Building an Institutional Sports Market Maker w/ BigBuckHunter | Ep 166

- Yeah, and I am like an AI maximalist, so I almost never say like, well, AI can't do X, Y and Z, but currently in the year of our Lord, 2026, one of the points at which you would start running into the limits of your AI generated software systems is if you let an LLAM build a really good integration with a single PM for you, that was all about doing one specific kind of training, and then you start expanding to other venues, another product categories, and trying to mix like top down with bottom up and order flow with this and that, and fast-feed strategies and all that. Like that's where you get to system blow that your inability to understand software and good extra from the beginning is now really tendering you. (upbeat music) (upbeat music) - All right, what's up everybody? GPSV and a returning, you're actually a two-time guest, kind of, to the pod. This is your first go on the new version. Someone would say the much better version, but you were, we talked before a while ago, I thought you had one of the better podcasts, Big Buck Hunter, welcome back to the show. Pleasure to be here, definitely a different set up and a different stage of both of our lives right now. So good to come back and talk. - Yeah, it kind of feels like stuff's more settled and less settled. Keep going, so I had some success and then history no bigs booming, but yeah, I mean, I think the first question is maybe just a little bit of background on you, and for those who didn't see that episode, you don't follow you on Twitter, how did you get to where you are as kind of head of everything at no big besides Jacob? - Yeah, I can get my title, so we actually, who start with the business. - Yeah. - Let's start with the business, yeah. Let's work backwards from where we are now. So I'm actually the CEO of a company called Manhattan Athletic Group, which we call MAG for short. Which we probably need to go update our LinkedIn's and whatnot. I was at no big, I ran trading there like the technology and operation side brought in my good friend Chris to kind of handle day-to-day operations so I could be a little more in technology. And then as part of the rules around regulated prediction markets can't have internal trading operations that exchange is, so no big, created two subsidiaries. One is the company that just owns the exchange business and one is MAG, which owns the trading business and we're firewalled. So I'm currently the CEO of a proprietary prediction market sports trading company. That's my job. How did I get there? I would say ultimately it was like my special interest hobby was this hypothetical world where there were American facing legal sports exchanges where you could trade whatever you want. And I started building technology to do that before it was actually true. Kind of thinking wouldn't it be great if this was real? It's hard to overstate just how delusional it was. It's not all that far away from like a dungeon master for a D&D game, like inventing far too complex an economy for his game. It's just like, when I talked to you three years ago, there just was nowhere to actually do these transactions. And so it was ludicrous to be putting all this effort into doing it this way. But I did think at the time that it was kind of crazy that you know, fandal and trafficking for the big market leaders in sports betting. But they didn't take their approach to trading and marketing making very seriously. The number one arrow in their quiver was banding customers, which regardless of whether or not you think that's right or wrong, it just didn't seem very forward thinking to assume that you'd always be able to do that and be the dominant player in the space by doing that. And so I kind of thought, you know, if I figure out how to do this, certainly it's got to be worth something to someone. And so I joined Novig, Pitching Jacob and Kalechi on the idea of doing that. I wrote him a letter, it's pinned on my Twitter. Like literally the exact pitch, the first thing I ever said to any of them and had him meeting with them and explain what I thought I could do and they brought me in to build it. And then we just ran really good. Like both the company did very well and managed to onboard a lot of customers and a lot of liquidity in all the different forms that you want to see it. But then also the industry and the regulatory side, everything kind of broke the way of PMs over the last 12 or 18 months in a big way. That is just uncapped the opportunity for guys like me to do what we're doing. So on here now. One of the questions I wanted to ask, I went back and watched the last time you talked with on the show and I wasn't on the show. One of the things you mentioned is you originally, when you were making that switch to sort of more traditional industry to this industry, you'd reach out to venture capital like funds to get the lay of the land or have to see where is most interesting. Like I wanted to dive into that and understand how did you get people to respond to that? I would have thought that would be like a hard avenue to even get the time of day. What did that look like? Yeah, and I'm going to sound bad because I don't really respond to LinkedIn messages very much but you can get a lot of these guys to respond to your LinkedIn. And the message matters. And this sounds like a LinkedIn post, but it really matters what you write to people, whether or not you're selling them on the idea that they should respond to your message. But I would also confess that the fund that led, no of H.C. Brown is a fund called Lux Capital, which is a very well-regarded New York-based seed and the series-based stage fund that I was aware of. And my real estate agent told me he had a client who worked there. And real tours are great. They try to help you with everything because ultimately they get paid a lot of money to not do a lot so they try to find secondary value to Friday. And I said, can you just send an email intro between me and who I don't even remember the guy's name? And he sent this intro and I said, actually, who I'm trying to get in contact with is the leadership team at Novig. And the guy from Lux was kind of confused, like, what do I have to do with this? But okay, like this is no longer a problem of mine if I just send one more email. And so then by the time it hits Jacob, it's like, oh, we have this fiery hot referral from one of our top VCs to talk to this guy and the guy's never met me before. So that wasn't how I did it every time, but I think, but literally that's just glazed bare how overpowered this strategy is. So you're like, you bearded into Novig. - Yeah, big time. I mean, this also works way better if you want to, like working at a seed stage company is kind of an insane thing to do. Like you couldn't reach out to, you know, like Marki and Theresa and be like, hey, I need an intro into Anthropic and just expect to respond. That's not gonna happen. But it works for really small companies. - I love it. - Well, I think, I think let's go with when you first joined Novig because I think if you haven't watched the video of Henry's old interview, there's very few ones where like the video matters. That one, it kind of does matter because you were pretty open with showing us some behind the scenes. So talk about like building, when you got to Novig, like building the system, like a basically a sports exchange, also a sports book, like all of this from the ground up as somebody who came from, your previous job was Bloomberg, right? - Yeah. - Because you're not here. So you're kind of coming in and you're like, well, I have this idea, but now I actually have to build it and it has to work. Like what was that like? - Yeah, I think we were at GVT3, which was important, like keeping track of. - Oh yeah, true. I mean, like you can't tell these stories without noting exactly where you were on the exponential takeoff curve. Because there'd be a very different story today. Kalechi, I talked to him a lot about what I wanted to do and he's a very good software architect and he's not a sports better. And so he would challenge everything I said. And then if he finally accepted, to that he would come up with much better designs for it than I had. And then we, it was a lot of whiteboard and a lot of just like doing math and making sure we weren't missing things and we're double counting things. And then I think