Hill’s much vaunted
market-making and public relations abilities were put to test this month, on the
hardest of all betting markets to manage, but the blue ribbon market: the U.S.
Presidential Election. Over £200m has been staked by bettors on British Betfair alone, on the contest decided next Tuesday night. And this is the market which the rest of us are actually
interested in, especially now, and I imagine Caesars were too, although as yet,
political betting is curiously illegal in America.
But over in
England, where the practice is legal but where the spectre of safeguarding
regulation looms like the Sword of Damocles, at times during October, not a
single British bookie was brave enough to stand above the parapet and offer
his services, including William Hill. Betting on the Presidential
Election had been suspended.[i]
The bookies’ reason for existence is managing predictions, or rather adding up and averaging the predictions of
its customers, the general betting public. That is where their
wisdom comes from. The crest on their Coat of Arms could read: ”The Voice of the People is the voice of God." If the bookie takes on the public, thinking he knows more than
they do, in the long run he will lose. That is a short history of
British political betting over the last thirty years.
As Sporting Index’s political trader in the 1990s, I used
to get regular rollickings from Alistair Hunter, the venerable head trader, for
conducting too much academic research, running insightful novelty markets and
losing money. When the limey bookies get cock-sure, they always get skewered by the
punters who know more.
Less insightfully, we took bets on how many sips of whisky the Chancellor would take, in
the House of Commons, during his budget speech, as well as how long he would talk.
When the dour Scottish Presbyterian Gordon Brown gave his first speech, he had us reaching for the Johnnie Walker's.
We had based our 'expert' prediction on the form of Brown’s predecessor,
the clubby, genial, wide-smiling, Kenneth Clarke.
We knew Clarke drank heavily, as many as 6 or 7 sips during his speeches
at the Dispatch Box. But Gordon Brown
was a teetotaller and we didn’t know it. In
the end he didn’t even touch his glass of water. Needless to say, the crowd of punters knew. They
sold the market heavily, i.e. went low on his sips. For ever sip he didn’t take, it cost Sporting
Index £20,000, and we had originally estimated four.
The best political bookies hoover up
information from their customers. They know who the long term winners are, so they give
disproportionate attention to their behaviour. They listen to their
customers. If they listen to the wrong people, such as academics and
journalists, they lose. And the good bookmaker talks up his losses and never issues tips on his own markets.
Ladbrokes lost an estimated £2m on the 2015
election, and William Hill reported a £1m loss in their official results, eye-swivelling
amounts when you consider how much is staked on politics today,[ii] and the fat margin built into bookmakers’ prices. It’s not so much what
they lost, but what they should have won.
The bookmakers own stewards’ inquiry in 2015 was brief:
“We trusted the polls and the expert analysis. The customers got
lucky.” But yet more was lost on Brexit and Trump in 2016, doing the
same thing, i.e. swallowing the media and the academic account of the
referendum or election, rather than understanding what their customers were
saying with their bets.
As documented in this blog ad nauseam, when managed
correctly, the betting market is a more reliable guide to what will happen in
politics than: a) fast-whirring academic models of many breakable parts, b)
voter intention opinion polls – a snapshot of opinion, not a prediction in any
case - and c) the views of political pundits, i.e. tipsters, the most
unreliable source of all.
A market price prediction, particularly on a matter of
public interest, often draws up more relevant information from a wider range of
varied sources than expert opinion can, essentially because it has more
tentacles. The market, as Hayek put it, is a vast information storage system.
Its tentacles are the bettors, now motivated by winning a game, to think
harder about what will happen, largely ignoring emotion and their own
prejudices - if they are good and going to win.
In this regard, Dominic Cummings was right when he said:
“political news makes you dumber.” Right now, we need political
betting like never before, as an alternative to polling and the pundits, to
answer questions like: What was the impact of the first televised debate
on the race? What is the effect of
Donald Trump catching covid on the outcome of the Presidential Election? Indeed what will be the effect of covid on the
result? At the time of writing, all I have heard is conjecture on that
last question, and a resounding silence from political scientists who prefer to
start their work, after the event.
