Liam Donovan's Shortform 2020-10-26T00:24:17.772Z


Comment by Liam Donovan (liam-donovan-1) on My Journey to the Dark Side · 2021-05-10T02:41:05.697Z · LW · GW

Hopefully it's not too late to try to keep the focus on the fun puzzles, etc! There really does seem to be an alarming amount of craziness floating around LW, along with the constant weird attempts to explicitly model things that we evolved to understand instinctively (eg most aspects of social interaction). Reading that stuff slightly negatively affected my mental health despite thinking it was mostly silly -- to the extent it's taken seriously it seems like it could have more substantial negative effects. 

Comment by Liam Donovan (liam-donovan-1) on Open and Welcome Thread - April 2021 · 2021-05-02T19:18:36.724Z · LW · GW

If anyone wants to get money onto Polymarket (real-money prediction market with no limits, no fees, and a wide variety of markets), I can facilitate that for free. Send me cash or crypto and I will send money directly to your poly account. As a heavy polymarket user I'm somewhat sad more LW people aren't taking the opportunity to bet on their beliefs, so I'd like to make it as easy as possible for anyone interested. 

Comment by Liam Donovan (liam-donovan-1) on Violating the EMH - Prediction Markets · 2021-05-01T03:37:20.925Z · LW · GW

What prediction markets are liquid enough for a fund to make sense? (unless you were just referring to the crypto trading part?)

Comment by Liam Donovan (liam-donovan-1) on Scott Alexander 2021 Predictions: Buy/Sell/Hold · 2021-04-30T20:21:07.227Z · LW · GW

Risk neutral pricing is always a danger when trying to make inferences about real world probabilities based on market pricing, but it's usually a negligible one because participants in current prediction markets are generally speculators with no built-in exposure to the underlying asset, or ability to hedge against other markets.

 On the other hand, implied probabilities from options pricing can differ significantly from real world probability, because any participant in the options market can hedge their position against the underlying asset.

"In all the examples we're talking about, those risk premiums are tiny relative to the numbers involved so they don't make a significant difference to how we should be calculating the "market implied" odds." What evidence do you have that this is true? Your post is taking risk neutral probabilites from the market + your own opinion that risk neutral is similar to real world, then presenting that as the "market probability", which is very misleading. 


Edit: Maybe a better framing is that in order for option probabilities to give us a ~real world pdf of asset price at a given time, the asset needs to be approximately a martingale from now to the time in question. Many people would strongly disagree that BTC/ETH are even approximately a martingale on this time scale (they think there's large positive drift).  You are making a strong claim that is contrary to the view of many or most of the top crypto traders in the market, and yet you don't make this clear but instead claim it's a "market probability", with the implication that people should defer to it unless they have strong domain knowledge. 

Comment by Liam Donovan (liam-donovan-1) on Scott Alexander 2021 Predictions: Buy/Sell/Hold · 2021-04-30T01:24:51.378Z · LW · GW

I'm happy to; no commission needed. If anyone else wants to get money from fiat into polymarket easily with no fee, just let me know

Comment by Liam Donovan (liam-donovan-1) on Scott Alexander 2021 Predictions: Buy/Sell/Hold · 2021-04-29T07:53:11.444Z · LW · GW If you want to, you can in fact bet that Netanyahu will be PM on June 30th at 30c

Comment by Liam Donovan (liam-donovan-1) on Scott Alexander 2021 Predictions: Buy/Sell/Hold · 2021-04-27T21:45:57.905Z · LW · GW

This isn't really a meaningful explanation for why risk neutral vs real world is meaningless? To me "the credence I have that something happens" is actually a meaningful, important number that is by definition different from the risk neutral price. You can argue that all market probabilities may deviate from real-world probabilities in some way, but that doesn't make real-world probability meaningless! 

Comment by Liam Donovan (liam-donovan-1) on Scott Alexander 2021 Predictions: Market Prices · 2021-04-27T21:16:27.913Z · LW · GW has a market for "California Governor on 12/31/2021", which should function as a great proxy for the chances of Newsom being recalled. They're quoting .0625@? for the chance of Newsom not being governor on 12/31 (they accept bets on Newsom remaining governor, but not on Newsom being removed as governor, thus the "?")

