Betting on Taylor Swift or Who'll Be Made Pope: The Past and Present of Prediction Markets

Summary

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Podcast Summary: Betting on Taylor Swift or Who'll Be Made Pope: The Past and Present of Prediction Markets

Podcast: Business History (with Everybody’s Business, Bloomberg)
Hosts: Jacob Goldstein, Robert Smith, Stacey Vanek Smith, Max Chafkin
Release Date: March 25, 2026

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Overview

This live podcast mashup between Pushkin Industries’ Business History and Bloomberg’s Everybody’s Business explores prediction markets—places where people can bet on anything from political outcomes, celebrity actions, and even religious events. The episode delves into the modern explosion of these financial markets, their economic value, historic roots dating back hundreds of years, and the ethical quandaries they raise in today's digital age.

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Key Discussion Points & Insights

1. What Are Prediction Markets?

• Definition & Examples:

  • Prediction markets are platforms like Polymarket and Kalshi where users trade on outcomes—politics, weather, celebrity news, even the return of Jesus.
  • Max Chafkin explains (03:53) the mechanics:

    “You go on a prediction market and you'll see essentially a price... say 10 cents for AOC to be the Dem nominee. If you put down $0.10 and AOC becomes the Dem nominee, you get a dollar; if not, nothing.”

• Audience Example Market:

  • Live demonstration—betting if at least 10% of the audience would leave before the end of the show (04:51).

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2. Economic and Emotional Value

• Financialization of Everything:

  • Kalshee founder Tariq Mansour aspires “to financialize everything and create a tradable asset out of any difference in opinion” (08:00).
  • Max comments (08:45):

    “What if everything was finance? That's essentially what they're saying. And it sounds kind of crazy, but the argument is basically that this would be a way to sort of hedge your risk in areas where it might be hard to.”

• Emotional Hedging:

  • Sports bets often serve to soften emotional blows, e.g., fans bet against their own teams as “emotional hedges” (09:03).

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3. Absurd & Profound Bets

• Strange Lines:

  • The hosts mention bets like “Will Jesus Christ return before 2027?” (09:06).
    Stacey jokes:

    “It's gone up sharply since February.” (09:18)
    Jacob:
    “And we should say for people listening, it's a 3% chance, which seems pretty high, right? ...I mean, it's been 2,000 years.” (09:38)

• Are They Valuable?

  • The tension between markets as gambling and as sources of aggregated information.

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4. Homework (Research) vs. Luck in Prediction Markets

• Unique Edge for ‘Homework’:

  • Stacey explains why she appreciates prediction markets:

    “I like things where I like, homework oriented things.” (09:41)

  • Contrasts roulette/casinos—where knowledge doesn’t help—with prediction markets, where research (sometimes) wins.

    “On Polymarket and Kalshi, if you do your homework, you can get the edge.” (11:35)

• Success Stories:

  • “Poly Market Whale,” aka “Domer,” won big by researching details on Sarah Palin as John McCain’s 2008 running mate (12:47), and later, on Taylor Swift album sales (13:42).
  • The “Superbowl anthem” story: Caden Booth uses parabolic mics and travel to time Charlie Puth’s rehearsal, winning thousands (15:35).
    Stacey:

    “Homework for the win.” (16:16)

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5. Insider Trading and the Dark Side

• Insider Edge:

  • Concerns about athletes or insiders gaming markets (John Tay Porter, NBA) (16:42).
  • Max:

    “The other thing is this could happen in all sorts of other domains. And that, to me, is what's kind of so distressing about this.” (17:46)

• Institutional Embrace:

  • Instead of shunning these markets, sports leagues and financial players (like the NYSE) seek revenue channels—“cashing in” (18:00).

• Ethical Worries:

  • Max:

    “We're trivializing important stuff. Like here, let's look at this ad that Kalshee has been running... all these historical events, you may think of them as historical events, but they're just betting opportunities.” (19:08)

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6. History of Prediction Markets: From Popes to Presidents

• 16th Century Italy - Betting on the Next Pope

  • Jacob:

    “Prediction markets, not just gambling, but real prediction markets, go back at least 500 years... Italy in the 1500s... Betting on who's going to be the Pope...” (24:27)

  • Market mechanisms mirrored current ones: tickets with cardinal names, prices reflecting probabilities.
  • Evidence that “insider trading” by cardinals swayed the markets (26:47).

• Early US Presidential Prediction Markets

  • 19th–20th century: Bars and actual markets; eventually banned (28:49).

• DARPA’s Policy Analysis Market (2001–03)

  • US government experiment in predicting global events and terrorism using markets—shut down amidst public outrage over “betting on atrocities.”

    “The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque.” (Democratic Senators, 32:36)

• Moral Tension – The Papal Bull

  • 1590: Pope Gregory IV bans betting on the papacy—effective, “penalty was excommunication” (34:10).
  • Debate: Useful information versus risk of moral decay and corruption.
  • Jacob:

    “This is not a line where things are getting more and more gambly, more and more degenerate. This is a pendulum that has been swinging back and forth for literally hundreds of years.” (35:26)

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7. Will the Backlash Return? Is This Era Different?

