February 27, 2026 • 43 mins
It's a rapturous time to be in prediction markets, but is the promise of Kalshi and Polymarket to "financialize everything" a net good for society, or is it gambling in sheep's clothing? We actually have centuries of history that points towards a potential answer. From this year's On Air Fest in New York City, Everybody's Business and Pushkin Industries' Business History come together to explain the lengths people will go for a life-changing payday. (Or, at the very least, a tote bag at a podcast festival.)
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:12):
Welcome to Everybody's Business from Bloomberg BusinessWeek. I'm Max Chafkin and.
Speaker 3 (00:15):
I'm Stacy Mannock Smith.
Speaker 2 (00:17):
Stacy, you can almost hear the excitement in the background.
We're at the Wyatt Hotel at the on Air Festival
in Williamsburg, Brooklyn for a big live taping.
Speaker 3 (00:25):
It is true.
Speaker 4 (00:26):
This is a big gathering of the podcasters of America.
Speaker 3 (00:30):
Lots of people as people in America, lots.
Speaker 4 (00:33):
Of bo's noise canceling headphones.
Speaker 3 (00:35):
It is a great scene.
Speaker 4 (00:36):
And we are about to do a live show, which
is really cool. We're teaming up with a Pushkin podcast,
Business History with Robert Smith and Jaob Goldstein.
Speaker 3 (00:44):
Yeah, this is huge.
Speaker 2 (00:45):
This is like a podcast equivalent of a mega merger
Business History X times.
Speaker 3 (00:51):
I don't know what the word is.
Speaker 2 (00:52):
Everybody's Business, Stacy. I think the FTC might have to
get involved. They might have to approve this one. It's
such a big deal.
Speaker 4 (00:58):
Everybody's Business History is what we're calling it. And we
are talking today about prediction markets.
Speaker 2 (01:04):
Okay, but Stacy, before we jump on stage, yea, we
got to follow up on last week's emergency podcast episode
on the Supreme Court tariff's ruling and President Trump State
of the Union address.
Speaker 3 (01:14):
We got to get to that. Yes, indeed, it was
quite a.
Speaker 5 (01:18):
Week before we get there.
Speaker 2 (01:23):
Stacy, I thought we could just have a quick follow
up chat on the tariff issue. I listened to last
week's episode with Jonathan.
Speaker 5 (01:31):
Lieberman and the trade Barger.
Speaker 2 (01:32):
Good job on that emergency episode working over time for
our listeners, and I figured we just unpack what we've
learned over the last few days, especially with the State
of the Union address.
Speaker 3 (01:42):
Yeah.
Speaker 4 (01:42):
So Jonathan said, basically, what he does is helps companies
with the paperwork when they're trying to import goods. He
figures out all the forms and it's like a tax form,
a terraff form, because a tariff is a tax and
so he mostly deals with seafood. So if a company
is trying to bring in like a two hundred thousand
dollars shipp container full of lobster tales and they have
to figure out a tariff, that is what happens. Then
(02:05):
he helps them figure out how much they owe and
fills out all the forms.
Speaker 2 (02:08):
Yeah, that was fascinating, just because I hadn't thought about
the level of complication involved, or I hadn't thought much
about how complicated this is. And it kind of helps
explain why these tariffs have been unpopular, because it's just
this huge amount of not only attax which most people hate,
but just a huge amount of uncertainty. And I think
the takeaway from the State of the Union address, Stacy
(02:30):
is that uncertainty is going to continue.
Speaker 3 (02:33):
Oh yeah, yeah.
Speaker 4 (02:34):
In fact, Jonathan, poor Jonathan, when we talked to him,
was getting calls the whole time. We were talking from
his customers from these seafood importers who were wondering what
was going on, and they were like, does this mean
we don't have to pay tariffs anymore? What does the
new ten percent tariff mean? Can we get our money back?
Because if these tariffs were indeed illegal, these seafood importers
should be able to get the money that they paid
(02:55):
back from the government.
Speaker 2 (02:56):
And yet the Trump administration has in all sorts of
ways suggested that they are going to try to not
pay the money back. Also, Donald Trump immediately after and
I think this came up in your conversation with Jonathan,
immediately after the Supreme Court ruling essentially said we're just
going to do the tariffs through some other means, and
he reiterated that point during the State of the Union address.
(03:19):
Let's just quickly listen to that little segment now.
Speaker 6 (03:25):
But the good news is that almost all countries and
corporations want to keep the deal that they already made Scott,
knowing that the legal power that I as president have
to make a new deal could be far worse for them,
and therefore they will continue to work along the same
(03:45):
successful path that we had negotiated before the Supreme Court's
unfortunate involvement. So despite the disappointing ruling, these powerful country
saving it's saving our country. The kind of money we're
taking in peace protecting many of the wars I settled
(04:06):
was because of the threat of tariffs. I wouldn't have
been able to settle him with a will remain in
place under fully approved and tested alternative legal statutes, and
they have been tested for a long time. They're a
little more complex, but they're actually probably better, leading to
a solution that will be even stronger than before. Congressional
(04:29):
action will not be necessary. It's already time tests that
are approved.
Speaker 4 (04:33):
Yeah, this tracks with what Jonathan said. He said a
couple things.
Speaker 3 (04:36):
He said. Number one, the President is right.
Speaker 4 (04:38):
There are all these avenues that he has and can
use to put new temporary tariffs in place.
Speaker 3 (04:43):
One of them he did use.
Speaker 4 (04:45):
He invoked a ten percent tariff immediately, then raced it
to a fifteen percent tariff, and then lowered it again
to a ten percent tariff.
Speaker 2 (04:52):
They haven't actually done the fifteen percent, so there was
a little bit of confusion. The confusion continues, and it's
confusing even for those of us who make it our
business to try to help people figure this out. And
just like Jonathan, I was surprised by the tone I
guess of the State of the Union address. Trump has
been super unpopular on these issues. It's been this huge
(05:15):
turn for the Trump administration where it's.
Speaker 3 (05:17):
Hard on businesses, hard on consumers.
Speaker 2 (05:19):
He'd always been pretty popular on the economy, but these
tariffs and all the affordability stuff that we've talked about
has really bit into that. There was speculation that there
might be some sort of confrontation with the Supreme Court justices.
Speaker 3 (05:32):
I was watching on TV.
Speaker 2 (05:33):
I'd say it was a little awkward, not as awkward
as it could have been.
Speaker 3 (05:37):
He shook John Robert's hand.
Speaker 2 (05:39):
Although he did not shake Amy Coney Barrett's hand, And
even in this little bit you just heard, he's quibbling
with the decision, but he's not doing what he did
in the immediate aftermath of the tariff ruling, where I
believe Stacy called them lapdogs and was really slinging insults
at the justices of our High Court.
Speaker 4 (05:58):
And it's really interesting because that at the top level,
but practically what this means for businesses and for customers
is really interesting. Jonathan got into a little bit of this,
but one of the things he said was that for
every tariff that he levied, like every terraform he filled out,
for every single shipment of whatever lobster tails or shrimp
or whatever, it was a separate form. And if these
companies want their money back from the government, they have
(06:19):
to file a claim for every single one, which is
like tens about Yeah, it's tens of thousands of separate,
tiny lawsuits. And so Jonathan was kind of losing his
mind about how much paperwork this was going to mean.
It's going to be a big, possibly expensive mess for
companies going forward.
Speaker 2 (06:36):
Okay, I think there are two questions Stacy. One is,
when do we get our money back, Like we, yeah,
ultimately paid some of these tarrants. I know, are we
going to get a check?
Speaker 4 (06:48):
Well, this is where things get really messy because Let's
say you're a seafood importer and you sell your seafood
to Long John Silver's, so you've been paying tariffs. Let's
say you do get your money back on the tariffs,
but then Long John Silver is going to go to
you and like, hey, you passed those costs along to me.
I should get a refund too. Suddenly you're in this
really strange situation as well. So it is a mess
that I think is going to be going years into
(07:10):
the future.
Speaker 2 (07:11):
Yeah, and I think it's going to be a huge
political issue going forward, which I guess brings me to
the other question. Do we think that this ruling helps
Donald Trump in a weird way? Because maybe the Supreme
Court did him a favor saying these tariffs are illegal
allows him maybe to back away from these policies.
Speaker 4 (07:30):
I think it would have been amazing groundcover for two reasons.
One because he could have been like, if the economy
didn't go well or prices continue to rise, he could
have been like, listen, I tried with the tariffs. The
Supreme Court struck me down. What can I do? It's
their fault, right, it gives him good groundcover, but he.
Speaker 3 (07:46):
Didn't take the win.
Speaker 4 (07:46):
And then he put new tariffs in place, So I
don't know. I felt like there was a win right there,
but he's not taken. But he didn't take it.
Speaker 5 (07:55):
Stacy, I'm looking at the clock.
Speaker 2 (07:57):
Yes, And Robert Smith and Jacob Goldstein, the host of
Business History, they're going to be here any minute.
Speaker 3 (08:03):
We got to go downstairs.
Speaker 4 (08:04):
Enough about hair offfs, time to pivot to prediction markets.
This is Everybody's business from Bloomberg Business Week.
Speaker 3 (08:21):
I'm Stacey Mannock.
Speaker 7 (08:21):
Smith, I'm Max Chafkin, and this is Business History, a
show about the.
Speaker 3 (08:26):
History of business. I'm Jacob Goldstein and I'm Robert Smith.
Speaker 4 (08:29):
And today we are going to be talking about the
world of prediction markets. This is polymarket and call sheet.
These are places where you can bet on how many
inches it is going to snow in Brooklyn today or
whether we are going.
Speaker 3 (08:42):
To attack Iran.
Speaker 4 (08:44):
These markets are now worth more than one hundred billion
dollars a year.
Speaker 3 (08:48):
They're growing all the time.
Speaker 2 (08:49):
Yeah, I figured just for those people who have been
following this in the pages of the Wall Street Journal
or Bloomberg. Just want to lay it out quickly. Prediction markets.
You've probably seen them most with politics. They're two big companies.
Stacey just mentioned them, Calshi Polymarket. You go on a
prediction market and you'll see essentially a price like a
(09:09):
say ten cents for AOC to be the DEM nominee.
And what that means is that if you put ten
cents down and AOC becomes a DEM nominee, then you
get a dollar and if she doesn't, you get zero dollars.
And you can bet on everything pretty much anything under
the sun. And we wanted to kind of give people
a visceral sense of this via market our own sort
(09:31):
of prediction market. So this is our own prediction market.
You should scan the QR code. This is a financial
opportunity for everyone in the room. You can enter and
once people have had a chance to do that, I
will read the market and the terms of the market.
It's gonna require you to look around the room and
ask yourself, how's this talk going to go? The terms
(09:54):
of this market are will at least ten percent of
the audience leave the room before the end of the show.
So just to be clear, betting yes is betting. I
think you guys on a dud. Right, If they bet yes,
they're betting that more than ten percent are going to.
Speaker 4 (10:09):
Link is necessarily a dud because they're also like overlapping segments.
So there could be another panel that people feel like.
Speaker 3 (10:15):
They even stronger panels.
Speaker 2 (10:19):
It's difficult to believe that also, bathroom right, right, All
factors are possible. There's also the prospect of insider training,
which we will get to.
