1
00:00:00,000 --> 00:00:14,560
Paul Sztorc, he's worked on Drivechain, a peer-to-peer sidechain technology designed

2
00:00:14,560 --> 00:00:18,600
to bring completed technology to Bitcoin and do several other amazing things as
well.

3
00:00:18,600 --> 00:00:28,440
So Paul Sztorc, thanks.

4
00:00:28,440 --> 00:00:32,440
This talk actually is not about Drivechain, although I'm sure it'll come up in the
panel

5
00:00:32,440 --> 00:00:33,440
at noon.

6
00:00:33,440 --> 00:00:41,400
Okay, so hi, my name is Paul Sztorc.

7
00:00:41,400 --> 00:00:43,880
I have a relatively mainstream background.

8
00:00:43,880 --> 00:00:48,240
I went to public school in Connecticut for 12 years, and then I went to a private
engineering

9
00:00:48,240 --> 00:00:52,920
college in Ohio where I studied economics and statistics.

10
00:00:52,920 --> 00:00:57,920
I then worked a kind of pre-doctoral research statistician job at Yale University
for two

11
00:00:57,920 --> 00:01:03,700
years for a man named William Nordhaus, who just won the Nobel Prize in Economics a
few

12
00:01:03,700 --> 00:01:06,840
months ago, or the Swedish Bank Prize, if you prefer.

13
00:01:06,840 --> 00:01:10,560
And so my economic training is relatively mainstream.

14
00:01:10,560 --> 00:01:15,880
But despite all of that, I fell in love with Bitcoin in 2012, and I published
Bitcoin research

15
00:01:15,880 --> 00:01:22,900
on my blog, Truthcoin.info, since 2014, and I presented at many Bitcoin conferences,
especially

16
00:01:22,900 --> 00:01:28,900
the Scaling Bitcoin Conferences, as well as Building on Bitcoin last summer and
TabConf

17
00:01:28,900 --> 00:01:31,300
earlier this year.

18
00:01:31,300 --> 00:01:36,020
The topic of this presentation is an idea for getting the public sector, and I put
it

19
00:01:36,020 --> 00:01:43,540
there in a kind of scary red blob, to substantially inherit most of the
reasonableness of the

20
00:01:43,540 --> 00:01:44,660
private sector.

21
00:01:44,660 --> 00:01:48,300
And so this presentation is not about replacement.

22
00:01:48,300 --> 00:01:53,100
It is not about replacing the public sector with the private sector via some
mysterious

23
00:01:53,100 --> 00:01:55,380
process that no one will explain.

24
00:01:55,380 --> 00:01:57,700
It is just about improving the public sector.

25
00:01:57,700 --> 00:02:00,900
So you have to decide how anarchist you think it is.

26
00:02:00,900 --> 00:02:01,900
It's up to you.

27
00:02:01,900 --> 00:02:02,900
But it does involve markets.

28
00:02:02,900 --> 00:02:06,780
It's very Hayekian, so we'll see.

29
00:02:06,780 --> 00:02:08,620
Here is the entire talk in one slide.

30
00:02:08,620 --> 00:02:13,740
The problem, politicians are installing bad policies and getting away with it.

31
00:02:13,740 --> 00:02:17,940
We're going to create a solution, make it easy to find the bad politicians and get
rid

32
00:02:17,940 --> 00:02:24,020
of them, and specifically, we're going to create some assets whose value reflects
the

33
00:02:24,020 --> 00:02:28,500
politician's competence, and then we'll make the pricing data available to the
public,

34
00:02:28,500 --> 00:02:33,460
and they'll just vote for whoever has the better numbers.

35
00:02:33,460 --> 00:02:39,780
So people might have this information available to them just before they vote.

36
00:02:39,780 --> 00:02:43,540
And so for each person running, there's a column here, and it just gives forecasts
about

37
00:02:44,340 --> 00:02:46,540
how life will be if the person is elected.

38
00:02:46,540 --> 00:02:49,980
The first row guesses how much the government will cost.

39
00:02:49,980 --> 00:02:54,140
The second row guesses how economically prosperous the citizens will be.

40
00:02:54,140 --> 00:03:00,300
And the third row just maybe would cover things like invasion, war, health care,
mental health,

41
00:03:00,300 --> 00:03:01,300
gun safety, whatever.

