Polymarket vs. Pollsters, Podcasts & Politics, Open Source AI In Trouble

0:00Polymarket outshines Nate Silver and the pollsters. Bitcoin and the S &P500 jump to astounding new heights. podcasts become the breakout hit of the election cycle. Plus open source AI is in trouble. All that and more coming up on a big technology podcast, Friday edition, right after this.

0:20You're used to hearing my voice on the world, bringing you interviews from around the globe. And you hear me reporting environment and climate news. I'm Carolyn Buehler. And I'm Marco Werman. We're now with you hosting the world together. More global journalism with a fresh new sound. Listen to the world on your local public radio station and wherever you find your podcasts.

0:47Welcome to Big Technology Podcast Friday edition, where we break down the news in our traditional cool-headed and nuanced format. We have so much to discuss with you today. A lot going on in the aftermath of the election. We're going to talk about how well the prediction markets did, why Bitcoin and the S &P 500 are just soaring, the role of podcasts in the election, and the fact that China is now taking open source AI and using it for military, potential military uses and what that means for the new administration. Joining us as always is Ranjan Roy of Margins. Ranjan, great to see you. Welcome back.

1:20It's been quite a week, Alex. I'm ready to talk about it. It's a week where we had a tremendous amount of news break over a very short time, and there's so much to unpack. And, you know, we're going to get into it. We're still talking election here. I know we did some last week. I've done a couple shows this week, and this is the third that's going to touch on the election. But I just wrote a piece in Big Technology talking about how the AI story is going to roll on in the Trump second term. And I just want to put a point on that before we get going, which is that, yes, there are going to be a lot of Trump stories over the next four years.

1:51But our role here is to break down tech news. We're going to do, of course, some politics, as we always do. But the focus is going to be on artificial intelligence and technology. And that is going to be the place that we cover. So don't worry, this is not going to turn into a politics podcast. But that being said, we should talk about what to me was the most interesting tech story of the election, which is the fact that Polymarket just kicked the living daylights out of the pollsters. Polymarket, like we spoke about last week, had Donald Trump favored 61 % to 39 % for Harris. It called almost all the races accurately and did it before any of the news organizations did it.

2:29Nate Silver, you know, had Harris and Trump in a toss up 50-50. He ran like what, 80 ,000 simulations and it was like 40 ,000 each. Polymarket ran one prediction market and it was right. And so you talked a little bit about what the implications are last week, but now we have results. What do you think we should take from this? Oh, this was a tough one for me, Alex, because I have long believed in the power of betting markets having come from the trading world. And there's even a site TradeSports back in the 2000s, if anyone actually remembers it, where you can not only essentially bet these derivative contracts on sporting events, but they had entered politics actually back in 2008.

3:10So I really believe at some kind of scale and quality of market, it's a better way of trying to kind of glean information and predictions. I was a little frustrated and annoyed by both Polymarket and Kalshi during this election cycle because they were vindicated in this cycle. But these are still incredibly small, manipulatable and opaque markets. So I think the idea that somehow they are now positioned to give, kick the living shit out of pollsters and like, you know, really give us better information. I think in this exact situation, the Republicans won, Trump won, and the type of consumer that would probably be more geared to our betting market, especially Polymarket, which is only technically available to non-US citizens and is only available by using crypto and understand, I mean, clearly the crypto market and most crypto users would have leaned Trump fairly this election anyways.

4:14I think this was more like correlation, not causation. It just happens to be in this specific instance, the actual electorate went in the same direction that the people who would use a betting market went. I don't think that's going to be the case going into the future or as like a reliable indicator of future events. All right, I'm going to take the other side. I think that this is from Coindesk. It says the The vindication comes after several weeks in which the mainstream media harped on the theory that Polymarket, which runs on crypto and has seen billions of dollars in trading volume this year, was being manipulated by pro-Trump forces to inflate his odds.

4:53I think they're speaking directly to you. Are you quoting Coindesk for crypto? They're speaking directly to you. And here's the facts. The facts are that the pollsters were wrong. The pollsters said 50-50. and polymarket was right. And not only was it right, it became such an effective data point because as the results started coming in, the movement that you could see in polymarket was so predictive of the outcome. It started with that 61%. As the early votes came in, it tracked perfectly 66%. And eventually it got to the point where if you do any betting at all, you knew that it was good, that the odds on favorite was Trump before any of the swing states were called by the networks.

