Pentagon Lets You Bid on Terrorism?

Elysdir writes "DARPA is creating an idea futures market, the Policy Analysis Market, to try to predict events in the Middle East. See Bloomberg article for more info." Read this article. I mean it. This is amazing. Update: 07/29 14:45 GMT by J : The NYT story claims "The White House also altered the Web site so that the potential events ... that were visible earlier in the day ... could no longer be seen," but those example images are still being served: Jordanian overthrow, bidding on assassinations, cool graphics... Update: 07/29 16:44 GMT by M : Looks like the publicity was too much.

How... How...

Omigod! Predictive tool, my ass! How desperate have we gotten to keep our economies stable in times of despair? A way to instantly give people an economic boost when tragedy strikes? I thought the balanced budget was a lot to be sacrificing for a stable economy, with these refund checks, but now, we're staking our relations with the world? Like the article points out, ``How would you feel if you were the king of Jordan and learned that the U.S. Department of Defense was creating a futures market in whether you're going to be overthrown." I really, really hope this is a joke...

Amazing.

What a great way to fund future terrorism! All you have to do is load your bets on a target, then go blow it up! Talk about your self-fulfilling prophesies!

Re:Amazing.

"What a great way to fund future terrorism! All you have to do is load your bets on a target, then go blow it up! Talk about your self-fulfilling prophesies!" ...and, in doing so, you have:

1) Let the US Government know of your intentions.

2) Let the US Government know who you are.

Brilliant!

Re:Amazing.

Hmm... so are you saying that the events futures market (why does that sound so wierd to me?) is really a means of the government trolling for terrorists? Interesting way to combat terrorism...

If you read their TOS it probably says "if you bet on a terrorist act occurring, and then it occurs, we can detain you as a suspect indefinitely". Because only terrorists would bet against the USA.

Seriously though, I think this is an absolutely horrifyingly terribly offensive proposition, and if they actually go live with it I'll probably sign up and place some bets.

Yeah yeah, I know, they're trying to call it "trading" instead of "betting," but whatever...

Re:Depends on how the "market" is set up

But that's exactly where this hare brained scheme fails...someone puts up "japan subway bombing", but do they do that on the basis of knowing such a plot exists? No! It's sucked right out of their ass! It's pure conjecture....and the DoD is hoping pure conjecture will somehow magically change into fact!

And their mechanism for that is a bunch of idiots betting on randomly selected plots. Not actual intelligence, ears on the ground, but pure fiction mixed in with some intel and voted on by people who think they can make some money!

I mean, how dumb can you get? The poor programmers working on this must either be laughing or crying...and I'd hope the latter.

This is wrong on so many levels I'm struck into incoherence just trying to organise all the points which are wrong/dumb...so many are forming in my mind that I can hardly put them into order.

And this was voted through! Shit, just run a plane into the whole DoD/Darpa/Pentagon and the House (of Representatives?) and restart the whole system from scratch...a system which brings forth something like this /and actually thinks it will work!/ doesn't deserve your confidence.

And as an aside, I wonder how long it will take until the first 'bet realisation contracts' [=pay us and we'll make it happen] are up on ebay...

That's exactly how it works!

For any given attack, there are going to be a lot of people who know about it beforehand. Some of those people are going to be stupid enough to try to profit on it.

When the futures fluctuate dramatically due to the new 'interest,' everyone at the pentagon knows that something is going to happen. The SEC uses it to catch insider trading, the NCAA uses it to catch game fixing. Q: Why can't the government use futures to catch terrorists?

A: Great idea, bad diplomacy. Hello! This is the US government we're talking about! We don't care how the rest of the world feels anymore.

Re:That's *ALSO* exactly how it work*ED*

> The people who knew about the hijackings in September would just shrug off money. Not everyone in the world thinks money is special.

I'm only going to say this once, but I'm going to say it loudly.

You sure as fuck weren't watching the implied volatility and put/call ratios on airlines the week before 9/11.

If you don't know what that sentence means, you need to do some research. A lot more research. The story has since been picked up by conspiracy theorists, and the signal-to-noise ratio is pretty much nil. Dig back to September and October 2001, and read the financial press instead. You can find a lot of good starting points in the comments of this Slashdot article.

For the record, I believe (on circumstancial evidence - namely the rapidity with which the story was buried, leaving only conspiracy theorists to increase the noise-to-signal ratio,) that the SEC did the Right Thing - turned their conclusions over to other organizations who could ensure that the Right Thing (namely, outside of SEC jurisdiction) would eventually get done.

Also for the record, as I don't have a need to know, I can only hope that my speculation outlined above is correct. I do look forward to finding out when it's all declassified some decades hence. Gonna make for some damn interesting reading.

Re:That's *ALSO* exactly how it work*ED*

As we New Yorkers like to say: fuckin' A.

In the week before 2001-09-11, the volume of options traded on UAL (United Airlines) and AMR (American Airlines) was 500% of normal. 500% is not a blip. It's a huge freaking spike.

I didn't get these numbers from some.conspiracy.theory.org, I got them from cboe.com: the Chicago Board of Options Exchange, the official clearinghouse for options in the USA.

As for who did it ... the trail went to a German bank, and I couldn't find any more info than that.

I agree with the parent. This was the smoking hot $40 million money trail and it dropped off the news radar within days.

"Follow the money" -- Deep Throat

That's exactly how it (doesn't) work!

