Note the contradiction in your argumentation:
You write (I add the bracket but that's obviously rather exactly what's meant in your line of argument)
[I think the guy's trade is not as suspicions as others think because] why only bet 80k?
and two sentences later
And I don’t think the argument of “any more would be suspicious” really holds either here, betting $800k or $80k is about as suspicious
ah! fair enough actually. No idea how I missed that. But to be fair, I don't know how much others would care about this when suspecting him, so it may be moot anyway.
But I think if there's a risk reward graph of risking insider trading at X amount vs at Y amount, it's not 10 times more suspicious to trade 10 times as much, so therefore he would be acting irrationally.
But yeah, it's a fair argument that maybe he is acting irrationally precisely to avoid such suspicions.
Warning: more for imho beautiful geeky abstract high-level interpretation than really resolving with certainty the case at hand.
:-)
I purposely didn't try to add any conclusive interpretation of it in my complaint about the bite-its-tail logic mistake.
But now that we're here :-):
It's great you did the 'classical' (even if not named as such) mistake so explicitly, as even if you hadn't made it, somehow the two ideas would have easily swung along with it in many of us half consciously without being fully resolved, pbly in head too.
Much can be said about '10x times as suspicious'; the funny thing being that as long as you conclude what you now just iterated, it again defeats a bit the argument: as you just prove that with his 'low' bet we may - all things considered - here simply let him go, while otherwise... Leaving open all the other arguments around this particular case, I'm reminded of the following that I think is the pertinent - even if bit disappointing as probabilistic fuzzy - way to think about it. And it will make sense of some of us finding it more intuitive that he'd surely gone for 800k instead of 80k (let's ascribe this to your intuition so far), and others the other way round (maybe we're allowed to call that the 2nd-sentence-of-Dana position), while some are more agnostic - and in a basic sense 'correct':
I think Game Theory calls what we end in a "trembling hand" equilibrium (I might be misusing the terminology as I rmbr more the term than the theory; either way the equil mechanism here then I'd still wager makes sense at a high level of abstraction): A state where if it was clear that 800k would have made more sense for the insider, then he could choose 80k to be totally save from suspicion, and we'd in that world see many '80k-size' type of such frauds, as anyone could pull them off w/o creating any suspicion - well and greedy people with some occasions will always exist. And in the world where instead we assume it was clear that 80k was already perfectly suspect, he would have zero reason to not go all out for the 800k if at all he tries... In the end, we end up with: It's just a bit ambiguous which exact scale increases the suspicious-ness how much, or, put more precisely: it is just such that the increase of suspicious-ness vaguely offsets the increase in payoff in many cases. I.e. it all becomes somewhat probabilistic. We're left with some of the insider thieves sometimes going for the high, sometimes for the low amount, and (i) potentially with many of us fighting about what that particular choice now means as fraud-indicator - while, more importantly, trembling-hand-understanders, or actually maybe many other a bit more calm natures, actually see how little we can learn from the amount chosen, as in equilibrium, it's systematically fuzzy along that dimension. If we'd be facing one single player consistently being insider a gazillion times, he might adopt a probabilistic amount-strategy; in the real world we're facing the one-time or so random insider who has incentives to play high or low amount which may be more explained by nuanced subtleties rather than a simple high-level view on it all - as that high-level-only view merely spits out: probabilistic high or low; or in a single case a 'might roughly just as well play high amount as low amount'.
I don't really claim there cannot be anything much more detailed/specific said here that puts this general approach into perspective in this particular case, but from the little we have here in OP and the comments so far, I think that would reasonably apply.
Thank you so much for this reply. Makes perfect sense.
Turns out LW obsession with game theory matters in the real world after all :)
I don't share that intuition, from a few angles.
I think a 10x larger bet would be more than 10x as suspicious. There are more than 10x as many people who would bet 80k on low-medium conviction bets than 800k.
Also liquidity would dry up, quickly, once liquidity providers see the obvious insider, so the reward would be much less than 10x.