But
multivariate analysis of opinion poll data would reveal rigorous conclusions, especially in ‘time-series’, modelling the shock of covid on the American electorate over
time, rather than at a snapshot of time. British political science doesn't have the will or the skill to do it - with a few notable exceptions - to understand what will happen in politics using Bayesian methods, although it would have predicted the result of the Brexit referendum. Understanding how support for E.U. membership moved over time was what my PhD was about.
I found the dedicated study of political prediction is largely confined to a small 'prediction unit' hidden away in a dirty peeble-dash bungalow cum Nissen hut, at some obscure university in South Wales.
Meanwhile, in the gleaming towers of the City, these difficult skills of Bayesian analysis are the norm. They are used to predict economic outcomes, such as the movement of interest rates over-time, currency price fluctuations, as well as the effect of shocks like covid on everything economic, and how these effects will dissipate into the future.
Political correctness infects accurate
insight
I listened to the Today programme the morning after Trump's covid diagnosis, hoping to find out about its impact on the election. Even the sports news is about
politics on the Today programme, even the insulting racing tips at the end are
somehow selected for the topicality of the horse’s names, so the ghastly little
toad who does the sports news can share a political joke with Nick Robinson,
the main presenter, thus reducing them to a segue to another item.
Unsurprisingly, I was none the wiser about the election after a
miserable three-hour long ordeal. Now I will revert to checking the
odds instead, for a numerical ready-reckoner of the impact of news on the
predicted result, as I have always done, particularly at a time of crisis and
seismic fast-moving events, should the prices be made available.
I shouldn’t be the one saying bookmaking works, that it
should be a rival to mainstream media in educating us about politics. The
bookmakers should be saying it. Their job is to represent the magical
mechanic of the market - the soothsayer of probabilities, i.e. their product - and their customers - the two things that make the wisdom of crowds work. They
have to believe in their product and defend it to the hilt. I don't think
they have that fight in them. They don't understand of what their sometimes socially useful trade can deliver, instead they descend to where only frivolity lies: cheap product sold with cheap TV adverts.
It should also be the public’s choice whether they bet on
political affairs, even on an election when the pale cast of death hangs
overhead. It shouldn't be taken away from them by their
bookmaker. The element of death must be calculated in too, we can't
be squeamish about this. Incapacitation from fighting the election
is about a 10 per cent chance I would think, but this is the component of the
betting decision which the bookmakers say is distasteful.
Then there
are the regulators at home to consider for the bookmaker, and a perverse desire
to play up a sort of virtue in not doing their
job – a new and unlovely feature of British bookmaking. Bookies now flock to
the scent of progress, smelly little orthodoxies really, like blue-bottles to a
dead cat.
Political progress used to be about the steady empowerment of the people, such as giving everyone the vote, including women and the working class. But modern political progress - cultural correctness - is a swindle. The end is never
reached, conflict will go on and on, there will always be something more to vanquish, until the scythe of progress comes down on
the bookmaker himself, in the form of an outright ban, on safeguarding grounds.
Or the British bookmaker succumbs to the heat of Vegas. An old colleague and friend of mine called Humid, who sweat a lot, found even the more temperate climes of Gibraltar too much. He was a gigantic man, as so many bookmakers are, and we were all heavy drinkers on the Rock, where a litre of Smirnoff was a fiver and more expensive than the Red Bull we mixed it with. One steaming morning, seperated from the air-conditioning, on a cigarette break outside, Humid keeled over in the sun. He was successfully medevacked back to the U.K. - but was never to return to Gib.
I simply offer this as a warning to any bookmaker who may be Vegas-bound. The problem with the place is the problem for the bookmaker. The best bookmakers in my experience, like the best players, are addicts, it takes one to know one, but, increasingly, they must practice their trade in some of the most dangerous places in the world for them. With Vegas, top of the list.
