I’ve even seen that getting people to bet with real money and they will be exponentially more careful, diligent and down to earth even if it’s just lunch money.
I'm new to HN though and I'm curious if someone can change my mind.
Reputation is also not that great of a proxy, since you can game it. E.g. by using strategies that push all the risk into the tails. If it's money, you have a much stronger incentive to cover your ass against rare but disastrous blowups, since your entire livelihood is at stake (rather than just your ability to play the local game). If you're just trying to look good on Facebook... The risk/reward is different.
Wikipedia, reddit, HN, and stackoverflow would beg to differ. Reputation drives people to expend incredible amounts of effort. In 2002 I would have had the same intuition you do. But i've seen reputation systems and social credit build too many incredible things to feel that way anymore.
> Reputation is also not that great of a proxy, it encourages strategies which push the risks into the tails. If it's money, you have a much stronger incentive to reduce your own tail risk since your entire livelihood is at stake, rather than just your ability to play the local game.
I do think there's a reasonable argument that the risk curves will be different, but I don't really see how that cashes out in an inaccurate overall system. It seems to me that as long as reputation gets allocated to those who are consistently correct, the system should work pretty well.
>I don't really see how that cashes out in an inaccurate overall system
Imagine a strategy that has a 50% chance of blowing you up completely over 10 years, but nets you 50% more profit if it works. The average return of this strategy is 25% less than a safe strategy (zero risk, zero gain), but it has a 50% chance of winning in this marketplace. If it were real money, nobody would go near it.
Ok, now imagine there's 100 people running strategies with that profile and 100 running the safe strategy. All of the top spots will be held by the suicidal strategy. This is an artificial example but you get the point. Real money forces you to avoid that risk profile as soon as you identify it.
This isn't trading, though. It's forecasting. You could make that argument about the sub-category of economic forecasts, perhaps. But not about more general things, like presidential elections.
> Imagine a strategy that has a 50% chance of blowing you up completely over 10 years, but nets you 50% more profit if it works. The average return of this strategy is 25% less than a safe strategy (zero risk, zero gain), but it has a 50% chance of winning in this marketplace. If it were real money, nobody would go near it.
People go near real money strategies like that all the time. That's all WallStreetBets is, or the financial crisis, for that matter. I do take your point that this behavior may be more pronounced in a community like this, but I don't think it invalidates the model.
That's not my point. The point is people don't give away predictive edges for internet points (or reputation). There are many reasons why but the lack of a betting & trading StackOverflow is one symptom. It's just an example, but TBH it's not that relevant since this market wouldn't involve revealing edges.
>People go near real money strategies like that all the time.
Absolutely, and it's a problem with real funds. But:
- It's a lot rarer.
- There's a much stronger incentive for other people to quietly take the opposite sides of those bets, which normalises the market.
We'll see what effect it has, but I think this marketplace will just end up following the values on PredictIt.
Ha!
It's pretty obvious that on all those platforms the "people with tons of points" cohort is overwhelmingly made up of people who've gamed the system (which in pretty much all cases takes the form of "producing high volumes of low quality content that caters to the lowest common denominator of the local user demographics and doing so for a long time").