• Scale & Friction:

  • Max:

    “There are so many ways... you take these kind of things that have happened through history and then you turbocharge them with the Internet...” (36:57)

  • Stacey:

    “You can bet on everything and we are all so connected. I just think this betting is on another level...” (36:39)

• Journalism & Information Aggregation:

  • Use in reporting—markets as “news alerts” (37:44).
  • Stacey:

    “They're counting on insider traders to have a correct market. ...it does make those markets more valuable.” (38:11)

• Self-Referential Markets:

  • Jacob:

    “I think what we need is, is a market that says, will Kalshee or polymarket be banned by 2030?” (39:09)

  • Problem: How do you collect if the platform is banned?

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8. The Human Element: Why We Bet, Why We Care

• Entertainment vs. Information
  • Jacob:

    “I use them as a citizen. I look at them for elections... if there is meaningful news, those markets are big enough that they should move.” (39:46)

  • Robert:

    “I actually use it as entertainment... I looked at the words people were betting on that President Trump would say.” (40:09)

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Notable Quotes & Memorable Moments

• “On Polymarket and Kalshi, if you do your homework, you can get the edge.” — Stacey Vanek Smith (11:35)
• “We want to gamble, we want information about the future, but also we hate it when people do that. That has always been there...” — Jacob Goldstein (34:10)
• “This is not a line where things are getting more and more gambly, more and more degenerate. This is a pendulum that has been swinging back and forth for literally hundreds of years.” — Jacob Goldstein (35:26)
• “Weeping in the street, it's basically the Jerome Powell Renovation of 16th-century Italy.” — Max Chafkin (28:05)
• “Will Jesus Christ return before 2027?... It's a 3% chance, which seems pretty high, right? ...it's been 2,000 years.” — Jacob Goldstein (09:38)

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Important Timestamps

• 03:29 — Explanation of modern prediction markets and live demo
• 06:48 — “Powell says ‘renovation’: traders go wild”
• 08:00 — Tariq Mansour on “financializing everything”
• 09:06 — Bizarre market examples (“Will Jesus Christ return?”)
• 12:47 — “Domer” and insider research for profit
• 15:35 — Superbowl anthem homework win
• 16:42 — Sports insider trading (NBA, John Tay Porter)
• 18:00 — Institutions (NHL, NYSE) embrace and commercialize markets
• 24:27 & 26:47 — Papal prediction markets and insider trading in the 1500s
• 28:49 — Early US prediction markets & prohibition
• 31:13 — DARPA’s attempt at markets for predicting terrorism
• 34:10 — Papal ban, moral justification, impacts
• 35:26 — "It’s a pendulum,” not a straight line
• 37:44–40:09 — Journalism, news, and entertainment roles of prediction markets

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Conclusion: Pendulum or Permanent?

The episode closes with the hosts debating whether prediction markets’ reach and moral tension is a historical pattern that will swing back, or if the scale and frictionless nature of the internet makes this financialization permanent and unique. Throughout, they balance the fun and profit of “homework” with risks of insider edge and trivialization of real-world events.

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A rich, provocative journey from popes to Taylor Swift, from sealed chambers to global, digital bets—if you want to understand how our desire to know the future, to profit or just to play, has shaped business and culture, this episode is a must-listen.

Transcript

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[Robert Smith]

Pushkin Too quick?

[Jacob Goldstein]

No, it was perfect.

[Robert Smith]

Pushkin, stop.

[Jacob Goldstein]

You got it. Hey, it's Jacob. Robert and I recently did a live show with our friends from the Bloomberg podcast Everybody's Business. The show was about prediction markets, and the hosts of Everybody's Business talked about what's been happening in prediction markets in the While Robert And I talked about what's been happening in prediction markets for the last 500 years. It was a fun show. I learned a lot making it. And we're going to play it for you now. I hope you like it.

[Stacey Vanek Smith]

This is everybody's Business. From Bloomberg Businessweek, I'm Stacey Vanek Smith.

[Max Chafkin]

I'm Max Chavkin.

[Robert Smith]

And this is Business History, a show

[Jacob Goldstein]

about the history of business. I'm Jacob Goldstein.

[Robert Smith]

And I'm Robert Smith.

[Stacey Vanek Smith]

So actually, this is a podcast mashup between everybody's business and business history. We are calling it Everybody's Business History.

[Robert Smith]

Clever.

[Max Chafkin]

See what you did there?

[Stacey Vanek Smith]

I see. Do you see what I did there? And today we are going to be talking about the world of prediction markets. This is Polymarket and Call Sheet. These are places where you can bet on how many inches it is going to snow in Brooklyn today or whether we are going to attack Iran. Everything and anything we can bet on, it's. These markets are now worth more than $100 billion a year. They're growing all the time.

[Max Chafkin]

Yeah, I figured just for those people who have been following this in the pages of the Wall Street Journal or Bloomberg, just want to lay it out quickly. Prediction markets, you've probably seen them most with politics. There are two big companies. Stacey just mentioned them. Kalshee Polymarket. You go on a prediction market and. And you'll see essentially a price like say 10 cents for AOC to be the Dem nominee. And what that means is that if you put $0.10 down and AOC becomes the Dem nominee, then you get a dollar, and if she doesn't, you get $0. And you can bet on everything. Pretty much anything under the sun. And we wanted to kind of give people a visceral sense of this, the

[Stacey Vanek Smith]

DIY market, our own sort of prediction market.