Comment by Liam Donovan (liam-donovan-1) on Scott Alexander 2021 Predictions: Buy/Sell/Hold · 2021-04-27T21:08:42.571Z · LW · GW

You think there's only an 80% chance the olympics happen? This is a bit of a tangent but I'd love to hear why, since I have 100k+ shares of OLY2021 on FTX and haven't heard a convincing argument for the odds being below 90%.

re options, presumably Zvi is using the real world measure, which you can'treally infer from options prices without making a lot of dubious assumptions. Can you elaborate on how/why Zvi is "off the market forecast"?

Comment by Liam Donovan (liam-donovan-1) on Scott Alexander 2021 Predictions: Buy/Sell/Hold · 2021-04-27T21:04:37.331Z · LW · GW

Cumulative cases are still much lower, right? I assumed that "case count" meant cumulative cases, but it sounds like you're interpreting it as daily cases, which would explain our difference. Given that Scott only gives 50% chance it seems much more likely that he meant cumulative cases too imho

Comment by Liam Donovan (liam-donovan-1) on Scott Alexander 2021 Predictions: Buy/Sell/Hold · 2021-04-27T04:02:39.470Z · LW · GW

Can you elaborate on why India's cases being higher than the US is an instabuy to 80%? I haven't given it any thought but it seems like that would require a pretty big increase in cases there?

Comment by Liam Donovan (liam-donovan-1) on Tales from Prediction Markets · 2021-04-16T04:50:26.370Z · LW · GW

Because mr co2 guy was clearly making a -EV bet that happened to pay off this time :)

Comment by Liam Donovan (liam-donovan-1) on Speculations Concerning the First Free-ish Prediction Market · 2021-04-04T02:21:00.540Z · LW · GW

FWIW FTX allows you to bet on its prediction markets on margin with a tokenized version of the S&P 500 as collateral, which accomplishes exactly what you want to accomplish here

Comment by Liam Donovan (liam-donovan-1) on The EMH is False - Specific Strong Evidence · 2021-04-02T07:15:40.148Z · LW · GW

markets that easily allow you to make tens of thousands of dollars with nearly no risk. 

Back during November-January, FTX had a contract called TRUMPFEB that gave  ~risk free ~15% returns in 2 months, up to millions of dollars (by betting against Trump to be president in Feburary). Right now the FTX OLY2021 market comes pretty darn close -- you can bet hundreds of thousands of dollars on the Olympics happening at 76c. There is obviously the risk of the Olympics not happening, but I haven't seen a good case for that risk being under 10%, making this a fantastic trade in expectation. 

Comment by Liam Donovan (liam-donovan-1) on Violating the EMH - Prediction Markets · 2021-04-02T07:08:13.572Z · LW · GW

Just commenting to say this is a great post and I'm surprised it hasn't gotten more engagement (maybe it's so good there's nothing else to say)

Comment by Liam Donovan (liam-donovan-1) on Exploiting Crypto Prediction Markets for Fun and Profit · 2021-03-20T18:44:50.352Z · LW · GW

The fees are always 2% of the transaction value; i.e. numShares*avgPrice. The trick I described lets you substitute (1-avgPrice) when that would be cheaper . I should've been much clearer about this initially; I forgot that most people here probably don't know the polymarket fee structure. 

Comment by Liam Donovan (liam-donovan-1) on Exploiting Crypto Prediction Markets for Fun and Profit · 2021-03-20T07:49:08.450Z · LW · GW

You still pay fees, they're just lower. Most sharps on polymarket do indeed do this

Comment by Liam Donovan (liam-donovan-1) on Exploiting Crypto Prediction Markets for Fun and Profit · 2021-03-18T05:15:54.545Z · LW · GW

I don't know about Omen, but on Polymarket you can mostly avoid this issue by minting a complete set of shares and selling the cheaper side. In your example this would only cost you $0.0004 in fees to acquire shares at $0.98. The easiest way I know of to mint complete shares is to add and then immediately remove liquidity

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2021-02-20T03:51:29.233Z · LW · GW

But he's been a professional politics gambler for years now, which seems like much stronger evidence for evaluating his calibration than the results of one election cycle?

