I agree with you that people like him do a service to prediction markets: contributing a huge amount of either liquidity or information. I don’t agree with you that it is clear which one he is providing, especially considering the outcome. He did also win his popular vote bet, which was hovering around, I’m not sure, ~20% most of the time?
I think he (Theo) probably did have a true probability around 80% as well. That’s what it looks like at least. I’m not sure why you would assume he should be more conservative than Kelly. I’m sure Musk is not, as one example of a competent risk-taker.
The true probability would be more like >90% considering other factors like opportunity costs, transactions cost, counterparty risk, unforeseen black swans of various kinds etc.
Bear in mind this is all things considered probability not just in-model probability, i.e. this would have to integrate that most other observers (especially those with strong calibrated prediction ) very strongly disagree*. Certainly, in some cases this is possible but one would need quite overwhelming evidence that you had a huge edge.
I agree one can reject Kelly betting—that’s pretty crazy risky but plausibly the case for people like Elon or Theo. The question is whether the rest of us (with presumably more reasonably cautious attitudes) should take his win as much epistemic evidence. I think not. From our perspective his manic riskloving wouldn’t be an much evidence for rational expectations.
*didn’t the Kelly formula already integrate the fact that other people think differently. No, this is an additional piece of information one has to integrate. The Kelly betting gives you an implicit risk-averseness even conditioning on your beliefs being true (on average).
EDIT: Indeed it seems Theo the French Whale might have done a Kelly bet estimate too, he reports his true probability at 80-90%. Perhaps he did have private information.
“For example, a hypothetical sale of Théo’s 47 million shares for Trump to win the election would execute at an estimated average price of just $0.02, according to Polymarket, which would represent a 96% loss for the trader. Théo paid an average price of about $0.56 cents for the 47 million shares.
Meanwhile, a hypothetical sale of Théo’s nearly 20 million shares for Trump to win the popular vote would execute at an average price of less than a 10th of a penny, according to Polymarket, representing a near-total loss.
With so much money on the line, Théo said he is feeling nervous, though he believes Trump has an 80%-90% chance to win the election.
“A surprise can always occur,” Théo told The Journal.”
I agree with you that people like him do a service to prediction markets: contributing a huge amount of either liquidity or information. I don’t agree with you that it is clear which one he is providing, especially considering the outcome. He did also win his popular vote bet, which was hovering around, I’m not sure, ~20% most of the time?
I think he (Theo) probably did have a true probability around 80% as well. That’s what it looks like at least. I’m not sure why you would assume he should be more conservative than Kelly. I’m sure Musk is not, as one example of a competent risk-taker.
The true probability would be more like >90% considering other factors like opportunity costs, transactions cost, counterparty risk, unforeseen black swans of various kinds etc.
Bear in mind this is all things considered probability not just in-model probability, i.e. this would have to integrate that most other observers (especially those with strong calibrated prediction ) very strongly disagree*. Certainly, in some cases this is possible but one would need quite overwhelming evidence that you had a huge edge.
I agree one can reject Kelly betting—that’s pretty crazy risky but plausibly the case for people like Elon or Theo. The question is whether the rest of us (with presumably more reasonably cautious attitudes) should take his win as much epistemic evidence. I think not. From our perspective his manic riskloving wouldn’t be an much evidence for rational expectations.
*didn’t the Kelly formula already integrate the fact that other people think differently. No, this is an additional piece of information one has to integrate. The Kelly betting gives you an implicit risk-averseness even conditioning on your beliefs being true (on average).
EDIT: Indeed it seems Theo the French Whale might have done a Kelly bet estimate too, he reports his true probability at 80-90%. Perhaps he did have private information.
“For example, a hypothetical sale of Théo’s 47 million shares for Trump to win the election would execute at an estimated average price of just $0.02, according to Polymarket, which would represent a 96% loss for the trader. Théo paid an average price of about $0.56 cents for the 47 million shares.
Meanwhile, a hypothetical sale of Théo’s nearly 20 million shares for Trump to win the popular vote would execute at an average price of less than a 10th of a penny, according to Polymarket, representing a near-total loss.
With so much money on the line, Théo said he is feeling nervous, though he believes Trump has an 80%-90% chance to win the election.
“A surprise can always occur,” Théo told The Journal.”