[Max Chafkin]

So this is a financial opportunity for everyone in the room. It's going to require you to look around the room and ask yourself, how's this talk going to go?

[Robert Smith]

People are starting to laugh as they see the official.

[Max Chafkin]

Okay, okay, okay. Let me read the terms. The terms of this market are will at least 10% of the audience leave the room before the end of the show. So just to be clear, betting. Yes. Is betting, I think you guys on a dud. Right. If they bet. Yes, they're betting that more than 10% are going to.

[Stacey Vanek Smith]

Is necessarily a dud because they're also like overlapping segments. So there could be another panel that people feel like they.

[Jacob Goldstein]

Even stronger panel also.

[Max Chafkin]

Bathroom. Right, right. All factors are possible. There's Also the prospect of insider trading, which we will get to. I mean, you could bet. Yes. And then walk out.

[Stacey Vanek Smith]

We could all leave.

[Max Chafkin]

Okay, I'm going to get us back on track, and I just want to give people a sense of how. How crazy this gets. So Stacey mentioned a couple of markets, weather, there's politics. There are also these things called mention markets. And Stacey, you are a big fan of the Federal Reserve.

[Stacey Vanek Smith]

I do love the Federal Reserve.

[Max Chafkin]

People who listen to the show know this. It's kind of. It's endearing. Strange.

[Jacob Goldstein]

It's not strange.

[Stacey Vanek Smith]

I think it's not strange. It's a very important and powerful policy.

[Max Chafkin]

Monetary policy is exciting. And there is a prediction market. There are prediction markets. As you know, Stacey, every time Jerome Powell gives a speech, and we wrote about one of these in the latest issue of BusinessWeek, this is the lead of the story. So basically, this is Jerome Powell's last press conference. You could bet on 44 words. So is he going to say the phrase good afternoon? That's a gimme, by the way.

[Stacey Vanek Smith]

He always says good afternoon.

[Max Chafkin]

Always. Easiest $0.01 you'll ever make. But the thing that was kind of crazy about this market is as the press conference goes on, the odds change. You just saw that with our own market. Right. As people are entering the odds shift. And so during the. The last press conference, there was a question of the word renovation. Would Jerome Powell mention renovation? Remember, people who've been following this probably remember that there's a big controversy over the renovation of the Fed building. Donald Trump's very mad about it. And let me just play what happened.

[Guest Speaker / Interviewee]

Technological developments that raise potential output. Some kind of technological renovation, you know, revolution.

[Jacob Goldstein]

Did he say renovation?

[Max Chafkin]

Insane. Am I right? It's like the equivalent of a Hail Mary at the. When you're, you know, the game is almost over.

[Robert Smith]

We need a replay.

[Max Chafkin]

Traders on Discord and on Twitter went absolutely berserk over this. The quotes, and you can read these in the Business Week story. The most insane market I've ever traded. Somebody else wrote investigate Powell in all caps, suggesting that perhaps Jerome Powell had done this on purpose.

[Stacey Vanek Smith]

Yes. Poly market bet.

[Max Chafkin]

But I do think, Stacey, this kind of raises a question which is like, is this valuable? What is the point of these?

[Stacey Vanek Smith]

Yes. Like, what is the economic value of these? Obviously, if you are betting on Jerome Pal saying renovation, you have personal value, but what about for the economy?

[Max Chafkin]

Okay, so let me give you the perspective of the founder of Kalshee, who's. This is one of the two big companies. Let's let's just listen to Tariq Mansour try to explain why this matters, like why this is important beyond just an exciting opportunity for gamblers. The long term vision is to financialize everything and create a tradable asset out of any difference in opinion. And I think if you do build a general purpose exchange that can resolve differences of opinions on anything, like the TAM is quite massive. I think that might be the least relatable sentiment I've ever heard. We're going to financialize everything. Do you like finance? What if everything was finance? That's essentially what they're saying. And it sounds kind of crazy, but the argument is basically that this would be a way to sort of hedge your risk in areas where it might be hard to. So one example the Kalshi founders give is flood insurance. Like maybe instead of buying flood insurance or if the flood insurance were too expensive, you could buy a contract on the weather, you could buy a contract on rainstorms. And it sort of is. It's the way that like Wall street hedge funds, you know, use futures and stuff like that. But it would be for all of us. And I want to say, as crazy as this sounds, anyone who bets on sports knows this phenomenon because there's this concept of emotional hedging where you bet against the team you're rooting for serve as a way to soften the blow. Like, my team loses, but you know, but I make a little money.

[Stacey Vanek Smith]

If I lose, I win.

[Max Chafkin]

It feels kind of wrong though. Like, here, let me just give you one last prediction market that's on Polymarket right now. Will Jesus Christ return before 2027?

[Stacey Vanek Smith]

It's gone up sharply since February.

[Robert Smith]

Well, it's also gone down. What has happened in the last month or so?

