NYT journalist Adam Iscoe on the hidden world of prediction market sharps — and why Wall Street keeps losing to them

games because I think that that's such a such an incredible technology. I think it's going to be really popular, but it's going to take time for it to actually roll out. Uh anyway, uh there is a cutdown of Jensen's keynote that you can watch. We linked it in the newsletter and uh we we will uh go into that more later, but we have our first guest from the New York Times. He's a journalist. Adam Isco uh just wrote a fantastic piece about prediction markets and he's here with us in the TV ultram. Adam, how you doing?

With a slat wall.

Slat wall.

Ready to pop.

Wait, is that a slat wall or is that a virtual background? What we got? What we got?

It's real. It's real. You think I can do a virtual background on you, y'all? I mean,

thank you. Thank you. With the suit. With the suit.

You look fantastic.

Bringing a slat wall and a suit. You are ready to podcast.

Okay. Uh are you in New York City?

I'm in New York City. Long time listener, first time caller. So good to be here. Fantastic to have you. Uh since this is the first time and we have some and we do have some time to kind of unpack this. I wanted to hear a little bit about uh your journey, your history, how you wound up at the New York Times, where else you've written, the type of topics, how you describe your beat, your process. Just sort of give me the the 101 on you and then we can dive into prediction market specifically.

Yeah. You know, at a party if someone asks me what the hell do you write about? Are we allowed to curse on this show? Is it's no

welcome to We don't. But you're welcome to. I'm surprised the New York Times would let you. Are you allowed to draw in the gray lady?

I can tell he's a bit of a

The gray lady bad boy.

It's been the great It's been the great uh controversy with me working at at the times is that I spent the last five years at the New Yorker.

Okay.

It's a magazine that that that encourages profanity in. But the Times, you know, uh

more things are a little different there. Um, I've spent the last five years at the New Yorker writing about all kinds of things, whether it's mental illness and homelessness in New York City or it's um, like, you know, every year I read a story about a cool boat on the New York Harbor.

Cool.

Uh, you know, I'm just trying to like go interesting places and see interesting things.

What drew you to the boat? I got to know about the boat. Yeah, since you brought it up.

Oh, well, I mean, y'all ever see a shipping container ship?

Yeah.

Like, you ever want to get on one? You ever been on one?

I don't think I've ever been on a shipping container ship, but I have wanted to go on one. I've been on I've been on an aircraft carrier. That was very cool.

You've been on an aircraft carrier.

I've been on an aircraft carrier. I went on the USS Carl Vincent as part of the Distinguished Visitor program. There's a program that you can sign up for. You have to wait years and years and years unless you're actually famous. Uh and I had a friend who waited years and years and years and they slotted me in at the last second. So, I got to go with like a lot of like big Hollywood producers and stuff and they sort of give you the dog and pony show, let you sleep on the boat for two days, meet everyone. Yeah. Two days. you're like at sea with them and they they you have no cell service. They don't tell you where you are and you can kind of speculate, okay, well, we left from San Diego. We're probably around Mexico. But um but yeah, you get to watch the planes take off and land and they take you and they fly you off and stuff. It's it's a wild experience.

We definitely knew where we were. We were in the New York Harbor. Okay. Uh like we came under the Verzo Bridge and uh uh it was great that the cargo was a miniature of the Statue of Liberty. It was a gift a gift from the French government to um to to us. They gave us another one.

They gave us another one. Round two.

They're just running it back.

Yeah. Yeah. Um and I wanted to get on the ship, so I just sort of made some calls and I I asked around and um they were they were super psyched to have me on the on board.

Yeah.

How do you think about sizing stories in that context? Like when you're at the New Yorker over a couple of years, I I imagine that there's there's shorter pieces, there's longer pieces. Like how much is it just a conversation with your editors and the team on, okay, I actually have something here. I need to go heads down on this for months and pull on this thread and there's a 70% chance it's great, 30% chance it goes nowhere. Like what is the process? Because we have like the same show every day. It's always like the same length. We don't really ever get in the world where we're like we're going to do an eight hour show, you know, next week and but we're going to take a couple shows off. Like how do you think about sizing projects?

