How the World’s #1 Prediction Markets Trader Finds Edge! - Domer on Trading Global Political Events

My guest this week made more than $3 million from trading on Polly Market. I've invited the #1 prediction market trader in the world to odds on open. Meet Doomer. In 2024, he correctly bet $4,000 a Donald Trump would pick JD Vance as his running mate, and won over 100k. His work was previously covered by Bloomberg and CBS. On the podcast, we talk about how top prediction markets traders find edge. Doomer, thanks so much for doing this. Yeah, hey, thanks for having me. How does edge present itself in prediction markets? Yeah, I mean, that's a great question. So I mean, prediction markets are a little bit different than, you know, other types of investing or other types of betting because the news can happen at literally any moment in time. So you kind of have to be ready for it, and you have to, you have to kind of fall into a pattern where you can anticipate when things are likely to happen, or when news may drop. So for instance, if you're betting on something that's political, you kind of want to be in the groove in terms of Baltics, and maybe things tend to show up early in the morning or late at night if people are trying to bury it. So it really depends on what you're betting on, but you have to kind of get into the groove of what you're doing and be able to research it. What I guess makes a good process for evaluating a good bet. So I'll, and I'll give you an example, right, so that to make things more specific. And I think this is the example everyone asks, right, 2024 election. You have Trump and Kamala running or maybe Trump Biden. How do you analyze something like that and synthesize all the news to make, let's say, a plus EV bet? Yeah, so I mean, so that is a very long term bet because there's a lot of things that are happening in that bet. Like let's say you start betting on a in January of 2024. Well, there's going to be primaries. There's going to be primary debates. There's going to be debates between Biden and Trump or Biden and Kamala or whatever. There's going to be polling. There's going to be conventions. There's going to be VP pick. So it's a very protracted process and it depends, you know, and within that large event, that large, very, very, very important event where the main market may have billions of dollars traded. There's a bunch of submarkets like within these markets, like within the overarching event in terms of what's going to happen in the short term. So there's a lot of things to analyze. And I guess it depends exactly what you're trying to do. And I think that's one thing that's important to know about prediction markets is like you don't necessarily have to be predicting the exact election results. There can be multiple things that you're trying to find your space and are like your exact specialty within prediction markets. And you can pick and choose what you want to bet on. So for instance, you can focus on who's who's Trump going to pick as his VP or who's Kamala going to pick as her VP or you can just focus on what they're going to say during the debates. You can study like, you know, Trump's stump speech and be like, okay, he talks about these things. He tends to not talk about these things. There's, so there's multiple facets within it. And you know, one thing about prediction markets is you can just kind of go through the available markets. Like right now, there's probably 2000 available markets. And you can just scroll through and you can be like, well, I don't know anything about this. I don't know anything about this. So you're not forced to try and predict things or bet things that you're not comfortable with or that you don't know anything about. And you can kind of find your niche within that within the space. And do you find that most successful prediction markets, betters or political betters focus on those micro events? And is there more opportunity and edge there? Yeah, I would say most people focus on the big level of events. Right. So it really depends because there are some micro events that, you know, may have 10,000 in volume. There are some events that may have, you know, tens of millions in volume. So it really depends on what you're trying to do and what time span you're trying to do it. But generally speaking, people try and predict the high profile things, the things that people care about, the things that are on TV, that are in the news, that your parents are asking you about. So it really kind of jives with like reality, what is important and what's not super important. And so when you're looking at those high level events, as you said, how do you determine what's priced in by the market? Like, you know, given the current odds, how do you figure out directionally whether something is cheap or expensive? Yeah, so that's really hard and maybe even impossible because, you know, a lot of these events are very unique. They've never happened before, right? Trump versus Kamala that has never happened before in the history of mankind, right? So you're trying to price something that is totally and completely unique. And so there's a degree to which the pricing is kind of a little bit made up, not in the sense that people are just kind of just, you know, beessing or whatever. But, you know, there's a lot of unknown things and there are things that are, you don't even know what you don't know, right? So there's a lot of uncertainty within these numbers. And so I guess what you would really want to first approximate is not necessarily whether the prices are totally correct, although that's something you can definitely do. What you would probably want to do is focus on day-to-day changes within the market. So for instance, you see a news story that some scandal is about to hit, right? So you would want to short the candidate and maybe they go from 50 to 45 or, you know, 30 to 38, whatever, whatever the news impact is. So you can trade these within the short term without necessarily being an expert on what the ultimate answer is if that makes sense. I see. And would you say that that is where most prediction markets traders tend to find their edges, tend to trade the markets, taking that example, that same example, the 2024 elections, they kind of have a short term forecast of where the odds are going to move and then they bet on that direction and then close the positions out. And I guess my real question is how much of prediction markets trading tends to be those short term price forecasts versus holding events to maturity and kind of just treating it as, okay, I'm going to be paid based on the outcome. Yeah, so I would say like someone like me who does this all the time, you know, as a living, I would be more inclined or someone like me would be more inclined to trade short term swings and not necessarily, you know, be just betting on it and then turning my computer off and checking in two months from now, whether I won or not. But, you know, a lot of casual players, they really only care about what the final outcome is. So there could be some Trump super supporter who's going to be like, okay, I'm going to deposit 10,000, I'm going to bet on the candidate, but I love and he's going to win, right? So I mean, it really depends on the perspective, but someone like me is doing probably a lot of swing trading, a lot of like, okay, I'm getting in, I'm getting out, I'm reacting to the latest news. And you don't really want your positions to be like super stale. You don't want to fall in love with your positions. You don't want to be like, okay, I bought this at 30 and now it's at 40. I'm going to ride it to 100, right? So you need to analyze things all the