Speaker 3 (10:27):
I mean, you could bet yes and then walk out.
Speaker 7 (10:30):
We could we could all leave, make sure you come
back in case you want.
Speaker 3 (10:34):
We are, by the way, counting, and I just.
Speaker 2 (10:35):
Want to give people a sense of how crazy this gets.
So Stacy mentioned a couple of markets. Whether there's politics,
there are also these things called mentioned markets. And Stacy,
you are a big fan of the Federal Reserve. I
do love the Federal People listen to the show know this,
it's kind of it's endearing, strange, it's very Minetary policy
(10:56):
is exciting. And there is a prediction market. There are
prediction markets, as you know, Stacy, every time Jerome Powell
gives a speech, and we wrote about one of these
in the latest issue a business Week.
Speaker 3 (11:08):
This is the lead of the story.
Speaker 2 (11:10):
But so basically, this is Jerome Powell's last press conference.
You could bet on forty four words. So is he
going to say the phrase good afternoon?
Speaker 5 (11:18):
That's a gimme by.
Speaker 2 (11:19):
It always says good always, easiest one cent you'll ever make.
But the thing that was kind of crazy about this
market is as the press conference goes on, the odds change.
You just saw that with our on market right as
people are entering the odds shift. And so during the
last press conference, there was a question of the word renovation.
Speaker 3 (11:39):
Would Jerome Powell mention renovation?
Speaker 2 (11:41):
Remember people who've been following this probably remember that there's
a big controversy over the renovation of the FED building.
Speaker 3 (11:47):
Donald Trump's remad about it. And let me just play
what happened.
Speaker 8 (11:51):
Technological developments that raise potential output, some kind of technological
renovation revolution like like kappening and.
Speaker 1 (11:59):
Not here like.
Speaker 5 (12:02):
That insane? Am I right?
Speaker 2 (12:05):
It's like the equivalent of a Hail Mary at the
when you're you know, the game is almost over, we
need a replay. Traders on Discord and on Twitter went
absolutely berserk over this. You know, the quotes and you
can read these in the in the Business Week story
the most Insane Market I've Ever traded. Somebody else wrote
investigate Palell in all caps, suggesting that perhaps Jerome pal
(12:28):
had done.
Speaker 4 (12:28):
This pollymarket bet.
Speaker 2 (12:31):
But I do think Stacy, this kind of raises a question,
which is like is this valuable?
Speaker 5 (12:37):
Like like what is the point of this?
Speaker 3 (12:39):
Yes, like what is the economic value of these?
Speaker 4 (12:41):
Obviously, if you are betting on Jerome Pala saying renovation,
you have personal value, But what about for the economy?
Speaker 2 (12:48):
Okay, So let me give you the perspective of the
founder of Calshi, who's uh, this is one of the
two big companies. Let's let's just listen to Tarik Man's
or try to explain why this matters, like why this
is important beyond just an exciting opportunity for gamblers.
Speaker 9 (13:04):
The long term vision is to financialize everything and create
a tradable asset out of any difference in opinion. And
I think if you do build a general, on purpose
exchange that can resolve differences of opinions on anything like
the time is quite massive.
Speaker 2 (13:16):
I think that might be the least relatable sentiment I've
ever heard. We're going to financialize everything. Do you like finance?
What if everything was finance? That's essentially what they're saying,
and it sounds kind of crazy, but the argument is
basically that this would be a way to sort of
hedge your risk in areas or it might be hard
(13:37):
to So one example the Calshi founders give is flood insurance,
Like maybe instead of buying flood insurance, or if the
flood insurance were too expensive, you could buy a contract
on the weather, you could buy a contract on rainstorms.
Speaker 3 (13:50):
And it sort of is.
Speaker 2 (13:51):
It's the way that like Wall Street hedge funds, you know,
use futures and stuff like that.
Speaker 3 (13:56):
But it would be for all of us.
Speaker 2 (13:57):
And I want to say, as crazy as this town,
anyone who bets on sports knows this phenomenon because there's
this concept of emotional hedging where you bet against the
team you're rooting for serve as a way to soften
the blow, Like my team loses, but you know, but
I make a little money.
Speaker 3 (14:13):
I lose, I win.
Speaker 2 (14:14):
It feels kind of wrong though, Like here, let me
just give you one last prediction market that's on polymarket
right now. Will Jesus Christ return before twenty twenty seven.
Speaker 4 (14:25):
It's gone up sharply since February, it's also gone down.
Speaker 2 (14:29):
What has happened in the last month or so? And
who is betting on this? Anyway, there's a lot But
is this would be good information to have if this
were reliable.
Speaker 4 (14:39):
I'm not sure how you could possibly cash in, but
but yes, I mean, this is very informative.
Speaker 2 (14:44):
If he with a capital age returns, do we think
that polymarket's gonna pay?
Speaker 7 (14:51):
Oh, that's a good It might be bigger problems at
that point, or opportunities, depending on how you've lived your life.
Speaker 1 (14:56):
And we should say for people listening, it's a three
percent chance, which seems pretty high.
Speaker 2 (15:01):
Right, it's been two thousand years. We'll talk about this
more stacy. But to me, like this just kind of
feels wrong. I'm not specifically talking about the Jesus market,
although this does feel wrong to me, but the whole.
Speaker 3 (15:16):
Thing, the whole idea of financializing everything.
Speaker 4 (15:19):
I mean, yes, these markets are incredibly problematic, but I
kind of like them.
Speaker 3 (15:26):
Okay, here's why I like them.
Speaker 4 (15:28):
So I really hate gambling. I don't like taking risks,
and I don't like trying my luck.
Speaker 3 (15:35):
I like homework. You know you do the work and
you get the payoff.
Speaker 4 (15:39):
That makes sense to me, That feels fair to me.
These are the markets I mean, And homework does not
help you in gambling. This all tracks like if you
go to a roulette table and you know more about
roulette and the history of roulette and the roulette wheel
than anybody in history, it's not going to help you
win at roulette.
Speaker 3 (15:57):
Right in those cases, like the casino, it's got an edge.
Speaker 7 (16:00):
Yeah, if you understand gambling, you don't go into the
casino exactly.
Speaker 4 (16:04):
And I would argue in investing, there's kind of similar
things going on because you know these big investment houses
and hedge funds, they have all this money and they
have access to all this information that you and I
have no access to. Like they will look at satellite
photos of Walmart's parking lot and they will see how
many trucks are going in and out, and they will
estimate Walmart's sales, and they will figure out Walmart's profits,
(16:27):
and then they will place a bet on Walmart's share price.
You and I don't have access to that information. It
feels very unfair to me, and I don't like it.
Speaker 3 (16:35):
It just feels like in.
Speaker 4 (16:36):
These cases the house has the edge and homework is
for suckers, and I don't like it, but this is
not true on Polymarket and Calshi.
Speaker 2 (16:45):
We a couple of months ago on the show interviewed
this big poly market trader. I think we called him
the polymarket whale. His name is his pseudonym is Domer.
We know his name, but he likes to be anonymous because,
I think partly because these markets are in sort of.
Speaker 3 (17:01):
A legal gray area.
Speaker 2 (17:02):
But anyway, Domer had bet Stacey's something like four hundred
million dollars.
Speaker 3 (17:08):
On Polly Market.
Speaker 2 (17:09):
When we talked to him, he had a big money
bet on Taylor Swift album sales. He had one million
riding on the question of how many albums Taylor Swift
would sell.
Speaker 4 (17:19):
Yes, And we asked Domer, like, was there a bet
that did it? How did you get on on these
markets because this is his job.
Speaker 6 (17:25):
Now.
Speaker 4 (17:25):
He had been a professional poker player, but he had
left the world of professional poker for this market. And
he said, yeah, there was this bet that did it.
It was back in two thousand and eight, so it
was John McCain versus Barack Obama. We knew that, but
they hadn't picked their running mates yet, and everyone was wondering,
especially who's John McCain going to pick. People thought maybe
Mitt Romney, but they weren't sure. And there was this
(17:45):
old betting market, this old version of a betting market
was not poly market or Calci that went up and
Domer thought, I'm going to bet on this, and I
wonder if I can get an edge.
Speaker 3 (17:55):
And here's what he told us.
Speaker 8 (17:56):
The date for John McCain picking had been announced, and
also the location was a small town in Ohio, which
is obviously a swing state. And then it's okay, like
what are the logistics of it? And so we looked
at the map and we're like, okay, where's the nearest airport?
And so we found the nearest airport, and we were
looking at the flights that were coming in, and most
(18:18):
flights are a little po dunk things, but there was
this one random flight from Alaska that was coming in,
and it's like what is going on here? Like why
is a flight from Alaska coming into this random town
in Ohio? And we're like, okay, I think it might
be Sarah Palin And she was twenty five to one
odds and I put a thousand dollars on it, which
is a huge bet and ended up being Sarah Palin
(18:40):
and I made twenty five thousand.
Speaker 3 (18:42):
Game change baby.
Speaker 5 (18:43):
Yeah.
Speaker 3 (18:44):
Heartwarming story, right.
Speaker 4 (18:46):
I think so homework for the win to meet is
a heartwarming story.
Speaker 9 (18:49):
Do over.
Speaker 2 (18:50):
By the way, he made sixty k on that sixty
thousand dollars on that Taylor Swift bet, which that was
like a couple of days work for him.
Speaker 5 (18:57):
So this guy is pretty.
Speaker 3 (18:59):
Successful, yes, and at this point Domer is kind of
a pro.
Speaker 4 (19:02):
But anybody can do this. So our wonderful producer, Jasmine JT.
Green say, Hi, Jasmine uh told me about this story
that I loved and have not been able to stop
thinking about. This guy, Cayden Booth, he was twenty one
and he decided he wanted to bet on the Super Bowl,
and he didn't want to bet on the game or.
Speaker 3 (19:18):
The halftime show.
Speaker 4 (19:19):
He wanted to bet on the national anthem, which seems
like a weird thing to bet on.
Speaker 3 (19:24):
He was betting on.
Speaker 4 (19:25):
The length of the national anthem specifically, which doesn't seem
like there should be that big of a range because
the song is the song is the song, but there's
actually a huge range. So back in nineteen ninety eight,
This is Jewel singing the national anthem. It's one of
the shortest national anthems in Super Bowl history, clopped in
at one minute in twenty seven seconds. Now, in twenty thirteen,
(19:46):
it was one of the longest national anthems in Super
Bowl history. It clocked in at two minutes and thirty
six seconds from the Lovely Miss Alicia Keys. So now
Cayden had to call this this year's Super Bowl national anthem.
Charlie Pooth was singing, and he had to figure out
where Charlie Pooth's national anthem was going to fall on
(20:08):
the like Star Spangled spectrum.
Speaker 5 (20:10):
Yes, is he gonna hold the hind note from a
minute and a half?
Speaker 3 (20:14):
Yes? Exactly?
Speaker 4 (20:15):
Is he gonna be on the Jewel side or is
he gonna be on the Alicia Keys side? So he
was kind of poking around and he came across there
was this moment and he saw it and he was like,
this is my moment.
Speaker 3 (20:25):
And what happened was.
Speaker 4 (20:26):
He just saw a social media post from Charlie pooths
being like, hey headed to San Francisco. It's like a
week before the Super Bowl, and he thought, this.