When the futures fluctuate dramatically due to the new 'interest,' the Pentagon won't be the only one who knows. This system essentially lets terrorists know the probability of success of a given terrorist action before they launch it. They can see which of their plans have leaks and which do not, and use that data to organize more effectively.

This is an idea which Has Not Been Thought Out.

Re:How... How...

Given that the PAM only allows 1000 people a day to sign up, it'd take just under 3 years for even one million people to sign up. I don't think that the economic impact of the PAM will have any statistical significance. There's a really good piece on information markets [newyorker.com] on the New Yorker's website [newyorker.com].

Did you link to the wrong article?

There isn't any "science" in that article. Just unsubstantiated claims.

They ignore the most basic factor in this equation.

The people with the most knowledge may have an interest in hiding that knowledge.

The easiest way for them to do so would be to artificially inflate a completely different scenario to focus attention on that item.

Like bidding up an attack on Egypt on a certain day. When the actual event will be the assassination of an Israeli government official.

Its sadly not a hoax...

I work in an office involved with the press conference. Its real enough that DARPA wants US$3 million to continue it, and it was originally slated to become a piece of TIA.

Aren't you just so glad that Poindexter is in charge of the department that comes up with such useful ideas?

LE

TIA piecemeal: Building the Perfect Beast

it was originally slated to become a piece of TIA.

This is interesting if only because funding [fas.org] for the TIA was cut by Congress [slashdot.org] in the 2004 Defense Appropriations Act and killed by the Senate's 2004 defense appropriations bill [slashdot.org] recently.

Does this mean that TIA will be built through the back door with many much smaller projects instead of one massive project? The smaller projects could be linked and analyzed via a separate piece of analysis software. Commercial business intelligence and data-mining tools could probably do the job with a little modification.

It sounds a little like the title of that old Don Henley song, Building the Perfect Beast.

Re:How... How... It's not a joke - it's real

I really, really hope this is a joke...

Even senators thought this was a joke so you can be excused for thinking so. See the bold text from the rejected submission below - it's from the NY Times article.

Poindexter's Middle East Terror Bookie Scheme

2003-07-29 08:16:21 Poindexter's Middle East Terror Bookie Scheme The NY Times reports on DARPA's latest scheme: an options and futures trading market where you can bet on assassinations, toppling governments, instability and war in the Middle East [nytimes.com] (Google [nytimes.com]). The $8 million program [washingtonpost.com] is under the control of Admiral John Poindexter who brought us Total Information Awareness [slashdot.org]. The Policy Analysis Market [policyanalysismarket.org] starts taking registrants this week and betting/trading begins in October. Senator Byron L. Dorgan [senate.gov] of North Dakota, said the idea seemed so preposterous that he had trouble persuading people it was not a hoax.

Game Theory to Predict Outcomes

Yes a predictive tool. Basicially, this a way to measure the current "worth" of a particualar idea by using a market-type game theory. As ideas become more likely, their worth rises so they will be bid-up by the masses (of analysts). The most likely will float to the top. The theory is that no one person has perfect (or infinite) insight and information, but thousands of people - each acting independently in a common market - will distill some insight by their collective action. That is classical political-economic theory.

Take the "money and morality" part out and you can see the academic value in a theory like this. Can anybody suggest a better option? Perhaps a bunch of ivory-tower professors and analysts making wild-a** guesses (WAGs) around a conference table? Which WAG is more "valuable" than the others?

Pentagon Abandons Terrorism Betting Plan

As reported in Yahoo News [yahoo.com] The Pentagon has Abandoned its plan for the Terrorism Betting. My favorite quote from the story:
"The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque," said Sen. Ron Wyden D-Ore.

place your bets!

perhaps the /. paranoia bug has rubbed off me a bit too much, but what are the chances that your "bets" could be used against you in the war on terrorism?

you hit three or four correct terrorist acts and the next thing you know you're in an orange jumpsuit overlooking guantanamo bay.

Mike

Re:place your bets!

This is moderated "funny", but it's less funny, and probably more true. Someone might be tempted to bet a lot if they had "insider information", and then the government would track them down to see what they know, and why they know it. Some might be false leads, but if the King of Jordan is assassinated 2 days after CmdrTaco bets $10,000 on it, I'd definitely question CmdrTaco if I were a fed.

No kidding!

You just nailed one of a major benefits of this system.

At the very least, this system would provide statisticians with a massive, currently relevant pool of opinions on the likelihood of any particular kind of terrorist attack occurring. The statisticians may not find anything, but honestly, for the price of running a single secure website, they're gathering an insane amount of valuable data.

That's at the very least. If it does just what it is intended to, and no more. At best . . .

At best, it is a honeypot. If something major is in the works, like 9/11, what are the odds that someone, somewhere along the line wouldn't have placed some serious bets? Maybe not the terrorist himself, but what about his family? The people he stayed with in the US? Not everyone involved is going to be a Q'ran-thumping martyr. This scheme plays the self-interest of individual terrorists against the greater secrecy of terrorist proceedings, and it has the potential to be extremely revealing in that respect, simply as a massive, relatively cheap method of adding to ordinary intelligence information.