the, the back end, I don't want to get too technical. The back end of it was not that hard to like come up with everything I wanted to account for, but then the real question was like, how do you build this in such a way that traders can see every single thing that's going on and control all of it? And what's every decision a human being could ever make? And, and why would they make it and how do you make it like a really low friction path to making that decision that doesn't break anything else? And even like constantly, that's, that's always the problem today, right? Like it's so easy to highlight like, oh, we don't want to do this. We should be selling this to this price, we'll have a, but to, to get every single person involved from the trading, engineering to understand why that happened and, and how many great features went into that one mistake being made and how you don't want to disrupt it. And you also don't want to put in some like brute force switch like don't want to happen because like, well, the next guy's going to be confused. You're going to say, I see all these numbers in a row, they should do this, but it's not, you know, it can be very, very hard to make a system that is sufficiently sophisticated to win, but also sufficiently simple to understand. So that I think like constant internal and external negotiations about what are we actually going to do? How do we keep reducing the level complexity here? That a big long iterative process of doing that was the, I think the simplest way to describe what it continues to be, especially now, like, I think things keep. Adding dimensions to themselves, like we, we trade on multiple venues and we do. Parlay's through the same engine that we do straight. And we do virtually every market like I don't think there's a market maker out there who covers more markets than we do. Besides like, you know, drafting training or something somebody who has a band button and to actually have all of these, you know, tens of thousands of markets across multiple venues and configurations like communicating their activity with one another is really complicated. And that's kind of the big challenge that we run into. We had a question we will definitely get into that I'm curious like the transition from internal to to like external and that that growth, but maybe one more question on like. You moving to no big and maybe something that was not obvious at the time, maybe it's obvious now to you, but when joining there, I think you had said at the last interview you had thought you basically pitch to the founders that market making is going to be really important and you thought you could help. That's, you know, different exchanges have gone different routes on that like whether they've invested in that or not. Why did you think that was important and what sort of gave you the confidence that that you could do it. I know in the first interview, you talked about it in your sports betting and obviously you came like professionally from that background too, but it's it's a pretty big leap and I'm curious like why you thought it was important and why you why you thought you were the right person to solve that. Well, you own customer experience, which is really big. It's a nightmare to like build a bunch of product and then say now we have to find a market maker is willing to quote it. And the product doesn't exist unless they agreed to so they can ask for mega rebates or whatever and we just have to say yes because we have no plan B. And so that makes me develop it cycles really slow and make sure like product release not great. And it's really expensive. And you know, Calci and probably market have kind of outrun cost by raising an insane valuations and I say very high valuations. I try not to have like. Don't cap your head. Yes. I'm top down on the pricing. That's what they raised that that's what they're worth. Like you can't you can't fly into the market. There's some trades that would make up these Republic companies. So the. Yeah, like it costs both of them or other exchanges. Insane amounts of money to pay for market making services. And even then you don't really get everything you want. Like nobody really has full prop coverage to type spreads anywhere except for us. Right. Like there's a lot of a lot of these things that are just part of the liver. And they've had to sell like meaningful pieces of equity to market makers to achieve a lot of these goals. So that's a big thing is like you can deliver something to customers that that you otherwise could not do. Additionally, it is a it's a revenue stream. If you do it right. And revenue is important. Certainly long term, but in the short term because you can make the numbers work on on reducing fees and margins and all these things. So even if you're like not hyper focused on revenue because you're a high growth business, you need to be able to paint some kind of picture of how this thing could go. But then so a big one though that I think I think basically everybody is miss this. And this is why no other US based English change has been able to build a really good internal team is. You need talent to do internal trading. You can't get second rate people and put anything good together. And the talent want money and they want to win. And that numbers don't work if you're like, well, this is like winning a secondary to customer experience. It just doesn't add up. You you need to actually say to somebody like you can come in and crush and crush for size. And you get a piece of this and you know, you have a salary and whatnot. And it all adds up. And it can. It is meaningfully competitive with what you can do trading on your own. If you want to attract anybody who's good because there's so much. If you can win on the guns, you can make a lot of money right now. You're like the square. Yeah. A lot of one. I don't want to start it. Yeah. It's like, no, it doesn't work. We're recording this early. No, it's joy. I mean, before noon, right? Transparent always like hold it together for about 30 minutes and it's a pod and then once the Dan broke every other word is an F bomb. It's so and talking about the most mundane topics, but somehow it all made them and period it and on the same way. So yeah, like if you actually want to have the best people. You you need to be built to truly win and compete at the highest level or you have nothing you'll have mass nutrition as people go search for that other opportunity. So there's no there's no strategy of being pretty good. You're either absolutely nothing or you're the best. And so so you know, recently like we were about finishing up on a you know, our first kind of public round of hire small round. I know you guys hired seven new traders. From listening to your last episode, but we're kind of finishing up here and like that's so true. Like you have to you have to be like, Hey, like this is worth your time. It's so hard to hire in the space right now because everybody good can make a million dollars by themselves. Basically. And it's just like you have to somehow be like, Hey, like this is more worth it for you. So I've had people be like, Hey, we're looking for like a job like this. And I'm like, I don't think I can recommend anybody because everybody who I would recommend wouldn't do the job because they wouldn't want to treat on your exchange or do all this. So like hiring right now, like obviously it's for off the, but like it is really really hard. I think. And if you think about the adverse selection effect of all you go to the street to hire and I get referred 10 good people and nine, turn me down because of money. And then I get one. It's like, Oh, what are the odds that I got the fraud of the bunch. You know, like there's some of that that can happen. That yeah. And and I do think you need also people to not just be convinced but be 100% bought it. They have to really truly believe this is going to work because your delivery. In this job is so dependent on your level of buy in like you just have to be working 24/7. You have to be up like who was up at midnight this week. Watching after innings of that game where there was a round double that's really a groundless thing. That's a quarter million dollars. If you guys are out there to get it. You know what I mean. Like that. That's literally the job is stuff like that. So it really, really matters that people are invested. So John and mentioned you you recently hired seven