now here's a question i've had for a while why don't companies who have direct incentive to get the best possible information on themselves on the factors affecting their business why aren't they using internal prediction markets if this is the best way to aggregate information all right this is gonna be fun uh today i have the pleasure speaking with with my friend steven gruget he's the founder
of manifold markets which has received a grant from scott alexander um scott has written thousands a word about these thousands of words about these guys and they've raised a two million dollar seed round and um you know it's an incredibly exciting project so um stephen why don't you tell us a little bit about manifold markets great uh thanks so much for having me on this podcast orkash it's great to be on
here after seeing other people like tyler cowan and david deutsch i guess first thing i'm i'm one of three co-founders of manifold markets um but what we're doing is building a platform for user created prediction markets so the idea is that anyone can come onto our site and create a question about anything that they care about and then they can have their friends and other people on
our site come bet on that and that the betting process through the magic of our like market mechanism will help uh you know get the best and most calibrated probabilities um that you can find so uh let's talk about the mechanism here so the uh uh uh currently very wrong but the idea is you use real money to buy manifold dollars what is your reason for expecting that people will care a lot about how many
manifold dollars they have um so what is your hypothesis about human nature and reputation that makes you think this is something people are going to invest a lot of effort and time into calibrating yes uh so i guess to take a step back for people listening to this uh manifold uses a play money currency um if you sign up right now we'll give you a thousand manifold dollars which is our
in platform currency uh uh for you for you to use and bet as you see fit um but the the reason why we think that uh play money can work is that people are driven more by uh status and competitiveness um than greed you know we we kind of see ourselves as a social game where uh people can come on to hone their skills at predicting and then demonstrate to others that they really do know more about what they what
they're talking about and they can prove it with an um an objective track record uh from their betting history yeah that that's uh that's a very interesting point which makes me wonder do you expect that in the future wall street firms will be enticed to get the top people on the leaderboards on manifold markets to come work for them one of the objections that tyler cowan has to um prediction markets is you know he's
kind of tongue-in-cheek about this but i remember at one point he was saying you know if you guys are so good at predicting stuff you would expect all these hesh funds to be trying to constantly hire you guys the fact that they're not makes me think that you know this is kind of just a hobby this is not uh so i i'm curious about your reaction do you expect uh people to be coveting
these uh these top predictors for their uh you know for their prowess at uh predicting the future yeah i'm obviously very biased but i think something like that is possible um i think the we have a leaderboard right now our top predictors are actually quite good the the person who who's uh currently occupying the top slot uh won big on the russian in uh on one of our markets on whether russia would invade
ukraine in february in the so in the forecasting community in general there actually is like as you would expect um a fair amount of overlap between the people who who are using these services and financial professionals who actually do manage money or trade uh trading as as their profession um so i'm not don't entirely agree with the with the premise of the question or tyler cowan's earlier point um although
obviously our time uh you know as a play money platform we do attract a fair number of hobbyists who despite not having a financial background still are quite good i do believe that there's a lot of like untapped potential um in the in these top predictors and that sites like ours actually are able to identify them in your experience what has made people who are the top predictor so good
at uh so good at the art um is it just their domain knowledge you know i i know there's different theories about how people can get good at predicting um you know based on your experience what kind of traits do you identify here so pro or probably a big one is just like experience um a lot of our a lot of our top predictors have actually come from other sites um and have spent a good deal of time thinking about
forecasting and prediction in general probably the first hurdle that most people have to overcome in in order to start improving as a predictor is getting used to uh clarifying and crystallizing crystallizing your views about the world you know if you're thinking about some political event you can you can uh very easily uh incorrectly uh you know misremember that you've got some event right or not um
but if you're not like actively putting out like numerical predictions and recording those to keep yourself to keep yourself honest it's very difficult to improve so if you you have to have that's that's a good first step and a lot of our users already cleared that before before joining our site you know we talked about whether uh if finance firms would want to hire these predictors but it would be incredibly
exciting if we lived in a world where you know news firms would want to hire the people who are very good at predicting scott alexander actually has a very interesting post where he um where he where he speculates what if you had investigative reporters who could short like let's say they discovered that some government has really up they could um they could like i don't know
short the market on the government's gdp in a year and then uh release the information and then benefit from having that uh from their investigative journalism i don't know if you're what your reaction is to that those kinds of ideas oh i think that's great i think that's great i think that's a very obvious case of uh pro-social benefit of markets using using the the market mechanism to or in some ways is kind of