I mean, honestly, I know it sucks that they might tap your phone because of a $1,000 bet, but if you were just some guy exercising free speech, and proclaimed to the world that you would bet anyone $1,000 that there would be a major biological attack in Israel within the next week, and it got bandied about in a newspaper, your phone would be fuckin' tapped. Nothing happens, they intrude your life a little, and realize you're a crank or a nut or just a weirdo, and they leave you alone. It sucks, but at least this is something you can avoid and expect -- I mean, you do know who is running this thing, right?

Re:No kidding!

The statisticians may not find anything...

You don't know any statisticians do you....

Re:No kidding!

"a massive, currently relevant pool of opinions on the likelihood of any particular kind of terrorist attack occurring"

What are you talking about? Massive, yes. Relevant, probably not. The only way this could work is if the people investing the money had access to all the information. CNN and FoxNews are decent news sources, but their coverage of world events is clearly limited by our (and foriegn) governments.

For other markets where this has been a success, there was adequate information provided mandated by law. How open do you think the DoD will be with information relating to national security? (And if you don't think foreknowledge of a possible coup would be classified, you're living in a fool's paradise!)

When investors don't get adequate (or they are provided with incorrect) information, investors make inacurate (or just plain poor) choices. Look at corporate/market scandals like Enron and Arthur Anderson. With all the proper information, nobody would have invested in those companies. And look at everyone who lost big, because they didn't have all the information.

Imagine if the government had acted based on how the markets percieved Enron. They might have forced other energy companies to close (in darwinian fashion) to let Enron continue its successes.

At best its a honeypot, but thats all it is. At worst, it will ruin our already poor relations with other nations. But please don't think for a moment that there will be any correlation between this "market" and the real world.

You are too dismissive

It's true that our stock markets had serious problems during the boom, and some of the problems persist.

The only way this could work is if the people investing the money had access to all the information. CNN and FoxNews are decent news sources, but their coverage of world events is clearly limited by our (and foriegn) governments.

I disagree. If people want to invest their money solely on the basis of CNN and Fox, they are more likely to lose it. That will improve the market because these investors will have less money to invest and be more interested in research. There are tons of information available about the countries of interest - most of us don't have time to keep up.

Remember, intelligence agencies have a very bad track record at predicting future events. That may be because the incentives affecting an individual employee reward political conformity rather than correctness. The Cold War was largely shaped and perpetuated by the flawed intelligence of the CIA and KGB.

The proposed system creates a class of analysts with an incentive for accuracy. And having their own money at stake will harness the analytical powers more effectively.

In the big picture, Enron-type disasters are needed to discipline the market. Likewise, this events market would make some mistakes. Maybe after losing a few thousand dollars people would learn not to predict events based on their political beliefs or what they saw on TV.

Re:No kidding!

Okay, suppose I'm a member of a well-funded terrorist group and I think the US government takes the 'information' from this market seriously. My organization is planning a biological attack on Israel. I disperse money to people all over the world and have them all invest in the "hijacking in Jordan" option. The Feds ramp up their efforts to track down who placed the bets and redouble their efforts to catch hijackers in Jordan. Suddenly, everyone is talking about a possible hijacking in Jordan. The market for 'hijacking in Jordan' goes wild.

Meanwhile, the plans for a biological attack on Israel proceed apace.

It amazes me that anyone take the efficient markets hypothesis seriously after the dot com boom/bust. Bubbles are not compatible with the efficient markets hypothesis. Bubbles exist. Draw the obvious conclusion.

Re:place your bets!

Isn't this what happened just before September 11? [unansweredquestions.org] Lot of investor bought put options for airline stocks for unknown reasons (unknown until Sep 11, that is...), causing the stocks to dip noticeable. Strangely enough the affected airlines where AMR (American Airlines) and UAL (United), those two whose planes were used in the attacks.

Even more interesting, due to closure of the New York stock exchanges, the "investors" couldn't trade in their loot right away. And by the time it re-opened, papers and the SEC were already makeing the connection between the attacks and the strange trading patterns. Thus, many of those "investors" didn't turn up to collect their loot, even though their options were in the money!

Re: That doesn't make sence

Why buy airline options *before* 9/11? The share prices for airlines fell after 9/11 if I am not mistaken which means that the price of options would have fallen after that date.

It is a *PUT* option. It is a promise to sell the buyer the stock at a given price on a given date. As the seller you are betting that the stock will be *lower* than the price you promised to sell at, the buyer is betting that it will be higher. If the stock plummets you make money.

Re: That doesn't make sence

Actually, it's the other way around:

If A sells B a put option on American Airlines with a strike price of $10, A is giving B the right to sell one share of AMR to A at $10.

If the stock goes down, say to $3, B can go into the open market, buy a share at $3, and then immediately sell it to A for $10, netting $7. (In reality, options aren't settled this way - A just pays B $7 directly, B doesn't have to buy the stock and then resell it).

In the scenario described above, B is betting that the stock will decline, while A is betting that it will stay stable or rise.

You described selling a call option, which is also a bet that the stock will go down. If A sells B a call on American at a $10 strike price, then A has sold B the right to _buy_ a share of American from A at $10. If the stock drops below $10, the option is worthless (B would be insane to buy a share from A at $10 if he can buy in the open market at $5). If the stock goes up to $15, then B can buy the share from A at $10, and sell it in the open market at $15, netting $5. In this case, A is betting that the stock will decline, while B is betting that it will rise.

