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  • datadrivenangel · 2 days ago

    If the forecasting models were so good that people were actually consistently beating prediction markets, they wouldn't be starting startups to be selling it.

    And even if it is good enough, once you're shelling out thousands of dollars a year in research costs, does that give you any remaining alpha?

    • glimshe · 2 days ago

      You got it (I was going to say "nailed it" but that's becoming an LLM marker).

      This is exactly what I feel about a lot of the paid investment advice out there. Compounding can make any decent alpha worth a ton, to the point that these people would be investment bankers and not advisors if they knew what they were talking about.

      • exe34 · 2 days ago

        Same with get rich quick books.

        • mc32 · 2 days ago

          With one exception : if it teaches you how to put out get rich quick content (books or otherwise).

          • dylan604 · 2 days ago

            Shouldn't it be generating that content and making the money for itself? Why does it need the human at all?

          • jimbokun · 2 days ago

            I realized paid content creation wasn’t a good business when the only successful paid content creation was courses teaching you how to make money from creating paid content.

          • jknoepfler · 2 days ago

            Yes, but have you considered the performance of a few lucky outliers? Catch 'em fast before they regress to the mean!

            • energy123 · 2 days ago

              They do. One guy with at least 7 figure PnL is a well known forecaster, SemioticRivalry.

              • datadrivenangel · 2 days ago

                Only news article I found on that suggests the guy is mostly just market making against bets he thinks are dumb? No mention of AI.

                • bee_rider · 2 days ago

                  Wait, the original blog post was about competing with top-tier guessers using “AI.” I wonder if there’s more money to be made on the flip side: find the people making dumb bets, at scale, and take the free money they are offering, haha.

              • gwern · 2 days ago

                > And even if it is good enough, once you're shelling out thousands of dollars a year in research costs, does that give you any remaining alpha?

                That's precisely why you would want to make a startup to get investment now rather than self-fund and bootstrap. That alpha isn't going to last forever, especially because everyone has access to the frontier LLMs, which keep getting better, and will eventually beat your fancy harness or specialized finetune.

                And also, perhaps more importantly, so you can start developing an alternative to prediction markets and become the new PM; as Scott notes, with superforecaster AI, it's unclear why you really need Kalshi or Manifold or anyone else, with all their fees and overhead. Leave them to the degens, and carve off the socially useful part to do much more efficiently - tokens are cheaper than transactions! This is the big prize, but you need to start now before someone else does it better or commoditizes it.

                • kennywinker · 2 days ago

                  > I met an AI superforecaster startup founder who told me his AI had turned $35 into $2 million on Kalshi over seven months

                  Ok… assuming you can’t use that $2mil for some reason, simply take out a $10k line of credit and you’ll have $571 million in 7 months.

                  If you have the 2mil, congrats you’re 7 months away from $114B - you’re now one of the top 20 richest people in the world.

                  If this was truely the money printing machine they are saying it is, they would not be talking about it.

                  • Tenoke · 2 days ago

                    1. The liquidity is not infinite to compound that easily.

                    2. The alpha dries up with more players, even in the year or whatever since that founder started.

                    • gwern · 2 days ago

                      You're attacking a strawman. No one is claiming that you can pull off that multiplier at arbitrary amounts arbitrary amounts of times. And 7 months is plenty of calendar time for those arbitrages to disappear, given the attention on the area and the rapid rate of development. (Warren Buffett can't pull off his early trades now either, doesn't mean he was stupid or grifting in taking early investment.)

                      • kennywinker · 2 days ago

                        So you agree this stuff isn’t useful?

                        • gwern · 2 days ago

                          Wow, I obviously do not agree with that, and since you're trying to put words in my mouth and false dichotomies, I think that's the last question of yours I will be answering.

                          • kennywinker · 2 days ago

                            I was specifically responding to your comment by pointing out that you’re describing something that is valuable now but will be of less and less value as the market adapts. If you think that’s a good investment, that’s your business, of course.

                      • ffitch · 2 days ago

                        from the article:

                          I asked the guy who turned $35 into $2 million in seven months on Kalshi whether, in another seven months, he would be able to 100,000x his money a second time to $200 billion. Unsurprisingly, he said no - there’s only so much easy money on Kalshi, and his AI had already taken it all (also, other people with similar AIs are starting to fight him for it!)

                        • kennywinker · 2 days ago

                          So this stuff is only as useful with a steady supply of people making less intelligent bets. You don’t have to sell me on it being bullshit, but you are.

                          • ffitch · 2 days ago

                            The article is not about this stuff being useful for making money off of prediction markets.

                        • chucksmash · 2 days ago

                          Any given trade also has a capacity. A mispricing opportunity can only absorb so much investment before it's no longer mispriced.

                          A particular trade that can 2x $20k won't be able to do the same for $20 billion.

                          It's why RenTech capped their Medallion Fund and closed it to outside investment.

                          If there's only a billion dollars sloshing around on Kalshi, you can't expect to put $1 trillion into bets and take $2 trillion out.

