Astral Codex Ten

NYSE

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NYSE

Article

NYSE is a recurring organization in the Astral Codex Ten archive, appearing 2 times across 2 issues between September 22, 2022 and December 20, 2022. The archive places it in contexts such as “It’s like the NYSE operating mutual funds or packaging ETFs”; “we trust that our brokers / the NYSE / etc won’t run off with our money”; “like your broker / the NYSE / various online stores”. It most often appears alongside Elon Musk, Scott, Tesla.

Metadata

  • Category: Organizations
  • Mention count: 2
  • Issue count: 2
  • First seen: September 22, 2022
  • Last seen: December 20, 2022

Appears In

Source Context

Recovered passages from the original issue text. When the raw archive preserved outbound links inside the source passage, they are listed directly under the quote.

Highlights From The Comments On Billionaire Replaceability
September 22, 2022 · Original source
It's what they used to call a natural monopoly. Having one central provider flows from the structure of the business. Amazon has built an amazing fulfillment empire, but it also runs a marketplace where competes with its sellers. It's like the NYSE operating mutual funds or packaging ETFs. Like the railroads, Amazon controls an outsized chunk of the online marketplace and uses its position as one might expect.
Prediction Market FAQ
December 20, 2022 · Original source
when you’re not sure which of many competing experts to trust, you should trust a prediction market instead of any of them Going through these claims one by one: 3.1: Why expect all prediction markets to agree with each other? Either all prediction markets agree with each other, or you can get rich quick: Suppose prediction markets disagreed. For example, suppose the RNC ran an Official Republican Prediction Market that said there was only a 10% chance Democrats would win the next election, and a 90% chance Republicans would. And suppose the DNC ran an Official Democrat Prediction Market that made the opposite prediction: 90% chance Democrats, 10% chance Republicans. Then you could buy a share of “Democrats will win” from the Republican market for 10 cents, plus a share of “Republicans will win” from the Democrat market for 10 cents, and be guaranteed to make $1 when one party or the other wins. You have turned 20 cents into a guaranteed $1. Repeat until you are rich or the mispricing has been corrected. This is just what financial experts call “arbitrage”. You may notice that in finance, people always give specific prices for things like shares of stock, barrels of oil, or Bitcoins. People say things like “Google stock is up to $300”, but never “Google stock is up to $300 on the NYSE, but down to $200 on NASDAQ”. If that was true, people would buy it on NASDAQ, sell it on NYSE, make $100 in free money, and get rich quick. In ideal situations, arbitrage forces everybody everywhere to agree on the same price for a financial instrument. Prediction markets turn claims about truth into financial instruments in a way which forces everybody everywhere to agree on how likely the claim is to be true. 3.2: Why expect prediction markets to be hard for special interests to manipulate? Either a prediction market is not currently mispriced because of a manipulation attempt, or you can get rich quick. Argument: Suppose a prediction market was currently mispriced because of a manipulation attempt. For example, suppose there is a prediction market for whether the sun will rise tomorrow. The true probability is obviously 100%, corresponding to a cost of $1.00. But suppose some special interest who wanted to trick people into believing the sun would not rise successfully spent money to bid the market down to only 10%. This means that you can buy, for $0.10, a share which pays $1 if the sun rises tomorrow. In other words, you can dectuple your money for free. Repeat until you are rich or the mispricing has been corrected. This may sound complicated in theory, but it plays out straightforwardly in real life. As a test, I tried to manipulate the market on whether Austin Chen, founder of Manifold Markets, would be charged with a felony. There’s no reason to think he should be, so the price started at 5%. I spent $200 in Manifold’s play money bidding it up to 95%. Within an hour, other investors noticed the mispricing and corrected it back down to 5% again. 3.3: Why expect prediction markets to be free from bias? Either a prediction market is not currently mispriced because of bias, or you can get rich quick. The argument: Suppose all smart people, including you, know that there is an 80% chance that the Democrats’ economic plan will create new jobs. But suppose that Republicans, because of their partisan biases, refuse to believe it, and say there is only a 40% chance. And suppose the Republicans set up their own prediction market where they bid the price of a share down to $0.40. You can, of course, go on this prediction market, buy shares for $0.40, and double your money in expectation. Repeat until you are rich or the mispricing has been corrected. I already described how something like this happens on PredictIt (a non-ideal prediction market that you can only make a few hundred dollars in expectation by correcting), and that I do in fact make a few hundred dollars every election season. 