The both buying a put and selling a call are bets that the stock will decline, the two have different risk profiles - if you buy a put, the most you can lose is whatever you paid for the option; if you write a call, your losses are technically unlimited (i.e. you sell a call at $10, and the stock goes to $1 million a share - you're on the hook for $999,990 per share).

Re:place your bets!

your missing the point, this system isn't about insider information or profiting off terorism, its about gather intelligence upon the risk of terrorism / risk happening. This entire future market model is a risk assessment model where a market of thousands predicts the odds at which events happen. Here's what most people miss about this idea; when people have money, they always consider risk vs gains. Not many people are going to put a million down on France declaring war on the UK unless they're fine with throwing a million away. Inverselly, many people would hedge bets on Iran becoming a nuclear power because there is less risk in that issue (but smaller returns).

DARPA is running this program, think how valuable it would be to DARPA if thousands of analysts all started hedging bets on Iran. The use of money makes the bet relevent because people act more objectivelly with their true beliefs with real money.

This entire project seems to me like it was dreamed up by an economist because it does make sound economic sense. Have people who know the most about certain topics put future investment in to issues that are most likelly to happen. The best way to gauge the amount of risk in any issue is through money.

The most troubleing thing about this article to me is that it suggests the US goverment isn't doing enough in gathering adequete foreing intel to prevent international disasters from happening. ie International terroism

Re:place your bets!

I think any organization bright enough to pull off a major terrorist act would also be bright enough not to make a bet with the pentagon about when and where it would happen

I'm sorry, but I can't imagine that any major defense/anti-terrorism organisation could not have forseen this.

When I saw this, one thing came to mind: honeypot. And when they say you're "untraceable", it only emphasises it. They're going to pay you millions on the back of a big bet, and you're going to be untraceable? Yeah, right.

-- james

Re:place your bets!

the same type of people who try to get there deposit back on the van they blew up?

Convenient container

Please place all american-bashing statments under this comment. Thank You.

Re:Convenient container

Where should we put our All-American Bashing-statements? You know, the ones that insult all other countries because we're #1?

Re:Convenient container

Where should we put our All-American Bashing-statements? You know, the ones that insult all other countries because we're #1?

Dunno. How 'bout under that .sig you copied from a French artist?

This is gambleing, not investment.

There are no commodities being purchased, and unlike the stock market there is (hopefully) no relation between the actions these countries are going to take and the investors "investing" in the liklihood of them occuring. However, right there is a huge flaw. It seems like a $1,000,000 investment in terrorists bombing isreal could potentially be a good enough reason for someone to bomb isreal.

Better Question

What happens if you predict an attack, and the attack happens? Will you:

• Be investigated by the FBI because of your knowledge of the events?
• Be jailed as a material witness?
• Be prosecuted for conspiracy to commit murder? After all, how could you so accurately predict a terrorist incident unless you had ties to the terrorists ?

Re:Better Question

So here's my problem: If I invest and the government uses my "vote" that something will happen to prevent it from happening, I lose my money, because the event didn't occur.

If the event actually happens and I have predicted it, I get my phones tapped, a visit from the FBI, probable interrogation and possible imprisionment for having "terrorist ties." What exactly is the incentive for an investor to enter this market?

Re:This is gambleing, not investment.

Well, yes and yet no. The lack of a commodity does not off itself imply gambling, the use of a derivative to move risk from the risk averse to the risk friendly is a totally legitimate form of investment. Taking this site at face value, the idea that the government might use the value of these derivatives to determine policy is kinda scary, but if you were a business with exposure to the Middle East, the idea of a derivative to help you hedge the risk of a war in the area is an extraordinarily powerful tool.

The big problem with the idea though is pricing the thing. I mean it wasn't until Black and Scholes showed that one could price a financial derivative using quantifiable metrics (albeit corollary metrics in some senses, ie price volatility for risk and interest rate for baseline return on investment) that financial derivatives took off. The explosion in credit derivatives in the last five years is another example where the discovery of pricing methods fuelled the creation of a market.

The other thing is that this is a futures market not an options market so there is a zero sum game at the end of every maturity so the pricing question is less of a showstopper for actually running the market, but the difference between a derviatives market and gambling is not the fact that there are no commodities involved, but rather that bookmakers determine price by current payout exposure not underlying metric. This market appears to be different and real metrics will be used in the end to determine strike price.

Returning to the interested parties, Arms manufacturers and Airline companies would be ideal counterparties for such derivatives since their businesses rise and fall on the opposite outcomes of the same "event". The issue is not profiting from these events but avoiding the catastrophic fallout from the side of the event that is bad for you. For example if the airline industry had been able to hedge with the military supply industry (and look at Boeings recent acquisition history for an example of an attempt) then maybe they would not have gone bust after 9/11. Though this may sound callous, it really isn't the spreading of risk is a way to smooth out the economic bumps. To enhance the efficiency of capital to avoid sloshing it around, in and out of different sectors as markets change and all the problems that causes.

Considering how much they pay CIA personell

I can't wait for a few middle east specialists to start skewing data to make their bets pay off.

"Woot! Car Bomb in Riyadh! That pays 100-1, guess I shouldn't have sat on that report about Saudi terrorists."

question?

If al-quieda sign up will they get taken to court for insider trading?

Quality!!!

And you thought that the "short the dying guy" strategy on Hollywood Stock Exchange was a slightly sick game to play.

So this is what they mean when they talk about a "peace dividend". I never realised it was quite so literal.

why on earth do they think this would help?

