At this point, for many tax situations, you cannot rationally believe both 'Nate Silver is credible' and 'I should not be betting on Biden'. If you have any trust in Nate you cannot think Biden is below ~80% to win. You can get 'Biden' for 65-66c on Predictit. Notably, there are several de facto copies of the same bet (Female VP, Dems win presidency). Even with fees, you are making a lot of stochastic money. Your capital will probably not be held up that long.
If you are outside the USA or [wink wink] you can get even better odds. There are many places you can get implied odds of 62-63%. Many sportsbook offer election odds. You can also use bet with crypto on sites like Polymarket. This bet gets worse if you are paying tons of income tax and cannot offset losses. But this is a very good bet for lots of people.
I edited in an image of the rolling polling averages so people can judge this for themselves.
Here is another good analysis of why we should be confident in Biden.
In general, I think Rationalists should be a lot 'louder' about their advice when they are sure. For many tax situations, this is a complete slam dunk. I really wish rationalists had been louder about similar advice in the past when I could benefit.
Contest Entrants Think Trump is Going to LoseOf the 98 entries, only six said that the Democratic candidate was under 50c to win the presidency. In fact, the median predicted probability for the Democratic candidate (hereafter Biden, for brevity) among contest entrants was 87%; notably, the median probability given by the models out there is also 87% (though Nate Silver has yet to release his and based on his fights with G. Elliott Morris it’s probably not going to come in very high).This confidence in Biden (he is “Likely” to win the presidency, in the parlance of verbal handicappers) isn’t shared by the markets. Both BetFair and PredictIt price Joe in the low 60s, suggesting that the presidency “Leans” Biden (the price ranges on PI depending on the market you’re looking at). Even Silver thinks that’s too low: “I don’t think people realize how dumb and sometimes even irrational the prices are at political betting markets as compared to almost every other type of market (which is not to say other markets are always rational, either).” and “Too low on Biden.”
Contest Entrants Think Trump is Going to Lose
Of the 98 entries, only six said that the Democratic candidate was under 50c to win the presidency. In fact, the median predicted probability for the Democratic candidate (hereafter Biden, for brevity) among contest entrants was 87%; notably, the median probability given by the models out there is also 87% (though Nate Silver has yet to release his and based on his fights with G. Elliott Morris it’s probably not going to come in very high).
This confidence in Biden (he is “Likely” to win the presidency, in the parlance of verbal handicappers) isn’t shared by the markets. Both BetFair and PredictIt price Joe in the low 60s, suggesting that the presidency “Leans” Biden (the price ranges on PI depending on the market you’re looking at). Even Silver thinks that’s too low: “I don’t think people realize how dumb and sometimes even irrational the prices are at political betting markets as compared to almost every other type of market (which is not to say other markets are always rational, either).” and “Too low on Biden.”
Note: My claims are completely orthogonal to whether Biden should win. Rationalists, in general, have some faith in Nate Silver and similar analysis. This post is about the logical conclusion of that faith. Please do not discuss the merits of which candidate is better for the country.
edit: At this point if anyone is reading and can access international markets the 'safe' line is to buy both 'pop vote' and 'Biden'. Pop vote is safe so you can 'hedge' Biden bets with a safe +EV pop vote bet. This way you win money unless Dems lose the pop vote (extremely unlikely).
I have bought $400 worth of Trump No contracts on PredictIt which will pay off if Trump loses. The price as of this writing is 61 cents for a contract that pays $1 if Trump loses.
Notably, the 538 prediction doesn't include a number of outside factors, primarily around mail-in ballots and voter suppression. 538 has already talked about the problems with mail-in ballots being rejected, and there are also concerns about not having all of the ballots counted before the cut-off point where they have to finish counting. Republicans have also made it harder for Democrat-leaning bases to vote. These are factors that will hurt Biden more than Trump. All those links are to 538, and there are other articles on the site about those same issues. If you believe in 538's model, you should probably also believe in their articles that indicate that these outside factors will be important. If you don't believe in the articles, then why do you believe in their model?
Either way, this is not a clear case where the market is wrong.
Only the first article in the comment is by Silver, on whose expertise the original poster is basing his recommendation. That article doesn't discuss mail-in ballots or voter suppression, and in fact his main point is that the time remaining until election day (almost three months when the article was written) combined with uncertainties due to Covid-19 meant that the race was still open back then. Those considerations have much more limited force at present, when only 16 days remain, and Biden's lead has widened considerably.