Speaker 3 (20:33):
Is my moment. He bought three things. He bought a stopwatch.
Speaker 4 (20:37):
He bought this weird listening equipment that really serious bird
watchers use, yeah, exactly to listen to like distant bird calls.
And he bought a plane ticket to San Francisco. He
went to San Francisco. He stood outside of the stadium.
There he is, there's the weird bird watching. He stood
outside of the stadium and he was like, at some point,
Charlie Pooth is gonna come and he is going to
(20:59):
rehearse on site, and I'm gonna catch the sound with
my bird watching listening equipment.
Speaker 3 (21:05):
I'm gonna time it. I'm gonna place my bet.
Speaker 4 (21:07):
And he waited and he waited and he waited, and
then he heard the swell of the music. He hit
the timer and clopped it in. I think you can
see it there. At a minute fifty one, he placed
his bet. He won thousands of dollars homework for the win.
Speaker 5 (21:23):
Okay, two things, Stacy.
Speaker 2 (21:25):
One is, this is not heartwarming to me because if
I'm gonna bet on this, I have the bet against
this guy with the parabolic mic and the plane ticket
and the stop watching.
Speaker 3 (21:33):
He did his homework. Okay, this feels fair to me.
Speaker 2 (21:36):
Problem number two is what happened, Stacy if Charlie Pooth deliberately,
you know, swayed the you know, he held the high
notes for longer than he intended to during the Super Bowl,
placed a bet and took five million dollars from this guy.
Speaker 4 (21:50):
Yes, so these markets, it is true, have always had
an insider trading problem, but now that they're getting bigger
and more money is going into them, the insider trading
problem is getting much larger. This is especially true in sports.
Of course, everyone loves sports betting. Sports betting, you can
bet on everything from like the color of socks that
some athlete is going to wear, to how many fouls
(22:13):
there's going to be to how many free throws. So
you can bet on every aspect of every sports game.
And some people have really taken this kind of insider
trading to almost an art form. So there is an athlete,
Johntay Porter. He was with the Toronto Raptors and he
was accused of basically making bets on the sideline saying
(22:36):
I'm about to go in and fake an injury and
place a bet, and he would go in and fake
an injury and win all the time.
Speaker 2 (22:44):
These aren't necessarily prediction markets, right that you're talking about.
This is traditional sports betting with Johntay Porter. And the
other thing is this could happen in all sorts of
other domains, and that, to me is what's kind of
so distressing about this.
Speaker 4 (22:59):
So Johntey was banned for life from the NBA, but
these issues have happened on professional sports leagues and college
sports leagues. And here's the thing that shocks me and
makes me think that maybe this is all going in
the direction of casinos and hedge funds.
Speaker 3 (23:14):
You think that sports leagues would be horrified by this, right,
it's terrible for sportsmanship.
Speaker 4 (23:18):
Who wants to watch a game where people are throwing
the game or wearing socks or missing free throws because
they can get some side money. But no, the biggest
thing the sports leagues are worried about is getting a
cut of the action. National Hockey League, Major League Soccer
have signed deals with poly Market, basically exclusivity deals so
Polymarket can offer bets on.
Speaker 3 (23:39):
Them and they are cashing in.
Speaker 4 (23:42):
And the New York Stock Exchange bought a huge chunk
of poly Market. They too are cashing in, which makes
me think that poly market and call she and all
the glories of homework are now going in the direction
of casinos and hedge funds, and that these big rich
players can buy an edge or make an edge in
(24:02):
this case, and that homework once again is for suckers.
Speaker 2 (24:14):
I also just worry Stacey that we're trivializing important stuff.
Like let's look at this ad that Calshi has been running.
I think I saw this during the Olympics, but it's
it's been out there for a couple of months.
Speaker 3 (24:26):
This is how Calshi is promoting itself. History has taught
us anything. It's not to root against the underdog.
Speaker 1 (24:32):
All right.
Speaker 2 (24:33):
So you see David with a sling shot Paul Revere ride.
People are betting on whether the Right Brothers plane will crash.
I guess, will prisoners escape out?
Speaker 5 (24:46):
The tras just Sparta win the war.
Speaker 2 (24:48):
It's like a three hundred scene here, And I guess
the point is, like, hey, all these historical events, you
may think of them as historical events, but they're just
betting opportunities.
Speaker 3 (24:59):
I will say they were betting up.
Speaker 1 (25:01):
It's like we know in fact that there were prediction
markets on the Revolutionary.
Speaker 7 (25:06):
War and we think that we've invented something new, as
we always do on the internet, but as we found
a business history. People want to gamble and they want
to know the future, and that has always been the case.
Speaker 3 (25:18):
So can we check you in on the market?
Speaker 5 (25:20):
Can Yeah, let's just see how it's going. It's one,
it's at fifty six cents. What oh, it just dropped.
It is at whale.
Speaker 3 (25:32):
Now remember remember on AirFest whale.
Speaker 5 (25:35):
Just get against them.
Speaker 7 (25:38):
Because we're part way through this session, people have looked around.
They have determined that not a lot of people have
left so far, and so they are reevaluating what they
think of this question. Whether ten percent of the audience
is going to leave the room or note.
Speaker 3 (25:52):
If there's also pressure to not leave, because.
Speaker 7 (25:56):
We will close our eyes for ten seconds. If any
one wants to make a batary anybody, anybody.
Speaker 5 (26:04):
We will call you out. Okay.
Speaker 1 (26:05):
We know that prediction markets, not just gambling, but real
prediction markets go back.
Speaker 3 (26:10):
At least five hundred years.
Speaker 1 (26:13):
They go back to Italy in the fifteen hundreds and
the big market there, the big prediction market in Italy
scomeza farel papa betting on who's going to be the
Pope Papa. And it makes sense both that it's in
Italy and that's what they were betting on, because this
was the time Italy in the fifteen hundreds when modern
(26:35):
finances emerging in Europe, the first banks are being established,
the medici are running Florence, and so you see these
laws being passed to give brokers in Rome and Florence
a monopoly on these prediction markets.
Speaker 3 (26:50):
And then the Il Papa part also makes sense.
Speaker 1 (26:53):
Because predicting the next pope in the fifteen hundreds was
like the super Bowl and the presidential election rolled into
one lottery and a lottery. Sure, you know, the pope
had a tremendous amount of political power. It mattered if
you were a wool merchant in England or if you
were the king of France or whatever.
Speaker 3 (27:10):
It mattered who was going to be the next pope.
Speaker 1 (27:12):
And so you see ambassadors writing back home every time
there's a conclave like who is papabul who's popable? They
would ask, And these brokers who have the monopoly they
print up chid they like they would. That's like a
voucher today, like tickets with each cardinals or all the
like possible guys' names on them, and they pay off
(27:35):
for one hundred scootye, and you buy it for whatever
fractional probability the guy is selling it exactly like prediction.
Speaker 3 (27:42):
Markets work today.
Speaker 1 (27:43):
And for example, in fifteen forty nine, there was a
Conclave and at one moment Cardinal Poll of England was
at eighty percent in the voting heavy favorite. And interestingly
we know now from the historical record, but at that
moment he did in fact have twenty six of the.
Speaker 3 (28:04):
Twenty eight votes he needed. That market was reflecting reality.
Speaker 5 (28:08):
How could they possibly know that the people who are
betting on it.
Speaker 3 (28:12):
Could the Cardinals have been insider trade?
Speaker 5 (28:15):
Oh muldeu.
Speaker 2 (28:16):
No.
Speaker 1 (28:17):
Look, if you saw the movie Conclave, right that the
Conclave is supposed to be sealed, like literally the word
conclave is like kon kiavik kum klavis right with the key.
Speaker 3 (28:27):
It's a room that's closed with a key.
Speaker 1 (28:29):
But yes, obviously the Cardinals were insider trading, right, of
course they were.
Speaker 3 (28:33):
This is how it got out. And now there is
this question, right stay.
Speaker 1 (28:37):
Saying next, you guys just talked about why prediction markets
are so bad and fair enough, but put yourself in
the shoes of the British wool merchant or of the
ambassador or whatever. These people who really need to know
who's going to be the pope. Lives depend on it,
livelihoods depend on it. And so this insider trading by
(28:57):
the cardinals. Yes, it's unfair, Sure it's gross, but it
is useful information. And it's helpful if you're the ambassador
who needs to know, if you're the wool merchant who
needs to know, it's good to know what's going on inside.
Speaker 3 (29:09):
The locked room. Although I should say.
Speaker 1 (29:12):
That Cardinal Pole, that guy who was trading at eighty percent,
he did not win.
Speaker 3 (29:16):
A French cardinal showed up at the last minute.
Speaker 1 (29:19):
An accused Pole of being a crypto Lutheran, not a
bitcoin trader, but a secret Protestant, and the papacy went
to an Italian cardinal instead.
Speaker 3 (29:28):
Your bet on Pole was now worth zero weaping in
the street.
Speaker 2 (29:31):
It's basically the Jerome Powell renovation of yes sixteenth.
Speaker 5 (29:35):
Exactly right, exactly right.
Speaker 7 (29:36):
I've done this sort of history of the opportunities of betting,
but there's also a history of the backlash to betting
on real events. We're gonna forget Europe for a second
and move to America in the eighteen hundreds and the
early nineteen hundreds. The big question, of course, was similar
to the pope one, which is who is going to
be the next president? In the United States. There was
not polling at the time, and so they tried unique
(29:57):
things to figure out who the next president was be
Reporters would go to bars and count the number of.
Speaker 5 (30:04):
Toasts to the various candidates.
Speaker 7 (30:06):
They would be like huzzal William Harrison, and they can't
mark that down. This was a terrible way to predict
the presidency.
Speaker 3 (30:13):
Only drinking, but the most fun but the most fun bah.
Speaker 7 (30:17):
And there were actual prediction markets in presidential elections. They
tried that, but then States thought this is a terrible idea,
and in the nineteen twenties they decide that they are
going to basically outlaw this kind of betting in the
United States of America. Now it does come back, and
it comes back prediction markets from an unlikely source. At
the beginning of the twenty first century. The source of
(30:41):
prediction markets is the US government. The US government decides
they're going to see if people can bet on terrorism.
Let me explain, all right, May of two thousand and one, DARPA. Now,
I know it sounds like a H. James Bond bad guy,
but DARPA is the research which arm of the Pentagon.
(31:01):
They're the people who helped bring us the Internet, and
they put out this call for proposals for quote electronic
market based decision support. The proposal is basically asking, can
prediction markets help the US government predict what's going to
happen around the world, Like maybe in the coming year,
what's the probability of a revolution in Tunisia? What will
(31:24):
the economic growth in Mexico be? These are things the
US government wants to know. And you know, the smart
guys they are playing around with prediction markets because the
Internet has just come in. People are obviously using the
Internet for betting already, and so DARPA thinks we should
give this a try and see.
Speaker 5 (31:38):
What's going to happen.
Speaker 3 (31:39):
Now.
Speaker 7 (31:39):
They put out the call for this in May of
two thousand and one. I don't need to tell you
that on September eleventh, two thousand and one, the World
Trade Sitter is attacked and it's the worst attack on America.
Sin's pearl harbor, and this should affect the market.
