Stephen Grugett (Manifold Markets Founder) - Predictions Markets & Revolutionizing Governance

**Dwarkesh Patel** (0:00)
Now, here's a question I've had for a while. Why don't companies who have direct incentive to get the best possible information on themselves, on the factors affecting their business, why aren't they using internal prediction markets if this is the best way to aggregate information? Thank you for watching.
All right, this is gonna be fun. Today, I have the pleasure of speaking with my friend Stephen Grugett. He's the founder of Manifold Markets, which has received a grant from Scott Alexander. Scott has written thousands of words about these guys.
And they've raised a $2 million seed round. And it's an incredibly exciting project. So Stephen, why don't you tell us a little bit about Manifold Markets?

**Stephen Grugett** (0:46)
Great, thanks so much for having me on this podcast, Dwarkesh. It's great to be on here after seeing other people like Tyler Cowen and David Deutsch. I guess first thing, I'm one of three co-founders of Manifold Markets.
But what we're doing is building a platform for user-created prediction markets. So the idea is that anyone can come onto our site and create a question about anything that they care about. And then they can have their friends and other people on our site come bet on that. And the betting process, through the magic of our market mechanism, will help get the best and most calibrated probabilities that you can find.

**Dwarkesh Patel** (1:24)
So let's talk about the mechanism here. So correct me if I'm wrong, but the idea is you use real money to buy manifold dollars.
What is your reason for expecting that people will care a lot about how many manifold dollars they have? So what is your hypothesis about human nature and reputation that makes you think this is something people are gonna invest a lot of effort and time into calibrating?

**Stephen Grugett** (1:46)
Yes, so I guess to take a step back for people listening to this, manifold uses a play money currency. If you sign up right now, we'll give you a thousand manifold dollars, which is our in-platform currency for you to use and bet as you see fit.
But the reason why we think that play money can work is that people are driven more by status and competitiveness than greed. We kind of see ourselves as a social game where people can come on to hone their skills at predicting and then demonstrate to others that they really do know more about what they're talking about and they can prove it with an objective track record from their betting history.

**Dwarkesh Patel** (2:30)
Yeah, that's a very interesting point, which makes me wonder, do you expect that in the future Wall Street firms will be enticed to get the top people on the leaderboards on Manifold Markets to come work for them?
One of the objections that Tyler Cowan has to prediction markets is, he's kind of tongue in cheek about this, but I remember at one point he saying, if you guys are so good at predicting stuff, you would expect all these hedge funds to be trying to constantly hire you guys. The fact that they're not makes me think that, this is kind of just a hobby. This is not, so I'm curious about your reaction. Do you expect people to be coveting these top predictors for their prowess at predicting the future?

**Stephen Grugett** (3:13)
Yeah, I'm obviously very biased, but I think something like that is possible. I think we have a leaderboard right now. Our top predictors are actually quite good. The person who's currently occupying the top slot, won big on one of our markets on whether Russia would invade Ukraine in February.
So in the forecasting community in general, there actually is, as you would expect, a fair amount of overlap between the people who are using these services and financial professionals who actually do manage money or trading as their profession. So I don't entirely agree with the premise of the question or Tyler Cowen's earlier point.
Although obviously, as a play money platform, we do attract a fair number of hobbyists who despite not having a financial background still are quite good. I do believe that there's a lot of untapped potential in these top predictors and that sites like ours actually are able to identify them.

**Dwarkesh Patel** (4:13)
In your experience, what has made people who are the top predictor so good at the art?
Is it just their domain knowledge? I know there's different theories about how people can get good at predicting. Based on your experience, what kind of traits do you identify here?

**Stephen Grugett** (4:30)
So probably a big one is just like experience.
A lot of our top predictors have actually come from other sites and have spent a good deal of time thinking about forecasting and prediction in general. Probably the first hurdle that most people have to overcome in order to start improving as a predictor is getting used to clarifying and crystallizing your views about the world. If you're thinking about some political event, you can very easily incorrectly misremember that you got some event right or not. But if you're not actively putting out like numerical predictions and recording those to keep yourself honest, it's very difficult to improve. So that's a good first step. And a lot of our users already cleared that before joining our site.