42
00:03:01,300 --> 00:03:04,700
It just kind of catches all these things, and people will just look at the two
numbers

43
00:03:04,700 --> 00:03:06,500
and decide which one they like more.

44
00:03:06,500 --> 00:03:10,660
So where do these numbers come from, and why would anyone take them seriously?

45
00:03:10,780 --> 00:03:14,100
And that is what this talk is about.

46
00:03:14,100 --> 00:03:18,620
And so first, I'm going to give some background knowledge, and then second, I'm
going to talk

47
00:03:18,620 --> 00:03:23,860
a little bit about democracy and what I call electoral feedback.

48
00:03:23,860 --> 00:03:27,460
And then I'm going to talk about these event derivatives, which are usually called
prediction

49
00:03:27,460 --> 00:03:31,540
markets, and fourth, I'm going to combine these ideas, and fifth, I'll explain why I

50
00:03:31,540 --> 00:03:37,140
think this idea actually will work, unlike other ideas that don't work.

51
00:03:37,140 --> 00:03:39,060
Those last two are super short.

52
00:03:39,060 --> 00:03:41,620
They take about 60 seconds, I hope.

53
00:03:41,620 --> 00:03:46,220
So the background knowledge that you need to have in a nutshell is that this idea is

54
00:03:46,220 --> 00:03:51,900
very old, and a lot of super smart people like it, including many cypherpunks.

55
00:03:51,900 --> 00:03:56,220
The second is that I've already basically implemented the idea, so it's not
vaporware.

56
00:03:56,220 --> 00:04:00,660
And the third, there is no, like, scam ICO or any kind of, like, weird scamming
thing

57
00:04:00,660 --> 00:04:03,500
in this project anywhere, which I'm going to explain.

58
00:04:03,500 --> 00:04:06,340
So the first name I'm going to drop is Hal Finney.

59
00:04:06,340 --> 00:04:09,900
A lot of people think that Hal Finney is Satoshi Nakamoto.

60
00:04:09,900 --> 00:04:12,020
He received the first Bitcoin transaction.

61
00:04:12,020 --> 00:04:14,740
He liked this idea a lot.

62
00:04:14,740 --> 00:04:16,580
He's calling them conditional prediction markets.

63
00:04:16,580 --> 00:04:22,340
I'm going to call them multidimensional event derivatives later.

64
00:04:22,340 --> 00:04:28,340
The second name is Robin Hanson, who Ralph Merkle is name dropping him as an
important

65
00:04:28,340 --> 00:04:29,420
guy.

66
00:04:29,420 --> 00:04:35,260
This is basically Robin Hanson's ideas just put on a blockchain, and Ralph Merkle
built

67
00:04:35,260 --> 00:04:37,460
most of the technology that Bitcoin uses.

68
00:04:37,460 --> 00:04:42,860
So this is more name dropping, which is that this was a paper that was put out in
order

69
00:04:42,860 --> 00:04:47,700
to try to convince the government to stop interfering with prediction market
development

70
00:04:47,700 --> 00:04:49,260
and research.

71
00:04:49,260 --> 00:04:51,540
It's signed by a giant list of people.

72
00:04:51,540 --> 00:04:55,900
All these people either, like, will win the Nobel Prize or have or should.

73
00:04:55,900 --> 00:04:58,700
They're super, super well respected.

74
00:04:58,700 --> 00:05:02,940
And they all signed this paper, but it's kind of going nowhere, hence the blockchain
emphasis

75
00:05:02,980 --> 00:05:11,980
that I'm taking it further away from the high road because it's been shown to be
impractical.

76
00:05:11,980 --> 00:05:17,860
So the second thing is that this talk assumes that someone will solve the so-called
blockchain

77
00:05:17,860 --> 00:05:20,620
oracle problem, which is a technical problem.

78
00:05:20,620 --> 00:05:22,900
In order to make these assets, you need it to be solved.

79
00:05:22,900 --> 00:05:26,340
Fortunately, I personally have solved it, so there's nothing for you to worry about.

80
00:05:26,340 --> 00:05:29,060
And I wrote this paper about it a long time ago.

81
00:05:29,060 --> 00:05:31,940
And this paper has some pretty cool endorsements.

82
00:05:31,940 --> 00:05:33,740
We got Roger Ver up here.