[Max Chafkin]

And who is betting on this anyway? There's a lot. If he with a capital H returns. Do we think that Polymarket's gonna pay?

[Stacey Vanek Smith]

Oh, that's a good question.

[Robert Smith]

There might be bigger problems at that point or opportunities, depending on how you've lived your life.

[Jacob Goldstein]

And we should say for people listening, it's a 3% chance, which seems pretty high, right?

[Stacey Vanek Smith]

It does seem.

[Jacob Goldstein]

I mean, it's been 2,000 years.

[Max Chafkin]

We'll talk about this more, Stacey. But to me, like, this just kind of feels wrong. I'm not specifically talking about the Jesus market, although this field does feel wrong to me. But, but the whole thing, the whole idea of financializing everything, I mean, yes,

[Stacey Vanek Smith]

these markets are incredibly problematic, but I, I kind of like them. Okay, here's why I like them. So I really hate Gambling, I don't like taking risks and I don't like trying my luck. I like homework. I like, you know, you do the work and you get the payoff. That makes sense to me, that feels fair to me. These are the markets. This is what I like. I like things where I like, homework oriented things. I mean, and homework does not help you in gambling.

[Max Chafkin]

This all tracks.

[Stacey Vanek Smith]

Like if you go to a roulette table and you know more about roulette and the history of roulette and the roulette wheel than anybody in history, it's not going to help you win at roulette. Right. In those cases like the casino, it's got an edge.

[Robert Smith]

Yeah. If you understand gambling, you don't go into the casino.

[Stacey Vanek Smith]

Exactly. And I would argue in investing there's kind of similar things going on because you know, these big investment houses and hedge funds, they have all this money and they have access to all this information that you and I have no access to. Like they will look at satellite photos of Walmart's parking lot and they will see how many trucks are going in and out and they will estimate Walmart sales and they will figure out Walmart's profits and then they will place a bet on Walmart's share price. You and I don't have access to that information. It feels very unfair to me and I don't like it. It just feels like in these cases the house has the edge and homework is for suckers and I don't like it. But this is not true. On Polymarket and Kalshi. On Polymarket and Kalshi, if you do your homework, you can get the edge.

[Max Chafkin]

Yeah, we a couple months ago on the show interviewed this big poly market trader. I think we called him the Poly Market Whale. His name as his pseudonym is Domer. We know his name, but he likes to be anonymous because I think partly because these markets are in sort of a legal gray area. But anyway, Domer had bet stacey Something like $400 million on polymarket. When we talked to him, he had a big money bet on Taylor Swift album sales. He had 1 million riding on the question of how many albums Taylor Swift would sell.

[Stacey Vanek Smith]

Yes. And we asked Domer, like, was there a bet that did it? How did you get on on these markets? Because this is his job now. He had been a professional poker player, but he had left the world of professional poker for this market. And he said, yeah, there was this bet that did it. It was back in 2008, so it was John McCain versus Barack Obama. We knew that, but they hadn't picked their running mates yet. And everyone was wondering, especially, who's John McCain going to pick? People thought maybe Mitt Romney, but they weren't sure. And there was this old betting market, this old version of a betting market was not Polymarker or CalSHI. That went up and Domer thought, I'm going to bet on this, and I wonder if I can get an edge. And here's what he told us.

[Guest Speaker / Interviewee]

The date for John McCain picking had been announced. And also the location was a small town in Ohio, which is obviously a swing state. Then it's like, okay, like, what are the logistics of it? And so we. We looked at the map and we're like, okay, where's the nearest airport? And so we found the nearest airport, and we were looking at the flights that were coming in. And, you know, most flights are, you know, little podunk things, but there was this one random flight from Alaska that was coming in, and it's like, what is going on here? Like, why is that? Why is a flight from Alaska coming into this random town in Ohio? And we're like, okay, I think it might be Sarah Palin. And she was 25 to 1 odds. And, you know, I put $1,000 on it, which is a huge bet, and it ended up being Sarah Palin, and I made 25,000.

[Max Chafkin]

Game change, baby. Yeah. Heartwarming story, right, Stacy?

[Stacey Vanek Smith]

I think so. Homework for the win. To me, it is a heartwarming story.

[Max Chafkin]

Domer, by the way, he made 60k on that $60,000 on that Taylor Swift bet, which that was like a couple of days work for him. So this guy is pretty successful.

[Stacey Vanek Smith]

Yes. And at this point, Domer is kind of a pro, but anybody can do this. So our Wonderful producer, Jasmine J.T. green. Say hi. Jasmine told me about this story that I loved and have not been able to stop thinking about. This guy, Caden Booth, he was 21, and he decided he wanted to bet on the super bowl, and he didn't want to bet on the game or the halftime show. He wanted to bet on the national anthem, which seems like a weird thing to bet on. He was betting on the length of the national anthem specifically, which it doesn't seem like there should be that big of a range because the song is the song is the song, but there's actually a huge range. So back in 1998, this is Jewel singing the national anthem. It's one of the shortest national anthems in super bowl history. Clocked in at 1 minute and 27 seconds. Now, in 2013. It was one of the longest national anthems in super bowl history. It clocked in at 2 minutes and 36 seconds from the lovely Ms. Alicia Keys. So now Caden had to call this year's super bowl national anthem. Charlie Puth was singing, and he had to figure out where Charlie Puth's national anthem was gonna fall on the, like, star spangled spectrum.