time. So if you think it's worth 39, it's at 40 right now, you probably should be starting to sell some of it and not necessarily just trying to hold on and try and hit a big win or whatever. So you have to kind of be very numerical about it and like, you know, not just fall in love with your positions and let them either go to zero or go around. And so when you're looking at those bets and you're trading them, how do you go about synthesizing the news for events that really have never happened before? I imagine that's hard. Yeah, no, it's very hard because you know, a lot of profits can be made when people over-react to the latest news like for instance, there are all sorts of scandals that have played Trump since he arrived on the scene in 20s and you know, how many, because this is an easy and cheap example, but you know, how many times did you, you're always over, you know, oh, this is this, right? It's just like, it's one of the most common stories and politics. So you know, if you overreact to the news and you're like, okay, he's at 80 right now, he's ahead of the zero, like, you're going to lose that. And so you really have to figure out, okay, this actually is a big scandal. He was at 80 before. I think, I think the news is going to hit and he's going to go to 70 or something like that and you can't get to caught up in the exact moment. You really have to be disciplined about it and be like, okay, he's down to 60. I think that's an overreaction. You know, even in the face of this scandal, I'm actually going to start betting on him at 60, even though like all the news is negative right now because, you know, there has to be a low point at some point. So it is very nuanced and it's hard to do because usually your instinct is to go with the crowd, right? So sometimes you're kind of betting against the conventional wisdom that XYZ is because people often overreact to the latest news, whether it's a political scandal or something. something totally unrelated to politics. People tend to overreact to the latest piece of news or information and think that like overweighting the latest, like a recency biased type of thing. - Let's take something like that as an example. Would you say, because I'm right now when we're talking about pricing in the news and you're saying people tend to overreact, I'm seeing that as an analog to, let's say mean reversion in price, right? And then I would say that the opposite of that would be momentum. Let's say that a big news story kind of cascades and it's this catalyst for a greater trend. How do you identify one versus the other? Because I imagine it's, you know, like, as you've said, one scandal is not gonna hurt Trump's, is not gonna hurt Trump's odds really. I mean, people have thought that plenty times before. Everyone says it's over, but then lo and behold, two weeks later, everyone's forgotten. Versus something like say, Trump almost getting assassinated, right? And everyone's saying, okay, this is a great shift. Yeah, how do you think about those things? - Yes, I guess the ultimate counter example or the one recently that was a very profitable was peace between Israel and Palestine or Hamas or how we define that. But because they were close for so long and there were so many near misses and it was like, you know, XYZ is gonna happen. Oh, it's gonna happen in May. Oh, it's gonna happen in June. Oh, it's gonna happen in July. So there were a lot of near misses. And so by the time it finally came around, which I think was in October, I wanna say, maybe late September, early October, I'm remembering correctly. Anyway, so it was like some Trump tweet where he's like, okay, Israel stop bombing Gaza, like, you know, get your act together or whatever. And I remember seeing that and I was like, okay, the market is not reacting enough, right? So I think, you know, peace between them, let's say by the end of November was trading and let's say 25 cents, I'm just making up, if it was probably something like that. And I was like, well, given this Trump tweet, where he's basically telling Israel what to do, he's kind of acting like the president of Israel, I think this is probably worth like way above 50 right now, right? So I mean, that's a huge shift in a very, very important and well-traded event. But, you know, all these people that were like, you know, burned all these times, they're like, oh, I think it's gonna happen, oh, I think it's gonna happen. They're very reticent to move the price that much. And so it's, this goes back to how hard it is to do it because, you know, I could have easily been like, oh, you know, this is just another, you know, empty, near miss that's gonna happen. And I don't think the price changed that much. But, you know, I happen to analyze it correctly. And I'm like, okay, this is actually, it sounds like it's gonna happen. And so I made all these big bets on peace in the Middle East happening. And I ended up winning that one. But yeah, I mean, it's very hard 'cause it's very, you know, qualitative. It's not necessarily quantitative. There's a lot of context involved. There's a lot of research involved. I remember the weekend that Trump tweeted that and or Truth's Day, whatever, this moment of ClayTurus now. And I was chatting with a bunch of people, you know, I was like, well, what's gonna happen, you know, and I was chatting with people that were on the other side of the bet that I was on 'cause I was just trying to get to the bottom of it. And, you know, I figured out that their main, the reason that they were holding the opposite position as me is because of all these other times that it has failed. And I'm thinking to myself, like, okay, I mean, that's a compelling reason, but like, it seems like things are a lot different now. And so after talking with all my counterparties or at least people that were on the other side of the bet, like, I became even more confident in my bet. And I actually increased my betting. So that's just an example of like reacting correctly to the news, right? And I'm not some, you know, superstar robot that reacts perfectly every single time. But, you know, over time, you wanna react better than worse, you know, over the course of, you know, all these repeatable events or whatever. - Is that something you do often? Just talking to people on the other side of your bet and truly trying to think, okay, why are they on the other side and then synthesizing what do you know that they don't? - Yeah, no, that's super important because it's so easy to just look at, you know, confirmation bias, is it really, but I mean, there are all these biases, I think I've already mentioned two, recency bias and confirmation bias. There are all these biases that are basically trying to screw with your brain. They're basically trying to, you know, mess with you and prove to you that what you're seeing is correct and your view of the world is totally right. So it's very easy to look at your position and look at the facts and conform the facts that you're seeing to the position and the bias that you already have that you're correct. So it's very important to expose yourself to the idea that you're wrong and be very open-minded about it and be like, okay, maybe I'm wrong. Like in the world where I am wrong, what does that look like? Like what are they, what are their arguments? Because if you think about the other side of the equation, like I love my position, but they also love their position and they love their position for a reason. So why have they fallen in love with this, right? So it is very important to be analyzing it at all times, especially if you have a big position. I mean, if you're just betting small, then you don't really eat to