83
00:05:33,740 --> 00:05:38,620
We also have Andrew Poelstra, who I think is the brightest technical mind in the
space.

84
00:05:38,620 --> 00:05:41,900
And we have also Adam Back, CEO of Blockstream.

85
00:05:41,900 --> 00:05:44,500
And we even have a smiley face from Peter Todd.

86
00:05:44,500 --> 00:05:48,780
So it's, like, basically as good as it gets, I think.

87
00:05:48,780 --> 00:05:54,420
This paper that I wrote spawned virtually all the projects in this area, some of
which

88
00:05:54,420 --> 00:05:58,500
I'm more proud of than others, but the only one I really like is this one at the
top.

89
00:05:58,500 --> 00:06:02,260
I oversaw its development personally.

90
00:06:02,260 --> 00:06:06,580
It's a fork of Bitcoin Core, and it was assembled by two different Bitcoin Core
developers over

91
00:06:06,580 --> 00:06:09,700
a period of about 24 months.

92
00:06:09,700 --> 00:06:15,940
And I run the project website where I put content, like papers and this
presentation.

93
00:06:15,940 --> 00:06:17,100
And here's some screenshots.

94
00:06:17,100 --> 00:06:19,580
There we go.

95
00:06:19,580 --> 00:06:22,940
Some screenshots, which hopefully by the end of the talk will kind of make some
sense to

96
00:06:22,940 --> 00:06:23,940
you.

97
00:06:23,940 --> 00:06:25,340
So we have some events here.

98
00:06:25,340 --> 00:06:26,340
They're, like, in a big list.

99
00:06:26,340 --> 00:06:27,900
And then we have some markets.

100
00:06:27,900 --> 00:06:28,900
They have prices.

101
00:06:28,900 --> 00:06:33,980
And then we have, like, a trading view, where you're, like, buying and selling
things.

102
00:06:33,980 --> 00:06:39,060
So that's just kind of to show it's not paperware.

103
00:06:39,060 --> 00:06:44,940
This project could theoretically be live on the Bitcoin BTC mainnet as early as this
autumn.

104
00:06:44,940 --> 00:06:47,820
But I don't, you know, you never know about that type of thing.

105
00:06:47,820 --> 00:06:51,980
It depends on a lot of variables, so we'll have to see about that.

106
00:06:51,980 --> 00:06:56,180
So finally, I just have to mention there's no ICO and no, like, weird utility token
going

107
00:06:56,180 --> 00:06:57,180
on here.

108
00:06:57,460 --> 00:07:01,620
There is a second token, which leads to misunderstanding, so I'm going to explain it
in about three

109
00:07:01,620 --> 00:07:02,620
sentences.

110
00:07:02,620 --> 00:07:05,860
The second token is more analogous to mining.

111
00:07:05,860 --> 00:07:10,300
So in Bitcoin, the people who transact, they don't need to mine.

112
00:07:10,300 --> 00:07:14,660
And in this project, the users, people who trade in these markets and create them,
they

113
00:07:14,660 --> 00:07:18,940
don't need to know anything about the second token, nor do they need to own any of
the

114
00:07:18,940 --> 00:07:19,940
second token.

115
00:07:19,940 --> 00:07:23,660
So you only own that token if you want to go into that line of work, the same way
you'd

116
00:07:23,660 --> 00:07:27,140
only buy an ASIC if you wanted to go into that line of work.

117
00:07:27,140 --> 00:07:32,700
Okay, so now the talk can really get started, actually, for real.

118
00:07:32,700 --> 00:07:36,320
So the question is, why is the public sector so disappointing?

119
00:07:36,320 --> 00:07:37,860
Because it's really everyone that hates it.

120
00:07:37,860 --> 00:07:42,500
It's not just people who come to an anarchist conference in Mexico.

121
00:07:42,500 --> 00:07:45,780
It's just kind of universally, culturally, it's just disappointing for people.

122
00:07:45,780 --> 00:07:47,580
And the question is, why?

123
00:07:47,580 --> 00:07:52,140
And the argument I'm going to put forward has nothing to do with morality or with
lofty

124
00:07:52,140 --> 00:07:55,340
abstractions such as freedom or whatever.

125
00:07:55,340 --> 00:07:58,020
It won't even have that much to do with economics.