3.4: Why should I believe a prediction market’s consensus over my own opinion? This is the same argument as “the prediction market will always be at least as accurate as the top expert” only with you in the place of the top expert. Either prediction markets are at least as smart as you are, or you can get rich quick. The argument here is the same as “at least as smart as the smartest expert” argument in 2, except replacing “the smartest expert” with “you”. But just to lay it out explicitly: Suppose you were smarter than some prediction market. Then if you disagreed with the market, usually you would be right and it would be wrong. So look for cases where you disagree with the market, buy those shares, and you will make money in expectation. Repeat until you are rich or the mispricing has been corrected. I like this because it’s a good empirical test, and one that many people have tried. If you think you’re smarter than the prediction markets, bet on them and see what happens! I think most people will find that (over the long run) they lose money, and eventually this will cure them of their delusion that they can beat the markets. A few people might find that (over the long run) they do win money, just as a few people (eg Warren Buffett) can consistently win money on the stock market. Hopefully those people will quit their day jobs and become full-time prediction market traders. They’ll become multimillionaires, and their hard work will ensure that prediction markets stay more accurate than the rest of us. 3.5: Why should I believe that a prediction market makes good decisions about which of many competing experts to trust? Suppose you accept that a prediction market will always be at least as accurate as some well-known expert (eg Nate Silver). But what if you’re not sure who the real experts are? Or what if there are many experts, all saying different things, and nobody knows who to trust? In this case, a prediction market will always be at least as good as any other source (including you) at telling good experts from bad, or at figuring out which of many good experts is the best. By this point you should be able to predict the argument, but for completeness’ sake: Suppose you were better than the prediction market at determining which of many competing experts to trust, or how to aggregate the pronouncements of many experts into a single authoritative opinion. Then if you disagreed with the market, usually you would be right and it would be wrong. So look for cases where you disagree with the market, buy those shares, and you will make money in expectation. Repeat until you are rich or the mispricing has been corrected. To ground this in a real example, suppose there is some new virus which might or might not spread to the United States. A Harvard professor of epidemiology says there’s a 70% chance it will spread, a Yale professor of epidemiology says there’s an 90% chance it will spread, and a guy in a tinfoil hat on Infowars says there’s a 0% chance it will spread because it’s all a fake government plot. If I knew nothing else about this situation, I would probably think there’s about an 80% chance the virus will spread. I trust the Harvard and Yale professors equally much, and the tinfoil hat guy not at all. Suppose I saw a prediction market that was only at 10%, because most people trusted the tinfoil hat guy. I would want to buy YES shares until the price got up to 80%, because in expectation I would octuple my money. Suppose I saw a prediction market that was only at 70%. Now I wouldn’t be sure whether the prediction market was dumber than me (believed tinfoil hat guy) or smarter than me (they know a lot about epidemiology - or about the credibility of specific experts - and have decided to trust the Harvard professor over the Yale professor). Maybe I could improve on this. If I knew things about epidemiology, I could read over both professors’ arguments and try to figure out if one was better than the other. If I knew things about academia, I could pick over both professors’ resumes and see whether the Harvard professor seemed more distinguished or had more respect in her own field than the Yale professor. In the end, I might decide the prediction market was right to price it at 70% (in which case I wouldn’t do anything), or that actually both experts seemed equally expert (in which case I might bid it up to 80%), or that actually the Yale epidemiologist was better (in which case I might bid it up to 90%). 3.5.1: Isn’t it weird to give non-experts (like prediction market investors) the final judgment in which of two experts is right? Yes, but I don’t think this is avoidable. If there were no such thing as prediction markets, and the Harvard epidemiologist said 70%, and the Yale epidemiologist said 90%, and the tinfoil hat guy said 0%, and for some reason it mattered a lot to you which of these was true - then you would still have to make that decision. If there’s some extremely authoritative source who can make the decision for you - let’s say the World Health Organization says “after reviewing all experts’ arguments, we believe that the final probability is 75%” - then great! Either: The WHO is clearly the most trustworthy source - in which case we go back to the Nate Silver situation where the prediction market should be just as accurate as it is.
Able to get top-1 strict accuracy of at least 90.0% on interview-level problems found in the APPS benchmark introduced by Dan Hendrycks, Steven Basart et al. Top-1 accuracy is distinguished, as in the paper, from top-k accuracy in which k outputs from the model are generated, and the best output is selected. By "unified" we mean that the system is integrated enough that it can, for example, explain its reasoning on a Q&A task, or verbally report its progress and identify objects during model assembly. (This is not really meant to be an additional capability of "introspection" so much as a provision that the system not simply be cobbled together as a set of sub-systems specialized to tasks like the above, but rather a single system applicable to many problems.) Resolution will come from any of three forms, whichever comes first: (1) direct demonstration of such a system achieving ALL of the above criteria, (2) confident credible statement by its developers that an existing system is able to satisfy these criteria, or (3) judgement by a majority vote in a special committee composed of the question author and two AI experts chosen in good faith by him, for the sole purpose of resolving this question. Resolution date will be the first date at which the system (subsequently judged to satisfy the criteria) and its capabilities are publicly described in a talk, press release, paper, or other report available to the general public. Even this isn’t perfect (which models are “the equivalent of” a 1:8 scale Ferrari 312?), but in practice once you get to this level of details people mostly stop worrying about this. Another method (mostly associated with Manifold) is to just leave it up to human judgment - specifically, the judgment of the person who made the market. For example, I could make a market in “By 2050, will there be an AI which Scott Alexander thinks qualifies