like, analyze it or talk to your counterparts. But if you're making like a big position and this is a very serious endeavor, like it's really important to figure out what's going on on the other side of the ledger. - What do you've spoken about there about confirmation bias? One of the things I find so interesting about it is that, you know, it can hit anyone, you know, Rich Poor, even if you've been in the game for a long time. I mean, I'm thinking about top traders or hedge fund managers who've been at their game for the longest time. They can still, you know, they can fall prey to it and end up losing a lot of money. I guess my question for you is, you're hailed as sort of this prediction markets genius who understands these things. How do you consistently and constantly put yourself in the position so that you won't get burned by confirmation bias? - I mean, so I think the very important thing, this is a very simple answer, but I think it's like kind of the key is to be thinking about it all the time, right? It's to have top of mind that you're being tricked by your brain and that you, you know, you can look at your position and be like, "Oh my God, this is a great bet." Like you can, you know, you're telling your wife or your spouse or your friends, like, "Oh, I just made a great bet." Like it's very easy to fall in love with everything that you're doing and think that you're some super genius. So you have to really be humble. You have to be thinking about the fact that, you know, the information that you're getting is not necessarily the whole truth. So yeah, I do think it's very, very important. It's just something from experience that you have to have in mind because, you know, the other thing about experiences, I've been doing this for so long that I've been in the position where it's like, "Oh, like I was just blinded by my love for this." Like I should have sold like two weeks before I actually did. So, you know, the one thing that experiences you is as I've repeated these number and, you know, and large number of times is that you really just have to be very on your toes and aware of all these things that are trying to like, you know, lose you money, I guess. - Guy, tell me about a time where you felt prey to confirmation bias and really got burned. - You know, I would say it's funny because I feel like it's the same exact thing that happened twice although it was slightly different. So I would say losing on Trump in 2016 and in 2024, were very similar. And in fact, it was also true a little bit in 2020 because it ended up being a lot closer than people thought. Like Trump kind of easily lost, but not like people that would be a blowout and it was definitely not that. So, you know, in 2016, a lot of the people that I was surrounded with were all betting the same way. And it's, you know, if you're chatting with a lot of smart people and a lot of traders, but everyone is already thinking along the same lines. Like you're only going to be telling each other information that is helpful, right? And like information that goes against your position is kind of like, "Well, I'm not sure that's important." And then another person's like, "Ah, I'm not sure that's important." And then all of a sudden, it's an echo chamber, right? You click yourself inside of an echo chamber where everyone has just amplified what you already think. And so that was, you know, 2016, I lost a pretty significant amount of money. I was actually able to live trade Trump at like 10%. After results started to come in. So that was like that kind of saved my bacon or else I might have been out of the game. But yeah, so 2016 was a humbling experience because it was like everyone was like on the same page. And, you know, but then 2024 came around and I feel like it was a little bit of the same scenario. But I, you know, having lived through 2016, I kept telling myself, okay, you want to be at 50. You want to be at like zero going into election night, right? You don't want to have a position. But everyone, and there were two factors of play. Number one. I was again rounded by people who were very, like, who were also on the same page as me. But I was a little bit more cautious about this, but it was definitely a factor. Then the second thing is that this French guy had come in and was betting so much money on Trump that it almost felt like one person was distorting the odds. And I still think that was the case a little bit. It's hard to go back and look and figure out whether the odds were correct or not, even knowing all the information. But those two things clouded my vision. And this mantra that I had, go into election night, having zero, go into election night, having zero position, kind of faded into the background. Hell, I kind of ignored my own advice to myself. So it's very easy to get lost in these type of things. And I took a bigger loss and come all of them. Then probably I should even thinking that she was going to win, which I think, you know, it was wrong, but it's a fine position to have. I bet more than I should have. I should have been more cautious about it. I shouldn't have been, you know, blinded to what I was going to do. And I should have stuck with my mantra and what I was trying to do were at least huge closer to it of having no position going into election night. That was a very interesting time. I guess looking back, I'm no expert on prediction markets. And I remember talking to my brother on election day. And I was, I thought Trump was going to win, but I didn't know if my confidence was higher than the odds. So I think on the day, it was maybe like 63, 37. I don't know if I'm correct there. And so I thought that, you know, I thought Trump was going to win. And then looking at the odds that kind of gave me confidence in predicting that for myself. But I guess I wasn't sure if I would have had any edge in that trade if I had placed that bet. How do you think about that? And how do you evaluate when a bet was good in hindsight? If you're predicting, if you're forecasting a particular outcome, when you don't, there's, I mean, there's no real way to do it, I guess. Yeah, I'm so the way that I think about the elections is right. So 2016, the polling was just very off. Right. If you're betting on the polling, you got blown out, right? That Trump vastly outperform this polling. And I think we kind of figured it out that the Trump voters were harder to find. They didn't trust pollsters, you know, they, they were, they didn't answer pollsters as much. So there was a degree to which, okay, yeah, the polls were all wrong, but we kind of figured out why they were wrong. And then 2020 was a little bit of the same phenomenon to a lesser degree, but it was also a little clouded by COVID. So it is really hard to disentangle exactly what happened. But I think there's a degree to which, again, the same phenomenon kind of presented itself where Trump did better with people that were very hard to poll than Biden did. And probably a bit better than people expected him to do. And then so, but what I think was influencing me quite a lot was 2022 rolled around. And that was a midterm election. And that was one where kind of Republicans were really trumpeting themselves and being like, okay, we're going to do really well. This is going to be a red wave. And the polls were a little bit backing them up, but not really. The polls were closer to like a 50, 50 type of election. But people were like, well, the polls were wrong in 2016. The polls were wrong in 2020. So they're going to be wrong again. There's something about Republicans that, you know, their people are hard to find. And you know, the prices reflected that, right? So they were