Also I see the disutility from suspicion as closer to a step function: you really do not want your suspicion to rise to a level that would warrant a serious investigation. Which is kind of binary, closely-related to the risk of traders framing you as an insider beforehand, and I would think 80k is already pretty close to this threshold (but I'm not familiar with how liquid this market was).
I can’t really imagine a guy close enough to trump that he would have this amount of intel yet not have more than 80k in the bank to gamble with.
You're assuming a lot about how close anybody has to be to anything. There's reporting today that the New York Times and the Washington Post both knew in advance about the plan (and didn't report because apparently some kind of "deference" covers intent to act illegally and unconstitutionally).
Things are usually a lot leakier than people think they are.
Also, the bet wouldn't have been a sure thing. It's not like it's rare for an operation like that to fail.
If I recall correctly, one of Hanson's original arguments for prediction markets was that "insider trading" would drive prices closer to true probabilities. Insider trading was meant to be a feature, not a bug.
'Course, it's not necessarily very useful to get that kind of signal just hours in advance....
I'm away from my laptop for a few days, but you'd make a stronger argument by applying Bayes Rules.
Sure, maybe you expect 1 coincidentally suspicious trade per year but that doesn't mean this specific trade wasn't insider trading.
And if you think that this is so obviously insider trading and this person is obviously so sure, then why only bet 80k?
This is the crux of it. Nobody high up enough in the U.S. government to know about this in advance would have any reason to care about 320,000 dollars, and that is, I think, immediately obvious to any good-faith observer. Redditors have a long history of amplifying nonsensical conspiracy narratives as long as they are directed at public figures they personally dislike.
Having talked to a few of these redditors, I suspect that many don't themselves believe the claims they're making, and only make them because they imagine some hypothetical voter out there credulous enough to be convinced by them.
...it seems very hard to keep whoever is involved in organizing/planning the operation from knowing about it 24 hours in advance, and very unlikely that every such person is wealthy enough to ignore a quarter million dollars.
I expect that politicians issue controversial pardons primarily on the basis of making alliances rather than acquiring donations.
For example, the pardon of the Weathermen by Bill Clinton in 2001, which was not exactly popular, was not because of their prospective future donations (though many of them received well-paying jobs after being freed), but because they would be reliable political allies in the future.
Pardoning Juan Orlando Hernández isn't going to advance Trump's political interests in any way, ever. This is a foreigner who has no influence with anybody Trump might want to please, and isn't just unpopular with Trump's opponents, but with his base. Pardoning Changpeng Zhao might please a few crypto bros, but is still surely a net political loss. What power or influence does Trump gain from pardoning Henry Cuellar? He's not going to be reelected to anything.
I suspect Bill Clinton pardoned the Weathermen at least in part to send a signal to other people who might be allies, and also to make a point about their actual cause. Yes, there's usually a political component.
Trump has also issued pardons just to reward people he thinks of as allies, or to send messages to allies. Obviously not every January 6 pardonee paid Trump anything. He probably also pardons people just on a whim sometimes. And it's going to be harder to convince him to issue any given pardon if he sees it as "controversial".
Also, to be fair, it's not necessarily the case that the payments are going to (Donald) Trump personally. I overstated that. The money is more likely ending up with family members and others who can get in front of him and manipulate him into pardoning people. They may not mention the money to him; it'd be more effective and deniable just wind him up about what a raw deal person X got in some "witch hunt". He's probably not acute enough to ask about money. Practice the script and you should get a really good success rate. So I should have said that people "that close" to Trump sell pardons, not that he does so himself.
I was wrong about the amount, too. I'd seen an estimate of $567,000 (or $576,000?) for one pardon or another (don't remember which one), but apparently the Wall Street Journal sets the low end price at about a million dollars.
To be clear, these are not "donations". They're bribes. And Trump does not operate within the limits traditionally observed by "politicians" in general, not even approximately. Yes, you can point to some past President who's done something analogous to almost any given thing Trump has done, but Trump does them all, and at larger scale and with less attempt at finding excuses.
