The stupidity of the Pentagon is appalling! they are making me agree with Hillary Clinton! Damn them!
Unless one also applies meta-analysis to the combined probability profiles. However, there are many problems in meta-analysis. Direct analysis can be pretty fine, but meta-analysis, if it is going to be rigorous, tends to be like making finger sandwiches with a pitchfork, a chainsaw, and a steamroller.
You are right, but for me this was one of those last straw moments where I just had a hard time defending the actions of the United States to friends of mine who have a bit of an anti US streak in them. Over the last few months I find myself becoming more and more appalled by the actions of the United States government.
Actually the fact that this seems to be scrapped seems to me that some of the things I like about the American people are still present.
Sure my reaction was purely viceral but that if that is the reaction to a fellow North American I imagine that there will be others who would find the idea even more infuriating.
This also sounds remarkably similar to an idea in John Brunner’s “Shockwave Rider” in which the likelihood of future events were predicted by a Delphi Oracle which were simply the massed opinions of random people, collected over something that was a lot like the Internet.
(It’s been years since I read the book so I may have some of the details wrong, but it does seem as though this idea has been around for quite a while.)
Although details of the now-defunct market were sketchy, I suspect it would have to be run something like the one at www.tradesports.com, which is pretty interesting if anyone here hasn’t seen it.
On a very fundamental level, I really liked the idea, but how it was going to be executed (again, given the sketchy details) seemed a bit off. Only allowing one thousand traders initially would have lead to a very thin market, meaning that participants would essentially be making bets instead of trading because it would be almost impossible to get out of a position of any size once entered.
I think it was a neat idea though. Whenever my mom or someone tells me not to buy a motorcycle because they don’t want me to get hurt, I always say, “Well, how much do you not want me to get hurt? I’m willing to auction off my right to buy a motorcycle on a yearly basis to the highest bidder.” I’ll of course be one of the bidders. I think that, properly executed, it could have been a good way to guage how much people feel that something will happen in a way that the participants couldn’t lie about (i.e., they could lie if you just asked them).
This smacks of the Enronification of the world. Enron was doing weather derivatives, hell why not terrorism futures? After all, terrorism is just another form of weather.
I just heard on NPR that the Pentagon has just shit-canned this whole project due to the public outcry against it.
This is all extremely interesting.
Let’s ditch the “futures” label for a minute and talk about the underlying financial reality. Except for the possibility of capturing so-called “insider information,” it seems to me to be like a form of insurance–participants in the futures project would have been amateur actuaries, handicapping the odds of a terror event.
The government is already providing terror insuance, using real actuaries, through its TRIA program. Here’s a fairly good explanation from a commerical insurer’s website.
Insurers who can’t qualify for TRIA are trying to do it privately. Actuaries are trying to sell “proprietary” formulas for the calculation of terrorist risk, and skeptical buyers are probing to get at the assumptions. The most skeptical skeptics cling to the idea that it is inherently impossible to predict terror risks because it asks you to imagine the unimaginable.
People feel kinda oogy about insurance morbidity tables too. The actuaries only care about death, disease and accidents, and it seems like a denial of individuality to say to a 50-year old white male in Madison, Wisconsin that he has a 50% likelihood of living to age 82 (made that up). We periodically see people raging about why women pay less for car insurance and life insurance than men, and why urban dwellers pay more for home and car insurance. I’m not the bad egg," they say. It is, in a way, a denial of individuality and and unwillingness to look at the specific details of a single case, a kind of “discrimination.” Nonetheless, it works financially from a 10,000 foot financial perspective. We don’t, however, accpet this in our interpersonal relationships and moral judgments. I think some people find it difficult to make the distinction.
Oh well, if you’re Net Exchange, at least they got their US$8 million in software development funds.
I’m sure they haven’t thrown out the databases or the software. It’ll show up in another incarnation - one day.
Collunsbury, I have to vociferously disagree with you with this one.