very, they were huge favorites, take the house. And they were big favorites and a lot of individual Senate races where they were more like mega candidates, like slightly riskier candidates for Republicans to run than some like, you know, normal accountant or something, you know, it was a little bit, they were a little bit out there in terms of their center races. But so what happened in 2022 is that Democrats did a lot better in the people about they would. They kept the Senate, which was like a big win. And so people became more confident in the polling. They were like, well, you know, all these Republicans got high on their own supply. They lost a bunch of money in 2020. The poll for all wrong. And so the latest meta on polling was that they had kind of, you know, not necessarily that they had solved it or fixed it or it was 100% accurate. But that, you know, they, they had kind of figured out a way to, to at least somewhat reflect the electorate. But what 2024 showed, I think the ultimate lesson here is that Trump is kind of like a unicorn, right? If not that Republican, they're underpulling. It's that the specific, this one specific person is like very, very, very hard to pull. So I think, you know, in 2024, people like me were like, okay, 20 to the lesson from 2022 is that Republicans aren't some mythical beast. But what end of that happening is that Trump himself is a little bit of a mythical beast, I guess. And, and I think that was also reflected in the results of the election because Trump outperformed his own Senate candidates. He outperformed House candidate. So there was a degree to which it kind of, you know, proved itself that that Trump is like a singular figure that is, that is very hard to predict, very hard to pull and all those things. So if that makes sense. So no, absolutely. But we know that in hindsight, like, I mean, there's that Brazilian saying or at least I don't think it's no, and but I remember my, I have a Brazilian friend and he says this thing all the time, like everyone's a general after the war, right? We know those things to be true in hindsight. But when you're in that moment, election day, a week before election day, um, you look back to 2022 and it's like, they've kind of patched the polling issue sort of, right? Like, was it a bad bet to bet Kamala, you know? I mean, there's obviously there's things going for Trump and we can evaluate things in hindsight. And I guess my question here is, how do you evaluate the quality of a bet in hindsight? Yeah, I mean, so it's really hard. So I think on election day, my take was that Kamala was like 55% to win something like that. And I think the market was at 60/40 for Trump or somewhere around there. So I mean, I don't think in hindsight that that was that bad of a take. Because if you factor in that the French whale was distorting prices a bit, so maybe Trump's true price was like 55 or even 50. And I think Kamala is worth 55. You know, it's hard to micro, you know, analyze that or, you know, what to criticize myself too much. Where I think I made personally a mistake is that I bet too much on that edge, right? Because the here's the reason that I bet so much on that. Because I thought the initial results would be a little slower and a little bit more Kamala friendly. So it was also kind of like, okay, you know, as I'm starting to get the results in, I can quickly move the ship around. Well, the odds were always ahead of where I had the market. So as the results were coming in, I was like a little while I think Kamala is maybe like 45 and hour 40. Like by that point, she was already at 30. So it's like, if the market's always 10 cents slower than where you are, it's very hard to get out of your bet. But yeah, so I mean, it's hard to analyze things in hindsight. But I do think, you know, it was Kamala at 55 was probably a little bit too high, but I'm not sure the degree to which it was too high. Whether she was actually worth 45 or 20, you know, it's really hard to disentangle that and figure that out. Even knowing the results. Because you can only go off of what you have at the moment, right? And it's hard to like, you know, criticize yourself too much like, oh, you should have known that Trump was like some unicorn that really outperforms his bolt. In the fog of war, it's hard to analyze things like that. So you mentioned there that the issue with the mistake you made really wasn't sizing. How do you go about thinking about position size in a prediction market, support for your context? Yeah, I mean, so you really just want to go by the Kelly sizing, which is a very, very, very simple concept. And it's not necessarily something that I'm like breaking down mathematically. It's more just a philosophy, which is basically, you know, you should increase your bet relative to your edge. So if a market is trading at 60 cents and you think it's worth 70, you bet X number. But if you think it's worth 80, you bet a lot more than X. So you really just size your bet according to what you think your edge is. And then you stick with that. Now, I guess partially skeptical. How would you, how can you size that if I guess you can't fully be sure what your edge is? You know, it's your own forecasted edge, right? How does that, how do you think about that? Yeah, well, I think that's another dimension to it, right? So it's not just what you think the market is. Like, let's say, to use the same exact example. So let's say a market is trading at 60 and you think it's worth 70 or the other example is you think it's worth 80. Well, the example where you think it's worth 80, maybe your error bars are very high. Maybe it's like, well, I think it's worth 80, but I'm not. to sure about this. This is a little bit of unclear ground, maybe my error bars are plus or minus 30 sets, right? Or whatever. So it could be anywhere from 50 to 95. So you would probably factor that into, as far as what you're sizing, whereas if you think it's definitely worth 70 and you're like, oh, plus or minus one set, I've really like, I've analyzed this, I've bet this same event so many times, like I really have a good feel for this. Maybe you end up any more on the one where you're really certain about the price versus the one where you're kind of estimating it, but the error bars are high. So yeah, it's really a dynamic process where you're not only creating your own prices or at least some direction of where you think the market is worth. And then also your confidence level in that prediction. So you could stumble across a market where it's like, oh, this is a 20, I think it's worth 80, but you're only betting like 50 bucks because it's like, oh, well, I don't know anything about music in like Brazil or something. So it really depends on exactly the topic that you're betting on along with where you think the market is worth numerically. Does that make sense? - Yeah, yeah, for sure. And I think it's not a solved problem. Like I don't think there's any one answer that's, you know, no, it's not a solved problem. And also, you know, the pricing is not solved problem by any means, right? So a lot of, you know, if you're scrolling through a prediction market and let's say there's a thousand markets, like if you were a God, right? So if you're an omnipotent being and looking down on this market, you would probably look at this market and be like 95% of these prices are wrong. So it's just a matter of figuring out what market is wrong, what market is the most wrong, you know, things along those lines. - Domer in the 30 minutes we've been speaking, we've talked a bit about prediction markets as a whole about process. It seems to me that this game is super complex. As in if I'm comparing it