If you've been at all listening to Silver recently, you'll know that he thinks his model probably underestimates Biden's chances. This shouldn't be surprising, since as Silver acknowledges, in this new version of the model he has made a special effort to build conservative assumptions into it.
In any case, I would encourage people hesitant to bet for Biden to resist the temptation of "throwing in a bunch of considerations" for why the models may be wrong, and instead try to calculate what the correct forecast should be in light of those considerations. For example, if you think mail-in ballots will be a big factor, try to estimate the magnitude of this ef... (read more)
I'm debating to what extent to write a detailed explanation, but
(1) yes the odds are insane at this point, and I felt the need to note this in my weekly Covid post. Trump is not 0% but he sure isn't 38%.
(2) the relative odds between the odds now, and the odds earlier in the year, are how you know the market is insane here. Nate's update from 71% to 87% reflects that Trump's position is obviously vastly worse than it was before, with less time to go, fewer opportunities for things to change, many votes in the bank and Biden several points farther ahead when the baseline was tightening. Yet the odds on Trump remain stubborn.
When I wrote my recent review of PredictIt prices, I thought Trump's odds were very generous but perhaps plausible. That's no longer the case.
If you have any trust in Nate you cannot think Biden is below ~80% to win.
If you have any trust in Nate you cannot think Biden is below ~80% to win.
That seems too strong. I'm assigning a 50% chance to Nate being the best authority on this, and a 50% chance to markets being the best authority. I still agree that betting on Biden has positive expected value.
My main reason for doubting Nate is the likelihood that the pandemic will have strange effects on turnout. I'm unwilling to bet on which direction that will surprise people.
Hey OP -
Just want to say thank you for this post. This along with the failure of the rationalist community to buy bitcoin led to me betting $150 AUD on Biden, and Sportsbet Australia called the election for him already (no, I don't understand why either - I guess the publicity), so I got $235 in my bank account now (win: $85 AUD).
I would not have done this without your post.
I just made my account but I want to remind everyone that you cannot make inferences on how good your prediction (or how good of a bet this was) based on one data point (how this election turned out). If you want to dig deep into the odds that every state was given, you can start to make a case, but anyone with the gut reaction that since the election was close, this was a bad bet, are wrong.
In general I'm more inclined the trust the market value than any particular prognosticator. Why shouldn't I be?
edit: The arguments here have convinced me to bet some money on Biden (on Betfair), but today the odds are still moving against him (down to just under 60% on electionbettingodds.com). This does leave me rather confused - surely the "dumb money" can't outweigh the "smart money" so heavily? Especially not on Betfair which doesn't have PredictIt's limitations.
Yeah, I think the OP's argument requires a good explanation of why the markets have failed to adequately price in Silver's prediction. I'm not saying markets are always right and impossible to beat no matter what, but the EMH is a pretty good default starting point, requiring strong evidence to overcome in any specific case. 'I trust this guy's public prediction, based on equally public information about his methods and track record' doesn't seem nearly enough.
The efficient market hypothesis is an overrated and dubious hypothesis when applied to the stock market (a market which could plausibly have the necessary conditions for EMH to be reasonable), betting market's like predictit though are nothing like the stock market and significantly more inefficient. The necessary conditions for a market to be efficient require the market to be heavily/majority used by profit maximizing investors and this just isn't the case for most gambling markets. In general betting on a gambling market is a much worse idea than betting on stocks, since the transaction costs are a lot higher and you are betting on a zero-sum game instead of a historically positive-sum one. That being said there are some notable examples of the market completely failing. Take the Mayweather vs McGregor fight where the best boxer in the world for a decade only had a -400 edge against someone who had never had a professional boxing match (the line started at a much more reasonable -2500). If I had more money back in 2017 I would have bet that line heavily. Just because you are betting on a usually subpar market doesn't mean there aren't still good deals to be had on occasion.
Andrew Gelman, super legit (imo) statistician who built The Economist's model, criticizes 538's model for getting correlations wrong:
The Economist's predictions are even more favourable to Biden, though:
For whom is betting for Biden actually a good idea? Can non-US citizens effectively participate? What when you factor in transaction costs? What are my expected gains (are they high enough to register an account and go through the hassle)?
Do you have an estimate of expected profit per $100 bet (for a few of the most plausible scenarios)?
My impression is that PredictIt is +EV is you make lots of not-too-correlated bets so that your losses can offset your wins (though maybe not by enough to be worth the time & effort), but it's generally -EV (or at best barely +EV) if you deposit to make a one-off bet where you have to pay fees & taxes on your winnings (and don't get any tax benefit from your losses).