Look at how unpredictably the stock markets behave already. When was the last time a major drop or surge in the NYSE or NASDAQ was accurately predicted by the majority of investors?

At best this kind of analysis helps you see trends over a long time period, but I don't see how that can help the pentagon except when they ask for more funding (See! Carbombings will increase by 50% over the next 5 years! Please give us money).

Re:why on earth do they think this would help?

Check out this site [wahlstreet.de] (german only, sorry). It describes a similar system, Wahlstreet, which was used to predict voter opinion during the 2002 Bundestag elections in Germany. People traded shares of the parties taking part in elections.
The idea of these types of markets is that stock trading does in fact give a really good image of people's opinion. After all, it is about YOUR money if you voice your opinion.
The results of the Wahlstreet project support this theory: The final poll results were consistent with the election results. In fact, Wahlstreet scored second place [www.zeit.de] in a comparison of the difference between election and survey results of this and some other (conventional) survey institutions.

Re:why on earth do they think this would help?

The problem is that ellections have good media ccoverage, and all participants have acess to good data. In the prediction of terrorists atacks you have markets with with "asymmetric information" (check the 2001 Nobel Prize winners), highly unstable on the short term.

Re:why on earth do they think this would help?

You might want to read this New Yorker piece [newyorker.com] on the effectiveness of information markets.

Nabbing people.

They're just looking to nab the people that post "There will be a Jihad and DEATH TO AMERICANS!!!".

not just middle east

Ny Times [nytimes.com] article (free reg, stop whining) says it's not just for the Middle East. In any event, while I support innovative ways of fighting terrorism (as opposed to wiretapping everyone and giving the president imperium, etc) the idea of making money off of death is exceptionally disturbing.

Says this is another idea from Admiral John Poindexter of, most recently, Total Information Awareness fame. Sounds like he might be a sick sick man.

Jim Bell

Remember Jim Bell? Posted comments to the effect of setting up a system where you can bet on who will be assassinated. He got into deep trouble with the courts who tried to censor any mention of it. Here is some more information. [mccullagh.org]

Trading Places II

I think this is all a plot to make sure that the forthcoming film "Trading Places II" is a big box-office draw due to inclusion of lots of explosions, related to this new film being about bidding on military incident futures.

Taking it to a new level...

I wonder if everyone simply voted that someone would be assasinated, if some crazy man would say he was obliged to kill him?

I think it could get interesting...

the fallacy of efficient markets

Reminds me of the old joke about two efficient-market economists walking down the street. Economist one: "Look - there's a $50 bill on the sidewalk" Economist two: "Don't be stupid, if it was somebody would have picked it up already" I reckon that's about the predictive power of this initiative.

I keep looking at the calendar

It is not April First, is it?
This dogmatic idea that the market is the best model for almost anything in western society is creeping into subjects where the economics laws don't apply. The other side of this is would it be insider trading violation to bet a few mil that Jordan would be overthrown and then spend a few mil backing Jordanian rebels to overthrow Jordan increasing your turn. Capitalism is good, free markets are good, but for a market in statistical data to work the participants need to be involved in the creation of the data have complete intelligence on what they are betting or trading on and have some control of their goods. The subject matters broached do not seem to give them a full free market and not being a fully free market the data will be flawed.

It is not April the first or have I slept through atumn and winter this is just crazy.

Predicted in SF

by John Brunner, in "The Shockwave Rider", based heavily in Alvin Tofler's "Future Shock".

The principle is called Delphi Polling. It is based on the observed fact that the aggregate answers of a large number of people sufficiently knowlegeable to understand a question seem, empirically, to be more accurate than the anwers of any one expert. Even though the answers of any one non-expert may be wildly out, the errors cancel out to a good approximation of the correct answer. Futurologists have been using it for a while to predict trends, and it works better than tea leaves, crystal balls and just plain "informed opinion" i.e. guesses. The USN even tried it with flying a plane, and it worked there too.

Re:Predicted in SF

Yeah, it's also called "Poll the Audience" on Who Wants to be a Millionaire.

BlackNet? Assassination Politics?

This sounds like it could be abused to become a BlackNet [vipul.net]

an experiment in information markets, using anonymous message pools for exchange of instructions and items. Tim May's experiment in guerilla ontology.

Or actually a bit more like Jim Bell [wired.com]'s Assassination Politics [jya.com], which is a scheme that allows murder for hire under the pretext of a lottery.

This disgusts me.

Holy Crap.

That's disgusting.

And, on a lighter note: Think of the money you can make taking exotic vacations and causing havok! Insider trading laws be damned, this could be a wonderfully abusable system.

God, I hope this is a joke.

Let's fix our own stock market first

Ok, our stock markets are filled with lies, greed, and wild speculation. Let's fix that before we apply the same model to something that could take us to war!

"The new approach is to set up, as it were, a `market' in two kinds of futures contracts -- one pays $1 if an attack takes place; the other pays $1 if there is no attack, DARPA said."

I mean, holy shit dude! Rich guys putting bets on whether we'll go to war, then working behind the scenes to make sure it happens, so they get some profit! Christ, every day, I don't understand why I still live here.

Why this is sick...

The reason why this is sick is because next time you read that some coward terrorist decided to blow himself up on a Tel Aviv bus, killing him/herself and 15 schoolchildren, a gambler somewhere will go make himself a cool $50 because he "bet" on this.