as ‘human-level’?” This will force market participants to price in the risk that I have bad judgment or act dishonestly. But perhaps these risks are small. For example, I might say elsewhere what I think qualifies as “human-level” AI, or you might think human-level AI will be so obvious when it comes that I will definitely agree with you about it. As for honesty, this could be enforced either legally or by reputation. Someone who has resolved their past 100 prediction markets honestly will probably resolve this one honestly too, especially if they get paid to do so and will never get customers again if they lie. When we invest on the normal stock market, we trust that our brokers / the NYSE / etc won’t run off with our money, and this trust is usually well-deserved. Even when we make an online purchase, we trust that the store we’re sending our money to won’t steal it and refuse to send us the product. It would be an exaggeration to say that trust is a solved problem, but evidence from Manifold suggests that most people price in a <1% chance that well-known market makers with good reputation resolve dishonestly. If prediction markets got big enough, they could spawn trusted “resolution companies” who individual markets and market-makers could outsource their resolution to, for a fee. If these companies were ever dishonest, they would lose all their business from then on, so they would probably be as honest as other businesses like your broker / the NYSE / various online stores / etc. 4.7.1: Isn’t a lot of the “crisis of trust” around questions that might never have clear future answers? For example, consider the debate around whether Donald Trump is a Russian agent. Maybe no proof will ever come out either way. Or maybe some evidence will appear that seems to prove one side or the other, but people will continue to deny it for political reasons, and the problem of resolving the prediction market will be just as hard as the problem of answering the original question. Indeed, prediction markets aren’t very good at this, and are only fully trustworthy on questions where the true answer will eventually become apparent. Still, they might not be completely useless. For example, if you’re worried about Trump being a Russian agent because you expect him to pursue pro-Russia policies, you can start markets in whether he pursues those policies. Or you can start a conditional market (see 5.1) on whether, if Russia ever releases its past intelligence data many years from now, the data confirm/disconfirm that Trump was an agent. See Part 5 for other clever ways you might try to address this problem. 4.8: “Meme stocks” like Gamestop and AMC sometimes remain mispriced indefinitely. How do we know this won’t happen with prediction markets? Meme stocks are a type of Ponzi. It’s “reasonable” to buy Gamestop at some inflated price, because - who knows? - someone else might buy it at an even more inflated price tomorrow. And this can keep going arbitrarily long, or at least long enough for you to get out with a profit. Unlike meme stocks, prediction markets have a clear resolution date. If you’re predicting who will win the next election, the market will go to 100% or 0% after the election finishes. No matter how many memes there were, you wouldn’t buy a share in “the Democrats will win the election” for 99% the day before Election Day if you knew they would definitely lose. But that means prediction markets should be accurately priced the day before Election Day, which means you shouldn’t buy at an inaccurate price two days before Election Day, and so on. I can’t say for sure that no prediction market will ever get mispriced for meme reasons, but they should be much more robust against meme mispricings than the stock market. And even the stock market doesn’t have too many meme stocks. 4.9: How do prediction markets deal with outcomes in the far future? Suppose there is a question “who will win the 2100 election?” Currently it says 25% Democrats, 75% Republicans, and I believe it should be 50-50 (we’ll ignore third parties, or the possibility of America not existing in 2100, for now). So if I bet on the market, I can (in expectation) double my money. But there are many better ways to double your money by 2100. For example, if the stock market grows 4% per year, I should expect any money invested in the stock market to multiply by 20x in 2100. So just doubling it in a prediction market is a bad option. Realistically, this means prediction markets won’t work well for far-future events. These might be a better match for forecaster tournaments or some other structure, where we get the forecaster track records through present events, then use those track records weighting their far-future predictions (see also 5.5). There are already good forecasting tournaments on some far future events. But if you really wanted to use a prediction market, you could theoretically solve this by putting investors’ money in index funds while they waited. Then the winner would get their (and the losers’) original deposits and investment profits, and it would go back to being a better option than investing in index funds directly. In practice this seems complicated and I wouldn’t expect it to work. 4.9.1: What about predicting things that would make it impossible or pointless to win money, like human extinction? Again, these questions probably aren’t great matches for prediction markets, and you should use forecasting tournaments or some other method (see also 5.5). If you really wanted, you might be able to make it work in theory through a mechanism sort of like this one. 5. What are some clever uses for prediction markets? Here’s a non-exhaustive list: 5.1: Conditional prediction markets / decision markets Suppose the government is trying to decide whether to throw its weight behind Vaccine A or Vaccine B for some deadly disease. There are some experts behind both, both sets of experts accuse the other of being in the pay of pharmaceutical companies, and decision-makers don’t know who to trust. They might make two prediction markets, like: If we decide to go with Vaccine A, will at least X people die from the disease?
Inline links: Dan Hendrycks, Steven Basart et al, already good forecasting tournaments on some far future events, this one