new people. I think you met you on your your podcasts. Maybe more broadly like talk talk through how your team. I know you got into a little bit, but like how your team and the goals of your team has changed like since, you know, three years ago when you did that. to what you're doing now, maybe size, just like I said, general goals, at that point, I'm guessing it was mostly about keeping liquidity up on your own exchange. And like you said, you've branched out. So maybe talk a little bit more about that, you know, the split in your goals these days. Yeah. I think that we've always been really bad at in play because we've just like let all of our systems and models just kind of run loose. And then we run them at pretty low limits because we don't have like the coverage that people watching these lines all day long. So we just always kind of like flop scared. And I think it's a big problem with I think it's the thing we've least supported on the product and the biggest shortcoming for me. And the fastest path in my eyes towards having that kind of like six figure liquidity on both sides of major markets for us is to have human beings on the screen. So I feel like I have that insurance policy in place. So that kind of led us to what if we just went with a really big number and hired some more junior guys, some much experienced guys kind of a mix of some technical talent, but not a lot of sports training experience or a lot of sports training experience, but kind of not the resume and technical talent where it's easy to go to job. And we personally know internally that or we think we're very good at talent development. So we're going to be able to get everybody who comes in doing a lot of different things really, really well. So there we talk about it being like there's a nine to five element in a five to nine right. There's trading nights and weekends, but then there's also, you know, dipping your toe and modeling or writing software or all these other things that are going to, you know, wanting to come out and working here or wanting to stay here. And we also want you to feel like you're developing a lot of skills for your career. But yeah, I think thing is just knowing that we could actually run at huge size or run really serious coverage and that we have people who are tracking every single detail of everything that happens so that we don't get absolutely buried. As far as goals go, like, do you see this as I'm trying to think, do you, so like if you think about like some of the best biggest quant shops now, like they started as specializing in one niche thing, doing it really well. And then kind of expanding past that, like, do you have broader goals or does I guess having the same parent as no big kind of always make your goals like partially support the exchange? Like, or are you looking at this? Like we want to be the firm that makes the most money trading sports in the entire world. Like is yeah. So it's, I think like money is the coreboard. So part of it is even just, you know, I think it too deep into it. But like people work for us have equity and no big for instance, right? Like you already got some cop bias towards supporting the platform. And then you, I think you do want to make sure that you have either commercial agreements in place or structures like that that kind of point incentives the right way or could even be like, you know, the way we think about how we structured e-vals of traders or whatnot to be kind of oriented around this venue. Because ultimately like we do kind of own activity on no big and on the customer there, more so than other places. So there are a lot of ways in which like a huge influx of traffic there would be really good for us. So we try to balance, right? Like it can't just be all on vibes. Like, like there's actually no reason to do this under the hood. Like there has to be good reason. But also that's part of the buy-in thing, right? It's like, look, we only even have this opportunity because no big is given us this opportunity. So we have to like deliver on all this stuff big time for them. And everybody's going to do that and we'll figure out the rest later. Because that's just what this company does. So we do constantly feel like from 100 different directions, it's like all these things need to sort of happen in just in time and all have to come together. Yeah. Sorry. What was the question? I guess my question is like, what like is there that ambition to be, I guess off venue, like on non-novic venues, like, yeah, like we see jump, we see SIG and we think like we're going to be bigger than that. Yeah. Right. So I think if you have the best infrastructure, you become the pipe through which all kinds of things can happen. Right? Like, like, like, talking about higher, like, if you want to hire the best talent, and if you already have the best distribution and the best systems, right? And it's like, okay, you could take your, you know, your golf plays anywhere. We're going to get you the most down on them. We're going to be able to do the most with it. We're the most attractive destination for you as some golf originated, right? And so I think going back to what I was saying before, you have to dominate everywhere to get any kind of success and be able to attract talent and be able to move and operate. So I think even insofar as our goal is ultimately to support novig and make that happen, we have to be the best at everything we do in order to achieve that. And that's just the state we're in right now. And this stuff changes every six months. So I often say it works like your headlights can only see 200 feet in the front of you, but you can make it the whole way home, right? Like, we can only observe so much about how things currently work and it's okay, we have to absolutely deliver on this. We know all these other things that are coming down the pipeline on the donvig side. They're going to be really good for all of us. And if we're ready for what we think is going to happen, we'll be super rewarded for the fact that we live with this is our number one venue. Number one priority. So that's what we're doing. How do you think of that like building that sort of distribution channel that will naturally attract the best talent as sort of like a long-term vote? Because I, you know, I sort of these days it's and we'll probably get into some AI stuff. I love to talk about that stuff, but like these days it's easier than ever. And we talked about on this podcast how like before like just being able to hook up to the API would have been like a huge edge and that's obviously much easier, easier for people. So how do you think about like that sort of strategy is a long-term, you know, vote? Yeah, and I am like an AI maximalist, so I almost never say like, well, AI can't do X, Y, and Z. But currently in the year of our Lord 2026, one of the points at which you would start running into the limits of your AI generated software systems is if you kind of if you let an L, um, build a really good integration with a single PM for you that was all about doing, you know, one specific kind of training and then you start expanding to other venues and other product categories and trying to mix like top down with bottom up and and order flow with this and that and fast-heed strategies and all that like that's where you get to system blo that your inability to understand software architecture from the beginning is now really tending you. Um, of course like we're probably one generation of from tier models away from that being a solve problem as well. Um, but we know how to do that now. So building that now does feel like a technological edge in vote, um, which we then can also bit by bit bring, arrangement, modeling, original pricing data into doesn't have to cover everything, but if you have just doing a specific categories, those are individual modes. Um, and then in terms of just partnerships and hiring, right? Like having that now lets you get, you know, a lot of a lot of new and novel data into your systems that becomes additional mode. And then we think of the venues as being customers in addition to the customers themselves and that we have a, we're almost like service providers, right? It's you want your app to look this way when customers log in, you want this experience to be there. We can, we make sure that experience is there, right? We have a different mindset than somebody who is just trying to trade for the