like providing a public good um or uh that wouldn't uh you know society otherwise wouldn't be able to produce getting accurate information about uh you know corporate uh malpractices or whatever is very valuable to society anything that we can do to encourage that is good this is the question a lot of people will be interested in and maybe you can't comment but is there any potential um that eventually
through crypto or offshoring or some other option that the somebody's ability to predict will somehow be able to get reflected back on them in some sort of monetary gain outside of the you know play money oh on our site um i think that's i think that's uh well first of all we are planning to do things like uh host tournaments with real cash prizes you know that's something that we are able
to offer despite being a play money product uh you know we originally started as a crypto a crypto idea before uh pivoting pivoting back to web 2. you know that's funny we're we're one of the first firms to pivot from web3 back to web 2 for like usability usability um reasons but uh you know crit real money crypto uh you know creating a real money crypto offering is something that's on our back
burner and something that's worth thinking about that we're thinking actively thinking about it would probably be in the form of a a separate product um though rather than as an addition to our our current offering uh i'm curious what the usability concern was or is it like connecting the metamask wallet to your account your your current process is so easy you can basically make a bet within uh you know
30 minutes or 30 seconds of visiting the site i'm curious what the concern was there with crypto um i think there are several things the first is just like onboarding you know most you know only a tiny chunk of uh you know the global population actually has you know created a metamask wallet or a solano wallet or any of these things and the process of doing that and transferring tokens to the wallet is
actually pretty cumbersome and not yet very easy so that's kind of a huge hurdle just to start with then you have to add in all of the other uh frictions associated with being a crypto platform it takes a while for transactions uh to be confirmed um you have to you know if you're doing everything in a purely decentralized way you will have to sign each transaction with your wallet stuff like that uh each of those
things is just like an additional hurdle you know that will prevent prevent users from you know being able to bet and enjoy their experience on the platform yeah not to mention transaction costs which would reduce liquidity yeah that's that's a big one too so you know one of the things uh speaking of reputation one of the things that seems interesting to me my prediction over the long term is that
the reputation of the market maker or market creator rather will matter a lot because in your website they're the ones who get to resolve uh questions um or resolve markets uh so what is equilibrium there because is it just that there's going to be a few trusted uh market creators uh who people trust to adjudicate uh adjudicate what happened or you know will anybody be able to have a create a big trusted market
i think it'll be kind of a bimodal distribution well you'll see a few huge market creators that are high trust and have um you know huge volumes across all a lot of their markets and then there'll be a very long tale of smaller individuals with less of a track record and their markets will be participated on by people you know closer to them on the social graph their friends or friends of friends and stuff stuff like
that now here's a question i've had for a while why don't companies who have uh you know a direct incentive to get the best possible information on their you know on on themselves on the factors affecting their business why aren't they using internal prediction markets if this is the best way to aggregate information yeah this this is a great question um so uh first of all a lot of companies
have uh have tried using prediction markets internally including google gm um the cia um and a bunch of other firms as well but for the most part you find that um they they will use it people will talk about it for a bit um they will even praise the benefits of prediction markets but ultimately they'll abandon them um and i i think the the main reason for that um and the you know a
very uh hansonian point is that uh people literally don't want to know the answers to a lot of questions so in a corporate context that mostly manifest manifests itself in um the man the manager not wanting to um you know the manager choosing a course or vision for their company and then not wanting to get negative feedback about that um even if the feedback is mostly positive you know the fact or like it still can
like see doubt on the part of employees and you know the introduction of a prediction market by itself might just like lower lower the odds that that mission will be successful um yeah you know even though one wouldn't think that just the addition of more information would actually change the outcome um but i would say that that's the biggest point it steps on management's toes and they don't like that
interesting it's almost the opposite of his point about consultants so he's one of our consultants is that they basically put a pretty face from harvard uh did they allow you to say though this you know this highly credentialed person who talks well um supports what i'm doing so that that's why i should go ahead and do it um now one question i've always said about the sinsonia interview
is even if it's true uh you would expect some firms to do the painful thing or some managers to do the painful thing um i mean your startup founder you know that uh many of the most successful startup founders um will you know it will go ahead and do something that is you know quite difficult um that they want to do and you know we would expect over the long run for the market to be uh
dominated by players who have done the thing that helps their company right um out of all the thousands of companies that are out there so why do you think in like a decade or two all the best companies in the world will have internal prediction markets or is the force uh from managers against us so strong that that's not going to happen so i would say there are two parts i would say the first is a rational