It's it's such a great question. You know, it's like if you're going to write about a used car auction in Brooklyn, you know that that piece is going to be 850 words. you know, it's going to be a little just like a little tasty morsel for the reader to enjoy. Um, but if you want to do something where you're really trying to contribute to, you know, to society, to our culture, to, you know, then then you need more words to tell a deeper story, you know, and so yeah, if I want to write about mental illness and homelessness in New York City and have New York City be a sort of proxy for the nation,

then it's Yeah. We need 6,000 words. We need 10,000 words, which means I need six months or a year to work on that project. Yeah.

Uh, and then of course, you know, because The New Yorker is a business, you know, you also need to be writing shorter stories along the way while you're spending investigating something that's really sort of topical and important.

How did you first come into contact with prediction markets?

Oh my gosh. I mean, I I don't know about y'all, but isn't isn't aren't your friends just like, you know, degenerate gambling on on sports or on on on all of these things? For some reason, I actually don't know that many people that gamble on sports.

Our most active group chat, no one has ever talked about a sports bet,

but they were very viral during the presidential election. I remember maybe what was it three cycles ago, 2008, the Nate Silver uh before the silver bulletin, the 538 dashboard, everyone was refreshing that constantly. He famously called all 50 states correctly. It was a bit of luck, but uh those those dashboards, the needles, all of that stuff sort of captures every everyone's attention. And during the last presidential election cycle, it felt like the prediction markets were really having a moment. But I didn't actually know that many people that were actively betting on them one way or another. It was more just a curiosity to say, "Oh, well, you know, that source might be biased or that source might be biased, but you know, at least if there's just money on both sides, maybe it's more neutral. maybe it will give me a a stronger vision of the future. And I think that's where a lot of people a lot of the goodwill around prediction markets came from because it sort of told the story of the election somewhat more independently or more accurately. And so I think they carried a lot of that goodwill into the sports betting that you're talking about. Um, but

yeah, I've always been personally I've been interested in the tension between uh if you're just using prediction markets as a data source and like you're just logging onto a website, not even logged in.

Yeah.

You you kind of want people to be insider trading because that's going to make all the data more accurate. Yeah, but but the platforms I'm not saying like generally that's good for society, but I'm just saying like if you just want to get

uh an idea of what's going to happen in the future,

if there's no insider trading happening, it just means that people are just purely just

That's not true. That's not true. Because in the

Yeah, I mean they could sophisticated research, things like that. But on some but on some of these markets like for example like the

the the war markets around Venezuela where there were you were seeing like spikes in activity and then okay it turns out somebody was that did have inside knowledge on the operation was putting the whole operation it's going to be better

because because they wanted to make you know 100 grand or whatever.

Yeah.

Yeah. But when you look at the election or you look at, you know, you look at you look at financial any anything, you know, sort of unemployment or the Fed rate or what what have you, you don't need insiders to have sort of non-public information.

You can just you can sort of do what Wall Street has always done. Yeah.

Which is go out and find an edge. Go out and find the best information possible. Yeah.

Uh go and talk to a bunch of people. Go and look at really complicated uh weather data uh to predict oil prices. I mean, you can you can do like sort of really intense research as just like an individual or a group of individuals working together. And so, you don't need to be that guy that like um you know, compromised national security by um illegally trading Venezuela. You can be someone who just knows a lot more than the average sort of user or better um and kind of create tremendous informationational advantage for people. I mean, the stat that I came across sort of crazy is that a third of adult voters in America have insulted a prediction market, right? That's like a that's like a lot of that's like a lot of people.

They're basically at the ballot box being like, hm, who should I vote for?

And I mean, in low liquidity,

I only vote for winners. Who should I vote for?