5:38And in fact, I was in my group chats as the night went on and I called the race at 7.30 p.m. And I was like, listen, I was like, I'm looking at what's coming in with the exit polls. That's a data point. I'm looking at some of the early votes. That's a data point. And I'm looking at Polymarket and that's an important data point. And both Polymarket and Kyle Sheet were making massive moves in Trump's way. And I think you're underestimating how sharps, right, skilled bettors have come into this field and moved these betting lines and have been quite accurate on them. See, where I disagree here is, again, when we have an event where the outcome is something that is not geared towards the type of person in a betting market, then I want to see it actually work.

6:24Because when it's not the bias of someone who would participate in a betting market when the when the outcome is in that direction then we'll actually see and i think in this case it's just i don't know it i want betting markets to work i want all of us i think we might forget what the bet we made last week but we made a bet in a year wait i already forgot it i guess i'm off the hook on that one oh but shit it's recorded that's the problem with doing podcasts it's recorded so exactly but if we had a contract, a derivative contract that allowed us to place odds and let people bet, we would be held accountable.

7:02I think we made a bet around whether AI search would replace over 50 % of search. That's another one. I want all of these as derivative contracts. That's what crypto was supposed to allow us to do. I really think in the long run, this could be good. I think this is another example, again, of the way it's being rolled out and kind of turned into, I was getting endless. I was getting calciades that were like really like standoffish against the mainstream media and that whole positioning. And I think, again, it's attracting a very, very specific type of person. And in this case, that person reflected the entire electorate.

7:41I don't think that's going to be the case two years from now, four years from now. I disagree. I mean, they got so many of the states right. Like if they only had like a decent or directional accuracy, I would say, okay, maybe that makes sense. But they got so many things right. And they called so many states before the AP called them, for instance. They called Georgia at 10.27 p.m. and the AP called it at 12.58 a.m. They called Wisconsin at 11.10 p.m. The AP called it at 5.34 a.m. They called the overall winner at 11.43 p.m. We didn't have the AP called till the next morning. So I think the fact that they were both accurate and precise says that the wisdom of the crowds was right in this area.

8:24Now, do I leave open the possibility that you're correct in some way? Sure. But I do think this is the new standard until proven otherwise. Well, no, no. Precision in this case, if they were able to actually kind of call the vote differentials in these states, that's one thing. When Trump wins seven of seven swing states and the bias of a market like this would be towards Trump, then it's going to be correct. But if it's actually calling like these will be this narrow, then I would be impressed. Again, some kind of decision that would lean heavily, almost like comically progressive. I want to see that accurately called by a betting market.

9:07Again, I think these companies could actually really kind of build good markets around this. I don't think they're good markets right now. And I'm saying that purely from a market infrastructure standpoint. They're still very small. They're still very opaque. They're more trading like an emerging market than an S &P. If they could actually develop in a kind of good way, I'd be happy. I think these can actually be and should be kind of like more at the center of how decision making goes. But again, I've been following this stuff for the last 20 odd years. And we've been promised this in a lot of different iterations.

9:47And it has not worked. I don't know. I think the proof is in the pudding. Nate Silver, 80 ,000 simulations, 40 ,000 one way, 40 ,000 the other way. Polymarket forecast October 25th predicted the actual results perfectly. My favorite thing is I'm sure Nate Silver would be able to justify why I think it was 40 ,012 times Harris won. I think somehow he would actually still be able to say he was right. Well, that's one of Nate Silver's superpowers is explaining how you've misinterpreted how wrong he is. Now, I do think there's actually some legitimacy to that. I do think people pile on to Nate. And by the way, Nate is, he wrote about, we talked about it on the podcast with him.

10:31He wrote in his book On the Edge, he follows these prediction markets quite closely. And we talked about like whether they're going to replace polls at a certain point. And I think that like, you know, they do until proven otherwise. Let's see. But they do until proven otherwise. Well, just a quick personal story. During the whole peak, I think it was probably like 6.30 p.m., I tried to deposit money into CalShe, and it said via debit card it would allow you an instant deposit, and I was not able to. It kept giving me server errors and erroring out. And I think that kind of reinforced my view on this, that on face, it looks like this like really modern, sophisticated thing.