Related: Limits of Current US Prediction Markets (PredictIt Case Study)
Is there anything a person living in Germany can do other than place a bet via someone else?
Bet 100% of your upcoming charitable donations. Even if you are loss averse the charities are not. Donate the winnings if the bet pays off.
I concur with this. In my case, I set aside some amount of money I was comfortable losing, calculated the Kelly bet based on the expected win, and bet some amount on Biden. I used Betfair, which is available to Europeans.
Some commenters mention the EMH. As counterevidence, I present that Betfair is offering even odds that Biden will win at least one state Trump won last time. (The 538 model gives 96% to this) (This was wrong)
I got heavily downvoted for suggesting that Nate Silver's credibility was not strong enough to make this a good bet.The most you could say at this point (late in the night on election day) is that it looks like the election is very close. This suggests to me that those people saying that betting on it at 65% odds for Biden was a huge steal, were overconfident. People were quoted who thought Biden's P(win) was 96%. I am interested in any suggestions about what went wrong. I can't think of a lot of edifying reasons. 1. Rationalists don't win2. Dunn... (read more)
We are in a scenario Nate Silver explicitly described:
But what’s tricky about this race is that — because of Trump’s Electoral College advantage, which he largely carries over from 2016 — it wouldn’t take that big of a polling error in Trump’s favor to make the election interesting. Importantly, interesting isn’t the same thing as a likely Trump win; instead, the probable result of a 2016-style polling error would be a Biden victory but one that took some time to resolve and which could imperil Democrats’ chances of taking over the Senate. On the flip side, it wouldn’t take much of a polling error in Biden’s favor to turn 2020 into a historic landslide against Trump.
As of writing this comment Biden has several paths to victory and is heavily favored to hit at least one. I think he is about 75% to win at this point, despite all the bad news. We are in a world where Biden might win despite losing all of PA FL OH NC. Very little had to go right for Biden to win. Neither myself nor Nate Silver made any statements saying the election would definitely be a landslide. I told people to bet on Biden to win not to bet on Biden winning in a landslide. I will say there were some people pushing more aggressive Bets (Rainbow Jeremy comes to mind) and we should definitely update against their point of view. But Nate remains credible.
From the blog of Andrew Gelman, one of the authors of the Economist's model:
As noted above, I think that with wider central intervals and wider tails we could lower that Biden win probability from 96% to 90% or maybe 80%. But, given what the polls say now, to get it much lower than that you’d need a directional shift, something asymmetrical, whether it comes from the possibility of vote suppression, or turnout, or problems with survey responses, or differential nonresponse not captured by partisanship adjustment, or something else I’m forgetting right now.
Is there a simple guide on how to bet on Biden if I already have Ethereum and I don't live in the US? It seems I can do it on Augur and FTX, but both platforms seem very complicated.
Practical question: Say I were willing to break the law. Is there an easy way to bet on BetFair from the US?
If you have BTC lying around and trust mybookie you can get 1K free if you wager enough. Getting 1K free on top of 10K is a lot of value. The site is a lot worse without BTC.
Anyone with available capital interested in making money from this election should spend ~1hr researching TX, come to the accurate conclusion that Biden is favored there, and bet accordingly (buy Biden in TX, Dems to win TX senate race, Biden electoral college margin >210 EC votes, etc). The expected returns are much higher than betting on Biden to win overall, because Biden TX is currently trading at around 30% to win TX, when fair value is ~65%. These twitter feeds from (semi)pro politics bettors are a good place to start: 1, 2.
The key arg... (read more)
I'm not a fan of investment advice on LessWrong. If these markets are significant (they aren't - there's just not that much money changing hands, and the fees and terms make it unattractive to pro bettors), there's something to explain, before advising to exploit.
I think you're well off the mark when you claim that "rationalists ... have faith".
This is extremely false; I know of multiple professional political bettors, and plenty more who make 5+ figures betting on election years. Also, PredictIt has $113m matched on the "Who will be the next president?" market alone, which is a lot of money by any reasonable standard...
The explanation for the mispricing is really simple: Trump supporters tend to think that the polls are rigged and he'll win, and Biden supporters tend to think the polls are off/Trump will rig the election/voter suppression will cost them the election/ etc etc so 90% of the square money is on Trump and there's not enough sharp money to balance it out. Elections are just too infrequent for biased bettors to lose money quickly enough that prices are efficient, and it doesn't help that Trump unexpectedly won the 2016 election, transferring a lot of money to biased bettors.