concern on the part of managers to not use prediction markets because it undercuts their mission part it's not merely an irrational quirk of human nature although or perhaps perhaps it is in general but it's not an irrational quirk of the manager's part in choosing not to use them for certain contexts um the second part is they're actually uh i think they're the the areas where
prediction markets more clearly add value without distracting from the mission or hurting management are where they're used for further informational aspects or um to do like market research you know questions where you need to like survey a broad survey of like what consumer behavior will be how our competitors will behave that sort of thing i think that's a much clearer example of where prediction markets can
provide value in a corporate setting um which you know um you know doesn't fall prey to most of these downsides so and then the question becomes like why why hasn't that happened yet um and i would say part of that is just like uh part of that is actually just a usability um usability concerns it's actually very hard to create a product that's extremely simple and easy for like all of your employees to use that
doesn't require too much thought but can still yield like reasonable results um and i would say part you know part of our goal with manifold really is to like bring the bar down lower such that more and more people can participate in prediction markets and it'd be like a pleasant fun and uh easy to use experience yeah yeah that it definitely is um you know i was about to suggest you know
maybe it would help zuckerberg to know maybe it's like subsidizing market to find out how many vr devices there will be in the world by 2030 to help make help and make his um you know metaverse plans but you know maybe he doesn't want to know that or maybe at least he doesn't want that publicly known um uh so you know one question i have is in what situations is it best to have a single person
uh compound all the uh available knowledge and is it in what cases is the best to kind of decentralize the decision making process by having a market i would say that uh in general uh like if you're making a decision in the real world it's often very difficult to operationalize what the success criterion is down into one thing that the market can then measure and measure and be used to act upon
definitively um i i would say so that that's kind of the big the biggest case for you know like personal to discretion or like huma uh human involvement in decision making right or in general i think like prediction markets work best when uh people are creating creating markets on a variety of metrics and then using human intuition to figure out what the best course of action is to proceed um
using that information i'm curious what is your opinion about um insider trading in congress for example i know this is like a big debate um do you think it serves like a useful price discovery function or too much of a hazard of adverse election uh well kind of a tan jefferson point i'm just curious about your opinion um i would say in general my my view of insider trading is uh right i basically have matt levine's view is that it
should be viewed as a like taking from shareholders rather than a like fairness or equity uh type of discussion um i i do think in general like insider trading obviously does benefit price uh efficiency but there are there are other things that we care about we also don't want um in general our corporate shareholders to be profiting from um you know from certain types of information and all those in the case of like um you know
kong or like uh you know con congressional vetting or insider trading by elected representatives i think that's uh for the most part not not cool we would prefer for them to be compensated directly through salary or other things which are more open and transparent to the public rather than you know uh you know this is kind of a way of profiting or you know like a roundabout way of of corruption
in some sense you know you can make a deal with some company and then trade on that and instead of the money that never directly passes into your hands but you're privy to this insider information um and the net effect is is uh you know equivalent to this practice which we would not normally condone now one place where i'm skeptical of prediction markets is when we're talking about
um questions that resolve over a long period of time and which the um which there's no good base rate for so the market hasn't really been trained on that kind of question one example would be what are the odds of catastrophic ai by like 2030 which i'm sure is a question on your website and um i'm not sure how much credence i put into the prediction on this question um i mean one because i'm not sure why i
would expect that much um good information to be aggregated here in the first place would it just be i mean what is the information they're going off of um and um and second i guess more important is like you know um why would somebody bet uh yes because the best case scenario if they beat us is they die anyways right they have nothing to gain uh if catastrophic ai happens so um in these
kinds of scenarios what do you think is the role of prediction markets do you have these kinds of concerns uh what are your thoughts oh i think yeah both of those concerns are very valid um i think part of this is just like a fundamental like human constraint is if things are very far in the future we care about them less um it doesn't really uh you know that's true prediction markets but it's also
true in every other domain as well and every every other forecasting tech technique as well you know uh you know the the interest rate is uh like a fact about human nature um or like discounting of the future is a like a fundamental um facet of human nature um and you can twiddle with the mechanism here on the margins here or there but i don't think it will fundamentally change that
for your for your second point though uh your other point is is very well well taken too that you can't you can't like bet bet on an apocalypse bet on apocalypse you know you're not going to be there to to collect your winnings uh the money is worth less in that universe so you you should rationally uh bet against it actually so brian kaplan and elias rudowsky actually do have a bet on um naia apocalypse the bet is about
