The blunt approach of betting markets has been much more accurate in predicting the outcome of the 2024 U.S. election than the vast majority of sophisticated professional polls.
Why is that?
A simple and straightforward explanation is that every participant involved in the betting markets has skin in the game. In other words, they will lose money if they’re wrong.
On the other hand, professional polling firms have much less skin in the game: they operate as political consultants and will be paid regardless of being right or wrong.
This means that the most useful voices to listen to are those that face the biggest negative consequences when they’re wrong. That’s why, for example, a commercial airplane pilot has the final say in making the decision to take off.
Therefore, decision-making should never be done at the level where the decision-makers are shielded from the negative consequences of a faulty decision.
Skin in the game is a wonderful way to focus the mind.