Comment by Liam Donovan (liam-donovan-1) on The Pyramid And The Garden · 2021-01-15T07:59:50.501Z · LW · GW

But that line has an infinitesimal chance of intersecting with any point as significant as the Great Pyramids? Scott's argument about Uganda and Tanzania seems wrong for the same reasons 

Comment by Liam Donovan (liam-donovan-1) on Ongoing free money at PredictIt · 2021-01-09T08:19:04.214Z · LW · GW

I'm probably too late here but if anyone's wondering, PI will send you a 1099-MISC with $8.57 of income, and that's what you have to pay taxes on. (well, they only send the form if you make over $600, but that doesn't change your tax liability).

 The $85 you deposit definitely does not count as income, regardless of whether you itemize deductions. Regarding the discussion below, the IRS does not treat PI winnings as gambling income, but rather as 1099-MISC (other) income.

(source: have paid taxes on PredictIt winnings)

Comment by Liam Donovan (liam-donovan-1) on DanielFilan's Shortform Feed · 2020-12-31T21:04:23.300Z · LW · GW

Shor is very open about the fact that his views are to the left of 90%+ of the electorate, and that his goal is to maximize the power of people that share his views despite their general unpopularity. 

Comment by Liam Donovan (liam-donovan-1) on Real-Life Examples of Prediction Systems Interfering with the Real World (Predict-O-Matic Problems) · 2020-12-07T20:40:29.099Z · LW · GW

For anyone interested, the keyword to read about things like this in the economics literature is "performativity"

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-12-07T06:10:32.805Z · LW · GW

FWIW I'm 99% sure RJ made money from this election, and I'm 50% sure he made over 90k. Why would you update against someone who has consistently made enormous amounts of money betting on his beliefs?


Edit: looks like I was a bit overoptimistic about his profits but he supposedly did make a decent amount

(keep in mind he lies all the time so this is only noisy evidence)

Comment by Liam Donovan (liam-donovan-1) on Kelly Bet or Update? · 2020-12-07T06:03:41.277Z · LW · GW

reasonable expectation of negative outcomes if you lost your bankroll

One of the necessary conditions for the Kelly Criterion to be optimal is that losing your bankroll is infinitely bad, so a reasonable expectation of negative outcomes isn't enough to deviate from Kelly.

Comment by Liam Donovan (liam-donovan-1) on Kelly Bet or Update? · 2020-12-07T05:57:51.475Z · LW · GW

Isn't the point of "bet or update" is that you should be either updating on your counterparty's credences or taking a bet that your counterparty thinks is +EV? Here, the player is updating upon observing the host point to the door, not on the bet itself. 

 After the player has updated on the host pointing to the door, you can require the player to take the offered bet or update as normal. Assuming the host is offering the bet as a function of his credences*, the player should update from P(gold) = 1/3 to P(gold) ~= 0, because the player knows that the host knows where the gold is.  


*as opposed to e.g. offering the bet to provide entertainment to the audience. If the host doesn't vary the terms of the bet based on his private knowledge of where the gold is, then the player should bet rather than update, because the bet offer doesn't transmit any info about the host's credences or the actual state of the world. 

Comment by Liam Donovan (liam-donovan-1) on Anti-EMH Evidence (and a plea for help) · 2020-12-07T05:13:36.741Z · LW · GW

Can you explain how the leverage system works on FTX for TRUMPFEB? The calculator on the site seems to produce bizzare results. 

Comment by Liam Donovan (liam-donovan-1) on Pascal's Mugging: Tiny Probabilities of Vast Utilities · 2020-12-02T03:21:32.666Z · LW · GW

You've actually met the first mugger so he's more likely to exist than a hypothetical counter-mugger you've never seen any evidence for

Comment by Liam Donovan (liam-donovan-1) on Kelly Bet or Update? · 2020-11-03T07:04:55.119Z · LW · GW

yeah maybe the best framing is fractional kelly is doing 2 things -- updating your beliefs based on fact that the market is offering you these odds, then betting full kelly based on your new posterior belief. 