***
The old code of the bookmaker, once his only code, was “not
to bet on human suffering”. It used to
only apply on bets about someone actually dying.[iii] A
betting market on Trump dying, would, I suppose, be unacceptable, rightly. But now the rule seems to apply to any factor
involving suffering, within the betting calculation of a wider, more important, and different outcome: i.e. he may die – and that will affect the result - so the whole innocent election
market gets written off.
Of course the market’s importance goes way beyond the
health of one individual, even if it’s the President. I’m sure he didn't mind too much, he knew the stockbrokers were doing the same thing, just not downing tools. It’s major ground to concede by the bookmakers, not
assessing Trump’s survival rate, but I am a hard liner who thinks we should be
firing all our guns at a time of crisis. The biggest guns are the crowd.
The covid tracing app is another good example of employing the crowd, to police
covid, using new technology. The government, either sabotaged it or
didn't give it the support it needed, not trusting the behaviour of the crowd
and fearing the reaction of the civil libertarians at The
Telegraph.
We should be betting on covid rates of infection in my
opinion, because that will give us the best idea of what is going to happen to
covid numbers – better than any single epidemiologist’s view, based on another
expert algorithm of many breakable parts. Never mind the new
middle-class morality of not causing offence. Let’s save lives, we are in a crisis like a war with five-hundred people being killed a day. Imagine them, in a field, like the fifty at the end of The Great Escape: and then they are all mowed down. Sometimes, I needs the horrific mental image, of something we can manage, to knock myself out of denial and easy sweet talk about civil liberties.
And where exactly does all this new found sensitivity
about politicians end up? There is animal suffering involved in
horse-racing. Horses are killed regularly. Does that
apply any less than human suffering? And if hunting is wrong because
human pleasure is derived from killing a fox, why not ban horse-racing, which
is also for our entertainment?
I fear the bookmakers have opened a door here that will
not be easy to close. But the real problem is this. They have never
properly made a case for political betting as a tool of
insight. Having social value is the best bulwark against regulation,
as well as hooking the government into a share of your profits.
Even Betfair, not really a bookie but the facilitator of
exchange betting between players, suspended its market on the result this week,
announcing: “We do not feel it is right to provide a market, given the
circumstances,” continuing either piously or deceitfully, probably deceitfully:
“our thoughts are with the President and First Lady at this time.”
This after matching £100m in bets, with the company Political Analyst and PR man, Paul Krishnamurty, telling all its customers
Biden was a great bet throughout the campaign. Report the market, it is
more interesting. Tell the world what you are finding out about politics
from your customers. If not, public expectations on the election
cease to find expression. We are left with the experts view
only.
One thing we do not want more of is the expert view.
In any case, lines from political pundits jump into place like iron
fillings obeying the magnet. If the expert view on the election turns out
to be the correct one, we already know what that view is.
If you aren’t already aware of the British mainstream
media view on the 2020 U.S. Election, I think at least my American readers will
find it interesting. What the limey British media thinks of you, my
friends. It's one ginormous sneer after another I’m afraid. I promise you, many of the British public like you a
great deal, certainly more than the French or the Germans. They would like
Trump too, because he’s an entertainer and best appreciated as such,
particularly when he is making an otherwise dry political point, - I liked his
joke about the North Korean leader, “Rocketman” - perfect - but I’m afraid the
British public has been ‘got at’ by the British broadcasters. No one says
anything too positive about Trump on social media, out of fear. The elite view
is largely synonymous with the B.B.C. view.
Here it is, I heard it on the Today Programme:
It’s just too downright uncertain to get involved with
political predictions, at all. American politics right now is too
turbulent nay chaotic. It’s ill-tempered divisive and now ‘polarised’
(i.e. extreme). Accurate information is in short supply and the
Russians and the Chinese are trying swing the election with misinformation. The public are for
one conspiracy theory or another, and generally not very well informed on the
details of the debate. But this is a unique election where the usually strong
incumbency advantages do not apply. Covid has created a new and
dominant issue of competency tackling the virus. Given what is going on
over there, this can only be bad for Trump.