                          • kennywinker · 2 days ago

                            Stock market’s got plenty to spare

                            • danaris · 2 days ago

                              But if these "superforecasters" can forecast just about anything accurately—which seems to be the claim—then they're not limited to any one claim, or even a small subset of them. They can place bets on everything and expect to win most of the time.

                              This doesn't pass the smell test.

                          • jimbokun · 2 days ago

                            The article covers the purpose for prediction markets after super human predictors: to deal with bias or ulterior motives trained into the models.

                          • citizenpaul · 2 days ago

                            The market of trading is smaller than the market of business. I don't think most people have ever actually tried trading for real. The frequency with which you can put in a buy/sell order and nothing happens. Then you raise/lower the price several times and nothing still happens because nobody wants to buy or sell at a price that makes you money is much higher than you would imagine. If you've never tried it yourself.

                            That said, the very concept of selling such information means that it would eliminate any edge and become zero profit anyway.

                            • davedx · 2 days ago

                              That only happens if you're trading very illiquid stocks.

                              • citizenpaul · 2 days ago

                                I can't tell you the number of times of put in an order on SPY,QQQ,SPX when I found favorable statistical analysis and I could not get filled at any price below the estimated profit potential. Those are some of the most liquid products in the word. I'm not talking pennies either.

                                Futures are the only thing for me this has never happened on. However no retail broker I'm aware of allows trading futures though API.

                            • fer · 2 days ago

                              Agree, to an extent. The link certainly smells like an ad. If the predictions are on lower volume markets (i.e. no institutional investors with actual quants behind) the compounding power stops. Also that means it can't beat institutional investors. So the reasonable option is to monetize what you can.

                              • Tenoke · 2 days ago

                                He's been interested in forecasting since a long time before there was any money in it, and still hyped Metacalculus (free research project) and Manifold (play money) because he is interested in the subject. If it smells like an ad it is because your ad sense is faulty.

                              • povik · 2 days ago

                                If a model demonstrates being good by winning on prediction markets I may want to ask the same model questions which are too niche to have markets. That said I don't know if niche questions are enough of a revenue stream to be interesting for model providers.

                                Perhaps they may enforce a knowledge cut-off for information retrieval and price the service based on how recent the cut-off is, and also use the cut-off as a way to guard their advantage on the markets.

                                • janalsncm · 2 days ago

                                  The reason is, customer might care a lot more about the prediction than you do, or anyone else does.

                                  For example, your customer might really care a lot about some niche prediction like the number of car break-ins in Walmart parking lots. In practice you won’t have sufficient liquidity in a prediction market to actually profit off of that prediction. But a security company might really want to know the answer to it.

                                  • ddp26 · 2 days ago

                                    Doesn't this argument prove too much? Why does AlphaSense sell their company research instead of using it to trade themselves? Why do people work on open source time series forecasting packages instead of quietly using them to trade?

                                    • dofm · 2 days ago

                                      If you had a tool that would be capable of writing all software better than a human, why would you price it by the word (token)? Why wouldn’t you take a percentage?

                                      (This is one of the more interesting questions that came out of Alex Karp’s televised borderline psychotic break rant the other day and it has stuck in my mind even though he is clearly unstable)

                                    • alecco · 2 days ago

                                      This new forecasting industry is pushed by very dirty people.

                                      • AIorNot · 2 days ago

                                        For Pete’s sake lets outlaw prediction markets already instead of hyping them in crappy greed-posts like this one

                                        I am embarrassed this “rationalist, I’m so much smarter than you, so I know better” asshole Scott Alexander hasn't been skewered yet for promotion of gambling (prediction markets) that people like Trumps son are making millions of on

                                        https://www.theguardian.com/us-news/ng-interactive/2026/may/...

                                        • guelo · 2 days ago

                                          We elected con man so we're becoming a swindler nation. In a just world the Andreesen David Sacks types would be in jail stripped of all their money.

                                          • jdmoreira · 2 days ago

                                            Just out of curiosity, what is your legitimate criticism of Adreessen and Sacks?

                                            • jazzyjackson · 2 days ago

                                              Andreesen is full speed ahead on 1984-minority-report surveillance besides all the unethical crypto investments geared toward swindling normies. Anything that looks like it would turn a profit was fair investment for a16z-crypto, no matter the pump and dumping that was going on. His latest interview on the Joe Rogan show was all about how harmful the anti-flock-camera people are, trying to prevent police from solving crimes ! Imagine !

                                          • simianwords · 2 days ago

                                            What a strange and scoldy thing to say. I find speaking in terms of concretere predictions the best way to discuss things. It bypasses hyper moralists and scoldy type of people (your post reminds me of such) and directly jumps to truth.

                                            • breuleux · 2 days ago

                                              I don't think there's good evidence that it directly jumps to truth. The aim of betting on a prediction market is to earn money. This incentivizes you to bet on whatever you believe is the most profitable, which is disproportionately going to be whatever you have insider information about, whatever you can influence the outcome of, and whatever you can most effectively fool other people into taking the wrong side of.

                                          • estetlinus · 2 days ago

                                            I kinda like Taleb’s take on forecasters; get another job.