It is indeed a sick world when the response to a suicide bombing is "YES!"

Let me get this straight

They want the same people who made the dot com bubble decide what happens in the middle-east?

Just tell them about Wi-Fi startups in the middle east and they'll throw money at it...

Interesting idea

But, really there seems to be nothing people are not prepared to gamble on these days. I watched a program recently about a company the other day who took bets on whether the stock market would go up or down, same with the housing index in the UK. Despite the disclaimers this sort of gambling is tailored to those with high level insider knowledge.

I want you all to know though then you may feel free to 'invest' as much as you want on a middle eastern state declaring me to be a messianic figure and bringing peace to the region as the first step of my journey to world domination

Run by the Pentagon?

Isn't that a little like Greenspan running a pool betting on when and by how much the interest rates will change?

Another Similar Site

there is a similar idea already running online:
http://www.tradesports.com [tradesports.com]

you can buy/sell futures for most current events- for example, you can buy saddam futures based on when/if you think saddam will be captured, or you can bet on what kobe bryant will be charged with. this is a real site where you can make lose money- crazy stuff.

An Interesting Idea

This is an interesting idea, and it should stay that way.
I'd be afraid that if I were to bet on a longshot terrorist strike and it paid off for me, that the FBI might come knocking on my door (with a battering ram).

I can see the dialogue now...

Rumsfeld: How is it going?

Expert: Not very good.

Rumsfeld: What do you mean, "not very good"??

Expert: Well... The market experts all seem to think attacking Iran is a bad idea, that staying in Iraq is a bad idea, and the probability that G.W. Bush will lose the 2004 election has reached 94.7%

Rumsfeld: All Right! They have told us exactly what the surrender cheese-eqting monkeys don't want us to do! Therefore, let's do it!! Iran, here we come -- let's blast some mullah back to Kingdom come!

Expert: But uh, sir...

Rumsfeld: Great work, Johnson! Keep an eye on those Frenchies and Arabs for us, and you'll get that nice little raise we talked about! Ah, who needs the CIA when you can have contrarian web sites to point the way at the best interests of the USA?!

[Donald Rumsfeld leaves the room with his entourage]

Re:I can see the dialogue now...

I'm guessing that the parent post got marked "flamebait" because it's a vicious satire of the intelligence, personality, and decision-making style of the people currently running the US government. But guess what? It's also dead-on accurate. This is pretty much a true-to-life portrayal of how Rumsfeld at al. have dealt with the intelligence community since 9/11, if not before.

Sometimes, pointing out the foibles of those in power isn't just flamebait. Sometimes, it's called telling the truth.

Precedents

The Iowa Electronic Markets [uiowa.edu] operated by the University of Iowa Tippie College of Business has been n operaton since 1988 [uiowa.edu]. It has offered real-money futures contracts for U.S. and other political markets including"Control of Congress" as well as the Democratic & Republican Presidential nominee and the popular vote share, Senate seats, Russian and French Presidential contests, etc.

Speculation can be strictly distinguished from gambling.

The speculator makes a bet on the outcome of a risky event which would exist in the absence of speculators, such as bad weather and natural disasters.

The gambler, finding nothing satisfactory for betting, sets up a slotted wheel, makes six-sided dice, designs cards which are identical from the back but different from the front, and then bets on what happens when these devices are randomized.

Speculation shifts existing risk. Gambling adds to the universal total of risk.

The Pentagon site is speculative.

Guys, you're over-reacting

This is a way for the government to tap the expertise of people who do analysis of the middle east and other areas of the world. It is essentially opening the field to experts who, while they might not have insider information, might have a good "gut instinct" for what's going on.

The Pentagon believes that knowing the probabilities that these people assign to different events will help them predict the likelyhood of those events (if I am reading this correctly)--there is something to be said for that.

As another poster pointed out, this is a kind of gambling. What the Pentagon is interested in, however, is not making money off of it: they want to know the probabilities that people are going to assign.

Will it be useful? Who knows. It has the potential to be and they think it is worth the cost of running such a service, I say let them. I'll be as interested in anyone in seeing how closely these predictions matrch reality.

Re:Guys, you're over-reacting

>Why not just ask those same experts what they think?

Simple. There are way too many of them and the Pentagon doesn't want to pay them all civillian contractor fees.

> The possibility that al-Qaeda, say, could use this to make
>money from their own activities seems farfetched.

In doing so they are more likely to let the Pentagon know both who some of their members are and what their actions are going to be.

Do you *really* think that transactions here are going to be either anonymous or unwatched?

>Nevertheless, this strikes me as an inefficient and
>downright ridiculous way to of trying to gather expert
>opinions. Why not just hire the experts in the first place??

Actually it seems rather clever.

If I hire a group of experts I will hire them for one task, I have to make sure I represent a broad variety of experts (for instance, I need a water-politics expert, an oil-politics expert, a couple of cultural experts, translators, a religious consultant (or several!), a military consultant (or several!), some IPE people, etc) and I have to pay them all.

Then I have to wait for them to create a probability matrix for outcomes.

This is a good thing, it has many advantages. It also has many disadvantages: maybe I need more information to make an informed decision; perhaps the experts I've hired all come through academic or political connections and a few of them have an agenda; perhaps one of them is *really* good at Iranian water politics, but doesn't know a damned thing about Turkish water politics, and suddenly an issue comes up that relates to Turkey...