Speaker 5 (31:57):
But DARPA thinks.
Speaker 7 (31:58):
Actually, this is a case for having prediction markets for terrorism.
There is all of this stuff happening in the world.
We need better ways to predict the future. And for
those of you who read the nine eleven report, there
were people who knew parts of the story. It just
was in different agencies, different people. It was hard to
tell the signal from the noise. If there's one thing
(32:19):
a betting market does is it aggregates all this information
in one place.
Speaker 5 (32:24):
So Darbitt decides they're going to go forward with this.
Speaker 7 (32:26):
They pay a million dollars and they start a market
called PAM, a Policy analysis market.
Speaker 3 (32:33):
I don't know if that's their actual logo, but I hope.
Speaker 5 (32:35):
So it's got a rainbows.
Speaker 7 (32:37):
That's how the web used to look. Oh, I love it.
What the rain It's got a rainbow? The world supply
and demand curve, I believe over there on the market
part of it. So one of the main proponents of
this is an economist named Robin Hanson. He's still a
proponent of prediction markets, former Silicon Valley guy. And the
market is all set to open in the summer of
two thousand and three. Now it's just going to be
(32:59):
a sample market. In terrorism.
Speaker 5 (33:00):
It's just gonna be about the Middle East.
Speaker 7 (33:03):
And they are only gonna give testers one hundred dollars
to trade, so you can't make a million dollars un
predicting what's gonna happen in Middle East.
Speaker 5 (33:09):
But they're just gonna play around with this.
Speaker 7 (33:12):
And then in July of two thousand and three, a
few Democratic senators learn about the plan, and I believe
get wind of is the official Washington term. They get
wind of this plan, and the Democratic senators are not
happy about this. They are Byron Dorgan of South Dakota
and Ron Wyden of Oregon.
Speaker 5 (33:33):
Look at those guys, and on.
Speaker 7 (33:35):
July twenty eighth, they call a press conference. They call
a press conference. You're gonna have to We have a
picture up of them smiling, but you're gonna have to
picture them being incredibly mad.
Speaker 5 (33:45):
This is what Dorgan says.
Speaker 7 (33:48):
The idea of a federal betting parlor on atrocities and
terrorism is ridiculous and it's grotesque.
Speaker 3 (33:54):
Grotesque.
Speaker 7 (33:55):
Yeah, sounds bad when you put it that way, right,
Wyden says, why wouldn't terrorists just hop online and start
betting if they couldn't either mislead American authorities about their
plans or make money to fund more al Qaeda operations.
They say that it is morally wrong. And this, of
course was a huge story boiled down, not the subtle
(34:16):
economics of it, but really, just like Pentagon kills terror,
futures market sounds terrible, but there is something really deep here,
and something that gets to the heart of our relationship
with prediction markets.
Speaker 5 (34:30):
People love to gamble.
Speaker 7 (34:31):
There are real reasons to gamble, but people hate the
idea of gambling. It's unseemly, and they find gambling on
important things morally repugnant, things like will there be a
terrorist attack. So literally the day the Senators hold the
press conference, the Deputy Secretary of Defense says, I have
never heard of that program until I read about it
(34:54):
in the paper today, And yes.
Speaker 5 (34:56):
Obviously we're going to kill the program.
Speaker 7 (34:58):
The government will do without the election tronic market based
decision support, there will be no betting on terrorism, and
the prediction markets basically fade away until the rise of
Calshi and polymarket. Who took this lesson to heart because
the one thing they do not call it is gambling.
Speaker 5 (35:15):
It's prediction sounds much better.
Speaker 3 (35:21):
We're going to wrap up the history section.
Speaker 1 (35:24):
But before we do that, I want to go back
to Italy in the fifteen hundreds.
Speaker 5 (35:30):
For just have money on that you win.
Speaker 1 (35:32):
And the thing I want to point out is this
tension between like we want to gamble, we want information
about the.
Speaker 3 (35:37):
Future, but also we hate it when people do that.
Speaker 1 (35:40):
That has always been there, that was there from the
beginning in the fifteen hundreds, and in fact, in fifteen ninety,
Pope Gregory the fourth issued a papal bull banning Scomez
fai papa, banning betting on who is going to be.
Speaker 3 (35:56):
The next Pope. That is him. I don't know if
that's his papal bull in his.
Speaker 1 (35:58):
Hand, but he is waving, waving, goodbye, Papa. The penalty
was excommunication, and amazingly it worked.
Speaker 3 (36:09):
Prediction markets on.
Speaker 1 (36:10):
Who was going to be the next Pope seem to
have gone away after this point. You don't see ambassadors
writing home about it anymore, and so you know what
has happened. The church seems less gross and maybe less corrupt.
Speaker 3 (36:23):
The Pope talked.
Speaker 1 (36:24):
About how we shouldn't combine the most holy thing in
the world with the corruption of the market.
Speaker 3 (36:29):
Right and emotionally, that is resonant.
Speaker 1 (36:32):
It's the counter reformation, right, So it's also good for
business at this moment if the Catholic Church seems less corrupt.
But on the other hand, the people who really needed
that information about who was gonna be the next pope
don't have it anymore. They have less idea about this
important thing that's gonna happen, and so there is this
trade off.
Speaker 3 (36:52):
Last thought before we talk it out is it's easy to.
Speaker 1 (36:55):
Think, oh, prediction markets, like the modern world is so gross,
everything is just getting worse.
Speaker 3 (37:01):
That is clearly not true, right.
Speaker 1 (37:03):
This is not a line where things are getting more
and more gambly, more and more degenerate. This is a
pendulum that has been swinging back and forth for literally
hundreds of years.
Speaker 3 (37:12):
And so the.
Speaker 1 (37:12):
Question I would pose as we as we finish is
is there going to be a backlash? When is the
pendulum going to swing back?
Speaker 7 (37:20):
And just to be clear, this Papa Bowl is still
in effect, so the current pope cannot bet on Jesus
Nust returning.
Speaker 1 (37:27):
He would have to do it through maybe a cardinal
cardinal but yeah, so what do you think is this?
Speaker 7 (37:33):
Are we going to enter the era where everyone's betting
on everything or will it swing back where it becomes
morally repugnant in a way.
Speaker 4 (37:40):
I think this is different than the Papa voting because
you can bet on everything and we are all so connected.
I just think this betting is on another level.
Speaker 2 (37:53):
I feel like there are so many ways in which
you take these kind of things that have happened through
history and then you turbocharge them with the Internet and
you get something like say's saying different and and I
don't know, I mean putting these papal markets for instance,
did how.
Speaker 5 (38:10):
Did you have to bet Jacob?
Speaker 2 (38:11):
You had to like fill out a piece of paper
and like physically handed to too much friction I mean
more certainly more friction, and you didn't have all this
marketing behind it. It does feel like there is just
it's hard to say that this isn't going to go away,
because this stuff just feels like it's everywhere right now.
Just every part of life is being financialized, being turned
(38:34):
into gambling, essentially.
Speaker 5 (38:36):
Including journalism.
Speaker 7 (38:37):
Journalistic organizations have partnered with betting platforms because what they
see is that people are using this as a way
to get information. Why wait on what the news is
going to tell you about that was on Twitter or
on the polymarket. When you can sign up yourself and
see the moment the bet changes, the moment something pops.
That's a news item that may be considered in the
(38:59):
future like a news alert on your phone, except you're
watching it.
Speaker 4 (39:03):
Well, and then I think they're counting on insider traders
to have a correct market. They're counting on people who
have more knowledge than the rest of us weighing in
on the market. Well in this, I mean, in my heart, yes,
it is bad because it did values homework, but I
do think that it does make those markets more valuable.
I mean Domer actually told us this really interesting case
(39:25):
that took place here in New York around the mayoral election,
and it was when.
Speaker 3 (39:30):
There was corruption New York. I know, I know, hold
onto your seats.
Speaker 4 (39:34):
But Eric Adams was still in the race at this point,
but it was clear he was dropping out, and so
this question came up about when, and according to Domer,
he told us there was this huge bet placed from
a new user on poly market, like right before Eric
Adams dropped out of the race, like seconds.
Speaker 2 (39:52):
The suggestion being that maybe it was Eric Adams the
man himself, but I will say.
Speaker 3 (39:56):
He couldn't be rich for comment because he was on
a front sun bull.
Speaker 2 (39:59):
He I've only had a poly market account before.
Speaker 3 (40:04):
That's true.
Speaker 1 (40:05):
Actually, look, I mean I could imagine, like what you
guys are saying is true, but there could be some
huge horrific event and two senators could stand up and say,
people are profiting from this huge horrific event.
Speaker 3 (40:18):
And like, I do feel like there's a way to.
Speaker 1 (40:21):
Put a little skin in this game, right, Like, I
think what we need is a market that says, will
Calshi or Polymarket be banned by twenty thirty?
Speaker 3 (40:31):
You want to make a betting market about betting market?
Speaker 1 (40:34):
I guess the problem is if you say yes, they'll
be banned, how do you collect?
Speaker 3 (40:39):
It's like the Jesus bat all of it. It's Jesus bad.
Should we check in one last time? One?
Speaker 2 (40:44):
Yeah?
Speaker 5 (40:45):
See, let's see who might have won here?
Speaker 7 (40:47):
Oh wow, okay, so we're going to resolve this market.
Speaker 3 (40:53):
I don't understand this chart though, which we So this
is me bad for us? For us?
Speaker 2 (41:00):
This implies that the audience believes that it's a lower
than fifty percent chance that half that the people will leave.
And I would say that's great, We're going to get
the official results shortly, but I would say I'm feeling
pretty confident.
Speaker 7 (41:16):
I don't know about you all. I'm going to declare
this market closed. So if you have been waiting to leave,
you can last minute bed.
Speaker 5 (41:25):
But in a real.
Speaker 7 (41:26):
Market, of course, if you made this bet, you would
have bet a certain amount of money.
Speaker 3 (41:29):
I have the resolution home, my goodness. Okay, okay, so the.
Speaker 5 (41:34):
Market has resolved to know that's good for us.
Speaker 3 (41:42):
Than you around. Yes.
Speaker 2 (41:44):
Now, the the app we created that we vibe coded,
created user names for people and and we have selected
among the people who bet correctly, We've selected three winners.
Speaker 4 (41:55):
So you should have a username if you've placed it.
Speaker 2 (41:57):
And if you are on this list, come come find
us and will give you your prize.
Speaker 4 (42:03):
Come up, claim your toad bag. There is a toe bag.
This has been the very first Mashup live show of
Everybody's business history.
Speaker 3 (42:12):
I'm Stacey Mannix.
Speaker 2 (42:13):
Smith, I'm Max Shaffin, Robert Smith, and I'm Jacob Goldstein.
Speaker 3 (42:16):
Thanks for listening, Thanks everybody, Thank you. This show is
produced by Stacy Wong and Jasmine J. T.
Speaker 5 (42:32):
Green.
Speaker 2 (42:33):
Magnus Hendrickson is our supervising producer. Sam Rogich handles engineering
and Dave Purcell fact checks. Special thanks to Jeff Muscus,
Julia Rubin, Maria Ling, Alex Chucas, Melissa Rogers, and Lowly Chan.
If you have a minute, please rate and review the show.
