding the truth; you actually wish for everyone else to be as wrong as possible, because that’s when you make most money. Finding the truth is what the mechanism does as a whole; it’s not what the individual participants want to do. (Similarly how economical competition reduces the prices of goods, but each individual producer wishes they could sell things as expensively as possible.) Telling the truth means leaving money on the table. As a rational money-maximizer, you wish that other people believe that you are an idiot! That will encourage them to bet against you more, as opposed to updating towards your position; and that’s how you make more money.
This goes strongly against our social instincts. People want to be respected as smart. That’s because in social situation, your status matters. But the prediction markets are the opposite of that: status doesn’t matter at all, only being right matters. It makes sense to sacrifice your status in order to make more money. Would you rather be rich, or famous as a superforecaster?
This could be a reason why money-based prediction markets will systematically differ from prestige-based prediction markets. In money-based markets, charisma is a dump stat. In prestige-based ones, that’s kinda the entire point.