even to something like equities, I think prediction markets are extremely difficult to price because there's so much information. And I think it's very, very difficult to synthesize. I guess what was your background in getting into them? For starters. - Yeah, well, so I agree with that. I think they are very hard to price and you have to kind of be comfortable with the fact that all of this is very hard. So yeah, so my background, so I went to college. I graduated from college and I got a regular job. But what I was doing on the side is that's this is when poker got really popular with ESPN. It was called the Chris Moneymaker Effect and a lot of people my age like young males were getting into online poker. And so along with my regular job at night, I was kind of playing poker on the side and I ended up making more playing poker than I was at my job. So I was like, well, I had a college degree. So I was comfortable quitting my job, trying to play poker, worst case scenario, it doesn't work out and I get a new job again. So I mean, that's a lot of that big deal. So I quit my job, I put in my two weeks notice and then I started playing poker. And then that pretty quickly transitioned to betting on event contracts because the thing about poker is there's a lot of downtime as you're watching other people in the hands, right? So let's say you have some crap hand, you folded, your options are you can sit there for two minutes watching the wrestler players finish the hand or you can do something else with your time, whether it's watch TV or whatever. So I would be scrolling around on the sports books and stuff and maybe I put two books on the next to win. And as I was scrolling around, I saw that like you could bet on other things. Like there were like this other events area of the site and I was like, well, what's going on here? And I clicked on it and it was like, who's gonna win Oscars? And I'm very into movies. I'm not like, you know, like a super die hard Oscars fan or anything, but I was into movies. I watch a lot of movies. So I was like, okay, let me click on this and it was the year of Crash versus Brokeback Mountain and Crash was like eight to one. And so I put 10 bucks on Crash and I won 80 bucks and I was like, oh, he's shit, I'm a genius like this. (laughing) Is this like, oh, not, I found my calling. So yeah, so it started as just an 80 dollar win which at the time was huge and hindsight obviously is nothing, but yeah, so then I started researching it. I found out that there was a whole website devoted to it. And back then it was not nearly as big as it was now. So it was kind of like, you know, people betting in the millions rather than the billions. So yeah, it was a lot of fun. I kind of, as I discovered it, like back then the two big markets were the Oscars and the presidential elections. Now if you look at prediction markets, there's a big event like every single day pretty much that is unique. So that's one thing that has really changed about prediction markets is just how many markets are encompassed by it. So yeah, it's been a journey. And what skills that you learned playing poker, do you think transition best to prediction markets? Or what skills in general that you had prior were the skills that really transitioned amazingly to actually betting on events? - Yeah, I mean, I think just the idea of being comfortable, you know, this is a very simple concept, but being comfortable researching something and then putting money behind it. Because a lot of people are uncomfortable with that idea just as a concept, right? So it's like right away, it's too daunting, right? It's too intimidating. So just that idea, the idea that you're gonna do that and maybe you start with like 10 bucks or whatever and you just go for it. And I think one thing that you figure out pretty quickly is like, especially as a smart person, someone that like follows the news, it seems very easy from the outside. And a lot of people are so influenced by a hindsight by us that they're like, oh, you know, Trump was only 60% to win. That was a lock, like I could have made. Oh. (laughing) So people, people interpreted as sometimes easier than it is. So one thing that is, I would say the first thing is being comfortable risking money based on your own research number one, which I think poker kind of instills in you that you're comfortable risking money, you know, you have some edge, you're comfortable doing that. And then the second thing is you really have to be able to be humbles and not be super arrogant and not think of all the answers because very quickly you're gonna lose a bet. Whether it's your first bet or your third bet, like you're gonna lose on something and you're gonna think you're an idiot and then it's a matter of navigating around that, being like, okay, that was okay. I lost that, like let me analyze where I went wrong and then let's figure it out for the second one. So there's a lot of like learning and self improvement over time as you're navigating these wins and losses because if you think about poker, something that really impacts players is the swinginess of it, right? So you can be the best poker player in the world and you can have a whole month where you're losing money. Now that can be like, it's very easy to look at your life in the abstract and be like, okay, well, this is a down month. Well, you know, in the midst of a down month, that is psychologically very, very, very hard. There's a lot of self doubt. You're wondering if you're doing the totally wrong thing. And so it's a matter of navigating that in real time, which is really, really, really hard. And you know, the repeatable nature of all this, especially in poker or in prediction markets, 'cause I'm, you know, I have a thousand bets right now in prediction markets, you know, and in total you're playing a thousand hands a day or whatever it is. So it's a lot of repetition and being comfortable with the fact that, okay, maybe you're only gonna win 60% of the time. And you have to be comfortable with losing, you know, x percentage of the time. So I think those two things are, are really instilled in me from a poker background. One of the things that I think is more difficult about prediction markets versus say trading the markets, I would say prediction markets versus going long equities, right, with equities, I think the daily, now this is an oversupplication, but I think the S&P and the NASDAQ are up 52 or 53, to 53% of days and equities, you know, trading them isn't a zero sum game, as in everyone can make money. Whereas in prediction markets, someone is always taking the other side of your bet. The house, call it polymarket or call she is taking their cut. And so you really do have to have edge. It's not like the markets where you cannot have edge and still make money by, you know, shooting at 100 different stocks and the general market going up. And so we have a lot of people now who are interested in getting into these markets, a lot of smart people, a lot of not so smart people. And I would imagine most will get burned. Yeah, I guess where do you see the future of prediction markets from, as a tradeable market, when a lot of people are going to go in and just get burned, lose money, leave, how do you think about that? Yeah, I mean, to me, it's a little bit similar to the meme stocks in terms of people getting in and burning money and then losing. But, you know, if I think about this in the abstract, like, you know, there's passive investing, which is basically just, just putting money and then letting it go. And maybe you pick stocks to a certain degree. And then there's active investing where you're really trying to like, you know, maybe