Gambling

I went to watch the final presidential debate with a binder full of ERGies. Gang's friend Jimmy invited us over to watch the debate on foreign policy at his place. The debate was completely off the topic, but it didn't prevent us from enjoying the debate drinking game.

The biggest gain from last night was not seeing how politicians do Taichi to each other during the debate by avoiding questions, twisting facts and changing topics, but a website mentioned by Chris. Intrade.com provides a market in which people can predict who will win the election, such as who will be elected the next president, who will lead in each swing state, and who will control the Senate/House, and therefore own money from right predictions. The price of each share changes as the campaign goes on. For example, after Obama got drowsy during his first debate, the price of share for "Obama will win" dropped from almost $8 to less than $6. His next two debates reversed the trend and pushed the price above $6 now, but never back to its peak. We found this market very interesting and tried to buy a few shares just for fun. But as we registered and logged in, we found the procedures cumbersome: we needed to scan and send over our ID cards for confirmation, and the money couldn't be paid by either credit card or debit card. Also, Intrade.com requires a monthly transaction fee of around $5.

I learned about futures markets in my financial class, and how agency make money from both sides by taking the risks of insolvency. The business is no longer new, but Intrade.com is much easier: it only focuses on policy issues, and to each question there are only two options, yes or no. For example, there is a bet on whether a cap and trade system for emissions trading to be established before midnight ET on 31 Dec 2013, and another on whether the US and/or Israel are to execute an overt air strike against Iran before midnight ET 31 Dec 2013. About a hundred market is listed on its website, from the change of global temperature, terrorist attack, income tax rates, to the time for World Trade Center's reopening, etc. Where there is uncertainty, there is a market for gambling. In comparison to guessing the change of oil price in the following months and years, it's much easier to guess "Yes" or "No". However the risk is higher: once you lose, you lose everything.

I don't think a similar business model exists in China, and one obstacle I can think of to replicating the model in China is the opaque government policy-making process. Two weeks before the US election, no one knows who will be the next US president (though I think Obama has a better chance); but two years ago we already knew who will be the next Chinese president. However only people close to the core know what happens and have more information to predict the result, but majority remains uninformed - yes we know the result, but we don't know what leads to the result. However it may be interesting to try a bet on something like whether China and Japan will fight over Diaoyu Island or when will be Liaoning Hao's first voyage.