most money at all times. Um, and if there's a world where the PMs kind of coalesced around a smaller collection of very large MMS who kind of solve all the core problems for them and they more begrudgingly accept some other MMS or kind of try to wall-loft certain parts of the system where like toxicity really doesn't help the ecosystem at all. We think we're a well-positioned to be part of that small club, right? So just for instance, like, like if we land in some kind of world where, you know, if everywhere there's no delay, fast-feeding, core-tiding is super profitable and there's kind of nothing you can do about it, your relationship of, of venue is going to depend a lot on whether or not you need to. to do that to win, right? Like if that's a key part of you winning, they, you have no bargaining power. They really don't like you being there. They might have to accept you because of the CFTC, but that's a much different position to be in than being the person who supports customers in spite of all that, right? So I think that those kinds of things are votes and they, not all the fruits of those trees have fully worn out yet, but you can even, you know, if we were, if we were a year ahead of where we are now, if we have been, you know, SIG or jumper, whoever operating with huge bank rolls and built for zero latency regimes, we'd be owning large pieces of, you know, polymarket end or Calche, by virtue of liquidity deals, right? Like that's how those deals got done in the past. And I think the way they get priced and valued in the future will be different. And I think the vendors have much more refined ideas about what the highest quality market maker really is. I think maybe they don't know a lot about sports, right? Calche, the employee market people are not sports people. And some instances openly antagonistic towards sports. So I think the first path of identifying preferred partners to them was not really all that accurate. And you talk about like, again, that's possible edges for no big or how no big could like come out from behind like, I think those companies kind of, the sports is something that eventually ends up in the rearview year, right? Whereas if we continue to collaborate with their number one partner being a parent code that like really believes in this product and vision, you can see how you can accelerate past, certainly like what polymarket is doing in poly? I don't think it'll be crazy if we were being polymarket and daily, no, social sports volume by the end of this year. I think that's a very realistic goal. 20% of their trajectories. Yeah, yeah. I mean, they're kind of flatlined. And it's all split across two venues. Like, I don't think that's unheard of. And I think like, yeah. And then if it's you and Calche, and you can call it, I'll just say, hey, Tark, what do you think about American professional sports? Like, it doesn't really care for it. All of a sudden, you're in a great spot. So. Well, S.P. and I, that was one of our takes. It's like by the end of football season, like we're gonna see some, we're gonna see some surprises in the like volume rankings. But I have to, I want to ask you, I want to ask you a question on the, what you said about like being a market maker. This is something like, obviously we're smaller, but we're like a smaller, more niche version of what you guys do is like we're, you know, not as many venues probably, but, and we don't probably, and we definitely don't do as many markets, but, you know, we're in the same boat of like, you have to think of the exchange as your customer, they want things, sometimes you do things that you don't think are profitable just because, you know, it's gonna help them out and like, you wanna keep a good relationship. But like, when you're saying like, okay, there's gonna be what it sounds like is like a contraction of market makers. Like, talk about it from maybe a smaller, maybe two examples. Like one, maybe like my operation and call it like six, six, seven people, we're doing not everything, but do a few markets really well and then kind of pop around and make money where we can. And then like, maybe like the RFQ, what single person like RFQ, Max or something, you know, who's just kind of getting in front of Robin Hood flow. Like, what do you see the future being like for a couple of those different like, more garage bandy type market makers? - Yeah, so we haven't seen for sure, but I kind of suspect that some of the newer entrants are going to stay, Calcy and Polymarket are doing so well in the open ecosystem for you for all approach. What if we took a much more UI, UX, customer-centric, like even more like recreational customer-centric approach, right, like almost kind of rebuild the draft king's fanatics philosophy for PM ecosystem. And in that world, you would want more restrictions over what somebody can openly do with your API versus what a designated market maker can do because it gives you a lot more control over that user experience. And so I don't know that they're doing that, but I would suspect, and if I was running some of these companies that are trying to catch up from behind on the PM side, that's probably how I would build the product just because it feels like there's a lane there and you have the history of OSP succeeding with that kind of design. Right, so like offering odds boost daily that are paid for by the venue, right? Like you can do that. You can like to say, hey, we're gonna pay you to make a four leg combo. You can't force the quota to offer the boost, but you can add it on top. But you can only do that if you can pull the money together from somewhere. And it's a lot easier to pull the money together from somewhere when you have a restricted list of DMMs and you could be pseudo collaborative. So I bet some companies try that. And it's not clear whether or not that it's really doable given all the regulations. And it's not clear whether or not there'll be a winning strategy with customers. But as an MMM, I think it's worth the time and money to invest in being a premier partner for a DCM that wants to go that route. It's not realistic for a garage band MMM. And so if you're a garage band MMM, you probably don't want to see that be the end state of the way the industry works, right? That kind of OSP 2.0. And then if you talk to anybody with a European accent who has lived through the history of Betfair, they'll say it doesn't matter how you think this is different, how do you think it goes? Eventually you can't have the MMMs making so much more money than the exchange itself on fees. The exchange itself will come through more and more of a piece of the pie from the MMMs and just kind of gobble up all the edge. And if they're right, that will also drain the garage band MMMs. But I can't explain exactly what the path would be there other than big, big successful businesses decide that this is their money and are able to take it from you somehow. - Well, I wanted to ask a question on that. So I'm glad you brought it up. Like that, in my head sort of the path it would take in that scenario is basically every exchange eventually wants to, they look at their market makers and how much money they're making and they say, we can do this and they slowly close off the ecosystem. Like you said, I think some of the current players like underdog or whatever, it's not like anybody can just go and beyond any side of the trade. Like some of the Calishees or Novigs or whatever. Do you, it sounds like that's sort of an open question to you. But like to me, that seems like a pretty natural progression of if I'm a business trying to make as much money as possible, that seems like the direction it would naturally follow. Do you, it's like, do you agree with that? Do you, what would be your sort of push back to that? - Yeah, I think, like, look, I can't speak for any of these companies. I don't wanna say underdogs doing that, right? Because if they don't do it, - You're trying to get on a new, like, you know? - But also like, but nobody's, nobody's, nobody has really clearly done it yet a way that I could like point and wag a finger at them. But if I, if I was a betting man, I'd say you'd see at least one venue lean heavily into that strategy and I could see why it would work. I mean, ultimately, it's kind of like, you have to, you have to build the product on top of it that makes it worth your while to have done that, right? So if you, if you kind of