“Two types of people get rekt in the market: those who know nothing and those who know everything" -Qiao Wang

In this special edition of The Augur Edge, I'll share some fresh takes on Iowa in the context of prediction markets.



Poyo, the popular PredictIt + Augur trader, after a sleepless night of Iowa speculation





Bloomy Wins Iowa



The mayor won last night. No, not Mayor Pete. The other one. Mayor Bloomberg. If you’re Bloomy, sitting on the sidelines for the early states, building toward your Super Tuesday play, what more could you ask for than last night’s results…or lack thereof? If I were Bloomberg and could somehow tailor engineer an Iowa night to serve my campaign, it might look something like this: A muddled mess in which results come in so slowly/clumsily that nobody can claim victory, at least not soon enough to pick up a headline momentum story. Bloomy wants to be the one with momentum headed into Super Tuesday with rising polls due to ad spend etc.



Biden does poorly, not even hitting the top 3. Bloomy is competing in the same lane, as the “electable” middle-of-the roader who does well with Super Tuesday demographics. If he falls, that’s good for Bloomy.



The winner is either 1) the moderate with the lowest amount of support among Super Tuesday demographics (Mayor Pete) or 2) the most far left candidate (Bernie), driving demand for a moderate that can beat him (Bloomy?). If they're the top two, even better!



The winner wins by a small margin. If someone wins by a big margin, that boosts their perceived “electability” which is the key thing in this cycle. This is great for Bloomy, because he can win Super Tuesday and beyond if and only if he's perceived as the "most electable" candidate. And it looks like this is exactly what happened last night. Last week, I talked about why I’ve been buying Bloomberg shares in Super Tuesday states. Last night, I added to these positions, focusing on states where Biden has been polling well relative to Bernie, as I think Bloomy is well-positioned to poach the vice president's support. In the meantime, the billionaire is planning to double his already meteoric ad spend in Super Tuesday states and is rapidly growing his campaign staff. As his recent uptick in polls, as well as Steyer’s uptick in Nevada + South Carolina have suggested, saturating the air waves with campaign ads can pay off.



Look at his recent ad spend in a typical Super Tuesday state:







A wildcard factor is that it now looks like Bloomy will be on the debate stage soon due to new DNC rules. It’s quite possible that not being in the debates has served his campaign. We’ll see what happens here. It's unlikely I will hold these positions all the way through Super Tuesday, but I think the "Bloom Boom" still has a ways to go.



Friendly reminder: this is just a look at what I'm up to, not trading advice. I probably have no idea what I'm talking about here.



Nate Silver vs. Prediction Markets I follow 538 and enjoy its content, though I think Nate Silver is overly dismissive toward prediction markets. He has referred to PredictIt as a bunch of “stupid Scottish teens,” and has lately reserved special criticism for the market’s rising bullishness on Bloomberg. I agree that PMs can be irrational, especially centralized ones like PredictIt with low limits and high fees. But they can also react more flexibly to real-world developments, especially where there is no precedent. For example, 538’s model makes rigid assumptions about the importance of early states, assumptions that hold up in back tests but may go out the window with Bloomberg’s Super Tuesday play + unprecedented Ad spend. Prediction markets can recruit “second-order insights” and leaps of intuitive logic that models cannot. A mature prediction market e.g., Augur in 2030, could ultimately price in forecast models like 538...plus everything else.



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Augur vs. PredictIt Arbitrage Last night presented some wide price gaps and arbitrage opportunities between PredictIt and Augur. Given the trading caps on PredictIt, there is limited profit to be made here, but in terms of percentage gain and risk, these can be compelling plays. I wrote about this opportunity before, here and here.

An Opportunity for Builders Last night, to keep a pulse on Iowa, I had countless tabs and apps open, hopping between PredictIt, Augur, Political Alert Engine, Predictions.Global, Poyo's prediction market Discord, Twitter, 538, and some news broadcasts. A fragmented, inefficient "user experience." There is massive opportunity out there right now for someone who wants to curate data + social into a go-to interface for political traders.



Say Hi Thanks for reading, guys. Feel free to say hi with any thoughts or questions, and I hope you have a great rest of the week. Happy predicting,

Ben