you're doing it day to day or maybe quarter to quarter, like you have a very specific thesis and you're doing it. But prediction markets is like extremely active investing, right? So you have to be like on top of it at all moments, not necessarily at all moments, but you have to be on top of it. Like you have to be really tracking it. And you have to be, you know, varied, you have to be researching it. So I think it's kind of like, if you think about it in terms of stock investing, it's basically super, super active investing because there was a time when no prediction market existed or at least it was, it was very hard to get on them. And I went and I did stock trading. And I did it very, I did a very similar to prediction market of trading where I had a thesis and I was, you know, that it was X and Y and Z and I was very investing in very disparate companies and you know, it was like a chicken company and then there was like an oil tank company and there was, you know, I was investing in Yahoo and Ali Baba. There was like a arbitrage opportunity. So there are all these different like very specific pieces minded things. And I ended up making a pretty good amount of money, but the one thing that really bothered me and it's the same thing that bothered me and poker is like, you know, there's a lot of random walks. There's a lot of like randomness like stocks are down 3% for not a very good reason. And then stocks are up for not a very good reason. And it can be very annoying if you're trying to do it on like very actively and like with the thesis and it's like, well, you know, I have this very clear didactic like thesis, but the stock is just doing this random crap all the time. Like it's kind of annoying. And that's not really the case in prediction markets, right? It's not going to be like, oh, Trump is up five cents today because we feel like it or because, you know, inflation doubt, like it's not as momentum. It's not really like, you know, the crowd or like a vibe. You know, if Trump is up five points today, some polls come out or some scandal as hit as a pony and or something like that. So, so it's very information based and very news based. So in that sense, it's kind of like, I would describe it as like super active and best take basically. And interesting, that's something I've never heard before. So would you say that in some regards, prediction markets trading has less noise, less random variance than trading equities as an example? Yeah, no, for sure, less, less random variance. Price moves are almost always because of some event. Now, once in a while, especially as prediction markets are still kind of like growing, there can be basically, if you have one person coming in like the French Wales a great example, like if you have one person coming in with a ton of money, like that's way bigger than the market is, they can distort prices, but that aside, yeah, the prices are almost always like non-fair and not random, like, you know, something very specific has happened, yeah. You talked a little bit there about the French whale and I think we spoke a little bit about it throughout the conversation, but just for our audience, can you tell us a bit about that? What was the French whale and the 2024 election? Oh, yeah, so it was actually a, so crypto markets like anyone can trade on these crypto markets. Like all you have to do is deposit money and then, you know, you can kind of kind of obfuscate yourself as well. So it was not clear that there was some French guy that was betting a bunch of uptrop. But what was clear is that there was a new account that had showed up and was betting quite a lot on Trump. And then he was pushing the prices of Trump to a place where he had not gone before. So this account was not only buying a ton of one directional bets, but he was also moving the prices in order to get even more shares of it. And this happened over the course of, let's say, I don't remember exactly, but let's say it was like eight weeks, right? And what would happen is a new account would show up by a ton of Trump shares and move the price and then a different new account would show up. And then after this started happening over the course of a few weeks, like it ended up being that there was like, let's say four or five new accounts that had bet millions, sometimes tens of millions on the same outcome. And it's like, well, this can't be it. And so people were trying to like figure it out, like, okay, they were looking at the times that the person deposited, they were looking at the times the person traded, they were the person that started posting a couple comments. And people were kind of, you know, let's try and figure out what's happening here. And I worked with this guy who kind of tracked where all the transactions were coming from. And we figured out that all of these, let's say, it's five new accounts were all funded from kind of the same wallet. And so it was likely that the five accounts were connected. And then the timing on which these five accounts traded all seemed to align to the point where it was likely that this was one single entity, one single person, whatever it was, you know, in the fog of war, you know, I first thought is that this is someone like doing something, you know, not good, right? They're like, like, it's like some operative that is like, okay, we're gonna push the price of Trump up, like it's a little bit nefarious or whatever. So it's a matter of trying to figure out who it was. So we narrowed it down to its one person or entity. And then we looked at their comments and I was putting their comments through, 'cause it was like kind of garbled English. And I was putting their comments through like chat GPT and kind of working with chat GPT. And it was like, I think this person is French, okay? And so I made this big post on Twitter. I was like, okay, I think it's one account. I think it's French. And I ended up chatting with the person very briefly, very kind of rude and super into Trump. And yeah, yeah, yeah. And so what they had done was they had this guy, this one guy who had a mast, I think 50 million in bets on Trump. Yeah, right? Yeah, through five different accounts. Like he was number one, it was not nefarious. He was a true believer. And then number two, he had spent, I think probably upwards of a million dollars, like doing his own polling. So he had contacted a US polling company and he had told them exactly what type of polling he wanted to do. And he did a different type of polling. What he did was neighbor polling. So basically he had the polling company call, let's say me. And they're like, okay, we don't care who you're voting for. Who do you think your neighbors are voting for? Right? And so through that type of polling, he got the result that Trump was outperforming the quote unquote regular type of polling. Now it's a little bit controversial whether this was actually an edge or whether it was a little bit of confirmation by us, but he looked at these polls that he had commissioned and he was like, okay, this is up on correct. And that gave him even more confidence. And so he increased his bedding to like 50 million dollars. Because I think he started off with like low millions of them and over 10 million. So as he was increasing his bed, he was also doing this polling. He was doing this research. So a very interesting story. Yeah. And so as one guy, he was true believer, had done his own polls and he won, I think, yeah, he won tens of millions of dollars easily. And what was his background before, because he had hedge for manager, a banker. He claimed, yes. So he claimed to be a trader who had used to work at a trading firm in New York. It was kept