Comment by Liam Donovan (liam-donovan-1) on Liam Donovan's Shortform · 2020-11-03T06:53:52.732Z · LW · GW

updated as of 11/2  around when 538 forecast frozen

Comment by Liam Donovan (liam-donovan-1) on Kelly Bet or Update? · 2020-11-03T03:46:14.013Z · LW · GW

I'm not sure of the math OTTOMH but isn't fractional Kelly equivalent to having some credence that your model is correct and some credence that the market is correct? 

In your example, it seems like you're assuming that the event has a 0% chance of occuring in the worlds where your model is wrong, but that doesn't make a lot of sense -- the worst case from a betting perspective is that the true odds are equal to the odds that the market assigns, because that means that any bet you make will be -EV.

Here's an interesting case study for fractional Kelly in real world betting scenarios 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-27T20:27:01.960Z · LW · GW

I mean yes, clearly if you believe the Economist and 538 models are reasonable, then the TX bet isn't +EV. My point is that the models are clearly unreasonable for the reasons listed above, and the bet is actually extremely +EV. 

Comment by Liam Donovan (liam-donovan-1) on Liam Donovan's Shortform · 2020-10-26T00:24:18.416Z · LW · GW

Since I've been talking about the flaws with the 538 model and betting markets I figured I should post my own predictions. I'm pretty confident these will beat both 538 and the betting markets by a substantial margin (using a metric like log loss)

Comment by Liam Donovan (liam-donovan-1) on PredictIt: Presidential Market is Increasingly Wrong · 2020-10-25T23:27:49.072Z · LW · GW

FWIW,  understanding is that the 538 model is meant to account for the chance of catastrophe but not the chance of electoral interference; i.e. it's meant to model the result of a hypothetical fair election held on Nov. 3. 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-25T22:55:59.031Z · LW · GW

Neither model takes into account any of these factors, and indeed their discrepancy with the markets are much smaller. 

65% just comes from my estimate of the fair value of a TX biden contract, which comes from...whatever internal process generates probabilistic credences. 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-24T22:47:32.064Z · LW · GW

There's plausible arguments for Trump being favored (he is currently ahead in the polls, after all), but I can't think of any good arguments for him being at  ~75c. 

EDIT: Trump and Biden are now tied in the 538 TX polling average

Comment by Liam Donovan (liam-donovan-1) on PredictIt: Presidential Market is Increasingly Wrong · 2020-10-24T20:05:49.915Z · LW · GW

There's still plenty of proxy markets on PredictIt where you can bet on Biden, like "will the winner of the {MA,SC,TX} Democratic primary win the election?" or "Will the next VP be a woman?". 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-24T18:47:37.286Z · LW · GW
  • Polling shows Biden and Trump very close in the state
  • polling in Texas systematically underestimates Dems with Latinos
  • Turnout in TX seems to be much higher than past years, which is great for Dems because people who didn't vote in 2016/2018 are disproportionately young/nonwhite
  • Dems nearly won in 2018 despite depressed Latino turnout 
Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-24T18:45:20.986Z · LW · GW

Prices have been biased towards the GOP ever since 2016, and I'm pretty sure it's because most of the Trump bettors in 2016 were GOP partisans rather than sophisticated analysts. "Maybe they just had a good heuristic to do with preference falsification?" what does this mean? 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-21T04:59:50.207Z · LW · GW

He's been a pro political bettor for years, so if he was betting based on biased odds he'd have gone broke a long time ago. It's just a fact that Trump is extremely overpriced, and his share price is being propped up by extremely -EV bettors; him using that as an excuse to attack Trump supporters doesn't undermine the quality of his analysis. 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-19T06:00:03.447Z · LW · GW

That's a good question; I assume it's because they don't have enough domain expertise to make a confident judgement about the market, and they have more valuable things to do with their time than acquire that expertise. 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-19T03:20:35.198Z · LW · GW

again, watch out for rollover requirements before taking signup bonuses! Unless you're a prolific sports bettor it's almost certainly a bad idea to take the bonus. 