lose on price discovery and whatnot, but you really can deliver like, promos and customer experience that are really attractive to customers and you can sell that story, then it'll be worth it. And I think a few companies will take a swing at doing that. - But just to, just to clarify what I'm saying, like I wasn't trying to take a dig at any company, but like just presently on underdog or some of these other exchanges, like DraftKings predict or whatever. And I know it's early for a lot of these companies, like you can't go in and operate on like the way you can on other exchanges. I think some of those exchanges are working on it, but like that, that sort of closed off is sort of what I was, I was a little careful. - Sure, yeah, they all, some of them have UIs that don't allow for make orders at all. I think they all have open APIs to some extent, but you gotta go do your own research about what it takes to be trading on all these vendors. - All right, I have a kind of a, you know, rank these in importance of, of value to a sports MM right now. - Okay. - Okay. Pricing. So whatever we wanna call this data science modeling, coming up with your own price, trading team, market making, market making, let's just call it like an automated market making system. Number of venues, and I guess paired with lowest cost of trading. How do you see these, how would you rank them in terms of importance to that operation? - All right, so we've got pricing, trading, MM, infra, like software, infra, and then number of venues. And pricing, do you just being like bottom up or do you include like, pricing off-flow? - That goes with trading. That goes with trading or with MM, infra. - MM, infra. - Yeah. - Yeah, okay. The pricing is like, part of it is like, where do you see? Like, do you use a lot of people who listen to this, come from sports, being backgrounds, who like originally, right? So like, I think that's a big question. People's minds like, how much is actually originating matter? Now, but like not broadly, I still wanna know your thoughts on the other. - So I think the number one thing you need is response to order flow. Your edges are always gonna be small when you're realizing edges. You're never gonna realize more than a few percentage points. Your losses are uncapped and you only incur losses by being traded against. So the number one thing you have to do, 'cause it restrains the bottomless pit of losses you could possibly run into. It is how you respond to order flow that either hits your orders or does not, but like definitely number one is that crosses with you. To keep going back to the ground rule double thing, right? I think an encounter to got basically drained by selling unlimited points to one and a half, yeah, at 99%. So that's the kind of thing you can get wrong, but if you just have the correct risk parameters that barely cost you any money and it dominates everything else you've already done. You can do that via human traders or the technological infrastructure and people have success with both. So I'm biased still towards having technological and restructure number one and then trading number two. Pricing is in some regards like a vanity product to have. And I think we're just current ecosystem. It is not like, if margin is good-driven to a few bits everywhere and everything, then it's really important 'cause it's the only edge you can have. It's not the current case. So to me, pricing is number four, which brings cost of trading down, right? 'Cause it's just the reality. Like if you talk about, what do you call it? World Cup, World Cup, late stage matches, where there is unspeakable inflow on the single side of these markets, right? And it's just devouring all market maker liquidity available on the other side, right? That the very obvious edge and just literally being able to sell on that venue and selling at a very high cost because demand is outpacing supply is a very, very big edge that you can get a ton of quantity down on with basically zero down about whether or not your edge is real. And as long as that is the current equilibrium, it dominates like the ROI on personal pricing. Now however, long term, as much margin to get driven down, pricing gets really important. What really ends up happening, in my opinion, is, you know, everything is, like 10 to the towards entropy, but then outside things shock the ecosystem, right? So like, OSB was already on an entropy journey where I think a few years ago, he went to bet batch, everybody's kind of depressed 'cause it's like, we're all trying to form accounts, nobody has accounts anymore, they all get cut off, right? Like it's kind of over, and then PMs disrupted the whole thing. So there will probably be a point where people start getting depressed, but there will be some new meta that disrupts everything. And if you show up to that new meta with original pricing day one, you have a lot more maneuverability and you can do a lot of things, and then you also remain resilient. But in the current meta, the other factors dominate just in terms of where the money comes from. It would be more sexy if that wasn't true, and it'd be fun to say that's not true, but I'm sure if I just like, when I'm pulled like our total returns, right? And add it up, like where are these primarily originated from like OG bottom up pricing, versus where is this just kind of like, that trading flow, I think that trading flow is gonna be a very big percentage. - I had a question on sort of that long-term state with like the pricing being increasingly important, and it sounds like you do think that, how do you think then like about like long-term investing in that in your team or your group? Like balancing sort of like you said, the short term where the money is at is not necessary there, but long-term it might have increasing importance. - Yeah, well this is also my off, referred to Gus Fring, versus Walter White metaphor, right? Like the pricing thing is the one thing that I'm just really not that good at doing on my own, and I try to build all the systems around it to empower other guys to do it. My experience has been that to originate markets and come up with very good pricing that actually wins, you need to have a passion for it, and you need to be willing to really dive down a rabbit hole and engage with something that might take a long time or really be difficult and maybe adds up to nothing, but if you do it over and over again, you find something like it's a much more kind of magical, non-linear process. You get to models and workflows that actually wouldn't work. And then even once you have it, right, it's like, we'll have models and say, okay, you collaborate with trading now, and you can spend months with trading like really figuring out if you have something, and is it good at this time of day and is it good if we've already filled a hundred K on it and is it good if this, right? Like there's still so many open questions before you really start ripping it. So to me, it's, it works best if you have a lot of patience for it. I can't say, you know, we need to be doing all of our own tennis numbers and winning by the Australian Open and expect to get something that I actually want to own, right? Like that doesn't work. You need to find somebody who's obsessed with tennis and they have to come to you and say, like, I think I can beat CSGO and you say, okay, when you have some free time, you work on beating CSGO and it kind of unfolds until one day you've got your, you know, your traders and your model, and you're like, dude, we're ready to rip on the CSGO thing. We think it's really good. You say, okay, fine, go for it. But it's been like background kind of simmering thing. I mean, to me, that's how it is in an org because you have to kind of replicate what it would be like for an individual to build this thing on their own time. And that kind of almost creative artistic side of it where it's really this personal project, which is not easy to support and can feel like, it can feel like, you know, just a thing that's not tearing into anything until then it's something and then you're like, all right, great, I'm really glad that we let this happen. - Yeah, yeah, that is a good point about like originating within an org. It's so different than everybody else's workflow. And you and Henry on your last podcast said something pretty interesting about the CSGO example. Or sorry, you and Chris. But I think it was you