                                            • recitedropper · 2 days ago

                                              Tell me you don't understand Taleb without telling me you don't understand Taleb.

                                              • glimshe · 2 days ago

                                                I used AI to forecast that AI forecasters won't beat the market. We can move on now.

                                                • ddp26 · 2 days ago

                                                  Almost by definition, once AI forecasters are in the market, they won't (all) be beating the market.

                                                  But why evaluate AI forecasters by beating the market? Do we evaluate deep learning by whether hedge funds make money from it in the markets? These things have far, far more utility outside of finance.

                                                • pfortuny · 2 days ago

                                                  This is not even dumb. Unbelievable coming from act....

                                                  • brcmthrowaway · 2 days ago

                                                    So this person was known for thoughtful blog posts, but has since become a total AI booster. It's probably a gonzo-like effect through the various subcultures he aims to explore, but it paints a very bad picture of them. Imagine if Louis Theroux became a scientologist.

                                                    • jrowen · 2 days ago

                                                      Is there a future where AI takes all of these no-value arbitrage games to their limit and there is no longer a market for this type of behavior?

                                                      • VMG · 2 days ago

                                                        Here’s my dystopian sci-fi scenario:

                                                        As prediction markets already show, forecasts can influence the outcomes they are trying to predict.

                                                        What happens when these models become extremely accurate and widely trusted? A forecast like “Will there be a war between countries A and B?” may itself affect whether the war happens.

                                                        If the model says there is a 1% chance of war, little changes. But if it says 90%, governments, markets, militaries, and the public may react: capital flees, troops mobilize, diplomatic trust collapses, and each side starts preparing for the other side’s preparation. The prediction helps make itself true.

                                                        The same feedback loop could apply to bank runs, market crashes, civil unrest, elections, and corporate failures.

                                                        At some point, the most accurate forecaster may become less like an observer and more like an actor with enormous power over the system it predicts.

                                                        • guardiangod · 2 days ago

                                                          Given a powerful enough AI with enough outlays (eg. a Playwright instant), can an AI cheat by influencing the real world and self-fulfil its prediction?

                                                          Eg. Is corp ABC's stock price going to go down by 10% in 30 days?

                                                          Orchestrate a disinformation campaign on the 29th day to tank ABC's stock price.

                                                          • Tenoke · 2 days ago

                                                            In theory but in this specific example you can make a lot more money on the stock market instead if it's that doable.

                                                            In general you should judge different prediction markets differently and read the fulfilment criteria though - some are very ripe for abuse, AI or no, while others are much more ironclad.

                                                          • mikgp · 2 days ago

                                                            It feels like Scott is taking the bull case here - but like “perfect” information will pervert markets in bizarre ways.

                                                            As soon as the prediction market says “this path here has a 25% chance of curing cancer” all sorts of money is moved away from other things.

                                                            It will absolutely cause political outcomes not just predict them.

                                                            And then of course there’s the cheating element. Anything that’s feasible to change the outcome.

                                                            Maybe this just contributes to efficient markets? Or maybe the continued quests towards utopia have dystopic externalities.

                                                            • ddp26 · 2 days ago

                                                              But Scott's point is more: why even have markets? Once you have the superforecasting available on the questions you care about, why do you need to publish it for everyone to also react to?

                                                              • mikgp · 2 days ago

                                                                I mean he explicitly at the end says there will be a new era of prediction markets:

                                                                "This, then, is my prediction for the AI superforecaster future: for basic questions, your off-the-shelf AI chatbot will be able to offer opinionated probabilities superior to those of any human. For more controversial or bias-laden questions, a new era of prediction markets will smooth over differences in brand and model and efficiently aggregate all AIs’ opinions."

                                                                But one reason that you would publish it for everyone else to react was exactly what I said, because if you can show people that a superhuman AI believes a certain outcome is more likely, you impact whether or not that certain outcome is more likely. Which feels like a flaw in this version of the future. That in fact you could overcorrect and make the markets less efficient.

                                                            • largbae · 2 days ago

                                                              Prediction markets are just the new ICO, NFT, SPAC etc scam/gambling(scambling?).

                                                              Play if you want, and call yourself a genius if you win, but only with money you can afford to lose.

                                                              • mikgp · 1 days ago

                                                                There’s something of a footnote in here that - raises a moral or even spiritual question.

                                                                Scott says that one of the great things about superforcasters is that some people who regularly make bad decisions will be able to make better decisions by asking superforcasters questions like “Is this marriage likely to end in divorce.”

                                                                And there’s a number of profound questions in here about - what are we all here for?

                                                                There’s something of a philosophical horseshoe theory here which is like - I might argue - this sounds like astrology or other metaphysical forms of divination.

                                                                And the counter argument would be something like - no it’s completely different because this is true. Which is of course what all the spiritual traditions say about each other.

                                                                So it begs the question - is it the solution or the process.

                                                                Is using a super forecaster better because it’s “real”; or like I think I could make the argument it’s worse for that reason. Asking your grandmother or spiritual advisor is part of a process of existence. You ask multiple people, you have the experience, maybe you marry the wrong person, you learn and you grow.

                                                                But when you outsource that decision making.