Comment by Liam Donovan (liam-donovan-1) on PredictIt: Presidential Market is Increasingly Wrong · 2020-10-19T03:05:11.950Z · LW · GW

They are not legit at all; use instead. (also every bookie has insane rollover requirements for signup bonuses)

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-18T23:54:29.576Z · LW · GW

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. 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-18T23:37:50.077Z · LW · GW

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 argument is that polling systematically underestimates Democrats with Latino voters in Texas, and that the electorate will be much more favorable to Democrats than in 2018, when Dems lost the Senate race by ~2.5 points in a worse national environment. 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-18T23:33:55.253Z · LW · GW

This model seems reasonable, but I think bettors should mostly ignore the possibility of rejected mail in ballots, because the effect is extremely uncertain and around the same magnitude as many other idiosyncratic factors that should mostly wash out. For example, if there's severe weather or an outbreak of COVID on election day in a crucial swing state, that will hurt Trump much more than Biden because a much greater proportion of his voters are voting by mail (essentially the "rejected in person ballots" effect you mention). 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-18T23:27:17.982Z · LW · GW

For what it's worth, 538's final predictions have (narrowly) outperformed betting markets in 2008, 2012, 2016, and 2018 (I haven't looked at 2010 or 2014). Also, almost every consistently profitable politics bettor is putting massive bets on Biden this cycle, and my impression is that they either believe 538 is ~accurate or biased in favor of Trump. As an example, here's the twitter account of one of the best professional politics bettors around; he believes Biden has a ~96% chance of winning. 

Comment by Liam Donovan (liam-donovan-1) on Bet On Biden · 2020-10-18T23:22:11.314Z · LW · GW

This is total misinformation; mail-in rejection will probably be cancelled out by increased turnout from low-propensity voters (it's much easier to vote by mail than to vote in person). In any case, the effect of a 1-3% rejection rate is minimal and indistinguishable from general noise/uncertainty. 


Most of the claimed "GOP voter suppresion" either has a minimal effect or hurts the GOP, because the nuts and bolts of election administration are implemented on a county level. In most states, urban counties have the resources and inclination to counter the voter suppression, while rural (predominantly GOP) counties do not. 

Comment by Liam Donovan (liam-donovan-1) on Covid 10/8: October Surprise · 2020-10-11T01:01:53.900Z · LW · GW

FWIW I find it quite annoying/confusing too

Comment by Liam Donovan (liam-donovan-1) on Limits of Current US Prediction Markets (PredictIt Case Study) · 2020-08-03T09:13:49.858Z · LW · GW
  • a lot of the costs in the article are on net profits rather than gross profits (eg. taxes, withdrawal fees, risk of PI going under). I didn't include taxes or withdrawal fees in that figure, but it doesn't change the order of magnitude (and ofc it's not clear yet what average tax rate I'll pay this year)
  • you can make far more on a contract by trading on swings in addition to waiting for the final outcome (e.g. buy "Yes" at 20c, sell at 80c, then buy "No" at 20c and sell it at 80c).
  • There's a large number of contracts to trade on for a single important event (e.g. to bet on Trump winning, you can bet $850 that Trump will win the presidency, $850 that a Republican will win the presidency, $850 that a Democrat will not win the presidency, $850 that Biden will not win the presidency, $850 that the next VP will be a man, and so on). They're usually not identical, but correlated strongly enough that you can get a lot of exposure to the event. There's also bracketed markets on e.g. the margin of victory in an election, where each bracket (e.g. Dems win by 0-1%) is a separate contract. A single MoV market might have 10 contracts, so you can bet thousands on it (and they tend to be volatile, so you can easily have 5 figure total turnover).

Overall, PI seems to be a bizzare violation of EMH where you can extract large amounts of money for relatively little time/low skill