who were like, if we brought the CSGO guy in, would we even want to give them that as like their first project? Because they could just end up like being known as the CSGO guy and then if it loses, it's just like what a terrible way to start your time at the firm. - Yeah, yeah, that's a good point. There's this human resource issue totally. And like, and I'm sure you found this, right? Running a team of seven people where now a lot of, a lot of your most important decisions are talent management and leadership decisions more than any trade, right? You know, how do I, how do I set all these people up for success? How do I keep the vibes good? How do I put this in a position where if we all have to do something that sucks for a while, nobody wants to bail everybody's in on it, you know what I mean? And so yeah, I've talked to, we hire people all the time who, you know, have an edge in this or that. And I just went like, look, it's not that I don't believe you, although I, I 40% don't believe you, but you know, to some level I don't believe you. But even the part of me that does believe you for the sake of your career, I don't want to put a target on your back right now. So how do we do this in a way where that doesn't happen? Like for instance, can you, can you, limit the subset of stuff you play to smaller markets early in the life cycle where you think you get disproportionate PLP. All right. Little, you know, we got a mover and a shaker on the podcast. You know, he had to dip out, you know, I think it was the president or somebody in the organization. I'm not sure. But now we're going to go to the Q&A. And we're going to we're going to try and rip through these. But we have we have some different themes here and the first is going to be general no big questions. And then we'll have trading and market making questions. So feel free to give short answers or pass or whatever you want on anything here. But let's start with Kendrick or Kendrick James. How does no big plan on gaining and maintaining recreational flow on the platform? Will we see similar deposit bonuses for new users? Wide spread, I don't know, UGC and creator led content. User generated content. Okay. MVP programs to attract ideal customers. So a lot of that I'm not part of anymore. Right. Right. I know they are searching for what is and is permissible under CFTC regulation. I believe things like deposit matches and boost and whatnot are doable if they're done right. And they're going to try and solve some of those issues. We're definitely going to spend way, way more on marketing. I think you're going to start seeing no big ads in a big way going into football season, which will be really cool. And then getting back to I think we're in 48 states is huge, but it's all these things coming together once the wide release major spending. And we've always in comparison to a draft Kings or a Fandall. It's a kind of high information product. But I think if you stack up what our product looks like against Calche or Polymarket, it's a lot more similar to sports book, the Parley experience, especially. So I think those things are going to matter. It's just it's the question of whether or not we really succeed in getting eyeballs on it. And if all the marketing stuff works and I'm praying it does. Next one from Can of Corn. What's the logic behind keeping no big 21 plus when other competitors are Calche are 18 plus? Yeah. It's really shocked if it goes to 18. I think initially even just knowing that because OSP was 21 plus, you might invite some additional scrutiny if you went to 18. And we've always stuck at 21 and felt like, you know, we don't have a huge problem being there. It's not going to kill our customer acquisition pipeline. But don't be surprised if it changes. Okay. What magic school bus, what features restrictions offers you wish you could implement but can't because of regulation or just keeping pace with competition? Oh, yeah. I mean, one thing that comes up, everybody talks about creator IDs on RFQs, right? And it will drive me crazy if Calche has them kind of grandfathered in and never gets rid of them and no new entrance can do them. An ecosystem with them or without them are both fundamentally fair in their own way, but it's not fair if one place has them in one place doesn't. And so that will really annoy me. I kind of. Is that possible? Is that like what's going on? Basically. Yeah. So when you when you get a DCM license, you put together an application to the CFTC and you say, I want to do this. I want to do this. I want to do this. And they'll push back on a lot of stuff and they'll say, this is an independent, but we're not going to prove this, right? And you can decide, am I going to go to war on this? I'm going to tell my lawyer back and be like, no, it needs to be this way or do you take the note and change it, right? And so there's a there's a long iterative process. This is how like matching delay works, right? Like live trading speed bumps. Where the trader day by these exist, all the like fine details of the mechanisms of our views. And you can sometimes be surprised by what doesn't doesn't matter to them because they are coming from traditional finance and and a lot of these arguments and decisions have been made before with kind of different underlying principles that you might have thought about if you come from sports. So I don't know exactly what mechanism we're approved for. We do not have creator IDs on our views where instantly you could before any quote is going back identify who this came from and ban them if you want to. And calcium currently does have that. And it's it is easier to keep doing it when it was already approved, even if the CFTC doesn't currently like it, then you certainly can't just not get approval for it and then go into it anyway. That's like a big problem, right? So you know, I wouldn't say like, Oh, I really need it to be that way. We need to have that. Everybody needs to have that necessarily. But it's not a great situation if only one place has it because it just it allows for so much more generosity on pricing on just that venue and pushes sharp takers everywhere else. And it's just really hard for the industry to support. That makes sense. I had no idea. The next two I'll combine are sort of AI questions. We answered Daniels about competitive advantages for Novick, but he asked, what's the max you be willing to spend on cloud code code X per month if there is only one AI option. And then from makes sense, say you lose access to all your AI subscriptions tomorrow, what aspects of your work would you consider impossible? How would it affect Novick? How much would you pay to get it back? So I guess this is your soapbox that talk about anything AI related you want. Yeah, these are really good questions because they sound like crazy hypotheticals, but they also might be super real, right? The cost of these products could go up a lot or cost of inference might go down so much that it doesn't matter. So I think about it a lot and it's also just a kind of fun, mental thing. Currently, almost every aspect of our business, I understand. That just the nature of it, right? I run a business that only does things that I get. So it would be conceivable for me to set up like some end boss AI situation where I have constant running agents 24/7 doing all these different things, trying to cover everything. I don't think that's a healthy way for me to live or for a business to operate. And it makes a lot more sense to have a big team, have different perspectives, different people working on different things, have lots of humans in the loop. But if all of a sudden the cost of inference got insanely high, it would create a really weird situation, right? Like, I personally, my ceiling, I feel like I pay, certainly a quarter million dollars a year for a quad plan for myself, maybe over a million. Because if somebody else is doing it on dead, like the fleet of development is insane. But I'd have to fire a lot of people. You basically move to like one engineer is, there's no way. No point in having an engineer who doesn't have a cloud code or code exhibition, just would be ridiculous. And so one engineer is their cost plus the cost of that subscription and they have to be that good, right? So they have to be as good as like a seniorian, anthropic MTS is the model building at sports trading and for development. So it would be a very limited number of people