Lots of possabilities.

This lets them get the broadest scope of professional opinion, gives them clues as to what people's hunches are, and removes political bias and government regulations regarding contracting for finding out what people think.

Rather clever. I have no idea if it will work, but it has potential.

Wow, I hate to say it but....

I am now offically embarassed by the actions of my country.

I wasn't totally behind Gulf War II as my opinion is that if it's UN sanctions, then it needs to be a UN call. OTOH, I am totally willing to acknowledge that there is probably a lot about this I don't know and, therefore, chose to try and keep an open mind.

This however, is basically a country-wide "office-pool" on tragedy. At absolute best, its a ham-handed attempt at data-mining the population and even that is ethically "iffy" in my opinion.

Have we really sunk that low? Damn, I can't even watch prime time TV anymore because lately its all "reality game shows" where people are encouraged to screw each other over for fun and profit. This move by DARPA makes all that look like episodes of "Father Knows Best".

Sorry for the rant, it's just my initial reaction to this article. Maybe there is something about this I'm not understanding....I sure the hell hope so.

FutureMAP

Here's DARPA's [darpa.mil] FutureMAP website [darpa.mil] which explains a little more about the idea than the article did. Note that this is a follow-up to a previous, similar program.

Precedent?

In the days before September 11th, unknown parties shorted US Airlines stocks [snopes.com].

Maybe someone at the Pentagon is trying to learn from this? Remember, greed makes people do stupid things. If some low-level operative knew of an impending attack, s/he might be tempted to make a quick buck on this "futures market".

Theoretically, it seems like an interesting idea (aside from the various moral/political aspects).

The question is: why the Pentagon? Couldn't they have just used a shell company to do this, and accessed the realtime data?

Tax dollar allocation on 1040 tax form?

Actually I would like to see a checkbox on a 1040 form (just as there is one for presidential election campaign funds) for Terrorism funding.

I would like to see voting for tax dollars spent anyway. This would tell how truly popular/provisional government programs are:

Give a multiple choice at the end of each state and federal 1040:

I would like my first 10% of taxes paid to go towards the ________ fund

I would like my second 10% to go towards the _________ fund

and so on.

Not as dumb as it sounds

This could work as an anonymous bounty pool.

Think about it, you're a terrorist or just someone who's heard about some terrorist act. Sure, you could walk to the closest US embassy and tell the CIA representative what you know. But this option has many drawbacks. You don't know how the CIA guy will reward you; and if someone sees you entering the US embassy, you're history.

Now with this system, you just connect to the net, bet $100 on "suicide bomber blows Knesset" (for instance); and anonymously reap your 10 or 100 thousands.

But since the purpose of this program is to prevent terrorist attacks, they have an issue here. What happens if your bet on "suicide bomber blows Knesset" warns Israeli security and enables them to prevent the attack? Do you still win? If so, what defines the ocurrence of the attack that you predicted? Who decides? If not, the system won't work since betting on some event will reduce its probability.

But the main issue is anonimity. You need to be sure that you can place your bets and collect your cash anonymously. Nobody wants his house to be targeted by a tomahawk missile. And who will trust the Pentagon's terms and conditions?

Like it or not, this stuff works.

Look at the Iowa Electronic Markets [uiowa.edu], where people bet real money on the outcome of presidential elections and so forth. It has generally been more accurate than any poll. (Last presidential election was a rather unusual case)

The book Blind Man's Bluff [amazon.com] also gives a detailed account of how the lost submarine USS Scorpion was located. All the experts could only narrow it down to a 20 mile radius. With no other options, they resorted to taking real money bets from other submarine commanders on the probabilities of different scenarios. Result? The submarine was found within a couple hundred yards from where they guessed.

Can you imagine some Navy officer going to his superiors at the Navy and explaining that we're going to try and find a submarine by having a betting pool on it? It sounds completely insane, and personally I can't believe anyone had the balls to suggest it. But it works. When people have a skin in the game, they tend to give their best, most honest appraisal. If it was up to me, I would require intelligence analyst types to participate in this kind of thing.

Missing the point

It's amazing how the majority of /. readers miss the point of this system.

Futures-type markets are remarkably good at predicting future trends because they are essentially the consenses of thousands of people, who are confident enough in their outlook to put money on it. Because of this, the Pentagon launched this research project to see if they could harness that power in predicting terror. The point is not to make people rich off of terror attacks or assassinations, the point is to try to know where to focus your efforts in preventing such an attack.

Now as to whether it will work, who knows? If the investors know that the goal is the prevention of the events, therefore no payoff, will they put up the money? How will individual investors know the likeliness of various scenarios if they don't have access to top-secret intelligence, so therefore how accurate can they really be? It remains to be seen.

But again, this is only a RESEARCH project, to see if such a system is feasible, it isn't like we're betting the future of terror prevention on this.

Not what I would want to happen

I think I could be pretty good at this, it is a long time since I predicted that the US would go in and finish what the Soviets couldn't in Afghanistan.

The problem is, what I would want to happen is not often what I expect will happen. Give me a real way to influence policy makers instead, and I'll be much more happy.

Bad Boys, Bad Boys....

I once saw an episode of COPS where they sent out contest-winning announcements to people they'd been trying to arrest for awhile, but never seemed to get able to get their hands on. The people gladly showed up to claim their prize where they were promptly arrested.