[Jacob Goldstein]

Yeah.

[Robert Smith]

Is he gonna do the vibrato? Is he gonna hold the high note for like a minute and a half?

[Stacey Vanek Smith]

Yes, exactly. Is he gonna be on the Jewel side or is he gonna be on the Alicia Keys side?

[Robert Smith]

Yes.

[Stacey Vanek Smith]

So he was kind of poking around and he came across. There was this moment, and he saw it, and he was like, this is my moment. And what happened was he just saw a social media post from Charlie Puth being like, hey, headed to San Francisco. It's like a week before the Super Bowl. And he thought, this is my moment. He bought three things. He bought a stopwatch. He bought this weird listening equipment that really serious bird watchers use.

[Robert Smith]

Like a parabolic mic.

[Stacey Vanek Smith]

Yeah, exactly. To listen to, like, distant bird calls. And he bought a plane ticket to San Francisco. He went to San Francisco. He stood outside of the stadium. There he is. There's the weird bird watching. He stood outside of the stadium and he was like, at some point, Charlie Puth is gonna come and he is going to rehearse on site, and I'm gonna catch the sound with my bird watching listening equipment. I'm gonna time it. I'm gonna place my bet. And he waited and he waited and he waited. And then he heard the swell of the music. He hit the timer and clocked it in. I think you can see it there at a minute 51. He placed his bet. He won thousands of dollars. Homework for the win.

[Max Chafkin]

Okay, two things, Stacey. One is, this is not heartwarming to me because if I'm going to bet on this, I have to bet against this guy with the parabolic mic and the plane ticket and the stopwatch.

[Stacey Vanek Smith]

He did his homework.

[Max Chafkin]

Okay.

[Stacey Vanek Smith]

This feels fair to me.

[Max Chafkin]

Problem number two is what happens, Stacey, if Charlie puts Puth deliberately. You know, swayed the. You know, he held the high notes for longer than he intended to during the super bowl, placed a bet and took $5 million from this guy.

[Stacey Vanek Smith]

Yes. So these markets, it is true, have always had an insider trading problem. But now that they're getting bigger and more money is going into them, the insider trading problem is getting much larger. This is especially true in sports. Of course, everyone loves sports betting. Sports betting is you can bet on everything from, like the color of socks that some athlete is going to wear to how many fouls there's going to be to how many free throws. So you can bet on every aspect of every sports game. And some people have really taken this kind of insider trading to almost an art form. So there is an athlete, John Tay Porter, he was with the Toronto Raptors, and he would basically. He was accused of basically making bets on the sidelines, saying, I'm about to go in and fake an injury and place a bet, and he would go in and fake an injury and win all this money.

[Max Chafkin]

These aren't necessarily prediction markets, right, that you're talking about. This is traditional sports betting with johntay Porter.

[Stacey Vanek Smith]

These were on calling market.

[Max Chafkin]

Right. And the other thing is this could happen in all sorts of other domains. And that, to me, is what's kind of so distressing about this.

[Stacey Vanek Smith]

Well, it is distressing. And these kinds of issues. So Jontay was banned for life from the NBA, but these issues have happened on professional sports leagues and college sports leagues. And here's the thing that shocks me and makes me think that maybe this is all going in the direction of casinos and hedge funds. You'd think that sports leagues would be horrified by this, right? It's terrible for sportsmanship. Who wants to watch a game where people are throwing the game or wearing socks or missing free throws because they can get some side money? But no, the biggest thing the sports leagues are worried about is getting a cut of the action. National Hockey League, Major League Soccer have signed deals with Polymarket, basically exclusivity deals, so Polymarket can offer bets on them and they are cashing in. And the New York Stock Exchange bought a huge chunk of Polymarket. They too are cashing in. Which makes me think that Polymarket and Kalshi and all the glories of homework are now going in the direction of casinos and hedge funds. And that these big, rich players can buy an edge or make an edge in this case. And that homework, once again, is for suckers.

[Max Chafkin]

Okay. I also just worry, Stacy, that we're trivializing important stuff. Like here, let's look at this ad that Kalshee has been running. I think I saw this during the Olympics, but it's been out there for a couple of months. This is how Kalshee is promoting it.

[Jacob Goldstein]

History has taught us anything. It's not to root against the underdog.

[Max Chafkin]

All right, so you see David with a slingshot, Paul Revere, the Midnight Ride. People are betting on whether the Wright Brothers Plane will crash, I guess against impossible odds. Will prisoners escape Alcatraz? Will Sparta win the war? It's like a 300 scene here. And I guess the point is like, hey, all these historical events, you may think of them as historical events, but they're just betting opportunities.

[Jacob Goldstein]

I will say they were betting opportunities. We know in fact that there were prediction markets on the Revolutionary War and

[Robert Smith]

we think that we've invented something new as we always do on the Internet. But as we found at business history, people want to gamble and they want to know the future. And that has always been the case.

[Jacob Goldstein]

So can we check in on the market? Can we see how we can.

