(2022-03-15) Krishnan How To Win Public Opinion The Vc Method

Rohit Krishnan: How To Win Public Opinion, The VC Method. One of the iron rules of the world is that if you're successful in any domain you feel you have the right to an opinion in every domain. But one particular form of opinion has been recently trending in the memesphere.

what does success look like, if you are in the opinion business?

cases where the one correct opinion is shown as the proof of how you're prescient, how your model of the world is accurate, how you're the one worthy of being listened to.

Because in the venture capital model of opinion making it doesn't matter that you're wrong often, only that occasionally you're extraordinarily right. After all if you had one Stripe in your investing portfolio it doesn't matter how many Theranoses you had.

It doesn't matter how many blunders you make in your opinions about [monetary policy, history, fiscal policy, geopolitics, covid, healthcare system] as long as you're right about one big thing.

Exhibit A for this in recent years is perhaps Scott Adams

in opinion making, in punditry, there is no metric to judge outsized successes against a portfolio of failures. You fall prey to errors on both sides - of misjudging the successes as luck on the high side and misjudging the failures as predictive of the quality of your mental model on the low side.

And here enters the solution to create just such a global accounting system. Prediction markets.

After about a decade or so of talking and writing about it, and more than three decades after the Iowa Electronic Markets launched, I still don't see them actually used much

What seems to be happening here is that the theory of prediction markets never seem to be fulfilled in practice.

Now there's an answer, which is as convenient as it is ideologically consistent, that it is being held back due to regulations.

Clearly regulations by itself did not stop it. Even Binance, which has gotten into some legal trouble recently, got to the same size as Coinbase or more before any consequences caught up with them.

And even if you think it's nothing but gambling, it should at least work in markets where gambling is legal, like the UK.

a few reasons that people have put forth on why we don't have an opinion utopia below.

The most valuable predictions are highly sensitive

This is Hal Varian's response, which essentially says any interesting prediction has a non trivial and privately valuable answer, which means that those with information don't want to make the answers to those topics public.

They are too easy to game

The costs of trading are too high

The trades we're interested in aren't the ones with demand

sports betting is one of the major areas that sees high volume. The global sports betting is supposedly in the hundreds of billions of dollars, and FanDuel and DraftKings both have around $30m of bets, which seems fairly trivial.

There's not enough liquidity in these markets

The market ecology isn't diverse enough

the only way to help calibrate individual expert opinions to know whom to pay attention to, and by how much, is to create some basic metric to judge everyone equally. To know who's playing the VC game (trying to get the one big thing right) Vs the Berkshire game (trying to get many things right).

This isn’t a choice between good and bad. They’re both extraordinarily valuable. Just as in the markets you need all risk appetites and return curves, in expert opinions too you need all possible correctness curves.