11:13But in the back end, it's still just kind of a hacky startup that is promising this one big thing. But it's not even functional enough to allow me to deposit money as it's supposed to, to try to actually bet during a peak time. And even with those problems, it's still so accurate. By the way, who are you going to put that money on? I saw you tweet your screenshot. Who are you planning to bet on? As a trader, and I would have lost on this, I think it was down at seven and before any swing states were announced. And that's where, again, from like an expected value standpoint, betting seven, one swing state flipped.

11:47You could see that go up to 20 or 30. That would be and I would have sold it right away. I thought earlier on, I did not think she was going to come out on top. That would have been which is what I want these betting markets to allow me to do. just a very short-term kind of flip on some kind of event happening. And that event in that case would have been one swing state early on would have gone from 7 to 20 or so was the expectation. Well, that's 7 to make 13 to 20 or so. Well, I guess it's a good thing that it didn't take your money. So, you know, I joined FanDuel recently. It's really very addicting, I have to say.

12:26We've talked about sports betting in the past. um i was like i think looking at polymarket and i was like can i drop a wager on van duel for this but you can't but i'm sure you'll be able to at some point i like how just as i described how my mind works i was actually feeling uh almost terrible for all the discussion we have had about the ills of sports gambling and literally trying to like juice a little bit of return on a one hour period in an election day on the presidential. It just goes to show you how powerful these platforms are. They can be. They can be. Okay. So you used the term expected value, which is something that is used often in the crypto community.

13:09And to me, like one of the interesting things is like a lot of the coverage of these markets are on CoinDust. The markets take crypto. They're run by crypto people. And the people that were taking their victory laps were also crypto people. Here's one quote from the CoinDesk article, Prediction Markets Work, said Hart Lamber, the co-founder of a UMA protocol, a decentralized Oracle service that referees outcomes and disputes for Polymarket. Man, I feel bad for the reporter who had to write that description and title. But it's just so interesting that the ones that are so in favor of these markets are so pro-crypto.

13:49I sort of get the association, but could you explain it to me? Well, it's currently polymarket because it is illegal in the United States for US citizens and to US the US dollar. It's going to be crypto. And who has crypto in their wallet that they can actually invest in this is someone who is into crypto. So I think that kind of is, I mean, it's a pretty direct connection right there. Then you have again, I mean, Trump has been and he really leaned in towards the end as like incredibly pro crypto. We'll see how that plays out. But I think at all levels of that, this was a very strongly crypto thing.

14:31Yes. And it has to be more than just a default, right? I just think that this is a way that folks who are deeply enmeshed in crypto think, right, where they think about expected value, they think about exactly the way that you were talking about putting money on something and hoping for a swing and seeing, you know, how every event could be quantified. And so it's sort of natural for them. That's my thesis. Yeah, well, I mean, and also in this case, if you are a crypto owner betting on Trump, it's almost kind of like a double your money sort of play because you both are expecting to make money on that individual contract itself.

15:07And you know that crypto will spike if he is elected. And on that note, I mean, Bitcoin sitting right now, it's crazy all time high$76 ,500. And the entire crypto community like crypto was initially, I mean, Trump was initially anti crypto. Now he's pro crypto. This is from the New York Times. It's safe to bet that in the second Trump administration, the crypto industry will get most of what it wants in Washington, starting with the removal of Gary Gensler, the head of the Securities and Exchange Commission, who has become a villain among crypto companies for his tough regulation efforts. Crypto companies that were being sued or investigated under the Biden administration may see those cases drop under a Trump administration.

15:49And pro-crypto voices are likely to hold sway when it comes to write new rules for the industry. I still, I get that, but I still, there has to be like an intrinsic value to Bitcoin to be able to put all this money in. And to me, seeing Bitcoin sitting at 76 ,000 sparks two questions for me. One is how, and two is why did I not get in when it was like 17 ,000 in 2022? I mean, I feel on the intrinsic value conversation, that's a totally separate one, purely as a vehicle for speculation. This was a great bet. I mean, it was a great bet that Like, if it's trading on vibes, Trump winning, the vibes all clearly point towards a less stringent regulatory environment.