whether there will be like um you know catastrophic ai i think by 2030 is the exact path and so the uh brian pays eleazar now and if by 2030 there hasn't been uh catastrophic ai then eliezer pays brian you know the the sum that brian paid plus more based on like the ratio of their bet uh which i thought it was a which i thought was an interesting idea uh just going off this topic a little
more you know one of the things that scott alexander brought up in one of his blog posts is when you have these kinds of bets that resolve a long term it doesn't have to be as like uh as far-fetched as a uh you know agi it could just be something like who's gonna be president in 2024. he pointed out that at least at the time that he wrote it um dwayne johnson had like a nine percent chance of being
elected president um which seems high except why would somebody get their manifold dollars um held up in a question that won't resolve for four years or i mean two years now the ability of speculators to correct prices is diminished because they don't want their money to be held up in questions that won't resolve for a long time um how are you guys dealing with that kind of problem i i would say like so in general the
best way to tackle these long-term more speculative questions is to try to break them down and address uh the proxy variables that are most relevant um to you know to predicting their success in the future you know so instead of asking like will the ai apocalypse happen in 2013 or like in 2050 you can ask like will open ai's gbt4 like exceed you know this number on this benchmark etc or
similarly for like the rock like um instead of asking like will the rock be the president in like 12 years or whatever 20 whatever you could ask like what are his pulling numbers today like what are his favorability ratings has he like will he indicate interest in running show interest in running as a politician etc etc and those are much more short-term questions which you can use to you know get a sense of um
uh you know of the the longer the longer-term more speculative questions that um you know that interests you okay so um you know tyler cowan has this other criticism of prediction markets um that listen these prediction markets are tied to financial markets that you actually could bet on right so i i don't know if you think somebody's going to be has a higher lower odds of being president
maybe that has effect on um you know gdp or something and that has effect on you know stock prices right um and so then he says well if you're so good at doing uh so good at being in prediction markets why don't you just bet in the financial instruments that are linked to whatever question you're interested in and brian kaplan's response to this is um there's so many different things that
can affect any given financial instrument that it's not it's you know it's not easy to uh explain okay because i think a about you know uh you know dwayne johnson becoming president i can invest in asset b i feel like that defense of prediction markets is a criticism of your response that you just gave where you're saying short-term prediction markets uh can substitute for your uh interest in
long-term prediction markets uh i would say yes and no so like uh acid you know asset prices of uh you know of major major financial commodities and equities and other instruments you know are affected by way more factors than another prediction market on a more isolated question on some proxy variable that you care about you know the nice feature of prediction markets is that you really can isolate the particular
risk that you care about you know and even if it's just discussing like one proxy variable um that's related to the overall picture you can still get a much better understanding of the thing that you care about by picking multiple well-targeted like proxy variables and creating markets on those rather than like oil prices you know which tell you many things too many things okay so lay
out your vision for me of like 10 20 years you know we have uh prediction markets are not only you know much more liquid more people participate in them and it's kind of uh everybody kind of knows what a prediction market is so like people understand what it means when you say um you know this production mark you know biden i guess it wouldn't be right and then but whoever the president is passing
this bill [Laughter] one of the many things that would need to happen other than you know a constitutional change would be a major advances to longevity research um oh yeah so what would the world look like um if people actually cared about uh you know prediction markets and if it was like common knowledge uh what the market thought about any given situation that was happening well i i
would get say first of all i would say that would probably be a much better world you know um you know across a wide variety of domains i think it's it's it's better better and nearly but not all cases when people are grounded in terms of facts and like well-calibrated predictions instead of like pure speculation or like uh you know ideologically biased thinking um but you know more more concretely i
can imagine a world where you you know the average like news article blog post cnn station if that's still around in 10 or 20 years has like an embedded prediction market on whichever topic that they're discussing and it'll just like allow people to you know immediately get a sense of what like the most grounded or like it'll immediately ground the opinions that people are hearing in fact um and make it easier to have more
productive conversations um and ultimately allow them to better understand the world um i i i hope that's the case um you know there's a pessimistic take that people are not consuming politics to understand what's happening um or uh and that they'll almost resent you for presenting them with this kind of information that's true or certainly i'm i'm not implying that a large part or even like a majority of
the consumption of political news is based on a desire for accurate information um you know i think that would be a very very naive view of how uh you know humans operate um but at least a small part of that is you know at least some portion um of people's desire to consume news actually is to legitimately understand the world you know and insofar as people are attempting to do that you know