Over 200,000 Americans have died from Covid in six
wearisome months, over seven million have been infected, and now the President
has gone down with it, four weeks before the poll on 3rd November
and is in and out of hospital. Jon Sopel, the BBC’s North America
Correspondent,[iv] says
"the White House are scrambling like crazy to work out what to do” – a bit
like the Telegraph newspaper: “the power cord has been yanked out of his
campaign” (02/10/20) – i.e. you lot are rudderless and without a
plan.
Meanwhile, U.S. GDP has tanked 30 per cent; a third of
California has been incinerated, and the country is on the verge of a
constitutional crisis, if not a well-armed civil war.
Unsurprisingly, whilst a prediction is never made
explicit by the BBC, against such a backdrop any listener would call it as a
Biden win by default, backed up to some degree by his lead in the voting
intention polls.
The British punters, following it’s pundits,
under a sustained barrage of undisguised English sneers about Trump, the
President you voted for, forget the average American - the voters - cares
less about politics than is made out, they are not either for Antifa or the
Pretty Boys, and not all America is rioting.
An alternative academic view of American
public opinion
American public opinion is generally moderate,
conservative and authoritarian, as my favourite political scientist put it, an
American himself, called Morris P. Fiorina. He is no fan of Trump.
The American public have been like that for some time,
political change is over-egged at the public level, only the political elites
have become significantly more radical, and this is merely a reflection of how
political choice is working in America.
It is how policies are packaged together and sold to the
public in the American two-party system. Given the circumstances, it’s quite
rational for the two rival candidates to move apart - usually it is rational
for them to move together, like two ice cream vendors on a long beach will both
position themselves together in the middle, assuming sun-bathers are evenly distributed along the length of the beach.
However, American politics is changing currently in this
respect, with a realignment of policies around ‘identity politics’, and away from economics. The Democrats are now
more pro-free markets in their economics than the Republicans on questions of
global trade.
In short, what is
happening in American politics is natural change, it is not so mad, bad and
sad, if you want to analyse it honestly and dispassionately. The American
political system is more likely to produce more leaders like Trump these days, leaders
that play on the new political divide, because it is a more convenient way to
package themselves - successfully. If he loses, it will be because of the coronavirus, not his populism.
I follow Morris P. Fiorina who says the culture war
thesis is over-egged at the public-level. It’s the politicians and the media who
have moved apart to the point of conflict.
Culture wars aren’t emanating from the public as the writers in the
Telegraph tell us, or as Douglas Murray argues in his infuriatingly entitled
book, "The Madness of Crowds". The mass of
the American public is not that interested. It’s in the middle and could go
left or right. Will they buy the liberal package to the left, or the
populist package to the right? We will know after this election whether
the challenger liberal package of Biden will take the crown.
I do not however, underestimate how important questions
of competency are as drivers of vote choice. But there must be some
uncertainty of how much covid will provoke change in the ballot box, beyond a
referendum on populism and liberal packages. Covid is surely a big ‘shock
to the system’ and the more Trump moves the debate onto the territory of culture
wars, the better for him. He has a built-in majority on that
front in the U.S.A.
State of the prediction market
As
of Monday 5th October at 21:30, Trump had just 33 chances in 100 of
winning in November, according to Betdaq, Betfair’s smaller rival.
Currently, on the 29th October, the prediction is similar. The
expert models predict that Trump has smaller chances, the most celebrated expert
being Nate Silver, who gives Trump just 13 chances in a 100. Either the experts
or the markets have got it wrong.
For William Hill,
Biden’s chances leapt from 56 / 100 before the first T.V. debate, to 63 / 100
after it.[v] When
the news about Trump’s covid diagnosis came in, and then he was hospitalised,
they suspended the market, but Biden’s win probability rose to a high of 67 /
100 on Betdaq who bravely didn’t suspend their market. It fell back
slightly to 64 / 100 when Trump announced he was leaving hospital and has
fluctuated around that mark since. In
betting terms he is a 2-1 on shot. Stake
£200 to be returned £300, or lose it all if Trump wins, as of 29th October
2020, less than a week from the Election on 3rd November.