126
00:07:58,020 --> 00:08:03,460
Instead, it has more of like a physics or biochemistry flavor, because it rests on
this

127
00:08:03,460 --> 00:08:06,060
idea of feedback.

128
00:08:06,060 --> 00:08:11,220
And this is an idea of feedback in the free market, where you have bad products
being

129
00:08:11,220 --> 00:08:16,380
sold and consumers don't like the products, and they buy fewer of them, which
punishes

130
00:08:16,380 --> 00:08:18,860
the merchant who's selling them.

131
00:08:18,860 --> 00:08:21,860
So a free market doesn't mean instant utopia, right?

132
00:08:21,860 --> 00:08:27,260
But it does mean that things improve, and they improve basically as fast as
possible.

133
00:08:27,260 --> 00:08:32,380
And so the modern democracies that most of us live in, for better or for worse, also

134
00:08:32,380 --> 00:08:37,940
have feedback, called voting, and it kind of goes a little like this, where if the
government

135
00:08:37,940 --> 00:08:43,920
is too unsatisfying in some way, it can be dismissed with a majority vote.

136
00:08:43,920 --> 00:08:45,180
And it's a little more complicated than that.

137
00:08:45,180 --> 00:08:48,180
There's like some other weird stuff that's not really important, but basically this
is

138
00:08:48,180 --> 00:08:52,380
this gear that controls the machine very slowly.

139
00:08:52,380 --> 00:08:56,380
Now the free market feedback differs from electoral feedback.

140
00:08:56,380 --> 00:09:02,180
We know they're different because one works pretty well and the other one is always
disappointing.

141
00:09:02,180 --> 00:09:03,620
So what are the differences?

142
00:09:03,620 --> 00:09:05,740
Frequency is one difference.

143
00:09:05,740 --> 00:09:09,720
The market feedback fires every time a merchant loses a sale.

144
00:09:09,720 --> 00:09:12,420
So that's many millions of times per day.

145
00:09:12,420 --> 00:09:16,940
The electoral feedback fires once every four or two or six years or something like
that

146
00:09:16,940 --> 00:09:19,100
or whatever, whatever the election is.

147
00:09:19,100 --> 00:09:23,660
So that's one big difference, but I think that difference is actually relatively
trivial

148
00:09:23,660 --> 00:09:28,100
in comparison to something that I call research.

149
00:09:28,100 --> 00:09:32,380
And so you see there's actually even more feedback loops than you originally
anticipated

150
00:09:32,380 --> 00:09:40,580
because when a disappointing sale is completed, the consumer suffers, and the desire
to avoid

151
00:09:40,580 --> 00:09:44,580
suffering stimulates the consumer's search for alternatives.

152
00:09:44,580 --> 00:09:47,220
And I call that search effort research, for lack of a better word.

153
00:09:47,220 --> 00:09:49,960
I don't know what else to call it.

154
00:09:49,960 --> 00:09:52,220
But so, okay.

155
00:09:52,220 --> 00:09:57,660
Now in both sectors, public and private, you have to do your own research, so to
speak,

156
00:09:57,660 --> 00:09:59,880
and you have to pay for your research.

157
00:09:59,880 --> 00:10:04,580
Research consumes your scarce resources, especially your time.

158
00:10:04,580 --> 00:10:07,260
The important things in your life, you research a lot.

159
00:10:07,260 --> 00:10:09,860
Buying a house, you research it a lot.

160
00:10:09,860 --> 00:10:13,340
But picking out a hotel room, on the other hand, you do not do as much research.

161
00:10:13,580 --> 00:10:15,980
You only do a little bit.

162
00:10:15,980 --> 00:10:18,540
Cosmetic surgery, you would do lots of research.

163
00:10:18,540 --> 00:10:21,740
Buying a new pair of flip-flops, very little research.

164
00:10:21,740 --> 00:10:26,580
So the problem with elections is that your single vote will almost never affect the
outcome

165
00:10:26,580 --> 00:10:28,580
because there's so many voters.

166
00:10:28,580 --> 00:10:33,220
And people pretend that their vote matters in order to feel important, but really
they

167
00:10:33,220 --> 00:10:34,780
know it doesn't matter.

168
00:10:34,780 --> 00:10:41,420
So if you master the issues and the candidates and do a lot of research, it won't
change

169
00:10:41,420 --> 00:10:45,340
your life in the slightest, because other people are not doing any research.