prediction markets uh can can help uh i i really hope so and i think that actually could be true um which is very exciting so one question i have is these trays that people do on your market um you know four percent of the four percent of uh the church what is traded or the traders winnings they go to the market creator and one percent are just burned correct me if that's wrong um but that seems like a negative some
uh bet um which means that are you concerned that that would reduce liquidity because people uh people have to get over a higher threshold of confidence um before they're willing to bet on any given market yes yeah like your fee fees mp do impede the efficiency of the market in some sense you know there are people who on the margins would trade um if there were no fees who don't when
there are fees um that that certainly is true um but part of the reason why we have fees is like to encourage things that we like you know we have a creator fee the creator earns a commission on trades that incentivizes them uh to create and resolve more markets uh we currently have a liquidity fee as well which feeds into the liquidity pool which you can think of as subsidizing the entire market
i'm curious how what is your background so you know one of your co-founders is your brother um do you guys have some sort of financial background or mathematical background because you know i was looking at um you know your technical documentation i'm not claiming to have understood most of it but i saw the formulas that they were there i i visually skimmed it um and did you how are you guys able to um get into
this field so i i guess i i studied computer science in school then i went to work for sig or susquehanna it's an options trading firm for a little bit um then i left to go work um for my friends like robot robo advisor startup where i wrote their like um you know their portfolio optimizing software um yeah so i i have some uh financial experience as well and all three of us are are technical you know and and um
and also have a previous background doing other entrepreneurial things as well too so we're all we're kind of like full stack entrepreneurs i guess you could say uh can you talk a little bit about your previous entrepreneurial experience i think listeners might be interested sure um so right before this um my brother and co-founder james and i were working on our app called throne it's a
subscription group chat app for online creators so people like you um or like instagram creators or djs or anyone who's built up an audience online um the idea was that you know they can set up a private group chat with their their audience where they're paying a subscription fee to join um and uh basically our uh you know the the premise of our of our uh you know app is that we provide a much better chatting
experience for larger groups so it's designed uh designed to accommodate like the the creator's entire audience and make that a a seamless experience yeah i have a friend who has a popular fantasy football channel and he has um you know he has a very profitable patreon where um basically from the the point of the patreon is it'll give you the link to the invite to the discord uh
which is which seems convoluted and this product we're just basically combining those two services um that that seemed very useful so what happened with that um it's still going uh slightly basically we couldn't get the growth that we were hoping for um the the ultimate cause is it's kind of too late like the creator market is already saturated um with all different sorts of tools most creators are already
monetizing one way or another and aren't keen on moving monetizing using a new platform um so when it comes to the manifold markets i mean the idea for having um prediction markets even the idea of having prediction markets play money i believe has been around for a long time right what took so long for somebody to make a user experience that was so um comfortable as yours or is there something else that uh you know
prevented somebody from making a manifold yeah i would say the other uh key piece of the puzzle that peop other people were missing is the idea of user resolved markets um which on the surface sounds a little bit crazy that you just allow anyone to come and create a market on any question where they are also the judge of that question and can resolve it in any way that they want you know
that obviously opens the door to fraud and abuse and people taking advantage of the system and the fact that there is a possibility of fraud basically has prevented other people from like even exploring this option and um instead they're opting for oracles or centralized authorities deciding the outcome of all markets but of course that like severely limits the scalability and reach uh you know of a
prediction market platform if users can't go on and create their own thing so it's really realizing that user resolved markets actually can work um that let us let us down this path you know there is a small amount of fraud but it's actually quite small and manageable if you uh you know allow users to choose which markets to participate in they for the most part are making pretty
good decisions about where where to allocate their their time and money there's this great essay called unix is worse is better i i don't know if you've gotten a chance to look at that the the basic point the author makes is you know if you ask like why has unix been so successful you know um you can say oh the um some of the features and um some of the design decisions are arbitrary they're somewhat
inoptimal in certain situations um and then um but then you it seems that maybe it was those bugs that actually allowed unix to be the kind of thing that can actually run on real computers maybe it's not uh maybe it's not optimal from the uh the perspective of somebody who wants something super elegant and beautiful um and you know grunt has a really good blog post about this uh bitcoin is worse
is better um where he makes the same point about uh you know bitcoin like some of the i i'm not remembering the details right now but some of the uh you know some of the actual constants involving like you know block size or whatever they're pretty arbitrary but the fact that there's somebody just put the out of the arbitrary numbers um meant that innovations that could have been around uh years before in terms of