a little bit nebulous. He did a few interviews, but like his face was covered. And so it's totally unclear whether I, you know, whether it's believable or whether it's a little bit of a story to put people on the wrong track. But I do think given, because he was using limit orders, there at least a small degree of sophistication there where the person didn't seem like they were just trying to gamble money. So I think the story does make sense that he had a little bit of a finance background at least. Interesting. So if you were doing, sorry, that's too long of an answer. I have no, no, no, I think I can, I'm, I'm super like intrigued now. And I'm an a bit stopped because it's such a ridiculous story. I'm 50 million is crazy. Do you think there was actual edge in something like that? Like, can we learn from that? Or do you think it was just a guy who wanted to bet big and was really confident? You know, I don't want to sound like sour grapes or, you know, that I like bitter about it. But I do think there was a degree of probably a strong degree of confirmation bias where he wanted Trump to win. He had the thesis that Trump was going to win. He did polling that told him that his thesis was correct. And he kind of went all in. Whether he bet 5% of his of what he's worth or 90% of what is worth, I have no idea. So it's hard to criticize the bet sizing too much because I don't have any context for what percentage of his bank role he bet. But I, I do think he got a little bit lucky because I think neighbor polling is a little bit controversial and that it's, it's unclear if it actually provides any edge. So I think there's a universe where this guide did all of this and come all us weeks weeks out of when and then the story the story is the story is completely different but no no more $50 million. Yes, yes, but we do not live in that universe by any means and he was right. And he won a lot of money and kudos to him. But yeah, it's hard to disentangle things, you know, in hindsight like that. So how do you think about luck versus skill? Yeah, I mean, I think there is some degree of luck. There's a degree to which things are out of your control. And so when things are out of your control and and it's unclear what's going to happen, I think there's a degree of quote unquote, luck involved, but I think you can control the uncertainty of it. I think you can have knowledge that there is, you know, some random variance and that you can kind of factor that into your bit. So I think a lot of what we're doing is skill, but you know, it comes that some things come down to luck in the end. You know, something popped in my head, a thought popped in my head right now about betting on things happening in the world that are objectively bad. Call it war, suffering, outcomes for trials, which may be severely negative for people involved and maybe for society. Do you evaluate things and go maybe like are there bets you won't touch out of call it like, you know, just morals? Yeah, well, I mean, I think my bias in general is the bet on things not happening. So it would be very rare for me to bet on like just a naked bet on like bad stuff happening. But I do think, you know, if you think about prediction markets in the abstract and you think about their usefulness and you think about the alternative. So if you let's take the example of will there be war between Ukraine and Russia? So if we were aligned to what I think February of 2022 or whenever it was. So if you rewind to a month beforehand and they put up a market on, you know, World Russian, they Ukraine and it was controversial. And I think, you know, and to me, it was also controversial to me at the time because it's like, oh, should we have this up? This is a bit unscindly, et cetera. But you know, if you think about number one, this is a very important question to answer, right? It impacts so many people in impacts the world. So if it's important to have an answer to this question, then what's the best way to get an answer to that? And if you remove prediction markets from the mix and you look at the best way to get an answer, well, the best way to get an answer is kind of like experts, right? Quote unquote experts. Sometimes people are experts or sometimes people tend to be experts, but, you know, they can disagree with each other. And which is the first thing. And so it's a very, it's kind of a hazy thing, right? So if you listen to one guy, you think it's super likely. If you listen to another guy, you think it's super unlikely. So number one, it's not synthesized. It can be hazy depending on who you listen to. And then the second thing about it is like, there's no accountability, right? So if this guy is super entertaining, like this former general, they keep bringing him on TV. Maybe he makes all these bad predictions, but he's, he doesn't in a very entertaining way. Like there's no, there's no account of it. Like there's no scorecard. Like with let's say general Joe Smith comes on TV. It's not like, oh, he's O and five in his previous predictions. We're going to have him make another prediction, but like he's O and five. So, so there's no like scorecard or anything. Like there's nobody keeping track of any of this stuff. So in that sense, I do think that prediction markets are like a huge upgrade over that. Because if you're just trying to find out what's happening in the world, like you can just go to polymarket.com or calcium or whatever, you know, the competitors are. And you just go to the website and you're like, okay, this has an 80% chance of happening. Now that may be wrong. It may be 30. It may be 10. But at least there's some answer. It has been arrived at through a lot of research. It has been arrived at by people who care about the answer, care about being right and have accountability. You know, they'll lose money if they're right and there's lose money in the wrong. But it's also a huge upgrade over the alternative. Right. So I think I think where I've come to is yeah, we should not be incentivizing people to bet money on bad things and then bring bad things into the world. Like that, that definitely is way too far. That should not happen ever. But the degree to which prediction markets exist about quote unquote bad things and we're getting answers to the question to like really important question that impact a lot of people like, I'm tending to think that that's a good thing. Now how we put these markets up, maybe there's limits or whatever, like that can be something that can be navigated over time. But I think my my long answer to that to that important question is that I do think it's important. I do think these markets are good. Um, me personally, like I would be very, very, very careful about betting on something bad that's happening because first of all, bad stuff doesn't happen all that often. Like people tend to like the news, hype, things up and you know, things aren't as dire as they appear to be. But you know, sometimes I do bet on like something not good happening. But that's because of research or because I've really like, you know, done the work and figured out. But I think, you know, it's probably more likely than the odds suggest or whatever. Do you think that prediction markets are ultimately good for society? Yeah. No, no. I mean, on this blue, indisputably, yes, I do think they're good for society. Now the degree, yeah, that we can argue over whether we should have questions on, you know, 10,000 different topics or not. But I think the degree to which they kind of answer important questions that we're trying to figure out, that's super important. Because like, like let's say we think about, um, let's say whether there'll be a war in the