170
00:10:45,340 --> 00:10:48,180
So there's never any reason for you to do any.

171
00:10:48,180 --> 00:10:52,420
Now of course this is a big oversimplification, but I think it's basically the
explanation

172
00:10:52,420 --> 00:10:53,820
for what's going on here.

173
00:10:53,820 --> 00:10:57,100
Voters usually admit that they don't know what they're doing, and I have here 71% of

174
00:10:57,100 --> 00:11:02,060
Americans cannot even name their congressional representative, let alone know what
they've

175
00:11:02,060 --> 00:11:04,440
been up to or whatever.

176
00:11:04,440 --> 00:11:06,420
And why bother learning who their representative is?

177
00:11:06,420 --> 00:11:08,900
Because it basically makes no difference.

178
00:11:08,900 --> 00:11:14,100
So at breakfast on election day, voters will carefully weigh the costs and benefits
of

179
00:11:14,100 --> 00:11:16,940
different breakfast foods that they could eat.

180
00:11:16,940 --> 00:11:20,580
But when they go in to vote, they won't really know anything about the costs and
benefits

181
00:11:20,580 --> 00:11:25,780
of their choices, so hence this idea to kind of give them that information.

182
00:11:25,780 --> 00:11:31,580
Now an implication of this theory is that the idea of educating people in order to
make

183
00:11:31,580 --> 00:11:36,900
them libertarians or make them experts in economics will never be able to actually
solve

184
00:11:36,900 --> 00:11:39,020
this problem and improve society.

185
00:11:39,020 --> 00:11:44,180
It's very noble and worth doing, in the same way that chemistry and music are worth
doing,

186
00:11:44,180 --> 00:11:47,940
and like birdwatching is like a real skill, and mastering the skill of birdwatching
could

187
00:11:47,940 --> 00:11:53,240
be fun, but ultimately if persuasion were effective, then the elections themselves
wouldn't

188
00:11:53,240 --> 00:11:55,060
be so problematic.

189
00:11:55,060 --> 00:11:59,420
Friedrich Hayek would have been wrong about information diffusion, and a centrally
planned

190
00:11:59,420 --> 00:12:02,480
economy would be more efficient than laissez-faire.

191
00:12:02,480 --> 00:12:05,300
So the research incentives are the whole problem in the first place.

192
00:12:05,300 --> 00:12:08,220
So now what should we do instead?

193
00:12:08,220 --> 00:12:11,580
As I said, the plan is to have people show up on election day, open their cell
phones,

194
00:12:11,580 --> 00:12:16,980
and check some prices, and it should be as easy as checking an NFL score or the S&P
500

195
00:12:16,980 --> 00:12:17,980
or something like that.

196
00:12:17,980 --> 00:12:20,580
Then they just vote for the candidate with better prices, and this is just supposed
to

197
00:12:20,580 --> 00:12:23,300
be a huge improvement over what we do right now.

198
00:12:23,300 --> 00:12:24,620
So prices of what, though?

199
00:12:24,620 --> 00:12:26,600
What's going on here?

200
00:12:26,600 --> 00:12:31,640
This is an example of an event derivative, which is usually called a prediction
market.

201
00:12:31,640 --> 00:12:35,720
It's defined as an asset that pays you money if something happens.

202
00:12:35,720 --> 00:12:37,360
If the thing happens, you get paid.

203
00:12:37,360 --> 00:12:40,160
If it doesn't happen, you do not get paid.

204
00:12:40,160 --> 00:12:42,680
This is an example from a website called Intrade.

205
00:12:42,680 --> 00:12:47,720
The asset was created in 2011, and it would have been worth $1 if the year 2012 had
been

206
00:12:47,720 --> 00:12:52,680
the warmest year on record, as reported by these NASA satellites that measure
surface

207
00:12:52,680 --> 00:12:55,880
temperature and put it on a website where anyone can find it.

208
00:12:55,880 --> 00:12:57,640
Otherwise the asset is worth zero.

209
00:12:57,640 --> 00:13:05,280
So the asset traded at $0.40 in January 2011, but by mid-2012 it was worth just
$0.10, and

210
00:13:05,280 --> 00:13:09,240
in December of 2012 it was worth basically nothing.

211
00:13:09,240 --> 00:13:12,380
So event derivatives are similar to bets or wagers.