It'll mean a lot to us. And if you have
a story that should be our business, email us at
Everybody's at Bloomberg dot net. That's everybody with ans at
(42:55):
Bloomberg dot net. Thank you for listening, and we'll see
you next week.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:12):
Welcome to Everybody's Business from Bloomberg BusinessWeek. I'm Max Chafkin and.
Speaker 3 (00:15):
I'm Stacy Mannock Smith.
Speaker 2 (00:17):
Stacy, you can almost hear the excitement in the background.
We're at the Wyatt Hotel at the on Air Festival
in Williamsburg, Brooklyn for a big live taping.
Speaker 3 (00:25):
It is true.
Speaker 4 (00:26):
This is a big gathering of the podcasters of America.
Speaker 3 (00:30):
Lots of people as people in America, lots.
Speaker 4 (00:33):
Of bo's noise canceling headphones.
Speaker 3 (00:35):
It is a great scene.
Speaker 4 (00:36):
And we are about to do a live show, which
is really cool. We're teaming up with a Pushkin podcast,
Business History with Robert Smith and Jaob Goldstein.
Speaker 3 (00:44):
Yeah, this is huge.
Speaker 2 (00:45):
This is like a podcast equivalent of a mega merger
Business History X times.
Speaker 3 (00:51):
I don't know what the word is.
Speaker 2 (00:52):
Everybody's Business, Stacy. I think the FTC might have to
get involved. They might have to approve this one. It's
such a big deal.
Speaker 4 (00:58):
Everybody's Business History is what we're calling it. And we
are talking today about prediction markets.
Speaker 2 (01:04):
Okay, but Stacy, before we jump on stage, yea, we
got to follow up on last week's emergency podcast episode
on the Supreme Court tariff's ruling and President Trump State
of the Union address.
Speaker 3 (01:14):
We got to get to that. Yes, indeed, it was
quite a.
Speaker 5 (01:18):
Week before we get there.
Speaker 2 (01:23):
Stacy, I thought we could just have a quick follow
up chat on the tariff issue. I listened to last
week's episode with Jonathan.
Speaker 5 (01:31):
Lieberman and the trade Barger.
Speaker 2 (01:32):
Good job on that emergency episode working over time for
our listeners, and I figured we just unpack what we've
learned over the last few days, especially with the State
of the Union address.
Speaker 3 (01:42):
Yeah.
Speaker 4 (01:42):
So Jonathan said, basically, what he does is helps companies
with the paperwork when they're trying to import goods. He
figures out all the forms and it's like a tax form,
a terraff form, because a tariff is a tax and
so he mostly deals with seafood. So if a company
is trying to bring in like a two hundred thousand
dollars shipp container full of lobster tales and they have
to figure out a tariff, that is what happens. Then
(02:05):
he helps them figure out how much they owe and
fills out all the forms.
Speaker 2 (02:08):
Yeah, that was fascinating, just because I hadn't thought about
the level of complication involved, or I hadn't thought much
about how complicated this is. And it kind of helps
explain why these tariffs have been unpopular, because it's just
this huge amount of not only attax which most people hate,
but just a huge amount of uncertainty. And I think
the takeaway from the State of the Union address, Stacy
(02:30):
is that uncertainty is going to continue.
Speaker 3 (02:33):
Oh yeah, yeah.
Speaker 4 (02:34):
In fact, Jonathan, poor Jonathan, when we talked to him,
was getting calls the whole time. We were talking from
his customers from these seafood importers who were wondering what
was going on, and they were like, does this mean
we don't have to pay tariffs anymore? What does the
new ten percent tariff mean? Can we get our money back?
Because if these tariffs were indeed illegal, these seafood importers
should be able to get the money that they paid
(02:55):
back from the government.
Speaker 2 (02:56):
And yet the Trump administration has in all sorts of
ways suggested that they are going to try to not
pay the money back. Also, Donald Trump immediately after and
I think this came up in your conversation with Jonathan,
immediately after the Supreme Court ruling essentially said we're just
going to do the tariffs through some other means, and
he reiterated that point during the State of the Union address.
(03:19):
Let's just quickly listen to that little segment now.
Speaker 6 (03:25):
But the good news is that almost all countries and
corporations want to keep the deal that they already made Scott,
knowing that the legal power that I as president have
to make a new deal could be far worse for them,
and therefore they will continue to work along the same
(03:45):
successful path that we had negotiated before the Supreme Court's
unfortunate involvement. So despite the disappointing ruling, these powerful country
saving it's saving our country. The kind of money we're
taking in peace protecting many of the wars I settled
(04:06):
was because of the threat of tariffs. I wouldn't have
been able to settle him with a will remain in
place under fully approved and tested alternative legal statutes, and
they have been tested for a long time. They're a
little more complex, but they're actually probably better, leading to
a solution that will be even stronger than before. Congressional
(04:29):
action will not be necessary. It's already time tests that
are approved.
Speaker 4 (04:33):
Yeah, this tracks with what Jonathan said. He said a
couple things.
Speaker 3 (04:36):
He said. Number one, the President is right.
Speaker 4 (04:38):
There are all these avenues that he has and can
use to put new temporary tariffs in place.
Speaker 3 (04:43):
One of them he did use.
Speaker 4 (04:45):
He invoked a ten percent tariff immediately, then raced it
to a fifteen percent tariff, and then lowered it again
to a ten percent tariff.
Speaker 2 (04:52):
They haven't actually done the fifteen percent, so there was
a little bit of confusion. The confusion continues, and it's
confusing even for those of us who make it our
business to try to help people figure this out. And
just like Jonathan, I was surprised by the tone I
guess of the State of the Union address. Trump has
been super unpopular on these issues. It's been this huge
(05:15):
turn for the Trump administration where it's.
Speaker 3 (05:17):
Hard on businesses, hard on consumers.
Speaker 2 (05:19):
He'd always been pretty popular on the economy, but these
tariffs and all the affordability stuff that we've talked about
has really bit into that. There was speculation that there
might be some sort of confrontation with the Supreme Court justices.
Speaker 3 (05:32):
I was watching on TV.
Speaker 2 (05:33):
I'd say it was a little awkward, not as awkward
as it could have been.
Speaker 3 (05:37):
He shook John Robert's hand.
Speaker 2 (05:39):
Although he did not shake Amy Coney Barrett's hand, And
even in this little bit you just heard, he's quibbling
with the decision, but he's not doing what he did
in the immediate aftermath of the tariff ruling, where I
believe Stacy called them lapdogs and was really slinging insults
at the justices of our High Court.
Speaker 4 (05:58):
And it's really interesting because that at the top level,
but practically what this means for businesses and for customers
is really interesting. Jonathan got into a little bit of this,
but one of the things he said was that for
every tariff that he levied, like every terraform he filled out,
for every single shipment of whatever lobster tails or shrimp
or whatever, it was a separate form. And if these
companies want their money back from the government, they have
(06:19):
to file a claim for every single one, which is
like tens about Yeah, it's tens of thousands of separate,
tiny lawsuits. And so Jonathan was kind of losing his
mind about how much paperwork this was going to mean.
It's going to be a big, possibly expensive mess for
companies going forward.
Speaker 2 (06:36):
Okay, I think there are two questions Stacy. One is,
when do we get our money back, Like we, yeah,
ultimately paid some of these tarrants. I know, are we
going to get a check?
Speaker 4 (06:48):
Well, this is where things get really messy because Let's
say you're a seafood importer and you sell your seafood
to Long John Silver's, so you've been paying tariffs. Let's
say you do get your money back on the tariffs,
but then Long John Silver is going to go to
you and like, hey, you passed those costs along to me.
I should get a refund too. Suddenly you're in this
really strange situation as well. So it is a mess
that I think is going to be going years into
(07:10):
the future.
Speaker 2 (07:11):
Yeah, and I think it's going to be a huge
political issue going forward, which I guess brings me to
the other question. Do we think that this ruling helps
Donald Trump in a weird way? Because maybe the Supreme
Court did him a favor saying these tariffs are illegal
allows him maybe to back away from these policies.
Speaker 4 (07:30):
I think it would have been amazing groundcover for two reasons.
One because he could have been like, if the economy
didn't go well or prices continue to rise, he could
have been like, listen, I tried with the tariffs. The
Supreme Court struck me down. What can I do? It's
their fault, right, it gives him good groundcover, but he.
Speaker 3 (07:46):
Didn't take the win.
Speaker 4 (07:46):
And then he put new tariffs in place, So I
don't know. I felt like there was a win right there,
but he's not taken. But he didn't take it.
Speaker 5 (07:55):
Stacy, I'm looking at the clock.
Speaker 2 (07:57):
Yes, And Robert Smith and Jacob Goldstein, the host of
Business History, they're going to be here any minute.
Speaker 3 (08:03):
We got to go downstairs.
Speaker 4 (08:04):
Enough about hair offfs, time to pivot to prediction markets.
This is Everybody's business from Bloomberg Business Week.
Speaker 3 (08:21):
I'm Stacey Mannock.
Speaker 7 (08:21):
Smith, I'm Max Chafkin, and this is Business History, a
show about the.
Speaker 3 (08:26):
History of business. I'm Jacob Goldstein and I'm Robert Smith.
Speaker 4 (08:29):
And today we are going to be talking about the
world of prediction markets. This is polymarket and call sheet.
These are places where you can bet on how many
inches it is going to snow in Brooklyn today or
whether we are going.
Speaker 3 (08:42):
To attack Iran.
Speaker 4 (08:44):
These markets are now worth more than one hundred billion
dollars a year.
Speaker 3 (08:48):
They're growing all the time.
Speaker 2 (08:49):
Yeah, I figured just for those people who have been
following this in the pages of the Wall Street Journal
or Bloomberg. Just want to lay it out quickly. Prediction markets.
You've probably seen them most with politics. They're two big companies.
Stacey just mentioned them, Calshi Polymarket. You go on a
prediction market and you'll see essentially a price like a
(09:09):
say ten cents for AOC to be the DEM nominee.
And what that means is that if you put ten
cents down and AOC becomes a DEM nominee, then you
get a dollar and if she doesn't, you get zero dollars.
And you can bet on everything pretty much anything under
the sun. And we wanted to kind of give people
a visceral sense of this via market our own sort
(09:31):
of prediction market. So this is our own prediction market.
You should scan the QR code. This is a financial
opportunity for everyone in the room. You can enter and
once people have had a chance to do that, I
will read the market and the terms of the market.
It's gonna require you to look around the room and
ask yourself, how's this talk going to go? The terms
(09:54):
of this market are will at least ten percent of
the audience leave the room before the end of the show.
So just to be clear, betting yes is betting. I
think you guys on a dud. Right, If they bet yes,
they're betting that more than ten percent are going to.
Speaker 4 (10:09):
Link is necessarily a dud because they're also like overlapping segments.
So there could be another panel that people feel like.
Speaker 3 (10:15):
They even stronger panels.
Speaker 2 (10:19):
It's difficult to believe that also, bathroom right, right, All
factors are possible. There's also the prospect of insider training,
which we will get to.
Speaker 3 (10:27):
I mean, you could bet yes and then walk out.
Speaker 7 (10:30):
We could we could all leave, make sure you come
back in case you want.
Speaker 3 (10:34):
We are, by the way, counting, and I just.
