Why I Think I Win My Bets
By Bryan Caplan
I’m tempted to tell Scott, “You had me at ‘Why Bryan Caplan wins almost all of his bets.“* But my story varies from his. Scott begins:
Bryan almost always takes the consensus view in any bet.
Not really. In general, I think “consensus views” on interesting questions tend to be innumerate and paranoid.
Scott immediately adds:
The view a betting market would take, if one existed.
Betting market prices are hardly equivalent to “consensus views,” though you could say betting markets reflect the consensus of the small subset of people willing to put their money where their mouths are. But in any case, this is a circular explanation for why I win, because it doesn’t explain how I ballpark a betting market position when there is no betting market.
Introspectively, two key practices account for most of my success.
1. I take the “outside view.” When predicting, I start with long-run averages, and presume the “latest news” is distracting trivia. For example, when I made my unemployment bet with Tyler, I looked at all the unemployment data for 1948 to the present, and assumed the future would resemble the past. As usual, it did.
2. I spurn hyperbole. Human beings adore superlatives, but superlatives rarely apply to the real world. So when I notice someone treating hyperbolic poetry as literal truth, I rush to wager. For example, when John Podhoretz asserted that the Iran nuclear deal “effectively ensures that it will be a nuclear state with ballistic
missiles in 10 years,” I smelled hyperbole, and tried in vain to entice him put some money on it.
In slogan form: I owe my track record to numeracy and normalcy. Step back, calm down, look at the numbers, and target thinkers who say, “This time it’s different.”
* How frequently do I really win? See my 2016 bet inventory.