212
00:13:12,380 --> 00:13:17,720
The difference is that with event derivatives, the prices are constantly changing,
and this

213
00:13:17,720 --> 00:13:20,900
variation in prices produces socially useful information.

214
00:13:20,900 --> 00:13:25,400
So in a bet, the odds are fixed, and the odds are usually just fixed at 50-50.

215
00:13:25,800 --> 00:13:28,440
I bet you $20 if this happens.

216
00:13:28,440 --> 00:13:30,120
And where's the fun in that?

217
00:13:30,120 --> 00:13:35,320
With these assets, the market price is the objective likelihood of the event that
the

218
00:13:35,320 --> 00:13:36,720
market is about.

219
00:13:36,720 --> 00:13:41,920
So as 2012 went on, it was becoming clear that it wasn't going to be the warmest
year,

220
00:13:41,920 --> 00:13:48,480
at least according to these satellites, and so the price collapsed over time.

221
00:13:48,480 --> 00:13:53,160
The topic of prediction markets usually reminds people of election betting, which is
good,

222
00:13:53,160 --> 00:13:54,920
a good start.

223
00:13:54,920 --> 00:13:57,820
These are assets that pay out if the candidate wins.

224
00:13:57,820 --> 00:14:03,560
This right here is an example if a candidate won the 2016 Republican presidential
nomination.

225
00:14:03,560 --> 00:14:08,680
So after the Iowa straw poll, Trump's price in blue plummeted because he didn't do
as

226
00:14:08,680 --> 00:14:13,520
well as people thought, and then it surged after he won South Carolina.

227
00:14:13,520 --> 00:14:15,480
Now is this what I suggest that we do?

228
00:14:15,480 --> 00:14:18,880
A lot of people think that this is what I want us to do, but it is absolutely not at

229
00:14:18,880 --> 00:14:20,760
all what I want us to do.

230
00:14:20,760 --> 00:14:22,360
This is lame.

231
00:14:22,360 --> 00:14:26,440
It is certainly entertaining, and it makes election years much more fun, especially
for

232
00:14:26,440 --> 00:14:28,400
me, because I like this type of thing.

233
00:14:28,400 --> 00:14:33,680
But these type of markets only tell us who is probably going to win.

234
00:14:33,680 --> 00:14:38,720
Instead, we want to change who wins, and we want to sabotage the incompetent
candidates

235
00:14:38,720 --> 00:14:40,780
so that they cannot win.

236
00:14:40,780 --> 00:14:42,280
And how do we do that?

237
00:14:42,280 --> 00:14:47,160
This is what Hal Finney was excited about, although, yeah, they could never really
do

238
00:14:47,160 --> 00:14:48,160
it the right way.

239
00:14:48,320 --> 00:14:52,960
They were excited about it back in, whenever that was, 2006 or something.

240
00:14:52,960 --> 00:14:59,200
Okay, so, oh yeah, sorry, I'm going to try to explain this idea of multivariate
betting

241
00:14:59,200 --> 00:15:01,400
in nine slides.

242
00:15:01,400 --> 00:15:05,320
And hopefully after this, the whole presentation will make sense.

243
00:15:05,320 --> 00:15:09,240
And the first two are super easy, and four of them are really just one slide broken
into

244
00:15:09,240 --> 00:15:10,240
four pieces.

245
00:15:10,240 --> 00:15:12,240
So here we go.

246
00:15:12,240 --> 00:15:15,760
Okay, here on the left, I have a series of coin flip events.

247
00:15:15,760 --> 00:15:20,280
In this table, we're describing the behavior of the 303rd coin flip.

248
00:15:20,280 --> 00:15:23,360
We don't know what will happen on that flip, but we can nonetheless fill in the
probabilities

249
00:15:23,360 --> 00:15:24,800
in this table.

250
00:15:24,800 --> 00:15:28,680
Heads and tails are equally likely, so it's 50-50.

251
00:15:28,680 --> 00:15:30,520
This is just a basic statement of probability.

252
00:15:30,520 --> 00:15:32,080
And this next one is also easy.

253
00:15:32,080 --> 00:15:33,080
It's just a dice.

254
00:15:33,080 --> 00:15:36,560
It's the same as the previous slide, but with a dice.

255
00:15:36,560 --> 00:15:41,440
Since each face of the dice is equally likely to come up, they all have one sixth.