[Robert Smith]

Yeah, let's see how it's going. Oh, okay.

[Jacob Goldstein]

We're doing okay.

[Robert Smith]

It's at 56 cents. Oh, no, no, no. What?

[Max Chafkin]

Oh, it just dropped.

[Robert Smith]

It is at 44%.

[Jacob Goldstein]

The whale. Now remember, remember the on air fest whale just went against us because we're

[Robert Smith]

partway through this session. People have looked around, they have determined that not a lot of people have left so far. And so they are reevaluating what they think of this question, whether 10% of the audience is going to leave the room or not.

[Stacey Vanek Smith]

Do you feel like there's also pressure to not leave?

[Max Chafkin]

Because then 100%.

[Robert Smith]

Okay, we will close our eyes for 10 seconds. If anyone wants to make a bad amnesty. Anybody? Anybody? We will call you out. Okay? So in theory, those of you keeping count, this will change as we approach the end of the show.

[Jacob Goldstein]

I'll try and pick it up a little bit. I'll see if we can get at least back to 50%. We're going to take a break and then we're going to come back and Robert and I will talk about the centuries long history of prediction markets in just a minute.

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[Jacob Goldstein]

So yeah, in fact I meant it when I said that people might have been betting on Paul Revere's ride. We know that prediction markets, not just gambling, but real prediction markets, go back at least 500 years. They go back to Italy in the 1500s and the big market there. The big prediction market in Italy, Scomese Affara, Il Pappa. Betting on who's going to be the Pope, the Papa, il papa. And I mean it makes sense both that it's in Italy and that's what they were betting on. Makes sense that it was in Italy because this was the time. Italy in the 1500s when modern finance is emerging in Europe. The first banks are being established. The Medici are running Florence. And so you see these laws being passed to give brokers in Rome and Florence a monopoly on these prediction markets. And then the Il papa part also makes sense because predicting the next Pope in the 1500s was like the super bowl and the presidential election rolled into one. And a lottery. And a lottery, sure. You know, the Pope had a tremendous amount of political power. It mattered if you were a wool merchant in England or if you were the king of France or whatever. It mattered who was going to be the next Pope. And so you see ambassadors, you know, writing back home every time there's a conclave, like, who is papabile? Who's popable? They would ask these brokers who have the monopoly. They print up like they would. That's like a voucher today, like tickets with each cardinals or all the, like, possible guys, names on them. And they pay off for 100, 100 scuti. And you buy it for whatever fractional probability the guy is selling it. Exactly. Like. Exactly. Like prediction markets work today. And so, like, for example, in 1549, there was a conclave. And at one moment, Cardinal Pole of England was at 80% in the voting, heavy favorite. And interestingly, we know now from the historical record that at that moment, he did in fact have 26 of the 28 votes he needed. Right. We knew that that market was reflecting reality.

[Robert Smith]

How could they possibly know that the people who are betting on it.

[Jacob Goldstein]

Could the cardinals have been insider trading?

[Max Chafkin]

No.

[Jacob Goldstein]

I mean, look, if you saw the movie Conclave, you know, right, that the conclave is supposed to be sealed. Like, literally the word conclave is like conciave cum clavis, right? With a key. It's a room that's closed with a key. But, yes, obviously the cardinals were insider trading, right? Of course they were. This is how it got out. And now there is this question, right? Like, Stacy and Max, you guys just talked for 20 minutes about why prediction markets are so bad. And fair enough, but put yourself in the shoes of the British wool merchant or of the ambassador or whatever, these people who really need to know who's going to be the pope, Lives depend on it. Livelihoods depend on it. This insider trading by the cardinals, yes, it's unfair. Sure, it's gross, but it is useful information.

[Max Chafkin]

Right.

[Jacob Goldstein]

It's good to know what's going on inside the locked room. Although I should say that Cardinal Pol, that guy who was trading at 80%, he did not win. A French cardinal showed up at the last minute and accused Paul of being a crypto Lutheran, not a bitcoin trader, but a secret Protestant. And the papacy went to an Italian cardinal instead. Your bet on poll was now worth zero.

[Max Chafkin]

Weeping in the street it's basically the Jerome Powell Renovation of 16th century Italy.

[Robert Smith]

Exactly right. Exactly right. Well, we've done this sort of history of the opportunities of betting, but there's also a history of the backlash to betting on real events. We're going to forget Europe for a second and move to America. In the 1800s and the early 1900s, the big question, of course, was similar to the Pope one, which is, who is going to be the next President of the United States? There was not polling at the time, and so they tried unique things to figure out who the next president would be. Reporters would go to bars and count the number of toasts to the various candidates. They would be like, huzzah, William Harrison. And they'd mark that down. This was a terrible way to predict the presidency.

[Stacey Vanek Smith]

Only drinking, but the most fun.