Disagree. If you earn a few millions or so a year, a few hundred thousand dollars quick and easy is still a nice sum to get for quasi free. Plus not very difficult to imagine that some not extremely high up people likely enough had hints as to what they might be directly involved with soon.
FWIW empirical example: A few years ago the super well regarded head of prestigious Swiss National Bank had to go because of alleged dollar/franc insider trading (executed by his wife via arts) when questions of down-pegging the value of Swiss franc to weaker EUR was a daily question with gains of - if I rmbr well - a few ten thousand dollars or so from the trade.
Crosspost from substack
So, if you haven’t heard the news, America deposed Maduro, and a fresh polymarket account bet on it happening and made ~$320k in profit.
Seems suspicious right! And yeah! The media, expectedly, went hogwild.
And look, I agree, I smell the same stench all of you do, but that doesn’t mean that this is not an “obvious case of insider trading”, as some twitterers, redditors, youtubers and even news outlets have claimed. Today I want to make the case that this is not an obvious conclusion!1
Full story of the polymarket account
The account bought shares in 3 prediction markets:2
The first market was resolved to yes, since well, he’s out. This is where the majority of the profits were made.
The others have not been resolved yet. Yet this person sold! If this person had perfect information, as has been suggested, it would be very irrational to sell these shares before the market resolves.
Also, notice the rates at which he bought. It’s not like polymarket broadly believed this to be impossible at all. 10 cents means that the market thinks the odds of this happening are around 10%. You could explain this with even more insider trading. But maybe not! Maybe, in some ways, a lot of the signs were quite obvious.
The above quote is from december 31st.
And if you think that this is so obviously insider trading and this person is obviously so sure, then why only bet 80k? I can’t really imagine a guy close enough to trump that he would have this amount of intel yet not have more than 80k in the bank to gamble with. And I don’t think the argument of “any more would be suspicious” really holds either here, betting $800k or $80k is about as suspicious, at the very least, the wins would outpace the odds of trouble.
I think if what we were seeing was genuine insider trading, it would likely look a lot more like “buys shares at $0.01 way in advance for oddly specific date”, sells when market resolves. And as I said, that’s not what happened.
Now, why is it a fresh account? I don’t know! But again, it’s not immediately obvious that “this is a fresh account” ∴ “covering up insider trading”. It could be someone making that trade that doesn’t want to be seen doing it publicly, for personal reasons. Or just someone using polymarket for the first time!
Edges are naturally weird
An “edge” is information in the market that your competitors don’t have access to, or haven’t discovered. This is what those people at jane street do all day. They find edges and exploit them.
Anyone working in finance will tell you that getting an “edge” can be very bizzare stuff. Things like how shadows cast on oil barrows (I think), tracking the number of pizzas going to the white house, etc…
It’s definitely possible that this person had some sort of edge, without it having been insider trading.
An estimate
Now, let me be a nerd for a minute alright, there’s a theorem for this! And in this specific case, we don’t have to vaguely allude to bayes theorem, we can actually run the numbers for once!3
So, 4 suspicious things happened here at once! I’ll make conservative estimates for the probability of all of them.
Someone
So, even in a world with zero insider trading, how often would we expect to see something like this?
In other words, even with zero insider trading, you should expect about one eerily perfect-looking trade per year.
Not impossible!
Conclusions
There are many good arguments for this being merely a coincidence. Not every suspicious polymarket account is insider trading.
That being said, do I think it was insider trading? I mean, probably, the trump administration has shown that they care way less about this sort of behavior. But on the whole, I’m not dismissing the null hypothesis here. Nothing ever happens.
1
This post could have been way longer, feel free to add nuance in comments, but I have exams right now, so I mustn’t get nerdsniped
2
much more detective work to be done here, feel free
3
using bayes with a prior for insider trading is probably better, but I cba today, as I said, exams.
4
imperfect if there was actual insider trading, but polymarket is just very good otherwise, so hard to decide probability in a different way.
5
Notice how he didn’t outright win the other 2 markets by the way!