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Comment by bjackman | Hacker News Reader

You are not evaluating those questions, you are evaluating the probability of that two things happening, and you need to evaluate it better than the other people to win.

There are no easy questions, the difficulty is set by the skill/investment level of your competition.

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I'm confused by how you're modeling these markets.

Let's say I am quite sure that the Steam Machine will cost more than $700 dollars, and I buy a 'yes' lot for 65 cents on the payed-out dollar, those are the odds at my buy-in time.

Where exactly now do the other participants' bets on the same market influence my chance to win/lose? How am I up against them and not the question "will my prediction come true"?

Sure, before my buy-in the odds, and thus the value fluctuate on account of the market movements, but once I'm in I'm in?

How exactly do you think the price is set at 65 cents, if not by the other market participants? When you win, who do you think is paying you out from the other side of the bet? When you lose, who do you think your money goes to?

Not only did you miss the point of the conversation entirely, you're attacking a point I explicitly addressed in my comment. I well understand how the system works, ggps comment had me confused about their perspective.

I didn’t miss the point at all. Once you’re in, unless you want to sell your stake, you’re in. But the entire point is that at the time of your bet, you’re taking a position that’s inherently disadvantaged. If there was any more EV to be gained, people with more money than you would have exhausted it. So without insider information, you’re flipping a coin but the house takes a cut.

>if there was any more EV to be gained, people with more money than you would have exhausted it

In a perfect market that everyone participates in and in which everyone has perfect information, but not down here in messy reality. Your logic would have you you seeing a dollar on the ground and without further investigation go "Oh that can't be real, if it were someone would have picked it up already!" Or refusing to play chess against anyone because Magnus Carlsen could beat you.

The stock market isn't perfect and not everyone participates in it, and the data is extraordinarily clear that essentially nobody is capable of extracting a durable edge. Of the people who do beat the market in a given year, those who beat the market the next year appear to follow the exact same distribution as the market as a whole.

Prediction markets are worse, both on the surface and by the actual statistics. The house takes an enormous cut, and then you have the issue of trading against insiders. Only an absolute rube would put money into a market rife with insiders, when they don't have comparable information. And the statistics bear this out. Something like 80% of all profits are captured by the top 1% of profitable users, which are only 30% of the total user base.

Anyone who thinks they will consistently make sound bets in these platforms without actually having private knowledge is a complete fool.

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