[Robert Smith]

But the most fun. And there were actual prediction markets in presidential elections. They tried that, but then states thought, this is a terrible idea. And in the 1920s, they decide that they are gonna basically outlaw this kind of betting in the United States of America. Now, it does come back, and it comes back prediction markets from an unlikely source. At the beginning of the 21st century, the source of prediction markets is the US government. The US government decides they're going to see if people can bet on terrorism. Let me explain. All right, May of 2001, DARPA. Now, I know it sounds like a James Bond bad guy, but darpa, DARPA is the research arm of the Pentagon. They're the people who helped bring us the Internet. And they put out this call for proposals for, quote, electronic market based decision support. The proposal is basically asking, can prediction markets help the US Government predict what's going to happen around the world? Like maybe in the coming year? What's the probability of a revolution in Tunisia? What will the economic growth in Mexico be? These are things the US Government wants to know. And the smart guys there are playing around with prediction markets because the Internet has just come in. People are obviously using the Internet for betting already. And so DARPA thinks, well, we should give this a try and see what's going to happen. Now, they put out the call for this in May of 2001. I don't need to tell you that on September 11, 2001, the World Trade Centers attacked and it's the worst attack on America since Pearl harbor. And this should affect the market. But DARPA thinks actually this is a case for having prediction markets for terrorism. There is all of this stuff happening in the world. We need better ways to predict the future. And for those of you who read the 911 report, there were people who knew parts of the story. It just was in different agencies, different people. It was hard to tell the signal from the noise. If there's one thing a betting market does is it aggregates all this information in one place. So DARPA decides they're going to go forward with this. They pay a million dollars and they start a market called pam, the policy Analysis market. I don't know if that's their actual

[Max Chafkin]

logo, but I hope so.

[Jacob Goldstein]

It is. That's actually such a. That's how the web used to look. Drink it in.

[Robert Smith]

Oh, I love it with the rain. It's got a rainbow. Rainbow in a world and a supply and demand curve, I believe, over there on the market part of it. So one of the main proponents of this is an economist named Robin Hanson. He's still a proponent of prediction markets. Former Silicon Valley guy. And the market is all set to open in the summer of 2003. Now it's just going to be a sample market in terrorism. It's just going to be about the Middle east. And they are only going to give testers $100 to trade. So you can't make a million dollars on predicting what's going to happen in the Middle east, but they're just going to play around with this. And then In July of 2003, a few Democratic senators learn about the plan and I believe get wind of is the official Washington term. They get wind of this plan. And the Democratic senators are not happy about this. They are Byron Dorgan of South Dakota and Ron Wyden of Oregon. Look at those guys. And on July 28, they call a press conference. They call a press conference. You're gonna have to. We have a picture up of them smiling, sort of, but you're gonna have to picture them being incredibly mad. This is what Dorgan says. The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque.

[Jacob Goldstein]

Grotesque, yeah.

[Robert Smith]

Sounds bad when you put it that way, right? Wyden says why wouldn't terrorists just hop online and start betting if they couldn't either mislead American authorities about their plans or money to fund more Al Qaeda operations? They say that it is morally wrong. And this, of course, was a huge story boiled down not the subtle economics of it, but really just like Pentagon kills terror futures market. Sounds terrible, but there is something really deep here and something that gets to the heart of our relationship with prediction markets. People love to gamble. There are real reasons to gamble. But people hate the idea of Gambling, it's unseemly. And they find gambling on important things morally repugnant. Things like will there be a terrorist attack? So literally the day these senators hold the press conference, the deputy Secretary of Defense says, I have never heard of that program until I read about it in the paper today. And yes, obviously we're going to kill the program. The government will do. Without the electronic market based decision support, there will be no betting on terrorism. And the prediction markets basically fade away until the rise of Kalshi and polymarket who sort of took this lesson to heart because the one thing they do not call it is gambling. It's prediction sounds much better.

[Max Chafkin]

Speaking of morally repugnant, I saw someone leave the room. Oh, so right on the edge. That's going to affect the market. Also, somebody walked in.

[Jacob Goldstein]

So it was the count from the beginning. Okay, all right, so we're going to wrap up the history section. But before we do that, I want to go back to Italy in the 1500s for just, I have money on that. You win. And the thing I want to point out is this tension between, like, we want to gamble, we want information about the future, but also we hate it when people do that. That has always been there. That was there from the beginning in the 1500s. And in fact, in 1590, Pope Gregory IV issued a papal bull banning scomese al faria el papa, banning betting on who was going to be the next Pope. That is him. I don't know if that's his papal bull in his hand, but he is waving. Maybe he's waving goodbye. Arrivederches comeze afar il papa. The penalty was excommunication. And kind of amazingly, it worked. Prediction markets on who was going to be the next Pope seem to have gone away after this point. You don't see ambassadors writing home about it anymore. And so what has happened? Well, the Church seems less gross and maybe less corrupt. You know, the Pope talked about how we shouldn't combine the most holy thing in the world with the corruption of the market.

[Max Chafkin]

Right.

[Jacob Goldstein]

And emotionally that is resonant. It's the Counter Reformation. Right. So it's also good for business at this moment if the Catholic Church seems less corrupt. But on the other hand, the people who really needed that information about who was going to be the next Pope don't have it anymore. They have less idea about this important thing that's going to happen. And so there is this trade off. Last thought before we kind of talk it out is it's easy to think, oh, prediction markets, like the modern World is so gross. Everything is just getting worse. That is clearly not true. Right. This is not a line where things are getting more and more gambly, more and more degenerate. This is a pendulum that has been swinging back and forth for literally hundreds of years. And so the question I would pose as we finish is, is there going to be a backlash? When is the pendulum going to swing back?