Yeah. No, no, I think people do. I I I think people do actually see, okay, there's momentum. It's worth me donating to this candidate. And then you get this weird flywheel where potentially you could have someone who wants a particular candidate to win. Then they artificially shift the odds of that of that candidate. They spike and then that candidate runs a whole bunch of talking points or ads saying, "I'm at 60% on the prediction markets. You should definitely donate because I'm going to run away with it." And then they and then it becomes like a self-fulfilling prophecy. There's like a weird cycle there. Uh that could be bad. I don't know. I think six months ago, maybe eight months ago, there may have been at least pre pre2024 election, this may have been possible. But the way the markets are sort of becoming more efficient, just like any other market on Wall Street, I think now if you went in and you were trying to sort of artificially hype up a candidate that didn't have genuine support, smarter money than you would just would just buy your money, okay, and

just crush you and crush.

Interesting. Interesting. Okay. So tell me about like what smarter money looks like in this context because we've heard about you know big hedge funds Citadel is doing clearing and there's uh I think Steve Cohen's fund has a desk for this type of stuff. There's like traditional Wall Street then there are sharps and then there are the average traders. Like how do you segment the market? How would you characterize the different market participants?

Yeah. So I would say that the average trader and like that's me to be clear. We're just getting crushed. Absolutely decimated. I I actually wanna I I wanna I want to read youall something that that uh that that that one of my sources told me. Yeah. This is someone

turned 200 bucks. They're quite sharp. They turned 200 bucks into half a million bucks just last year.

Wow.

And so and so and and you know it's a grad student. I'm going to keep them sort of protect their anonymity. They're quite worried about being cryptokidnapped. Um sure

they go by this name frozen. Um, and they said, "I I really am just taking money from people.

Every dollar I gain is someone else losing." And there's a lot of people joining and betting and losing and leaving. And then there's a group of a couple hundred guys uh winning. And that's the whole story. And, you know, that's not the whole story, but but that's a lot of it. Uh, is that you have you have really smart people Yeah.

just crushing the average trader.

Okay. So, what I find weird about this is that I like I I I don't have that many friends who fall into the

Wait, but but do the people that get crushed quit right before they're about to hit it big?

Yes, clearly.

Wonder. I wonder. Um so so I I have been uh I have had friends who have been in that camp of like smart grad student uh tech person able to build a real model and I always go to them and say you shouldn't be trading because there's a much more sophisticated market participant sitting at a hedge fund with you know a data center worth of compute behind their models and they're going to crush you. And so I'm surprised that an individual of any sort can have an edge uh in this market. Like is it just that like did you try and talk to any of the the Wall Street funds that would more professionalize that that like like this activity? because it feels like even the even like the smart, clever, individual, disciplined uh individual who's maybe uh feeding off of like the casuals that are just coming in and out uh would eventually get crushed by something that's even more uh more robust and professionalized.

Yeah, you know, I was so delighted. I have I had a wonderful conversation with Jeff uh who co-ound

you know, one of one of the sort of most respected trading training firms in the country um if not the world. And and I asked him this question and he said, "We are just getting taken for a ride. We were just getting crushed by these sharps."

Uh and and I was sort of trying to figure out why. And I I talked to someone who actually, you know, Sig is trying to go out just like a number of other places and they're going to they're trying to hire these sharps, right?

I talked to someone who had an offer from SIG. Um and I said, you know, why didn't you take it? Well, you know, wouldn't we get, you know, better health insurance, you know, and he said, not only am I just baking a killing,

but I can do things that a big institutional fund can't do. For instance, I can, you know, he's a Rotten Tomatoes trader. He trades trades, how is a film going to do on Rotten Tomatoes, and he's he's turned, you know, I don't have the numbers in front of me, but he's made quite a bit of money, you know, seven figures easily. Uh, and so, you know, he's he's guessing, not guessing, he's predicting, he's building models to figure out how is a Rotten Tomatoes uh film going to perform and and such. And he's doing things, he's scraping websites, and he's doing things that that maybe SIG through their corporate policies wouldn't allow. Okay.

And he asked in the interviews like, "Could I do this technique?" And, you know, you know, and they said, "Yeah, probably not."

And so, at least in in these markets, um, you know, and there's just so many market.

Well, is that because it's illegal? No, it's not.

Yeah, it might be against terms of service, like an individual,

but not like a law, but like a terms of use,

just as well.

Yep. Yep. Exactly.

Interesting.

Exactly.