Osama is at least a multi-millionaire, even after the seizures. He can manipulate such speculation markets. What is to prevent him from orchestrating a massive misdirection of intelligence with this proposed futures?
Also, isn’t it bad enough that American Airlines was massively shorted before 9/11?
Why not just move it inside the NSA/CIA/FBI and company? Give each analysis X% of yearly bonus money to use within the framework. They won’t loose more than X% of their yearly bonus and given the accuracy of their projections they could make more.
It may also aid in identifying cross-department talents and in-depth experts. They’re supposed to be the “in-house experts” right? Why not use them that way?
I agree with Grey. It’s a great idea, but rather than excluding U.S. government employees, they should have started with them. This would be a fascinating way way to combine the huge amount of intelligence information available into an assesment that would, at least theoretically, properly value the entire universe of available informatiion and which would react quickly to new information.
Even better, you could expand it to the intelligence agencies in other countries and allow them to “place bets” as well. This could, potentially, be an outstanding early warning system. If, for example, August Disneyworld futures triple in price over a couple of days, that’s an excellent indication that something is going on that requires a closer look. The biggest problem with intelligence isn’t gathering it, it’s analyzing it. Markets can be quite excellent at processing huge amounts of disparate information.
I think you guys are missing the point of this market (other than Collounsbury, December, and a couple of others who ‘get’ it). This isn’t about people gambling and getting rich off of death. It’s an innovative and mathematically sound way to gather data that would otherwise not be found.
Futures markets like this have been cropping up all over the place where you wouldn’t expect them, helping to predict everything from network bandwidth requirements to presidential elections.
The whole point is to bring in diffuse information from many, many sources who wouldn’t otherwise bring their information into the public realm. For example, people like Collounsbury, who, by putting his money where his mouth is, would be able to transmit information that he has directly to the government through his choice of wagers.
Markets are tremendously efficient at filtering and transmitting information. When a person puts his own money on the line to purchase a future in something, he is aggregating and distilling all of his personal experience and transmitting the crucial part of it directly to the market. Others then react to the changes in price by using their own judgements, and information bounces around until a new equilibrium is reached which gives us meaningful information about the state of the ‘commodity’ being bidded. The idea of applying this to terrorism is brilliant - imagine people ‘outside the loop’, but with important knowledge about risks and vulnerabilities having a way to transmit that information efficiently.
Of course, the devil is in the details. It could be screwed up badly. But the idea is fundamentally sound.
A model for this kind of thing are the Iowa Electronic Markets.
Sigh. It was nice to see the DoD thinking out of the box and trying something truly innovative and intelligent. Too bad the idea will be scuttled by politicians looking to make political hay with scare phrases like, “They’re betting on death!”, and the kinds of knee-jerk responses we’re seeing in this forum.
Feel free.
Assertion. It is not at all clear what money remains in the hands of Osama. Wealth estimates were based off of his presumed share in family wealth and businesses, and his own, dating to the 1980s and early 1990s. There is really no factual basis to simply assert Osama remains a multi-millionaire. I suspect not. In any case, this may or may not be in liquid assets, whatever wealth he has. Regardless, it is irrelevant to the issue.
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He can manipulate such speculation markets.
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If the market allowed open participation. As described it was going to be a bounded market. Limited number of participants, I would further presume they would be vetted.
Market oversight, this is a red herring.
Was it?
I never saw a rationale analysis of the net long-short positions after 11 September. There was much heated speculation, and off the cuff assertions regarding levels of activity, but much like Osama’s fabled wealth, it strikes me there was much exageration.
Actually, if there was a proper analysis of the situation, I’d very much like to see it, it would be interesting. Without a good statistical analysis, I take with a grain of salt the anectdotal reports.
Well at least someone gets it.
True, now I think they misstepped in two areas, first the choice of lurid (if appealling to whomever wrote them) examples, and second the focus on discrete events such as an assasination.
I think the moral hazard issues involved in having money on things like offing an individual are more than slightly problematic, and certainly terrible PR.