Speaker 2 (10:35):
Want to give people a sense of how crazy this gets.
So Stacy mentioned a couple of markets. Whether there's politics,
there are also these things called mentioned markets. And Stacy,
you are a big fan of the Federal Reserve. I
do love the Federal People listen to the show know this,
it's kind of it's endearing, strange, it's very Minetary policy
(10:56):
is exciting. And there is a prediction market. There are
prediction markets, as you know, Stacy, every time Jerome Powell
gives a speech, and we wrote about one of these
in the latest issue a business Week.
Speaker 3 (11:08):
This is the lead of the story.
Speaker 2 (11:10):
But so basically, this is Jerome Powell's last press conference.
You could bet on forty four words. So is he
going to say the phrase good afternoon?
Speaker 5 (11:18):
That's a gimme by.
Speaker 2 (11:19):
It always says good always, easiest one cent you'll ever make.
But the thing that was kind of crazy about this
market is as the press conference goes on, the odds change.
You just saw that with our on market right as
people are entering the odds shift. And so during the
last press conference, there was a question of the word renovation.
Speaker 3 (11:39):
Would Jerome Powell mention renovation?
Speaker 2 (11:41):
Remember people who've been following this probably remember that there's
a big controversy over the renovation of the FED building.
Speaker 3 (11:47):
Donald Trump's remad about it. And let me just play
what happened.
Speaker 8 (11:51):
Technological developments that raise potential output, some kind of technological
renovation revolution like like kappening and.
Speaker 1 (11:59):
Not here like.
Speaker 5 (12:02):
That insane? Am I right?
Speaker 2 (12:05):
It's like the equivalent of a Hail Mary at the
when you're you know, the game is almost over, we
need a replay. Traders on Discord and on Twitter went
absolutely berserk over this. You know, the quotes and you
can read these in the in the Business Week story
the most Insane Market I've Ever traded. Somebody else wrote
investigate Palell in all caps, suggesting that perhaps Jerome pal
(12:28):
had done.
Speaker 4 (12:28):
This pollymarket bet.
Speaker 2 (12:31):
But I do think Stacy, this kind of raises a question,
which is like is this valuable?
Speaker 5 (12:37):
Like like what is the point of this?
Speaker 3 (12:39):
Yes, like what is the economic value of these?
Speaker 4 (12:41):
Obviously, if you are betting on Jerome Pala saying renovation,
you have personal value, But what about for the economy?
Speaker 2 (12:48):
Okay, So let me give you the perspective of the
founder of Calshi, who's uh, this is one of the
two big companies. Let's let's just listen to Tarik Man's
or try to explain why this matters, like why this
is important beyond just an exciting opportunity for gamblers.
Speaker 9 (13:04):
The long term vision is to financialize everything and create
a tradable asset out of any difference in opinion. And
I think if you do build a general, on purpose
exchange that can resolve differences of opinions on anything like
the time is quite massive.
Speaker 2 (13:16):
I think that might be the least relatable sentiment I've
ever heard. We're going to financialize everything. Do you like finance?
What if everything was finance? That's essentially what they're saying,
and it sounds kind of crazy, but the argument is
basically that this would be a way to sort of
hedge your risk in areas or it might be hard
(13:37):
to So one example the Calshi founders give is flood insurance,
Like maybe instead of buying flood insurance, or if the
flood insurance were too expensive, you could buy a contract
on the weather, you could buy a contract on rainstorms.
Speaker 3 (13:50):
And it sort of is.
Speaker 2 (13:51):
It's the way that like Wall Street hedge funds, you know,
use futures and stuff like that.
Speaker 3 (13:56):
But it would be for all of us.
Speaker 2 (13:57):
And I want to say, as crazy as this town,
anyone who bets on sports knows this phenomenon because there's
this concept of emotional hedging where you bet against the
team you're rooting for serve as a way to soften
the blow, Like my team loses, but you know, but
I make a little money.
Speaker 3 (14:13):
I lose, I win.
Speaker 2 (14:14):
It feels kind of wrong though, Like here, let me
just give you one last prediction market that's on polymarket
right now. Will Jesus Christ return before twenty twenty seven.
Speaker 4 (14:25):
It's gone up sharply since February, it's also gone down.
Speaker 2 (14:29):
What has happened in the last month or so? And
who is betting on this? Anyway, there's a lot But
is this would be good information to have if this
were reliable.
Speaker 4 (14:39):
I'm not sure how you could possibly cash in, but
but yes, I mean, this is very informative.
Speaker 2 (14:44):
If he with a capital age returns, do we think
that polymarket's gonna pay?
Speaker 7 (14:51):
Oh, that's a good It might be bigger problems at
that point, or opportunities, depending on how you've lived your life.
Speaker 1 (14:56):
And we should say for people listening, it's a three
percent chance, which seems pretty high.
Speaker 2 (15:01):
Right, it's been two thousand years. We'll talk about this
more stacy. But to me, like this just kind of
feels wrong. I'm not specifically talking about the Jesus market,
although this does feel wrong to me, but the whole.
Speaker 3 (15:16):
Thing, the whole idea of financializing everything.
Speaker 4 (15:19):
I mean, yes, these markets are incredibly problematic, but I
kind of like them.
Speaker 3 (15:26):
Okay, here's why I like them.
Speaker 4 (15:28):
So I really hate gambling. I don't like taking risks,
and I don't like trying my luck.
Speaker 3 (15:35):
I like homework. You know you do the work and
you get the payoff.
Speaker 4 (15:39):
That makes sense to me, That feels fair to me.
These are the markets I mean, And homework does not
help you in gambling. This all tracks like if you
go to a roulette table and you know more about
roulette and the history of roulette and the roulette wheel
than anybody in history, it's not going to help you
win at roulette.
Speaker 3 (15:57):
Right in those cases, like the casino, it's got an edge.
Speaker 7 (16:00):
Yeah, if you understand gambling, you don't go into the
casino exactly.
Speaker 4 (16:04):
And I would argue in investing, there's kind of similar
things going on because you know these big investment houses
and hedge funds, they have all this money and they
have access to all this information that you and I
have no access to. Like they will look at satellite
photos of Walmart's parking lot and they will see how
many trucks are going in and out, and they will
estimate Walmart's sales, and they will figure out Walmart's profits,
(16:27):
and then they will place a bet on Walmart's share price.
You and I don't have access to that information. It
feels very unfair to me, and I don't like it.
Speaker 3 (16:35):
It just feels like in.
Speaker 4 (16:36):
These cases the house has the edge and homework is
for suckers, and I don't like it, but this is
not true on Polymarket and Calshi.
Speaker 2 (16:45):
We a couple of months ago on the show interviewed
this big poly market trader. I think we called him
the polymarket whale. His name is his pseudonym is Domer.
We know his name, but he likes to be anonymous because,
I think partly because these markets are in sort of.
Speaker 3 (17:01):
A legal gray area.
Speaker 2 (17:02):
But anyway, Domer had bet Stacey's something like four hundred
million dollars.
Speaker 3 (17:08):
On Polly Market.
Speaker 2 (17:09):
When we talked to him, he had a big money
bet on Taylor Swift album sales. He had one million
riding on the question of how many albums Taylor Swift
would sell.
Speaker 4 (17:19):
Yes, And we asked Domer, like, was there a bet
that did it? How did you get on on these
markets because this is his job.
Speaker 6 (17:25):
Now.
Speaker 4 (17:25):
He had been a professional poker player, but he had
left the world of professional poker for this market. And
he said, yeah, there was this bet that did it.
It was back in two thousand and eight, so it
was John McCain versus Barack Obama. We knew that, but
they hadn't picked their running mates yet, and everyone was wondering,
especially who's John McCain going to pick. People thought maybe
Mitt Romney, but they weren't sure. And there was this
(17:45):
old betting market, this old version of a betting market
was not poly market or Calci that went up and
Domer thought, I'm going to bet on this, and I
wonder if I can get an edge.
Speaker 3 (17:55):
And here's what he told us.
Speaker 8 (17:56):
The date for John McCain picking had been announced, and
also the location was a small town in Ohio, which
is obviously a swing state. And then it's okay, like
what are the logistics of it? And so we looked
at the map and we're like, okay, where's the nearest airport?
And so we found the nearest airport, and we were
looking at the flights that were coming in, and most
(18:18):
flights are a little po dunk things, but there was
this one random flight from Alaska that was coming in,
and it's like what is going on here? Like why
is a flight from Alaska coming into this random town
in Ohio? And we're like, okay, I think it might
be Sarah Palin And she was twenty five to one
odds and I put a thousand dollars on it, which
is a huge bet and ended up being Sarah Palin
(18:40):
and I made twenty five thousand.
Speaker 3 (18:42):
Game change baby.
Speaker 5 (18:43):
Yeah.
Speaker 3 (18:44):
Heartwarming story, right.
Speaker 4 (18:46):
I think so homework for the win to meet is
a heartwarming story.
Speaker 9 (18:49):
Do over.
Speaker 2 (18:50):
By the way, he made sixty k on that sixty
thousand dollars on that Taylor Swift bet, which that was
like a couple of days work for him.
Speaker 5 (18:57):
So this guy is pretty.
Speaker 3 (18:59):
Successful, yes, and at this point Domer is kind of
a pro.
Speaker 4 (19:02):
But anybody can do this. So our wonderful producer, Jasmine JT.
Green say, Hi, Jasmine uh told me about this story
that I loved and have not been able to stop
thinking about. This guy, Cayden Booth, he was twenty one
and he decided he wanted to bet on the Super Bowl,
and he didn't want to bet on the game or.
Speaker 3 (19:18):
The halftime show.
Speaker 4 (19:19):
He wanted to bet on the national anthem, which seems
like a weird thing to bet on.
Speaker 3 (19:24):
He was betting on.
Speaker 4 (19:25):
The length of the national anthem specifically, which doesn't seem
like there should be that big of a range because
the song is the song is the song, but there's
actually a huge range. So back in nineteen ninety eight,
This is Jewel singing the national anthem. It's one of
the shortest national anthems in Super Bowl history, clopped in
at one minute in twenty seven seconds. Now, in twenty thirteen,
(19:46):
it was one of the longest national anthems in Super
Bowl history. It clocked in at two minutes and thirty
six seconds from the Lovely Miss Alicia Keys. So now
Cayden had to call this this year's Super Bowl national anthem.
Charlie Pooth was singing, and he had to figure out
where Charlie Pooth's national anthem was going to fall on
(20:08):
the like Star Spangled spectrum.
Speaker 5 (20:10):
Yes, is he gonna hold the hind note from a
minute and a half?
Speaker 3 (20:14):
Yes? Exactly?
Speaker 4 (20:15):
Is he gonna be on the Jewel side or is
he gonna be on the Alicia Keys side? So he
was kind of poking around and he came across there
was this moment and he saw it and he was like,
this is my moment.
Speaker 3 (20:25):
And what happened was.
Speaker 4 (20:26):
He just saw a social media post from Charlie pooths
being like, hey headed to San Francisco. It's like a
week before the Super Bowl, and he thought, this.
Speaker 3 (20:33):
Is my moment. He bought three things. He bought a stopwatch.