Uh and and this guy, you know, it's really interesting, right? Because he's someone who, you know, he, you know, pardon me, I'm going to swear, but but he he he he self-described as sort of like a [ __ ] from the M Midwest. You know, the first person talk to like,

you know, hey, I'm this guy. I didn't go to an Ivy League school. Yeah.

Wall Street with a $600 Lenovo laptop.

I could never have a job on Wall Street. This is not my world, but I'm able to do this because I'm quite sharp on prediction records.

The American dream. Call Sager and Jetty. He's going to be so happy to hear that. Uh, no. I mean, there has been a ton of push back. Uh, but it feels like, uh, the greatest gift to the prediction market industry has been AI being more controversial. And I'm wondering if you are tracking any of the potential political moves that might uh change the regulatory landscape for prediction markets. They've grown so fast. Feels like there's federal preeemption. They're going to be legal everywhere. Uh but has anyone popped out as a voice of what regulation might look like in this market? whether there's just hey no insider trading or uh you know make it more of a level playing field more disclosures even something as simple as uh with a lot of the Vegas casinos you can self-exclude I don't know how that applies in a modern prediction market world but uh that's something that the the like the anti-gambling lobbies would certainly like to see I imagine

yeah I mean I I think the the regulatory landscape is incredibly important with all of this stuff um the Trump administration has been incredibly favorable to Koshi to Poly Market to you the CFTC which regulates these things. They also regulate you know like the derivatives that you might trade leanhog or or wheat or corn on. Um so you know the Trump administration CFTC has been much much more sort of willing to play ball um with uh with prediction markets. And so, you know, you talk to folks and they say there may be, you know, come 2028, come 2029, if there's sort of a change of of power in Washington, things may shift, things may change.

Um, and in the meantime, I think, you know, who who knows? It's really hard to think beyond three months from now. So, it's really hard to think that far out. But in the meantime, there's a lot of people doing really really good work. um you know, Council on Foreign Relations, for instance, is doing really really good work on thinking through how how do we just kind of come up with sort of sensible solutions on how to better regulate these things. Yeah.

Uh h you know, how can we make sure that, you know, our national security is not imperiled um by, you know, a lone wolf kind of going out and trading on there's going to be a strike in Venezuela.

Yeah, exactly. It seems like there's a bit of a game of whack-a-ole where there's some really really uh really really problematic markets that have negative externalities like the Venezuela one you mentioned. And then I still don't really have a first principles problem with uh a a broad presidential election market that seems totally reasonable, totally useful, very valuable. I found prediction markets useful all the time. We were checking call sheet constantly throughout the OpenAI Elon lawsuit because we trying to cover it independently and it's a good source of okay what what does the market think uh and it was accurate throughout the whole the whole affair. Um but uh yeah, I mean certainly people can get sucked into all sorts of different markets and um there are going to be hot hotly debated issues for for many years, but it does feel like this is like the the key focus at the federal level will be AI at least for the next

what what do you think what do you think sensible regulation looks like? Because in the case of uh there had to have been some guidelines that would you know have somebody in the special forces you know if they check the rule book say like hm should not send a signal to the internet that we are you know uh going to attack a foreign country uh which is effectively what this individual was doing when they were betting on uh strike on Venezuel but but that doesn't feel like like that just feels like it's not even necessarily like that must have been violating like a number of policies I would imagine

policies and and federal law and you know the Justice Department and the CFTC are prosecuting the case. Um you know you also want to see better enforcement, right? You want to see you want to you want to sort of flag these things before they they they even start. You know I talked to KHI about this. I talked to Poly Market about this and they say, you know, they say, "Hey, we're really working quite hard to to stop this kind of, you know, this kind of insider trading. We're kind of we're working quite quite hard on we're building AI systems to do it. We have, you know, teams of people working and working and working on this. Um, we need to sort of make sure that they're actually doing that." And, you know, this is where, um, you know, there's lots of lots of other great reporters at the journal at the times at NPR. There was a good story in the journal about an independent watchdog that discovered a poly market trader who was betting on uh Google search results and he wound up working for Google so he just had the exact uh the exact data available which obviously is a violation of the terms of service but

yeah what percentage of the sharps do you think just have insidefo and are kind of taking you on a you know basically tell telling you a little story about