256
00:15:41,440 --> 00:15:44,920
Now here's where you need to turn on your brain, unfortunately, sorry about that,
but

257
00:15:45,080 --> 00:15:49,320
this is where it starts to get complicated, which is that this slide is just the
previous

258
00:15:49,320 --> 00:15:52,680
two slides kind of added together.

259
00:15:52,680 --> 00:15:56,520
And we have the coin flip in green along the left vertical edge of the table, and we
have

260
00:15:56,520 --> 00:15:59,760
the dice roll across the top horizontal edge.

261
00:15:59,760 --> 00:16:02,440
And I've circled some probabilities in red.

262
00:16:02,440 --> 00:16:07,800
The probability that a two will be rolled is still one sixth, it's at the bottom.

263
00:16:07,800 --> 00:16:11,200
Probability that a tail will be flipped is still one half.

264
00:16:11,200 --> 00:16:15,400
Those are called marginal probabilities because they're written in the margin, so to
speak.

265
00:16:15,400 --> 00:16:20,360
The probability that both a two will be rolled and that a tail will be flipped
simultaneously,

266
00:16:20,360 --> 00:16:22,800
that's shown here as one twelfth.

267
00:16:22,800 --> 00:16:28,560
And okay, so with that out of the way, we can talk about relationships between
events.

268
00:16:28,560 --> 00:16:32,640
And I'm going to draw a contrast between these two tables here.

269
00:16:32,640 --> 00:16:35,160
Both are about unknown future coin flips.

270
00:16:35,160 --> 00:16:43,560
The top table considers coin flip 304 in blue across the top, and it considers flip

271
00:16:43,560 --> 00:16:47,160
number 305 in red across the left side.

272
00:16:47,160 --> 00:16:51,280
Each cell occurs with probability .25, which is what I have indicated here.

273
00:16:51,280 --> 00:16:56,360
Now, the second table does something extremely unrealistic that is only for teaching
purposes.

274
00:16:56,360 --> 00:16:59,160
It plots coin flip 304 against itself.

275
00:16:59,160 --> 00:17:01,600
Now, in the real world, this would never happen.

276
00:17:01,600 --> 00:17:04,920
No one would do this because it's just the same thing twice.

277
00:17:04,960 --> 00:17:10,040
But the point here is that if it did happen, we could write certain numbers in this
table,

278
00:17:10,040 --> 00:17:14,320
and the numbers we would write would have zeros for things that are impossible.

279
00:17:14,320 --> 00:17:18,440
So we zero out everything that's impossible, and we see there's a kind of clumping
here.

280
00:17:18,440 --> 00:17:23,680
And I'm going to explain that again with this dice, which is also the same idea
here, which

281
00:17:23,680 --> 00:17:28,640
is that if it's the same dice roll against itself, you have this kind of clumping up

282
00:17:28,640 --> 00:17:29,640
in a line.

283
00:17:29,640 --> 00:17:32,440
If they're perfectly related, they clump up in a line.

284
00:17:32,440 --> 00:17:35,440
If they're just a little related, then they only clump up a little bit.

285
00:17:35,440 --> 00:17:39,120
And if they are not related at all, they don't clump.

286
00:17:39,120 --> 00:17:44,720
So that's really the synthesis here, is that instead of doing things that we know
are related,

287
00:17:44,720 --> 00:17:47,320
we check and see if other things are related.

288
00:17:47,320 --> 00:17:55,840
So here I have the—we just make four—okay, since clumping equals relatedness, all we

289
00:17:55,840 --> 00:17:59,680
do is measure these two things at once, and we look for the clumping.

290
00:17:59,680 --> 00:18:01,760
And if there's clumping, that means the events are related.

291
00:18:02,080 --> 00:18:06,960
So we make four different event-derivative markets, one for each of the grids here,
and

292
00:18:06,960 --> 00:18:09,920
we get a market price for each, and then we just look for this clumping.

293
00:18:09,920 --> 00:18:14,000
And that's basically the synthesis here, which is the short part, which is that with
some

294
00:18:14,000 --> 00:18:19,440
arithmetic you can just add two numbers and divide them, and you can get out of this
something

295
00:18:19,440 --> 00:18:21,760
that's very, very easy for the layperson to understand.

296
00:18:21,760 --> 00:18:23,400
They'll never have to see anything complex.