On the other hand, if it had been launched with a focus on larger, diffuse events – instances where I believe the kind of information people like myself have, but may not be clear in the financial markets, e.g. bets on general regional political-economic trends – then you could get the ball rolling a little easier. Perhaps also ‘bets’ or insurance on discrete, non-violent political events during the trial period.
Well, it depends on the nature and level. I can easily see how persons such as myself taking positions on upswings in general threat / political instability etc. in the region and in certain locations could transmit information.
I am less convinced that the information “in the market” is at all usefull regarding discrete terror acts. That strikes me as assuming far too much.
However, the macro view, you have a powerful tool for agglom. a variety of views of interested persons willing to put something on the line.
I think there would also need to be a screening functino, bec. otherwise the noise is going to be too much – e.g. just allowing any schmuck with $100k to bet as it were does add in information.
For once Sam I am absolutely agree.
BTW, to the “Kid” – I am sure you know that not all contracts are standardized.
I’d agree if it were true, but we don’t know. If there was a market open on this one, I’d hazard it was brought to them from outside. It’s so far from their traditional turf and mind set.
It’s nonetheless curious. If, as some of us suspect, this is about manipulating INTEL into manageable coherence, why are the Pentagon rather than the CIA or NSA fronting this idea and why haven’t those dedicated agencies come up with something similar before ?
Reading what I have so far on this idea, my view is that this idea/initiative was never supposed to completely mainstream, as in, a betting parlor. Sure, it would be available to individuals to participate, but it seemed that the logic behind it was to be used as a tool, ala Chaoticians, to help find trends and predict possible outcomes.
I just heard on NPR this morning that this Futures Market has actually been used for two years now, since before 9/11.
I think of it as a formal way to collect and analize intelligence on possible terrorist activities. Our government gets a mountain of tips on possible terrorist/political activities around the globe. Some are bogus. Some are true. But there are millions of these tips. Ignoring these tips is part of the reason 9/11 occured in the first place. But these tips come from all walks of life, US citizens, foreign nationals, CIA agents, etc. If, through sorting these tips, you start to find that more and more are leaning towards an overthrow of the Iranian Theocracy, then that possibility starts to become more and more a reality. We can then plan in advance to make the outcome to our advantage.
The only problem is that this sort of thing is ripe for fraud. Exactly who is proposing the different futures? Who is sorting through this information?
I think that this idea is pretty novel. At least it is better described than our color code/terrorist alert system.
I’m sorry. I said “formal”. What I meant was “more efficient way to collect…”
Well, I just had a convo with a colleague of mine who pointed out his concerns. On reflection, I am now glad this got spiked.
He pointed out a far more subtle abuse – although with restricted particpation perhaps it would be uncovered.
Imagine I short stocks in International Hotel Chain X in time frame Z. Then I place a contract speculating that in time frame Z that there would be an attack on Int’l Hotel Chain X or Y. Then the information is leaked. With a thin and illiquid market, and if the information is not well defined…
This, more than the more lurid scenarios of gambling on death, is the real drawback. After a long and intriguing conversation about the possib entre nous, we decided that while the concept was great, in execution it is too manipulable.
First off, who is the market maker here?
Secondly, the “markets” are a horrendous predictor of real life. What I mean is that the “markets” worst fear is always contained in the next rumor. EG, “markets” worry about the price of oil this week, you can bet tomorrow there will be rumors about Brunei endangered golden monkeys deciding to swim out and plug the offshore pipeline – and some fucknut in the market will spread that as the gospel so that it shows up 2 days later in the Sacramento Bee.
In the aftermath of 9/11, one of the first things I thought off was OBL using that incident to short certain markets. There was some unusual activity not only in the US but many of the global markets. Trouble is, I’m sure thoses positions were unwound long before any regulator thought to look for it. If OBL, reasonbly savvy financial guy, did in fact do the whole 9/11 thing, then it is pretty logical that at the same time he decided to make money in the options markets.