[extropy-chat] Re: Why bet only imaginary money?

[Harvey Newstrom]

On Sep 4, 2004, at 3:58 AM, Brett Paatsch wrote:
> Last I looked between 18 months and 6 months ago (when both Hal and
> Harvey were posting here about it), then I checked and the money bid
> wasn't real.

The other problem I had with these markets is that they didn't seem 
that accurate, despite all the claims.  I looked back through the 
history of all the political predictions, and I couldn't see that they 
were any more accurate than the polls as suggested.  Many of them were 
radically wrong.  Most of them swung wildly back and forth between the 
two options and only settled on the right one just before the 
elections.  A graph that radically oscillates between both choices back 
and forth has not predictive value, because you can extract any 
prediction you want at different times.

I looked at political elections, because this is one of the best cases 
where I think the markets should be able to predict best.  Elections 
are just voting people's preferences, as are markets, so they should be 
more predictable.  But even these weren't.  I am even less convinced 
that markets on technology would work.  Without inside information, 
investors go on hype and what they believe is real, rather than making 
any real predictions.  The Enron scandal and dot-com bubbles show that 
markets are driven on belief and not reality.  While they work well in 
well understood areas, they are not good at predicting poorly 
understood areas.

And I am really opposed to the concept of terrorist markets working.  
Besides having no information to work with, terrorists change their 
plans at a moment's notice and will specifically veer aware from a 
target with too much protection or public expectation.  Even if the 
market got it right, I would expect the terrorists to cancel and avoid 
such a target so that it wouldn't really happen.  My other concern was 
there were vague hints that the government didn't really intend to let 
people get rich on terrorist predictions, but instead would go after 
any winning investor as a probable terrorist with inside knowledge.  
When there were outcries from congress, they were told not to worry, 
that there was no intention of letting terrorists profit from this 
market or actually get away with making money from their crimes.  This 
would destroy the value of a market, if it really worked, if people 
didn't get to keep their winnings or had their lives ruined by the 
government after being successful in the market.  No one else would 
follow such an event with successful investing!

--
Harvey Newstrom, CISSP, CISA, CISM, IAM, IBMCP, GSEC
<HarveyNewstrom.com>