16:37Gary Gensler is definitely going to be gone. It'll be very interesting to see who he appoints on the CFTC. And I think overall, yeah, I mean, it's the most logical out of all the things that have happened. Bitcoin going up fast on a Trump victory. not a lot makes sense in the world to me all the time but that one makes pretty good sense you know we began our discussions on this podcast talking about the frothy economic environment and why nothing really made sense in the business world it was everything was going on from you know spax and crypto and sbf and there was a moment of correction where rates went up sbf went to jail cz just came out of jail and uh a lot of the crypto enthusiasm cooled nfts effectively went away.

17:25Well, Bitcoin is now at an all-time high. The S &P 500 is now at an all-time high. Rates are coming down, baby. We just saw another rate go down. Rate decreased this week, of course, quarter point. But are we returning to the frothy good old days of 2020? Or are we still effectively going to be removed from that period of time? I think I have argued over the last, let's say, year, year and a half, especially any AI-driven like boost in a stock price that it actually was a logical, not irrational thing. I think we're going to see, at least in the short term, that injection of life in a just a kind of untethered way, let's say, because, I mean, just again, at its like on face, markets are happy that Trump won.

18:15It's like the average investor, the average person working on Wall Street, like assumptions will be less regulation, like friendlier business environment. And that, again, that one makes sense. I think how long that lasts is going to be the very, very big question. But we'll certainly see it over the next couple of months. I mean, I'm quite happy with the way that my portfolio has performed this week. It's crazy. The S &P 500 just jumped over 6 ,000 points for the first time. I mean, I remember sitting at the desk at CNBC mid-day the year, and there was an analyst that came on, and they're like, we think it's going to be at 5 ,200 or 5 ,500.

18:56And my eyes were like, you know, coming out of my skull thinking about the calculation. It's now up 26 % on the year. It's wild. Yeah, I mean, but I think, okay, so I think Tesla is a good example for where this is going. And Tesla is up 26 % from the moment the election was called the next day from the open. 26 % in just a couple of days. The market cap just passed a trillion. And what's so fascinating about Tesla to me in this context is it kind of, I think, is going to capture what the Trump presidency will, how it will interact with markets. Because why is Tesla up? Because Elon Musk helped Donald Trump win.

19:43I mean, like very closely associated himself with him. And the assumption is his proximity to Trump means something good is going to happen for the company. Nothing has changed about the fundamentals of Tesla in the last few days. In fact, Trump, oddly enough, goes on anti-EV electric vehicle rants all the time. You know at his core he is not a fan of electric vehicles, yet somehow Tesla's up 26%. The moment there is a Musk Trump falling out, which I'm going to predict, and maybe there could be a contract on Polymarket on this, is probably going to happen by March or April because we've all seen this story before.

20:23Does the stock get hit at that point? Like the thing I kept thinking about was the early days of the Trump presidency, those massive moves in stocks from just a tweet or just like a speculation on his relationship with an individual CEO or other business leader. And we're definitely heading back there. So I think the question is which companies are the beneficiary of that and which companies are the victim of that. We're going to be heading back to that world probably now. I mean, Tesla has always been a story stock, right? It's as much you believe in Elon Musk's vision and the power of that individual than you believe in like the bottom line for the vehicle production.

21:03Yeah, but this is the most kind of egregious expression of that, where it's like in the other times it's like, yes, if Elon Musk says they're going to have autonomous robots and cars and whatever else. And I mean, it's still related to the company. this is simply trading on musk's proximity to trump someone again who is not a fan of the actual company's product so that's why like wait a second he's also the man i mean there are worse allies to have than the president of the united states right and he's also the man trump is also the man that's going to be setting the tariffs no no no that we're already that the biggest competition that elon has electric vehicles from china yeah yeah is going to put a hundred percent tariff on electric vehicles from china and trump is the tariff man so does that go to two or three hundred does that completely eliminate the possibility of chinese vehicles entering the united states market that's why you know the the story would be pro elon here and protest that okay that that is actually one of the more logical kind of like paths to why that could go up i'm impressed.

22:11I think, yeah, I think that's, it's a good story up 26 % passing a trillion back to above a trillion again on this. I don't know. I still feel it's going to be really interesting. I'm still calling Musk and Trump, those two in the same room trying to work together. It just, to me, again, we saw this over and over in the first term. Like it's almost, this one thing I'm kind of excited to watch play out too like it's going to be dramatic and fascinating when it does the only question is when the counter argument there is that musk isn't going to be in the administration i mean maybe he'll be able to run this department of governmental efficiency and uh and they need each other in a way so yeah i don't know we'll find out they're two they are two big personalities i i give you that wrong i saw musk tweet uh this like image of it was like at the bottom uh like some meme of a like a large strong guy holding up two other people and trump was like kind of the small one on top i was surprised that the bottom was elon in the middle was joe rogan yeah yeah yeah exactly yeah you saw it so that one i mean already that's the kind of thing that just one of those could totally trigger trump and end this whole relationship very quickly because now he doesn't need him as much anymore okay well you know we could speculate all day about when or if that's going to happen.