the cryptographic tools actually got instantiated in like a in a product like bitcoin um and it kind of seems like you're taking a similar attitude towards prediction markets um even if it's somewhat arbitrary to let users resolve markets you know that that's better than having some sort of oracle structure which is super convoluted and hard to use and it may sound good in theory but is kind of
impractical as something that people want to use yeah that's it that's exactly correct um i think the the most important thing for or not you know not just for us and not just for prediction markets but for creating a like a usable platform is making sure that the key mechanism is something simple and easy to understand more so than handling every possible edge case perfectly you know as long as it's
the core experience is extremely simple and easy to use and user friendly um you know that that matters much more than like the one percent of cases you know where you know but i'm curious if this is something you learned at your previous startup did you guys make this mistake and now you've learned to avoid it or curious how you came to that realization you know i don't know i don't know that i can
think of a good example that's directly relevant although we did like simplicity of um i guess like both the business model and our user interface for our previous chat app were big considerations you know the idea of having or like a subscription model is kind of like the minimum viable um business for like a creator to support themselves in a real way um over time that might be one manifestation of
this principle in action but i don't know okay so one concern somebody could have about manifold markets is um you know you said you were giving out one thousand manful dollars um somebody could you know just maybe even make a bot that i'm not giving anybody ideas um but i think i just like create a thousand different accounts make different traits on all of them um and or make a sequence of
different traits on all of them and in one of them they just make you know a series of the best trades that anybody has ever made on the platform and now they're on the top of the leaderboard it's certainly true that if you're giving away free money uh you know that's not a you know economically sound mechanism uh we currently do do some things to prevent uh abuse and like bot behavior i'm not gonna tell you what
those things are um if we end up open sourcing our code though the cat will be out of the bag you can you know see for yourself uh what abuse practices we have in place um i would say that we're not necessarily committed to maintaining our you know free giveaway or like free signup bonus indefinitely you know part of that that's definitely partially a um you know a growth and like just starting
golf thing um in the beginning most of our users are uh have been very well behaved and haven't abused abuse this system you know if more and more people if manipulate becomes like a a key nexus for people trying to weigh in on the future we may have to be more strict with our policies it kind of reminds me of the paypal story where they had to they were getting like 10 20 bonuses for
people for signing off and it basically meant they got exponential growth but they were losing money faster i guess in this case you're not like losing real money but uh i i don't know maybe you're diluting uh the diluting the reputational value that the best people in the leaderboard have at least for now maybe yeah i would say one of the other things that we're interested in or like the the concept of
a global leader board becomes less important over time the larger our site gets you know a lot of the markets that people bet on are personal markets or markets between friends you know what you as an individual care about um in terms of you know ranking who the top traders or predictors are really is not all of the markets that we have on our platform but the subset of markets that interest that are of interest to you we
we actually just remove or like we uh used to have this feature called communities where you could um create a community centered around a collection of different markets and we would show the leaderboard just for those markets um you know and that's a way of judging uh you know or it's a way of assessing the ability ability and skill of predictors within some particular domain
that you care about rather than globally we'll probably bring that back in some capacity in the future can you can you give an example of that like i guess something like that yeah so once one thing you might care about is like who is the bet like russia ukraine who is like the best like uh you know you like geopolitical and war predictor you know and what uh the one way to assess that would to just be to like
hand pick a few markets um about the inva about the invasion and you know the you know subsequent you know course of events during the war and then um just see how much profit people have made within those markets and i think that that'll actually give you a reasonable estimate of um you know who the top predictors are there versus just like a global thing you know for a while one of our like top
markets on our site was about whether this guy uh would allow like whether this stray cat would uh allow it's like this random human to pet it you know totally random stuff like that you know if you're if you're trying to assess who the best like geopolitical thinkers are who the best economic thinkers are you may not care about the straight cat um but a lot of people really do care about the stray cat uh
in in other contexts so it's a it's a fine balance to strike another interesting part of your platform is so p people can buy more play money um and i guess the concern is even within these uh even within these sub domains where people are being compared that you know the the actual the actual proficiency of a person could be distorted by the fact that somebody else could just um buy more manifold
dollars and um as a result may be able to have a higher profit i guess you can measure it maybe by um you know percentage gain on the total amount of money or something um but yeah i'm curious on your thoughts about this so in in general i'm a pretty pro efficient markets you know if you think about what's happening when a whale comes in and buys up a huge amount of money and like bets it on the wrong