Speaker 4 (20:37):
He bought this weird listening equipment that really serious bird
watchers use, yeah, exactly to listen to like distant bird calls.
And he bought a plane ticket to San Francisco. He
went to San Francisco. He stood outside of the stadium.
There he is, there's the weird bird watching. He stood
outside of the stadium and he was like, at some point,
Charlie Pooth is gonna come and he is going to
(20:59):
rehearse on site, and I'm gonna catch the sound with
my bird watching listening equipment.
Speaker 3 (21:05):
I'm gonna time it. I'm gonna place my bet.
Speaker 4 (21:07):
And he waited and he waited and he waited, and
then he heard the swell of the music. He hit
the timer and clopped it in. I think you can
see it there. At a minute fifty one, he placed
his bet. He won thousands of dollars homework for the win.
Speaker 5 (21:23):
Okay, two things, Stacy.
Speaker 2 (21:25):
One is, this is not heartwarming to me because if
I'm gonna bet on this, I have the bet against
this guy with the parabolic mic and the plane ticket
and the stop watching.
Speaker 3 (21:33):
He did his homework. Okay, this feels fair to me.
Speaker 2 (21:36):
Problem number two is what happened, Stacy if Charlie Pooth deliberately,
you know, swayed the you know, he held the high
notes for longer than he intended to during the Super Bowl,
placed a bet and took five million dollars from this guy.
Speaker 4 (21:50):
Yes, so these markets, it is true, have always had
an insider trading problem, but now that they're getting bigger
and more money is going into them, the insider trading
problem is getting much larger. This is especially true in sports.
Of course, everyone loves sports betting. Sports betting, you can
bet on everything from like the color of socks that
some athlete is going to wear, to how many fouls
(22:13):
there's going to be to how many free throws. So
you can bet on every aspect of every sports game.
And some people have really taken this kind of insider
trading to almost an art form. So there is an athlete,
Johntay Porter. He was with the Toronto Raptors and he
was accused of basically making bets on the sideline saying
(22:36):
I'm about to go in and fake an injury and
place a bet, and he would go in and fake
an injury and win all the time.
Speaker 2 (22:44):
These aren't necessarily prediction markets, right that you're talking about.
This is traditional sports betting with Johntay Porter. And the
other thing is this could happen in all sorts of
other domains, and that, to me is what's kind of
so distressing about this.
Speaker 4 (22:59):
So Johntey was banned for life from the NBA, but
these issues have happened on professional sports leagues and college
sports leagues. And here's the thing that shocks me and
makes me think that maybe this is all going in
the direction of casinos and hedge funds.
Speaker 3 (23:14):
You think that sports leagues would be horrified by this, right,
it's terrible for sportsmanship.
Speaker 4 (23:18):
Who wants to watch a game where people are throwing
the game or wearing socks or missing free throws because
they can get some side money. But no, the biggest
thing the sports leagues are worried about is getting a
cut of the action. National Hockey League, Major League Soccer
have signed deals with poly Market, basically exclusivity deals so
Polymarket can offer bets on.
Speaker 3 (23:39):
Them and they are cashing in.
Speaker 4 (23:42):
And the New York Stock Exchange bought a huge chunk
of poly Market. They too are cashing in, which makes
me think that poly market and call she and all
the glories of homework are now going in the direction
of casinos and hedge funds, and that these big rich
players can buy an edge or make an edge in
(24:02):
this case, and that homework once again is for suckers.
Speaker 2 (24:14):
I also just worry Stacey that we're trivializing important stuff.
Like let's look at this ad that Calshi has been running.
I think I saw this during the Olympics, but it's
it's been out there for a couple of months.
Speaker 3 (24:26):
This is how Calshi is promoting itself. History has taught
us anything. It's not to root against the underdog.
Speaker 1 (24:32):
All right.
Speaker 2 (24:33):
So you see David with a sling shot Paul Revere ride.
People are betting on whether the Right Brothers plane will crash.
I guess, will prisoners escape out?
Speaker 5 (24:46):
The tras just Sparta win the war.
Speaker 2 (24:48):
It's like a three hundred scene here, And I guess
the point is, like, hey, all these historical events, you
may think of them as historical events, but they're just
betting opportunities.
Speaker 3 (24:59):
I will say they were betting up.
Speaker 1 (25:01):
It's like we know in fact that there were prediction
markets on the Revolutionary.
Speaker 7 (25:06):
War and we think that we've invented something new, as
we always do on the internet, but as we found
a business history. People want to gamble and they want
to know the future, and that has always been the case.
Speaker 3 (25:18):
So can we check you in on the market?
Speaker 5 (25:20):
Can Yeah, let's just see how it's going. It's one,
it's at fifty six cents. What oh, it just dropped.
It is at whale.
Speaker 3 (25:32):
Now remember remember on AirFest whale.
Speaker 5 (25:35):
Just get against them.
Speaker 7 (25:38):
Because we're part way through this session, people have looked around.
They have determined that not a lot of people have
left so far, and so they are reevaluating what they
think of this question. Whether ten percent of the audience
is going to leave the room or note.
Speaker 3 (25:52):
If there's also pressure to not leave, because.
Speaker 7 (25:56):
We will close our eyes for ten seconds. If any
one wants to make a batary anybody, anybody.
Speaker 5 (26:04):
We will call you out. Okay.
Speaker 1 (26:05):
We know that prediction markets, not just gambling, but real
prediction markets go back.
Speaker 3 (26:10):
At least five hundred years.
Speaker 1 (26:13):
They go back to Italy in the fifteen hundreds and
the big market there, the big prediction market in Italy
scomeza farel papa betting on who's going to be the
Pope Papa. And it makes sense both that it's in
Italy and that's what they were betting on, because this
was the time Italy in the fifteen hundreds when modern
(26:35):
finances emerging in Europe, the first banks are being established,
the medici are running Florence, and so you see these
laws being passed to give brokers in Rome and Florence
a monopoly on these prediction markets.
Speaker 3 (26:50):
And then the Il Papa part also makes sense.
Speaker 1 (26:53):
Because predicting the next pope in the fifteen hundreds was
like the super Bowl and the presidential election rolled into
one lottery and a lottery. Sure, you know, the pope
had a tremendous amount of political power. It mattered if
you were a wool merchant in England or if you
were the king of France or whatever.
Speaker 3 (27:10):
It mattered who was going to be the next pope.
Speaker 1 (27:12):
And so you see ambassadors writing back home every time
there's a conclave like who is papabul who's popable? They
would ask, And these brokers who have the monopoly they
print up chid they like they would. That's like a
voucher today, like tickets with each cardinals or all the
like possible guys' names on them, and they pay off
(27:35):
for one hundred scootye, and you buy it for whatever
fractional probability the guy is selling it exactly like prediction.
Speaker 3 (27:42):
Markets work today.
Speaker 1 (27:43):
And for example, in fifteen forty nine, there was a
Conclave and at one moment Cardinal Poll of England was
at eighty percent in the voting heavy favorite. And interestingly
we know now from the historical record, but at that
moment he did in fact have twenty six of the.
Speaker 3 (28:04):
Twenty eight votes he needed. That market was reflecting reality.
Speaker 5 (28:08):
How could they possibly know that the people who are
betting on it.
Speaker 3 (28:12):
Could the Cardinals have been insider trade?
Speaker 5 (28:15):
Oh muldeu.
Speaker 2 (28:16):
No.
Speaker 1 (28:17):
Look, if you saw the movie Conclave, right that the
Conclave is supposed to be sealed, like literally the word
conclave is like kon kiavik kum klavis right with the key.
Speaker 3 (28:27):
It's a room that's closed with a key.
Speaker 1 (28:29):
But yes, obviously the Cardinals were insider trading, right, of
course they were.
Speaker 3 (28:33):
This is how it got out. And now there is
this question, right stay.
Speaker 1 (28:37):
Saying next, you guys just talked about why prediction markets
are so bad and fair enough, but put yourself in
the shoes of the British wool merchant or of the
ambassador or whatever. These people who really need to know
who's going to be the pope. Lives depend on it,
livelihoods depend on it. And so this insider trading by
(28:57):
the cardinals. Yes, it's unfair, Sure it's gross, but it
is useful information. And it's helpful if you're the ambassador
who needs to know, if you're the wool merchant who
needs to know, it's good to know what's going on inside.
Speaker 3 (29:09):
The locked room. Although I should say.
Speaker 1 (29:12):
That Cardinal Pole, that guy who was trading at eighty percent,
he did not win.
Speaker 3 (29:16):
A French cardinal showed up at the last minute.
Speaker 1 (29:19):
An accused Pole of being a crypto Lutheran, not a
bitcoin trader, but a secret Protestant, and the papacy went
to an Italian cardinal instead.
Speaker 3 (29:28):
Your bet on Pole was now worth zero weaping in
the street.
Speaker 2 (29:31):
It's basically the Jerome Powell renovation of yes sixteenth.
Speaker 5 (29:35):
Exactly right, exactly right.
Speaker 7 (29:36):
I've done this sort of history of the opportunities of betting,
but there's also a history of the backlash to betting
on real events. We're gonna forget Europe for a second
and move to America in the eighteen hundreds and the
early nineteen hundreds. The big question, of course, was similar
to the pope one, which is who is going to
be the next president? In the United States. There was
not polling at the time, and so they tried unique
(29:57):
things to figure out who the next president was be
Reporters would go to bars and count the number of.
Speaker 5 (30:04):
Toasts to the various candidates.
Speaker 7 (30:06):
They would be like huzzal William Harrison, and they can't
mark that down. This was a terrible way to predict
the presidency.
Speaker 3 (30:13):
Only drinking, but the most fun but the most fun bah.
Speaker 7 (30:17):
And there were actual prediction markets in presidential elections. They
tried that, but then States thought this is a terrible idea,
and in the nineteen twenties they decide that they are
going to basically outlaw this kind of betting in the
United States of America. Now it does come back, and
it comes back prediction markets from an unlikely source. At
the beginning of the twenty first century. The source of
(30:41):
prediction markets is the US government. The US government decides
they're going to see if people can bet on terrorism.
Let me explain, all right, May of two thousand and one, DARPA. Now,
I know it sounds like a H. James Bond bad guy,
but DARPA is the research which arm of the Pentagon.
(31:01):
They're the people who helped bring us the Internet, and
they put out this call for proposals for quote electronic
market based decision support. The proposal is basically asking, can
prediction markets help the US government predict what's going to
happen around the world, Like maybe in the coming year,
what's the probability of a revolution in Tunisia? What will
(31:24):
the economic growth in Mexico be? These are things the
US government wants to know. And you know, the smart
guys they are playing around with prediction markets because the
Internet has just come in. People are obviously using the
Internet for betting already, and so DARPA thinks we should
give this a try and see.
Speaker 5 (31:38):
What's going to happen.
Speaker 3 (31:39):
Now.
Speaker 7 (31:39):
They put out the call for this in May of
two thousand and one. I don't need to tell you
that on September eleventh, two thousand and one, the World
Trade Sitter is attacked and it's the worst attack on America.
Sin's pearl harbor, and this should affect the market.
Speaker 5 (31:57):
But DARPA thinks.
Speaker 7 (31:58):
Actually, this is a case for having prediction markets for terrorism.
There is all of this stuff happening in the world.
