You should bet more about the things that affect you. Not on sports, not on politics but on day to day things that actually matter to you. Betting is a good meta-habit that spawns other good habits by creating a feedback loop. Bets require that they be structured in such a way that they are decidable, which means you must measure what your’e betting on. Bets makes you think more clearly, otherwise you’ll lose. Bets makes prediction more like a game, which makes it more fun. Bets create a sense of camraderie. Bets change how you think.
About a year ago I was inspired to bet more when I reread Alex Tabarrok’s post “A Bet is a Tax on Bullshit”. In it he says that pundits should bet their beliefs so that it will decrease the amount of bullshit in the world. Bullshit is a tragedy of the commons problem. The bullshitter gets the benefit of making their statement but bullshitting decreases the signal to noise ratio in public debate. Bullshit’s cost is borne by society since bullshitters are rarely held to account. By betting against them you can force them to pay some of the cost.
The commons are a little less tragic when the cow’s owner has to pick up the patties.
But that’s an argument for why it would be good for society for pundits to bet more, it is a reason that the public should be in favor of betting. I’m not a pundit but I deal with a decent amount of bullshit so this made me want to bet more in my day to day life. My thinking was that betting would improve my life, not just decrease the amount of bullshit.
If you want to get better at something you need a feedback loop. A lot of what we do in the modern world is long term prediction which doesn’t have a feedback loop built in and betting can serve as a substitute. If Steve thinks the company can hit a sales number by next quarter and they miss it by 15% what are the odds he’s going to remember he was wrong next quarter. We remember our wins more easily than our losses. But if he and John have a bet about it John will remind him at the end of three months.
By having someone bet against you you’re outsourcing keeping yourself honest.
If you actually want to get better at something you need a feedback loop and betting is an easy way to create one.
Part of this is the bet makes it socially permissible to tell someone “I told you so”, which is normally taboo. If at the end of the quarter John said “Steve you were wrong” then he’s an ass but if he says “Steve pay up” then it’s fine. In addition by making a bet your belief has been manifested as something separate from you. This means Steve can admit he was wrong without his ego being hurt, while still learning from the experience. “I overestimated last quarters numbers, but that’s cause marketing lied to me, I’ll take that into account this time.” Saying “I lost a bet” is easier than saying “I was wrong”
The corollary of this is if you don’t care if you’re right then you should not bet on it. If making a prediction is just a way of signalling that you agree with your boss, or that you’re a team player or that you’re “thinking positively” then you should ’t bet on it because the actual prediction doesn’t matter. Just agree with the groupthink and move on. But if predicting well actually does matter then you should be willing to be on it
Betting makes you to track the numbers. If you really care about something you should be doing this already, but making predictions requires it. If you aren’t tracking something you can’t bet on it. But if you don’t track the numbers do you actually care about it? Obviously some things are hard to track than other, customer satisfaction is harder to measure than new sales. Luckily there is a whole book on this topic, How to Measure Anything. It can help you discover what you really care about. For example If you care about customer satisfaction because you care about keeping them on as customers. So you actually care about customer retention, which is easily measurable. So you would bet on customer retention rate.
Betting makes you think clearly or lose. In fact thinking clearly is usually a side affect of losing a few bets. Usually when people come up with a prediction it’s some combination of hand-waving and wishful thinking. They don’t bother to think clearly about what they’re predicting most of the time. But if we’re betting on it most people will actually think about what they’re predicting, do some research and maybe even some math. My proof of this is the amount of time wasted on fantasy sports. American businesses lose 18 billion dollars in productivity on employees researching and managing their teams for fantasy sports. Part of the popularity is that unlike predicting next quarter’s numbers playing in a fantasy league actually gives you feedback. Another part of it is that fantasy leagues are a game and people don’t like to lose at games.
Betting gamifies making predictions which makes it more fun which means people will put more energy into it.
This is related to why the bonding level is so high with people who bet against each other. Nothing brings people together like competing with each other over something with small stakes. This is why we have children play sports, why you can make friends playing online games and why bowling leagues exist. The semi-structured nature of the interaction and the fact that the stakes don’t matter means betting breeds friendship.
Sooner or later people who bet together start to bond over not just the betting but also they form a sense of camaraderie around the fact that they are betting unlike other people. Bryan Caplan puts it in a purposefully hyperbolic way in his bettor’s oath
“a betting loser has far more honor than the mass of men who live by loose and idle talk”
People who have bet against each other can trust the other’s predictions because they know each other’s limits. They have won money when the person was overconfident and lost money when the person was right. It builds trust in each other.
Betting changes your thinking though. As I’ve bet more I notice I get more frustrated by people who won’t at least give me odds when I ask them “How likely do you think this is?” If the question matters “Pretty likely” is not an acceptable answer. They should give me the odds. Preferrably with a decent payout.