23:38But let's talk like outside of the situation going on with the election, just the state of the market in general. I mean, Dan Primack was on on Wednesday and basically said the S &P has been booming for a year. And now the S &P 500 is out of place that, I don't know, even the most pro this moment are going to admit that it's a little bit nuts. I think so, at least. But let's hear from one of the bears. There's one of the Wall Street's last remaining bears warned on Thursday the S &P 500 is approaching a mania level as stocks become more expensive, right? Because there is a valuation thing here.

24:18The bear is Barry Bannister. He said, even allowing for the best case scenario of US soft landing, and despite the potential ramp higher for US fiscal spending and a geopolitical reckoning, the S &P 500 is in a mania, nearing a three-generation valuation high. This is your conductor. The train is approaching crazy town. I mean, I think these valuations will matter at some point. Don't you think? I don't think anytime in the very near future, they will. I think until we see, again, as you started this segment, rates are still being cut while the S &P is exploding. So the expectations are, I mean, pure Goldilocks right now.

25:01So I don't see any sober rationality entering the market again in the next few months. Again, at some point, yes, but not anytime soon. I don't see what the catalyst would be. This is from a financial account bar chart. The stock market has just hit the most overvalued level since the peak of the dot-com bubble. Anything to read into that? I mean, it was there. It was pretty close, I think, a year and a half ago, two years ago. during the main the mania of 2021 into early 2022 so it couldn't go higher i'm not going to say it will or it won't but it certainly can go higher yeah i mean nothing has has really stopped it this year okay so we have in our document two bar charts that are just hockey stick bar charts up and to the right one is the s p 500 and the other is the percentage of people in the us at least that listen to podcasts.

26:01And I was pretty taken aback by this because the number is so high. The share of the US population that have listened to a podcast in the past month is now 47%. And this is from the Wall Street Journal. 54 % of podcast listeners say getting news or political analysis as an important benefit of the medium. And 60 % of people who are under 35 have listened to a podcast in the past month. That was in the 40 % range in 2020 during 2021 during the lockdowns. It dropped back into the 30s after that as people went back. And now our medium, Ranjan, is having a moment. 47 % of people listen to these things.

26:44I mean, we know it's just an an increasingly important medium. And it basically defined the media strategy for Donald Trump during the election. You saw Trump, I think he was on 20 podcasts. He went on Lex Friedman, as a show the listeners of this show might be familiar with, but also the Nelt Boys, Theo Vaughn, he sat down with Joe Rogan for three hours. He was everywhere. And he ended up outperforming with young people, I think something like six points compared to where he was when he ran against Biden. So I'm curious what you would make of this. It obviously seems like podcasts have asserted themselves as one of the most dominant forms of media in the United States.

27:32And I think in the world, and look, I'm obviously on the podcast train. I think that this is a very special medium. It's a way that like me, you and the listeners feel like we're like together in a room really. And you can't replicate that anywhere else. I mean, maybe on talk radio, but talk radio had its own format, right? Which was really broadcast. And this is more longer and more nuanced, more conversational. And it's something that Trump took advantage of. So what's your takeaway here? Yeah, I've been thinking a lot and have plenty of thoughts on just the overall information ecosystem, media ecosystem, and how this all played out.

28:09And one of the things that really struck me on this, it's what you said, it's podcasts, even a three hour Joe Rogan podcast are about as like intimate a conversation to really get into who is a person versus any other medium, a convention speech, a cable news interview, a tweet or an Instagram post. I mean, this gets you feeling closer to a candidate or a person far more than almost every other medium. And then the thing I kept thinking about is speaking even with friends who are working as part of the overall Harris organization. And then everyone kept kind of talking up the get out the vote operation, you know, like knocking on doors, canvassing, making calls, small, small budget fundraising, like, like everything was the traditional view of how operational politics worked over the last few decades.