side what they're essentially doing is just like providing a huge subsidy and bonus to the people who are actually correct you know market markets are a mechanism which is like the most efficient way of solving the whale problem if you are too much money and you are not very smart and are very confident um in your views of the world like the markets have a very fast and easy solution for you um to solve to uh
you know to obviate that problem where you will no longer have so much capital um you know to to you know throw about there's a direct analogy to this actually as i'm sure aware and uh you know like real markets um where like a pension fund or some other sort of big fund needs to like rebalance its books or something so it'll it'll need to just like dump a bunch of stock and you know
liquidity providers can make money off the big trades that the uh you know that these big funds need to make so i guess then you wouldn't be you wouldn't be interested in schemes like i guess quadratic um like it's some decaying um some some decaying value of the manifold dollars that you can buy in one account so like the next the marginal um the marginal manifold dollar cost more than the one
before it um you think this would uh inhibit uh price discovery right yeah although i ha i have toyed with some other um interesting like monetary schemes in the past um so one one idea i had is uh introducing demurrage or like um basically negative interest rates on cash balances so like you could imagine a world where like uh where the your your purchasing power kind of erodes over time you know if you made a bunch
of like really good predictions this year you know it's not necessarily the case that you should be like rewarded by you know having all of that cash forever you know maybe some portion of that uninvested those uninvested cash balances erodes by you know 20 a year or something like that i think it's a really cool idea in principle but in practice like users absolutely hate um you know losing money
for any reason at all so it's kind of like a non-starter um but it's it's interesting to think about sorry i'm not sure i understood if the re-explanation um is unnecessary then we could just cut it out of the final but just for my benefit can you can you clarify what you were uh sure so so the idea is like um uh at certain times you'll have just like uninvested cash you know that's sitting in your account yeah yeah um the
idea is to just like charge you charge you for that so charge charge a sales tax at the rate of like 20 a year but like maybe like once once per day at midnight you lose you know whatever whatever amount that is a small fraction a small fraction of your your uninvested cash um okay so you know one thing that makes um financial markets really efficient is you have these big firms that are putting up in large
amounts of capital to recruit the top talent in the world um because it's worth it for them you know they're running like these super computer simulations um and um you know like it's expensive to do all this stuff right um but it's you know it's worth it if you're getting like point zero zero one percent of a trillion dollar market in the case where you have play money what
is the incentive for i get that people who are a hobbyist or um are in other words motivated to do this might choose to do it and like choose to engage in it um themselves what would incentivize somebody to put in the kind of effort it takes to have efficient financial markets and you know cost and time and so on yeah so i would say that in general people are willing to put a lot of time
and effort um into virtual economies irrespective of financial gains you know if you look at the look at things like world of warcraft or earlier like second life which has like virtual real estate people are willing to you know invest the equivalent of hundreds of thousands or millions of dollars uh in in in this game game world i feel like people's you know uh people's ability to drill in and focus and work on things
that are of interest to them um you know is just like a very very powerful force even if it's not directly tied to a financial payout so what is the point by which manifold's own internal decision making will be informed by um prediction markets involving i don't know the firm's uh predictions about the firm oh it is already um we you know we actively create markets on all sorts of things
which are of interest to us you know most so most recently we created a market on whether we would be able to complete our fundraising round by the end of april um you know that was a cool market the market the market believed in us for the most part i don't think we like fell lower than like 85 percent somewhere around there um for but we we uh you know internal we we actually do in try to dog food dog food
our markets as much as possible we have a new market now and whether we'll be able to onboard three employees i think before the end of june something like that um you know that that's a number that that we like try to keep our uh eyes on i guess probably the first the first big dis uh case where like the market actually you know substantively informed our our decision about how how
to act as a company um was um an early market we created on whether whether we should try to monetize by selling the fake uh by selling our the play money you know we initially we weren't sure whether that would be a good thing to do at all whether users would hate it or it would seem scammy or whatever but we we created a prediction a prediction market on on this subject uh i think phrased in conditional terms
that if we did introduce this would we if we introduced the feature would we keep it for you know some period of time um and the the market the market seemed to think that we would so that actually was a factor which played in played into our decision yeah i'm asking these questions in probably the wrong order so this is probably one of the initial questions i should ask you but talk me through the
timeline of developing manifold market so how long ago was it launched um and like what were you you said in the beginning it was supposed to be um based on crypto when did you guys change your mind but what is the timeline here yeah so this company began long long ago way back in december of 2012 yeah yeah so it's a very very new company um basically decided to ditch crypto after like a