Middle East, uh, to use a bad example or whether, you know, who the next president will be. Well, people are already betting on these in financial markets, right? Sometimes they're buying oil futures about the Middle East or, you know, for presidential elections, maybe they're betting on private prison stocks or oil stocks or, you know, that there are multiple ways in which people are expressing an opinion on these things in financial markets. And so the proxies or whatever. So if you clear away all the debris, if you clear away, you'd like, okay, we don't need to use a proxy like we're going to give you. What we think the answer is, like you don't need to bet on 10 year treasuries to bet on what the Fed is going to do. We're going to put up a market exactly what is the Fed going to do? So I think I think there's a degree to which yes, these are super helpful. These are good for society and that, you know, the people that are betting on proxies for what's going to happen in the world. They can actually bet on the actual thing whether it happens or not. I hear both sides of the argument and now if I had two guys on the podcast to didn't know, you know, didn't talk about prediction markets. One is Augustine LeBron who used to trade at Jane Street and one is Todd Simkin who's currently a director at Susquejana, you know, to trading firms and Todd on the podcast asked him a little bit about prediction markets actually. And he was saying that it's a great source of information. It's a great way to hedge. And you look at what Augustine's been saying on Twitter on X and he's been saying that it creates bad incentives. So, you know, let's say there's a 25% chance of something happening. Now you add volume to that and you add people who can bet on that that can influence the outcome. And obviously that bad thing happening generally has outsized returns and they have a direct impact on whether or not that happens. The incentive structure he argues is is bad for the fabric of society. How do you think about those things? Yeah, so I mean, well, number one, that should be criminalized like regardless. Like we nobody should have financial incentives to do bad things, whether it's through prediction markets or through the stock market or whatever. Because I mean, if you think about like right now, there are very huge incentives to do very bad things. Like someone could do something very, very negative in the world by a bunch of S&P puts right and make a lot of money. So I think there's a degree to which that exists right now. Now I do see the point that he has, right? So sometimes these are like micro events, not very important whether it happens or not. And then you're giving them an incentive to do something. Yeah, that should obviously be limited. This is something that prediction markets like kind of have to figure out how to navigate, which is people betting on an event that they can then either make happen or make not happen. That's not a good place for any market to be in whether it's prediction markets or the stock market. And then the second thing that I would want to say is jumping off of what the guy at Susquehana said is, you know, like think about polymarket existing, right? Like I'm a big trader, other people I know are traders, but a lot of the people that are visiting the site, they're never going to deposit any money. Right? They're not going to, they're not going to bet on anything. They're just visiting the site because they want to know what's going to happen, like who's going to be the next president of their country or who's going to do XYZ or, you know, is Russia going to actually invade Ukraine. So there's a degree to which a lot of the users of the, a lot of the consumers of polymarkets or how she's information is people that are never going to place a bet. And so, So the information itself is very powerful and very useful to people without being able to trade it at all. So I think that's an important point to make. And I guess final question, where do you see the regulatory aspect of prediction markets evolving? And then two questions, let into one, where do you see the regulatory environment of prediction markets evolving towards? And then where do you see prediction markets in five, ten years? Do you think what Taric Menzerah says, this is going to be as big as the stock market? Where do you see those things going? Well, I think they're not going to be as big as the stock market, which I think is, it's a little bit of a silly prediction and it's too unrealistic because the stock market is so important, you know, and its company values and stuff like that. So it's not going to be as big as that. But I do think it's going to be a lot bigger because if you think about how many, or if you go to the website right now and you scroll through it, like, you know, the prediction markets have a lot of markets up, but there's a lot more markets that they can put up. People can get a lot more granular about things and there are degrees to which, you know, things that we have on the financial markets right now might be better purpose for prediction markets like over under earnings and things like that. So there's a degree to which kind of maybe financial markets and prediction markets are going to merge a little bit and maybe some things that people do on financial markets are going to be much better purpose for prediction markets. So I do think they're going to get bigger both in terms of the volume of existing markets, but also so many larger markets. But to go back to your first question, like the regulatory future of it, you know, it's hard to think that five or 10 years from now, you're going to be able to bet an unlimited amount of money on any event in the world, especially be, you know, going back to the previous question where we're talking about being able to influence things, right? And especially if you're using like a crypto site or something where you can kind of mask it, like if you give people the opportunity to make money, people will try to exploit that. People will try to take advantage of that. Maybe there's not many of those people, maybe a lot of them are already caught or about to be caught or something like that, but they exist, right? People will try to exploit it. So I think there needs to be some guard rails in place. Maybe some of these not so important markets have quote unquote limits. Maybe they're not super high limits. And I think because if you think about like, okay, why do we want these markets to exist? What's the good part of them? Like why are we doing this? And it's to price to price the future to figure out what's going to happen. Yeah. And we don't need unlimited limits on stuff that is not super important to price. Whereas stuff what that is very important to price, like who's the next president going to be the limits can be extremely high because there's so many things going on and impact so many things that there's a degree to which, you know, like if you're betting 50 million, this is a drop in the bucket compared to the impacts of the presidential election. As high as that number is and as ridiculous as it is, like he distorted the price probably five to eight cents in 2024, but maybe in 2028, if he bets 50 million, he moves the price half a set. Right. So, so there's a degree to which the markets are so much bit, some of the questions that we're asking are so much bigger than the volume that is currently being traded. So yeah, I think maybe limits for stuff that's not super important and then the markets will be so much bigger for stuff that is actually really important. Awesome. Thanks so much, Tim. I learned a lot. Yeah. That was awesome. Thanks for having me.