297
00:18:23,400 --> 00:18:27,560
They just see a bunch of numbers that go up when the candidate is better, and go
down

298
00:18:27,560 --> 00:18:30,600
when the candidate is much worse.

299
00:18:30,600 --> 00:18:33,840
And that is how you get these numbers to show up that I mentioned at the beginning

300
00:18:33,840 --> 00:18:35,480
of the talk.

301
00:18:35,480 --> 00:18:40,600
And so now I have two minutes left, I think, and I'm going to talk about this last
part,

302
00:18:40,600 --> 00:18:43,760
which is why anyone will care about this.

303
00:18:43,760 --> 00:18:46,920
So why would laypeople check their phones on election day?

304
00:18:46,920 --> 00:18:50,640
Well, if they're already in line, then—actually, this is the first Google result
for, like,

305
00:18:50,640 --> 00:18:52,400
election line, and there's already people who are just on there.

306
00:18:52,400 --> 00:18:54,840
These people will be glued to their phones the whole time.

307
00:18:54,840 --> 00:18:57,120
So that's a small ask.

308
00:18:57,120 --> 00:18:58,600
People are basically on their phone all the time.

309
00:18:58,880 --> 00:19:02,280
Why would they navigate their phone to these particular prices, right, and not just
ignore

310
00:19:02,280 --> 00:19:05,640
them, the same way they ignore every other piece of information that falls under
this

311
00:19:05,640 --> 00:19:09,160
category of research that I mentioned before?

312
00:19:09,160 --> 00:19:15,160
Well, basically—let's see here.

313
00:19:15,160 --> 00:19:20,560
In a nutshell, the voter turnout rate is super low, and it's so low that the people
who don't

314
00:19:20,560 --> 00:19:24,920
vote could basically form their own political party that would defeat both of the
other

315
00:19:24,920 --> 00:19:26,120
parties combined.

316
00:19:26,120 --> 00:19:30,080
So you really aim for these people who are just totally overwhelmed and apathetic
and

317
00:19:30,080 --> 00:19:33,560
don't know what to do, and I think that really describes most people, especially
when you

318
00:19:33,560 --> 00:19:40,720
consider that fact about 71 percent of Americans not even knowing who their
congressional representative

319
00:19:40,720 --> 00:19:43,040
is, even though everyone hates the government.

320
00:19:43,040 --> 00:19:46,120
So I think that's the only way to explain all those things.

321
00:19:46,120 --> 00:19:51,360
The victory margins are very narrow, so even if you don't get every single non-voter
to

322
00:19:51,360 --> 00:19:54,360
form a party, you could still do very well.

323
00:19:54,360 --> 00:19:58,600
And finally, you can ramp this up by betting on other stuff that people like until
they

324
00:19:58,600 --> 00:20:02,040
get more comfortable with this institution, and then there you go.

325
00:20:02,040 --> 00:20:06,360
And that's basically—oh, yes, one final thing, and I think I have like 30 seconds

326
00:20:06,360 --> 00:20:13,120
left, so it's perfect, perfect timing, which is that this idea makes rhetoric
irrelevant.

327
00:20:13,120 --> 00:20:18,680
So for example—let me skip to bullet point number three—if a politician announces
that

328
00:20:18,680 --> 00:20:22,240
they want everyone to die and that they plan to kill everyone, that's fine, but if
the

329
00:20:22,240 --> 00:20:25,760
traitors don't actually believe that they will follow through, or they will or can
follow

330
00:20:25,760 --> 00:20:29,200
through with this, then the number won't actually budge an inch, because you're
speculating

331
00:20:29,200 --> 00:20:31,160
on stuff that will happen.

332
00:20:31,160 --> 00:20:33,000
Derivatives only pay if it actually happens.

333
00:20:33,000 --> 00:20:37,800
So everything that politicians say can just be safely ignored, and laypeople already
know

334
00:20:37,800 --> 00:20:41,960
that politicians are liars, so I think they will actually warm up to this idea
pretty

335
00:20:41,960 --> 00:20:42,960
quickly.

336
00:20:42,960 --> 00:20:43,960
Okay, that's the talk.

337
00:20:43,960 --> 00:20:44,960
Thank you.

338
00:20:44,960 --> 00:20:46,160
Thank you.

339
00:21:14,960 --> 00:21:15,960
Thank you.