who are expected to push themselves to the absolute limit and be kind of working at a 24/7 kind of cadence, even if they're not working like they would absolutely need to be running those instances remotely connected to their phone and a headset and kind of talking to them all the time and just making them stand out of money. And so then you probably also would throw a lot more resources at lower price, not technical human beings to just cover like the human safety gap, right? Like you just having a lot of people is good for a human in the loop security stuff. So even just hiring HR people, like just negligible people to exist in an office for whatever reason would be really important. I say negligible meaning like there's a lot of comfort business functions. It would be a- I can't say it. Like, I don't think it would be crazy to compare. Like, in a super highly priced AI environment, I don't think it would be all that different from like professional sports where it's there are very few people who are engineering and it costs a ton of money for them to do it because the alternatives are just ridiculous. That's interesting. I really hope that doesn't happen. That doesn't sound good. I don't want to believe that. That's why you got to get out. You got to make your hair now, right? All right. Let's hit the trading and market making questions. So Mr. Nobody, what's the workflow look like for identifying positions? The trading team wants to accumulate directionally versus delta neutral and how is sizing determined? Yeah. So they either come from a regionation where we have like members of our team who handicap stuff and of opinions versus market. And so then they'll have a side they want to be on and then it becomes a trading question of how do we get the most down the side of the best price? What period of time do we have? We think the market catches up to us. How do we prevent the market from catching on to this? We think it's something we're going to be doing regularly. That's one bucket. And the other bucket is flag pull events to markets where we say, hey, we know there's going to be a lot on this. How do we make sure we're capturing as much of this as possible? And the asymmetry is just like demand side and we have to resupply. And the ladder category, that's one of the places that helps having a big staff, right? Constantly identifying. You know, like the other day it was the lowest home run total per game in 50 years in the MLB. And so everybody's doing like featured parlays of unders in MLB today, right? And can we show up with the best in market pricing on all of that so that we're writing all this action? Or you know, oh, it's tight end week this week. What are we think is going to happen? We're like tight end touchdowns. Of course, what do we actually think the fair is all right? How can we make sure that we're a big part of that versus, oh, this is something everybody else got rich on and we kind of missed it. We got buried on you know, you got buried on a lot of the stuff. So fucking next to. And they're sure you weren't feeling very, very New Yorkie that day, even though they're are you an extent or like would you like, okay, so I'm a Baltimore guy. I'm a Ravens fan. I could I could bankrupt the company watching the Ravens when it's super bowl that no other team. Joe Flaka returns to Baltimore. Let's do this peanut quest. So peanut gave us a real question, which is not like him, but do you have do you think having profiling information on bets you've received or order book data is more helpful in determining current price when market making? And he's basically pitched that like, why would a PM be sharper if a PM doesn't get to see, doesn't get to do any customer profiling? Yeah. The flip side of that question is if you have, if you have short plays, why would you play them into a venue where they can see who you are and move their lines off to you versus playing them pseudo anonymously into an exchange? He's identified a true mechanism, which is that counterparting exposure in sports books, kind of sharp and so pencil for them, but that also drives the volume away from those places, makes them subject to manipulation, et cetera. The game theory optimal state is that quantity is king, just wherever you have the most size on both sides is the truth. That doesn't mean that actually is the truth, but that's like TTO truth and this equilibrium makes this all the time. Impoker? In everything. Yeah. That's a tough question. I would say yes. There are the equilibrium exists, but it doesn't mean you're always at equilibrium. Oh, sorry. I said just the equilibrium exists all the time. Oh, yeah, true. Yeah. I thought you said does. Yeah. I like it. I can read the next one from Calvin. He basically was asking what specifics you're able to provide related to what type of firewall or what your team will see relative to maybe like a normal, you know, no big user in trading. Now that you're sort of a separate entity, and I understand if there's things you can or can't stay here, but. Oh, yeah, because the answer is good, which is that we we see zero counter party information. We see the exact same order book that everybody else sees. We're hooked up to the API, which a lot of people are if you want API access developers in Novig.co. They're speeding up the process of one board and people onto that as they go. The end state for us is an open API, but we're not there yet just from like the load handling. I don't think it's quite there, but they're they're working towards that very, very fast. That's like a this year kind of goal. So yeah, we we don't see anything that anybody else can't see. We don't have any advantages than any structural advantages in that regard. We're just connected and trading the same way we trade everywhere else. We're on the same pricing engines and everything that we're going everywhere else. You said you could see like where the user lives. So if they beat you for a big number, you can go there. You said that before the show. No, that's that's not the case. I was missing again when I said that. He that was actually not not said. So we got we got Pete any tips for a beginner automated market maker before the NFL season or some pitfalls to avoid. I mean, it depends what you're doing. I would like. First of all, your best firewall is how much money is in your balance. So if you don't know what you're doing, you have to still put a lot of money in your wallet. Long term, I would say you have to price the risk you're taking. Right. So there's this. Just for a while, just rip it and if you just rip it, you have to put some percentage chance of total loss on it and price that in. And so if you're making, you know, if you're ROI is 2% on however much handle, you have to actually say no, my true ROI is that minus like risk of total failure times wallet balance. And it's still positive, but I'm like running really hot that I haven't lost my whole balance here yet. You have a constant. No, it's true. And you have to constantly update those numbers and then you can't spaz when you get drained. And you have to always believe it is possible that you get totally drained. Pretend a bank loans you the money and you're like filing reports with them and it's fraud if you've a lot of them about what you're doing and see how your risk management really looks when you look at it through that lens. I think that's great advice. I know how many more minutes do you approximately have? I got nine. Nine minutes. Okay, so I'll combine all we apologize if we don't get to your question. I'll combine sort of all the industry questions into one. We had one question basically like looking ahead and some like prospect, you know, prospects at, you know, next election, I know it's been bandied about, you know, like Democrats taking over. So maybe just like whatever you can share in terms of looking ahead. So like there was a question on like states carving it out and it being sort of like a patchwork framework. And then we had a can a canada question. So anything you want to say about the future like states, Canada PM industry. Yeah, we feel pretty good about our chances of the PM industry as the whole that goes before the Supreme Court. We really like who's running this CFTC. I think they're actually strongly advocating that they have jurisdiction over all this and fighting the states. The states are just mad about tax money. They're not actually making any