Post 9/11 there was a lot of evidence indicating that there had been a great deal of activity short-selling holdings in the airline industry. 9/11 happened ... shares were repurchased at a drastically lower price ... and terrorists probably gained financially from information they had about the upcoming events.

Translate that to this futures market. The very nature of this market can serve as an indicator for future terror events. Every major investments will serve as a lead for investigators to track where the money is coming from to see if there are terrorist ties. The feds may be allowing the average Joe to gamble on terrorism, but they're also opening the door ... waiting for the terrorists to come claim their prize.

Assassination Politics??

Why does this sound eerily like a government-sponsored version of Assassination Politics [jya.com], the piece written by cypherpunk/crypto-anarchist Jim Bell, who is now suing the government under RICO to get his freedom because they conspired against him?

Basically, his idea is the same thing, except people would be buying futures on the death of political personalities. It's strange, it's a bit fringe, it's not liked by the government except for when they use it for their own plans.

Saudi Arabia Needs Another Revenue Source

The oil isn't going to last forever. This is a perfect investment opportunity for rich Saudis funding the terrorist activities. Talk about win-win -- kill infidels and make your money back, courtesy of the US government.

1. Train fanatics in suicide bombing
2. Invest in appropriate futures
3. Execute the attack
4. Profit !!

Could be a useful hedge for stock market investors

It occurs to me that since international events often impact stock prices, people interested in mitigating the risk to their investments could use this market to hedge. For example, if I have a big stake in a company whose fortunes would be adversely affected by terrorism in Israel, I could place a bet *for* terrorism in Israel. That way if it happens, my losses in the stock market will be partially offset by my profits from this futures market. If it doesn't, I'm out the money I put into the futures market, but that's the nature of a hedge.

My bet on terror in Israel will probably also alter the odds on that issue, which may encourage the U.S. (and others) to work harder at preventing incidents in Israel, which is good for my investment. As such, a market like this will probably encourage the U.S. to work harder to manage threats which are financially dangerous, rather those which are dangerous to people. I'm not sure that's where we really want to go, but then again I doubt this market would be used as the sole basis for decisions, and it could be useful as long as its biases are understood.

As others have said, the real problem here is what happens when bettors have the ability to influence the outcome of their bets. Terrorists could potentially fund their operations by betting on long-shot attacks and then carrying them out. The dynamics of that would be interesting in an intellectual sense:

• Wouldn't long-shot targets be those that are either very hard to hit, or of very low value (to the terrorists)? Would such bets lead terrorists to attempt foolhardy attacks, increasing their odds of failure and capture? It seems like encouraging terrorists to attack hard or non-politically-beneficial targets would be good for the world, assuming it worked.
• Would the market be big enough that the terrorists could bet enough money to make it worthwhile without triggering heightened awareness and counterterrorism measures?
• In general, could the terrorists bet at all without "telegraphing" their attacks?
• Could they place bets to manipulate the market, using it to spread disinformation? (Doesn't seem likely, assuming the rest of the market is relatively efficient).
• Would they dare place bets, or would they fear that those bets would be used as a trail to track them down in the event an attack occurred.
• Would they find it useful to bet against attacks, raising funds by not doing anything? Since there are many groups of terrorists, would they actively try to stop each other from doing anything to damage their investments.
• Since they're obviously not reachable by any regulatory body, could the terrorists benefit from bold-faced market manipulation? For example, if the odds were high for a biological attack on Israel, they could bet against the attack, then annouce that they have formed a coalition of all of the terrorist groups capable of carrying out such an attack, and that none of them will do so. This would lower the odds on the attack (if anyone believed the announcement). For that matter, they could cash out their bets "against", place a bunch of bets "for" at now-better odds and then announce that they changed their minds, or just carry out the attack, perhaps even using funds obtained by manipulation.

The answers to those questions might be interesting, but the potential cost of "wrong" answers, in terms of lives and property, could be huge. Speculators trying to make a quick buck voting against terrorism or investors trying to hedge against terror-derived risks could actually end up *funding* the mayhem.

I suppose one way to mitigate this risk would be to carefully vet all potential bettors and verify that they have no potential ties to terror. This wouldn't be completely foolproof, but if done right it would pretty much eliminate the risk of terrorists profiting from the market in a big way. The cost of doing it right, however, especially if the pool of bettors is worlwide, would be staggering.

T

Another interesting development...

Thought I'd point \.ers to an interesting (although spooky) paper out in the September 2003 issue of the Journal of Corporate Finance (Elsevier) that is along this vein of attempting to "harness market knowledge".

It shows that the stock market had effectively decided which shuttle contractor was responsible for the Challenger disaster within minutes of seeing the explosion come across the news wire.

Here's the citation:

Michael T. Maloney and J. Harold Mulherin.
The complexity of price discovery in an efficient market: the stock market reaction to the Challenger crash, Journal of Corporate Finance, Volume 9, Issue 4, September 2003, Pages 453-479.

http://dx.doi.org/10.1016/S0929-1199(02)00055-X [doi.org]

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Jordanian overthrow [inkfrog.com],
bidding on assassinations [inkfrog.com],
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Already in Foresight Exchange

Foresight Exchange uses play money for betting on real world events, including politics and catastrophies.

In early September 2001, they estimated a (around) 40% probability [ideosphere.com] of a major act of terrorism in the US.