I built a cool web scraper I I I think, you know, I talked to to to dozens and dozens and dozens of sort of really top traders and, you know, I asked for receipts. You know, I wanted to look at their models. You know, I went down to Texas and, you know, knocked on doors. These I went I went and there was a group I went down to Texas with to sort of check out their approach to modeling Texas Democratic primary. Uh, and they call themselves MAGA Kiwi Club. It's it's, you know, 12 12 or so guys and and and they went and knocked on, you know, more than a thousand doors, nearly a thousand doors um to try and get a leg up in this election. Um and they were right, you know, they were right. I think there are some there are some sort of really bad wolves out there um that are taking advantage of the system. But the sharps the sharps that we're talking about, people who are using information to make the markets more efficient um are in a totally different category. And that's sort of that's the vast majority of the activity that in Wall Street um

you know making money.

We have a question from Emily Sunberg. Why is a New Yorker writer taking a job at an AI tech company?

It's a great question. That's a question from Emily or from for me or you

It's from Emily for you. Clearly

from Emily for me. You know, I I I I love my job and, you know, I've been I've been so lucky to have gotten to talk to all kinds of just wonderful people over the last 5 years. I have a sense that things are changing and I really rather than sort of be on the outside as a reporter and and and watch as things sort of sort of change and be become a tech reporter. I think this would be the thing that I would go do is I'd go be a tech reporter. I'd write wonderful stories about um you know what's happening and and I got this sense that I couldn't do it from the outside. like I I've become increasingly convinced that that sort of like AI is is like the thing that I need to think about over the next number of years and I didn't have a sense that I could do this as a sort of a reporter from the outside without sort of having you know the street credit at some level of of of being in AI world and then I went around and I and I had to sort of find a place that that shared my values. Um, and I I was lucky enough to to sort of by happen stance um meet uh you know this guy Ivan who runs this company notion. Uh and and I really loved his vision of the world and I loved this company's vision of the world and I thought okay you know I'll give it a shot. We'll see. Uh and and it seems like it's the kind of place here uh that you can tell wonderful stories about what's actually happening in the world. Um, and it sort of has a has a sort of, you know, a genuine curiosity and a sort of a genuine ambition to to tell to tell true stories, to tell real stories about what's happening in the world. Um, and I'm yeah, I'm quite excited to do it.

How do you think about the opportunity at Notion to tell stories about the technology that, you know, ultimately drive traffic into the Notion ecosystem versus like actually give insight into what would make Notion like a dominant product for the next generation of writers? like those those two opportunities seem both interesting, but is there one that's sticking out to you?

Well, maybe you could ask a different question or ask ask it slightly differently. I don't I don't quite understand them.

So, Notion is a product that that writers use to to actually research

all sorts of people, but people also use it for organizing information of all sorts. that uh there is a world where you as a member of nontechnical staff uh help advance the product and then there is another side where you uh tell stories and do uh more more written output to attract customers to notion more so it's more like product versus marketing if we went back in time.

Yeah. I mean I don't think product or or marketing really resonates with the thing that I I really do here. Yeah. Uh, I think I'd be a terrible marketer. I don't think I know how to sell Notion as a product. Um, but what I think I can do is come into this place,

ask a ton of questions about what's happening here, go elsewhere, ask a ton of questions about what's happening elsewhere, and then yeah, maybe tell interesting stories or or maybe the first thing I can do here is sort of ask questions and start to tell interesting stories about what does AI look like in the economy? What is and and may yeah maybe there maybe there is a an economic benefit for the business.

Sure.

Uh sure hope so. Um but but

I think there's also just sort of a deeply felt duty here to to do good work in all kinds of different ways. And so I think um you know part of that is is is this.

Very cool.

Anything else?

No, it was great to meet you.

Great to meet you. Thank you so much for coming on the show breaking it down and congrats on the new roll

a cargo ship. You know, just call me up. Let me know.

Let's run it.

Next one. I'll talk to you soon.

Great to great to hang Adam.

Have a good one.