kind of legal claim in my opinion. So that feels good, but anything could happen. Canada, I don't know what the legal blockers over Canada. I know we're looking at doing Canada. Every time you say you have an answer for either you're going to release in Canada, you change your underlying legal framework for United States, which I'm sure slows down Canadian release. Just attack on when is Victor Roca coming on inside prediction markets? Oh gosh, I really shouldn't ever say his name. I don't want his name in my mouth. Only bad things come from that. So yeah, we'll put a pen in that, but I'm going to advocate for that episode. It would be absolutely fire. We'll skip to the kind of some other question. I'm going to do one from from flop. This is a good one to do now. So this is your friend, Chris, head of trading. He asked, was your biggest regret and greatest accomplishment while working at NoVig in the same question, but for life? Biggest regret at NoVig is that I didn't go all in on building our side out faster. I ran it as lean as I could for as long as I could in part. because I felt kind of like, I certainly was talking about like not putting the targets on the backs of new employees. I felt like if we were too bloated and org, that if things weren't working, like it wouldn't reflect well on us. And in retrospect, I should have just like totally believed and hired a lot more people a lot sooner. - Biggest accomplishment? - I think the biggest accomplishment is building the level of trust and relationship with Jacob and Colletti that it took to even do the split in the first place and be able to operate this manner because it's a very challenging thing to do. There are a lot of parts of it that are uncomfortable and hard to navigate and we've managed to do it. And it just, you know, we talk about like, you know, building relationships and keeping your side of the street clean over and over again and not really knowing what the ROI is on it today or this year, but eventually it matters. Like that's a spot where it's like, I'm just really glad that I always showed up and did what I had to do and stayed out of like small ball bullshit so that when it was like in order to keep this all going, we have to do this. Everybody was able to get a report. In life, I mean, the biggest regret in life can't have bigger regrets in life. And what are you talking about? - I think that's a good answer. - I mean, the long arc of my life involves kind of, like not really understanding how to exist in function properly as an adult. And then, you know, quitting drugs in alcohol, keep coming to normal person, getting a wife, having kids and like figuring life out. And I think that's worth doing. I think you should be like a normal guy who doesn't do insane self-destructive things and your life's gonna be great. And that's what I would advise anyone to do. - That's my life arc as well. I can highly recommend that. It's like super OP. There's not, if you just start with that, it's, you're gonna do okay. - Yeah, I'm not down with like unusual people, interesting people, that's not good at all. You should be like the most normal person. Life's too challenging to try and be like one of the complications. - Yes. I like that. Okay, what SP, you pick one from the grab bag, I think. - We can do, maybe we can do, I'll throw it too. You can pick which one you want to answer and then we can close it up. So Isaacs, does he mitigate his incessant pronatalism when he meets people he doesn't like, who thinks he shouldn't, who shouldn't procreate the benefit of the child in society? Or you can rag on flop. What's it like working with flop? Have you ever considered quitting? Because of him, I'll let you go with everything. - I'll talk about pronatalism. I do encourage everybody to have kids and be normal, like I just said. But like I said, like I don't really associate with people who I don't think should be having families. That's a, I'm gonna quickly walk away from any conversation with a person like that. So I keep my circles maintained to groups of people that I would all give roughly the same advice. - Are you gonna be at Bet-Bash? That might be a challenge. (laughing) - I'm gonna be at Bet-Bash, but I don't talk to everybody at Bet-Bash. - Okay, well if you, if you-- - Is that what you kept trying to run away from me last bet-Bash? - Dude, you were at Bet-Bash without a ticket. You were doing the budget at Bet-Bash. - I had a ticket. - Did you have a ticket? - Yeah, I just didn't get a ticket. - Maybe the year before. - No, no, you're thinking like, "No, that's not me." - No, I'm telling you, all right. - I had a ticket with one seminar and an seminar and I didn't want to go to any other. So, maybe you weren't staying at Circo, was that it? - That's true, I was not. - Okay, so I had to like, you know, you had to get in every day. That's what it was. - I'm sorry. - Yeah. - But, yeah, I think that, I mean, sorry to, if we didn't get to your question about like the one-on-one basketball game or whatever, Clars, like, will- - Clars has a model, but Clars was constantly texting me and like, asking for respect 'cause he's just making models at home, handicapped and gambling Twitter pick up basketball games. For no reason, to no end. - Do you think that he should come on the podcast? - Definitely. - He, well. - Absolutely. - Well, oh, yeah, I don't know if like, he should have liked for his life, but it would be a good yes. - Yeah, I agree. - Okay, I think that that about closes it up, unless you have something you change your mind on or a hot take, you're looking to fire off before you gotta go. - I don't have, I have no hot takes, really. My, I think, you know, my life is largely about not having hot takes. - He stays on his own. - When we're off air for like one minute, you fired off like four hot takes in one second. - What did I say? You can repeat any of it. - Well, you called us fear fucking idiot. - Yeah, I guess I can get my update. - Yeah. - With that badge. - Yeah. - Does anybody disagree with that? No, go ahead, do your update. - Okay. - Okay. - My update is that I didn't want to get bullied for being an actuary at Bet Batch, so I have left that industry and I'm in the sports betting industry now. So there'll probably be more talk about, I know we're short on time, but the podcast, hopefully all that, you know, it's gonna all remain the same and be good. And we'll be here, but just wanted to let everybody know and Henry called me an idiot for taking this long, I think is what he said, something like that. - And I can tell you that the luminaries in the industry all share that perspective. Because anybody I talk to, I'd be like, SP, why is that guy anonymous and not putting his name out there and trying to get a great job? Why is he protecting this actuary job and everybody would just shake their head and be like, I know, he doesn't get it. - All right, well, I'll bet. I'll bet. - I said, I said, - I said, - You've reached out to you and said, look, you got it all wrong and installed that problem for you. And I did not, so I apologize. But I'm better, you got there, I'm better late than ever. - Meaningful, more meaningful that way. - Yeah. - Do you have anything to plug? Oh yeah, go, no. We're presenting at Bet Batch. You and I, we're both sold out, dude. Who do you think is gonna get more people at their podcast? You guys, we're both sold out. - Well, I think they keep upgrading the room. - Who's first? Who goes first? - I don't know. - I'm gonna, I'm not being controversial. As somebody who knows not to be controversial, I'm gonna just come out and say, I think we're a favorite. - Yeah, I think so. I think you are. - That's what you get for doing two hours. - Exactly. - These two hours, you make a lot of-- - You know who your real fans are. - Yeah. - You don't have anybody's faking it for two hours. Fan wise at least. But yeah, do you have it? It's a no, so you guys are all gonna be at Bet Batch. People should come up and ask you to become a market maker to get special perks to think or whatever, right? - We'll have people from the explain side and people from Mag both there. So whatever you wanna do, we can direct through the right person to talk to. - All right, sounds good. We are also gonna be at Bet Batch. And thanks everybody for signing off for the pod. And we will see everybody there. And thanks Henry for coming on. - For sure. Talk to you guys soon. (upbeat music)