[Robert Smith]

And just to be clear, this papal bull is still in effect. So the current pope cannot bet on Jesus Christ returning.

[Jacob Goldstein]

I mean, he would have to do it through maybe a cardinal, but yeah.

[Robert Smith]

So what do you think? Is this. Are we going to enter the era where everyone's betting on everything, or will it swing back where it becomes morally repugnant in a way?

[Stacey Vanek Smith]

Max, Stacey, I think this is different than the papa voting because you can bet on everything and we are all so connected. I just think this betting is on another level and it's on everything. I don't know. To me, this is different.

[Max Chafkin]

I feel like there are so many ways in which you take these kind of things that have happened through history and then you turbocharge them with the Internet and you get something like Stacy saying different. And. I don't know. I mean, putting these papal markets, for instance, how did you have to bet? Jacob? You had to, like, fill out a piece of paper and, like, physically hand it to something so hard.

[Jacob Goldstein]

So much friction. You have to actually have paper.

[Max Chafkin]

I mean, more, certainly more friction.

[Apple Card Advertiser]

And.

[Max Chafkin]

And you didn't have the, you know, all this marketing behind it. It does feel like there is just. It's hard to say that this isn't going to go away because this stuff just feels like it's everywhere right now. Just. Just every part of life is being financialized, being turned into gambling, Essentially, including journalism.

[Robert Smith]

Journalistic organizations have partnered with betting platforms because what they see is that people are using this as a way to get information. Why wait on what the news is going to tell you about that was on Twitter or on the poly market, when you can sign up yourself and see the moment the bet changes, the moment something pops, that's a news item that may be considered in the future, like a news alert on your phone, except you're watching it well.

[Stacey Vanek Smith]

And then I think they're counting on insider traders to have a correct market. They're counting on people who have more knowledge than the rest of us. Is that weighing in on the market? Well, in this, I mean, in my heart, yes, it is bad because it devalues homework, but I do think that it does make those markets more valuable. I mean, Domer actually told us this really interesting case that took place here in New York around the mayoral election. And it was when, Wait, there was

[Jacob Goldstein]

corruption around the New York mayor.

[Stacey Vanek Smith]

I know, I know. Hold onto your seats. But Eric Adams was still in the race at this point, but it was clear he was dropping out. And so this question came up about when. And according to Domer, he told us there was this huge bet placed from a new user on polymarket, like, right before Eric Adams dropped out of the race. Like, sad. That's true, actually.

[Jacob Goldstein]

Look, I mean, I could imagine, like, what you guys are saying is true, but there could be some huge horrific event, and two senators could stand up and say, people are profiting from this huge, horrific event. And, like, I do feel like there's a way to, you know, put a little skin in this game. Right? Like, I think what we need is, is a market that says, will Kalshee or polymarket be banned by 2030?

[Stacey Vanek Smith]

You want to make a betting market about betting markets?

[Jacob Goldstein]

I guess the problem is if you say yes, they'll be banned. How do you collect?

[Max Chafkin]

It's like the Jesus bet all over.

[Jacob Goldstein]

It's the Jesus bet.

[Max Chafkin]

Do you all use prediction markets in your journalism? Like, do you find yourself going to them?

[Jacob Goldstein]

And, you know, I use them as a citizen. I look at them.

[Stacey Vanek Smith]

Do you bet?

[Jacob Goldstein]

No. I look at them for elections. Like, when something happens, when there's some political news, I'll go and see, like, how has the probabilities moved of which party is going to control the Senate after the midterms? Because I feel like if there is meaningful news, those markets are big enough that they should move.

[Robert Smith]

And I actually use it as entertainment. So I knew I was going to watch the State of the Union, and so I looked at the words people were betting on that President Trump would say. Just so I had a reason to keep going.

[Stacey Vanek Smith]

What were they?

[Robert Smith]

Oh, they were everything from, is he going to say Iran? Is he going to say 250, which is the 250th anniversary of the United States? Which he did. And you could just see the list of them. And it just kept me watching it.

[Jacob Goldstein]

It's action. It turns it into action.

[Robert Smith]

It does.

[Jacob Goldstein]

Action.

[Robert Smith]

Edge of my seat.

[Jacob Goldstein]

All right, should we check in one last time on our.

[Robert Smith]

Let's see who might have won here.

[Apple Card Advertiser]

Come on.

[Max Chafkin]

Wow. Okay, so this implies that the audience believes that it's a lower than 50% chance that half that the people will leave the room. That's good for us.

[Stacey Vanek Smith]

Please thank everybody.

[Max Chafkin]

Thank you for being here.

[Stacey Vanek Smith]

Yes. This has been the very first mashup live show of everybody's business history. I'm Stacey Vanek Smith.

[Max Chafkin]

I'm Max Shavkin.

[Robert Smith]

I'm Robert Smith.

[Jacob Goldstein]

And I'm Jacob Goldstein. Thanks for listening.

[Stacey Vanek Smith]

Thanks, everybody.