maybe like a week a week's worth of you know speculation and research um mostly because we or part of it is that we just thought we could build a play money prototype very quickly and we could just like test that and see see what the experience is like and if we wanted to we could continue further on into crypto um and partially is just based off uh uh you know reading about the you know regulatory nightmare that
is uh prediction markets and and crypto and partially is the the usability concerns with crypto um but basically we uh we all like in the month of december we came up with the original idea um we applied and received uh the acx grant from scott alexander um and we timed it such that right right when the uh the grant announcement came out we had a working prototype um of our prediction market system ready
to go and then we were able to on on board a bunch of users from the acx community immediately which formed the the base of our platform you know and and since then we've been growing and you know respond you know uh you know responding to user concerns and improving uh improving our site to be ever more useful i i i know you guys do something called uh dynamic pair mutual uh vetting system
you know i looked into the paper i i think i understood like maybe a quarter of it um so is uh what was it like a experience uh of learning as you went or is it something you guys are already familiar with no definite definitely deformer you know we we had heard i had heard of uniswap and some other mechanisms i had heard of like hansen's log market scoring rule and some other things but i didn't
actually delve into the details until quite recently you know originally we actually came up with the idea for um dynamic paramutual uh buy or sell thinking about it from first principles and then then we later like i went back through the literature and read a bunch of papers and realized that it was called dynamic pair mutual um and found a more elegant uh implementation um of a dynamic paramutual system based
you know based on a quadratic cost function um that i hadn't considered previously yeah you had to talk me through it over dinner um the next time yeah so you mentioned that you are hiring maybe maybe there are some people in my audience who might be interested um so you want to talk about what kinds of roles you're interested in hiring for what other kinds of things that might be
uh involved in recruiting sure yeah yeah so we right now we're looking to onboard a few people to our team we're looking for full-stack developers who preferably have front-end a lot of front-end and potentially react experience we're looking for a community manager that would be someone to help us manage our discord help write blog post help with our sub stack help reach out to people on social
media and organize online events you know someone with you know a previous background in doing this at a startup would be great but we're open to people from other backgrounds as well um and then we're um uh then we're looking for a head of growth or someone who has um you know experience uh scaling up um scaling up an early to mid-stage startup you know we're we're looking for you know someone who you know who's who's take
who's helped uh you know take the company from you know like uh to like one like one to ten million dollars annual recurring revenue or around like 50 000 monthly active users something somewhere in that neighborhood but yeah if you if you are interested in prediction markets um and manifold in particular i encourage you to reach out to us you can either email me at jo or email us at jobs at manifold.markets or
me personally stephen at manifold.markets excellent um and any other topics involved with production markets or manifold that we have not discussed yet that you you would like you know you want to touch on i guess they're um one of the things that we've seen from launching this site is that users have come up with all sorts of like exotic ways to use prediction markets that we hadn't
previously considered so part part of that or like prediction markets obviously can be used on you know predicting the future basic yes or no questions but some exotic things you can do are like uh getting users to help like research topics for you um of in uh you know do you can create a market on phrase these types of things in a market-based way and then people can propose certain answers and other users
can bet on them that's an interesting feature of our site people have hacked our platform to do things like create lotteries um to play games we did manifold plays wordle where we created a series of prediction markets on which word we should guess next um you know people yeah they're they're just like all sorts of other things non-prediction type things you can do with the with this market mechanism
which are really cool that is an interesting idea um i'm not sure how that was conducted but like i could imagine uh for you know researchers saying um will my conclusion on a paper of this question be um x or y and um and then to move the market somebody would not only out of bed but also like maybe put in the comment section the data that makes them think it's x or y which can be the basis of
the paper um so you're basically getting research assistance um that yeah that is very interesting cool yeah yeah i would say relatedly one of the the new types of markets we've introduced is the uh this concept of a free response market you know so in addition to a yes or no market where you're just betting on something will happen we have this idea of a free response market where you ask a broad
open-ended question and people can submit an answer and when they're submitting an answer they're also placing a bet on that answer and other users can bid you know bid up um you know different answers um that the the market creator will then will then will then choose you know and that really opens up the you know the space of possibilities towards allowing you know a much wider wider array of
questions um uh stephen thanks so much for coming on the podcast and um yeah so that's manifold.markets right any other places or links that people should be aware of i think i think that's the big one manifold.markets yeah you can join right now and we'll give you a thousand manifold dollars to uh bed on any market you like or create your own excellent thanks so much steven all right thank you [Music]