Over the past year, John Aristotle Phillips and I have placed a lot of bets. Meeting regularly for sandwiches and beers at Soho House, a members’ club in Manhattan and his de facto office, we debated and wagered on the outcome of many contests — football games, macroeconomic data, Kentucky Derby thoroughbreds, election results and more.
If Phillips, 68, is well known, it’s for designing a nuclear weapon while he was an undergraduate at Princeton in the 1970s. The FBI confiscated his term paper and his mock-up of the bomb, and the press dubbed him the A-Bomb Kid. As a young man in the early 1980s, he ran twice, unsuccessfully, for Congress in Connecticut. In 1983, he founded Aristotle Inc, a technology consultancy that sold voter data to political campaigns. About a decade ago, he started PredictIt, which is currently the only legal popular venue for political-prediction trading in the US. A non-profit collaboration with Victoria University of Wellington, in New Zealand, the company offers markets on who will win gubernatorial elections, Senate races and the presidency.
Our meetings were prediction-market making in miniature. We discussed the events of the day and their particulars, we bid prices and reconsidered our own positions. Then we put money on it. For Phillips, prediction markets are a truth generator, powered by the invisible hand. Therein lies their public good. If you trade based on fake news or half-baked punditry, you’re going to lose your money. The problem, he says, is not that there is too much predictive betting but that there is too little. “It’s better to know, in life,” he told me. “It’s better to know, as a general principle.”