We need better ways to predict the future. And for
those of you who read the nine eleven report, there
were people who knew parts of the story. It just
was in different agencies, different people. It was hard to
tell the signal from the noise. If there's one thing
(32:19):
a betting market does is it aggregates all this information
in one place.
Speaker 5 (32:24):
So Darbitt decides they're going to go forward with this.
Speaker 7 (32:26):
They pay a million dollars and they start a market
called PAM, a Policy analysis market.
Speaker 3 (32:33):
I don't know if that's their actual logo, but I hope.
Speaker 5 (32:35):
So it's got a rainbows.
Speaker 7 (32:37):
That's how the web used to look. Oh, I love it.
What the rain It's got a rainbow? The world supply
and demand curve, I believe over there on the market
part of it. So one of the main proponents of
this is an economist named Robin Hanson. He's still a
proponent of prediction markets, former Silicon Valley guy. And the
market is all set to open in the summer of
two thousand and three. Now it's just going to be
(32:59):
a sample market. In terrorism.
Speaker 5 (33:00):
It's just gonna be about the Middle East.
Speaker 7 (33:03):
And they are only gonna give testers one hundred dollars
to trade, so you can't make a million dollars un
predicting what's gonna happen in Middle East.
Speaker 5 (33:09):
But they're just gonna play around with this.
Speaker 7 (33:12):
And then in July of two thousand and three, a
few Democratic senators learn about the plan, and I believe
get wind of is the official Washington term. They get
wind of this plan, and the Democratic senators are not
happy about this. They are Byron Dorgan of South Dakota
and Ron Wyden of Oregon.
Speaker 5 (33:33):
Look at those guys, and on.
Speaker 7 (33:35):
July twenty eighth, they call a press conference. They call
a press conference. You're gonna have to We have a
picture up of them smiling, but you're gonna have to
picture them being incredibly mad.
Speaker 5 (33:45):
This is what Dorgan says.
Speaker 7 (33:48):
The idea of a federal betting parlor on atrocities and
terrorism is ridiculous and it's grotesque.
Speaker 3 (33:54):
Grotesque.
Speaker 7 (33:55):
Yeah, sounds bad when you put it that way, right,
Wyden says, why wouldn't terrorists just hop online and start
betting if they couldn't either mislead American authorities about their
plans or make money to fund more al Qaeda operations.
They say that it is morally wrong. And this, of
course was a huge story boiled down, not the subtle
(34:16):
economics of it, but really, just like Pentagon kills terror,
futures market sounds terrible, but there is something really deep here,
and something that gets to the heart of our relationship
with prediction markets.
Speaker 5 (34:30):
People love to gamble.
Speaker 7 (34:31):
There are real reasons to gamble, but people hate the
idea of gambling. It's unseemly, and they find gambling on
important things morally repugnant, things like will there be a
terrorist attack. So literally the day the Senators hold the
press conference, the Deputy Secretary of Defense says, I have
never heard of that program until I read about it
(34:54):
in the paper today, And yes.
Speaker 5 (34:56):
Obviously we're going to kill the program.
Speaker 7 (34:58):
The government will do without the election tronic market based
decision support, there will be no betting on terrorism, and
the prediction markets basically fade away until the rise of
Calshi and polymarket. Who took this lesson to heart because
the one thing they do not call it is gambling.
Speaker 5 (35:15):
It's prediction sounds much better.
Speaker 3 (35:21):
We're going to wrap up the history section.
Speaker 1 (35:24):
But before we do that, I want to go back
to Italy in the fifteen hundreds.
Speaker 5 (35:30):
For just have money on that you win.
Speaker 1 (35:32):
And the thing I want to point out is this
tension between like we want to gamble, we want information
about the.
Speaker 3 (35:37):
Future, but also we hate it when people do that.
Speaker 1 (35:40):
That has always been there, that was there from the
beginning in the fifteen hundreds, and in fact, in fifteen ninety,
Pope Gregory the fourth issued a papal bull banning Scomez
fai papa, banning betting on who is going to be.
Speaker 3 (35:56):
The next Pope. That is him. I don't know if
that's his papal bull in his.
Speaker 1 (35:58):
Hand, but he is waving, waving, goodbye, Papa. The penalty
was excommunication, and amazingly it worked.
Speaker 3 (36:09):
Prediction markets on.
Speaker 1 (36:10):
Who was going to be the next Pope seem to
have gone away after this point. You don't see ambassadors
writing home about it anymore, and so you know what
has happened. The church seems less gross and maybe less corrupt.
Speaker 3 (36:23):
The Pope talked.
Speaker 1 (36:24):
About how we shouldn't combine the most holy thing in
the world with the corruption of the market.
Speaker 3 (36:29):
Right and emotionally, that is resonant.
Speaker 1 (36:32):
It's the counter reformation, right, So it's also good for
business at this moment if the Catholic Church seems less corrupt.
But on the other hand, the people who really needed
that information about who was gonna be the next pope
don't have it anymore. They have less idea about this
important thing that's gonna happen, and so there is this
trade off.
Speaker 3 (36:52):
Last thought before we talk it out is it's easy to.
Speaker 1 (36:55):
Think, oh, prediction markets, like the modern world is so gross,
everything is just getting worse.
Speaker 3 (37:01):
That is clearly not true, right.
Speaker 1 (37:03):
This is not a line where things are getting more
and more gambly, more and more degenerate. This is a
pendulum that has been swinging back and forth for literally
hundreds of years.
Speaker 3 (37:12):
And so the.
Speaker 1 (37:12):
Question I would pose as we as we finish is
is there going to be a backlash? When is the
pendulum going to swing back?
Speaker 7 (37:20):
And just to be clear, this Papa Bowl is still
in effect, so the current pope cannot bet on Jesus
Nust returning.
Speaker 1 (37:27):
He would have to do it through maybe a cardinal
cardinal but yeah, so what do you think is this?
Speaker 7 (37:33):
Are we going to enter the era where everyone's betting
on everything or will it swing back where it becomes
morally repugnant in a way.
Speaker 4 (37:40):
I think this is different than the Papa voting because
you can bet on everything and we are all so connected.
I just think this betting is on another level.
Speaker 2 (37:53):
I feel like there are so many ways in which
you take these kind of things that have happened through
history and then you turbocharge them with the Internet and
you get something like say's saying different and and I
don't know, I mean putting these papal markets for instance,
did how.
Speaker 5 (38:10):
Did you have to bet Jacob?
Speaker 2 (38:11):
You had to like fill out a piece of paper
and like physically handed to too much friction I mean
more certainly more friction, and you didn't have all this
marketing behind it. It does feel like there is just
it's hard to say that this isn't going to go away,
because this stuff just feels like it's everywhere right now.
Just every part of life is being financialized, being turned
(38:34):
into gambling, essentially.
Speaker 5 (38:36):
Including journalism.
Speaker 7 (38:37):
Journalistic organizations have partnered with betting platforms because what they
see is that people are using this as a way
to get information. Why wait on what the news is
going to tell you about that was on Twitter or
on the polymarket. When you can sign up yourself and
see the moment the bet changes, the moment something pops.
That's a news item that may be considered in the
(38:59):
future like a news alert on your phone, except you're
watching it.
Speaker 4 (39:03):
Well, and then I think they're counting on insider traders
to have a correct market. They're counting on people who
have more knowledge than the rest of us weighing in
on the market. Well in this, I mean, in my heart, yes,
it is bad because it did values homework, but I
do think that it does make those markets more valuable.
I mean Domer actually told us this really interesting case
(39:25):
that took place here in New York around the mayoral election,
and it was when.
Speaker 3 (39:30):
There was corruption New York. I know, I know, hold
onto your seats.
Speaker 4 (39:34):
But Eric Adams was still in the race at this point,
but it was clear he was dropping out, and so
this question came up about when, and according to Domer,
he told us there was this huge bet placed from
a new user on poly market, like right before Eric
Adams dropped out of the race, like seconds.
Speaker 2 (39:52):
The suggestion being that maybe it was Eric Adams the
man himself, but I will say.
Speaker 3 (39:56):
He couldn't be rich for comment because he was on
a front sun bull.
Speaker 2 (39:59):
He I've only had a poly market account before.
Speaker 3 (40:04):
That's true.
Speaker 1 (40:05):
Actually, look, I mean I could imagine, like what you
guys are saying is true, but there could be some
huge horrific event and two senators could stand up and say,
people are profiting from this huge horrific event.
Speaker 3 (40:18):
And like, I do feel like there's a way to.
Speaker 1 (40:21):
Put a little skin in this game, right, Like, I
think what we need is a market that says, will
Calshi or Polymarket be banned by twenty thirty?
Speaker 3 (40:31):
You want to make a betting market about betting market?
Speaker 1 (40:34):
I guess the problem is if you say yes, they'll
be banned, how do you collect?
Speaker 3 (40:39):
It's like the Jesus bat all of it. It's Jesus bad.
Should we check in one last time? One?
Speaker 2 (40:44):
Yeah?
Speaker 5 (40:45):
See, let's see who might have won here?
Speaker 7 (40:47):
Oh wow, okay, so we're going to resolve this market.
Speaker 3 (40:53):
I don't understand this chart though, which we So this
is me bad for us? For us?
Speaker 2 (41:00):
This implies that the audience believes that it's a lower
than fifty percent chance that half that the people will leave.
And I would say that's great, We're going to get
the official results shortly, but I would say I'm feeling
pretty confident.
Speaker 7 (41:16):
I don't know about you all. I'm going to declare
this market closed. So if you have been waiting to leave,
you can last minute bed.
Speaker 5 (41:25):
But in a real.
Speaker 7 (41:26):
Market, of course, if you made this bet, you would
have bet a certain amount of money.
Speaker 3 (41:29):
I have the resolution home, my goodness. Okay, okay, so the.
Speaker 5 (41:34):
Market has resolved to know that's good for us.
Speaker 3 (41:42):
Than you around. Yes.
Speaker 2 (41:44):
Now, the the app we created that we vibe coded,
created user names for people and and we have selected
among the people who bet correctly, We've selected three winners.
Speaker 4 (41:55):
So you should have a username if you've placed it.
Speaker 2 (41:57):
And if you are on this list, come come find
us and will give you your prize.
Speaker 4 (42:03):
Come up, claim your toad bag. There is a toe bag.
This has been the very first Mashup live show of
Everybody's business history.
Speaker 3 (42:12):
I'm Stacey Mannix.
Speaker 2 (42:13):
Smith, I'm Max Shaffin, Robert Smith, and I'm Jacob Goldstein.
Speaker 3 (42:16):
Thanks for listening, Thanks everybody, Thank you. This show is
produced by Stacy Wong and Jasmine J. T.
Speaker 5 (42:32):
Green.
Speaker 2 (42:33):
Magnus Hendrickson is our supervising producer. Sam Rogich handles engineering
and Dave Purcell fact checks. Special thanks to Jeff Muscus,
Julia Rubin, Maria Ling, Alex Chucas, Melissa Rogers, and Lowly Chan.
If you have a minute, please rate and review the show.
It'll mean a lot to us. And if you have
a story that should be our business, email us at
Everybody's at Bloomberg dot net. That's everybody with ans at
(42:55):
Bloomberg dot net. Thank you for listening, and we'll see
you next week.
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