Comments on: If I Had A Million http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html Overcoming Bias is economist Robin Hanson’s blog, on honesty, signaling, disagreement, forecasting, and the far future. Sat, 11 Feb 2012 23:23:58 +0000 hourly 1 http://wordpress.org/?v=3.1.3 By: Overcoming Bias : How Fix Boards? http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-429290 Overcoming Bias : How Fix Boards? Wed, 24 Jun 2009 10:00:27 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-429290 [...] than we have now, and probably more than most folks are comfortable with.   In contrast, my proposal to use prediction markets to advise key board decisions like firing a CEO requires no investor [...] [...] than we have now, and probably more than most folks are comfortable with.   In contrast, my proposal to use prediction markets to advise key board decisions like firing a CEO requires no investor [...]

]]> By: FreeMan http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-405032 FreeMan Sun, 13 Jul 2008 17:43:03 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-405032 Talk, talk, talk.... go DO SOMEthing with it! OR simply stop talking about it! Talk, talk, talk…. go DO SOMEthing with it! OR simply stop talking about it!

]]> By: Oleg D. http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-405031 Oleg D. Wed, 18 Jun 2008 00:17:33 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-405031 If a market condition is false (e.g. I bet on stock price given CEO steps down and CEO does no such thing), how are you going to decide payoffs? Or are you just going to give he bettors' money back? If a market condition is false (e.g. I bet on stock price given CEO steps down and CEO does no such thing), how are you going to decide payoffs? Or are you just going to give he bettors’ money back?

]]> By: Mason http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-405030 Mason Mon, 28 Apr 2008 16:52:31 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-405030 How many readers do you have? How many have an extra dollar? I'd make a $10 donation or a $500 investment (and I'm a student). Looks like at least one of your readers might have a little more cash waiting for a good cause/return. But I think company's would value a who-to-hire market over when-to-fire, but of course that is just more complicated and probably less liquid. How many readers do you have? How many have an extra dollar? I’d make a $10 donation or a $500 investment (and I’m a student). Looks like at least one of your readers might have a little more cash waiting for a good cause/return.

But I think company’s would value a who-to-hire market over when-to-fire, but of course that is just more complicated and probably less liquid.

]]> By: Tim Freeman http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-405029 Tim Freeman Mon, 28 Apr 2008 12:20:07 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-405029 Robin, is there some barrier to proposing this as a contract on intrade.com? Robin, is there some barrier to proposing this as a contract on intrade.com?

]]> By: david curran http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-405028 david curran Mon, 28 Apr 2008 10:38:26 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-405028 >The legal and regulatory costs are at least an order of magnitude more than $1M from what I can tell. Posted by: Dan | April 26, 2008 at 12:51 PM In what country? The number of online bookies based in Ireland suggests it is much cheaper to run markets here. >The legal and regulatory costs are at least an order of magnitude more than $1M from what I can tell.
Posted by: Dan | April 26, 2008 at 12:51 PM

In what country? The number of online bookies based in Ireland suggests it is much cheaper to run markets here.

]]> By: Peter McCluskey http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-405027 Peter McCluskey Mon, 28 Apr 2008 04:59:36 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-405027 I doubt that CEOs would start manipulating markets before influential people started watching the prices. And influential people aren't likely to watch the prices until there's a fair amount of trading volume. A $1000 per company subsidy doesn't seem sufficient to generate that much trading volume. I expect that even if it did attract enough traders, much of the subsidy would be spent on markets that yield little information. I expect that for the average firm, traders with only a few thousand dollars to gain would fail to identify any advantage to firing the CEO. But a long-shot bias might cause those markets to suggest a benefit to firing the CEO. Maybe if you only created markets for firms whose stock price performance was in the bottom 10% over the past few years, you would focus the subsidy on firms sufficiently troubled that a sizable fraction of the CEOs ought to be fired, and where the market gives odds of firing close enough to 50% that the long-shot bias doesn't dominate. I doubt that CEOs would start manipulating markets before influential people started watching the prices. And influential people aren’t likely to watch the prices until there’s a fair amount of trading volume. A $1000 per company subsidy doesn’t seem sufficient to generate that much trading volume.
I expect that even if it did attract enough traders, much of the subsidy would be spent on markets that yield little information. I expect that for the average firm, traders with only a few thousand dollars to gain would fail to identify any advantage to firing the CEO. But a long-shot bias might cause those markets to suggest a benefit to firing the CEO.
Maybe if you only created markets for firms whose stock price performance was in the bottom 10% over the past few years, you would focus the subsidy on firms sufficiently troubled that a sizable fraction of the CEOs ought to be fired, and where the market gives odds of firing close enough to 50% that the long-shot bias doesn’t dominate.

]]> By: Bob http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-405026 Bob Mon, 28 Apr 2008 02:34:22 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-405026 Tony, I agree that even with a good CEO there is a correlation between the firm's performance and the probability of CEO turnover. But you could observe the "average" gap and still draw solid conclusions based on deviations from the norm. Robin, why the "let go" language? Wouldn't you get even better information from a bet based on the stock price if the CEO dies? This would help eliminate the gap that Tony points out. Very morbid, I know, but that might generate even more publicity. Tony, I agree that even with a good CEO there is a correlation between the firm’s performance and the probability of CEO turnover. But you could observe the “average” gap and still draw solid conclusions based on deviations from the norm.

Robin, why the “let go” language? Wouldn’t you get even better information from a bet based on the stock price if the CEO dies? This would help eliminate the gap that Tony points out. Very morbid, I know, but that might generate even more publicity.

]]> By: Robin Hanson http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-405025 Robin Hanson Sun, 27 Apr 2008 02:06:12 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-405025 Dan, I agree that $10+M might be required in the U.S. - I was thinking of going offshore to whatever locale was most cooperative. Tony, the clearest market advice would come during the day before the board made their choice to fire or not. Dan, I agree that $10+M might be required in the U.S. – I was thinking of going offshore to whatever locale was most cooperative.

Tony, the clearest market advice would come during the day before the board made their choice to fire or not.

]]> By: Tony Henke http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html#comment-405024 Tony Henke Sat, 26 Apr 2008 22:36:05 +0000 http://prod.ob.trike.com.au/2008/04/if-i-had-a-million.html#comment-405024 It seems to me that the market will often predict that the stock price will be lower if a CEO is let go before the end of the quarter simply because there is a significant probability that some sort of disaster or scandal will hit the company for which the CEO will be let go even if it was out of his control. And, since some companies may be more prone to this sort of PR maneuvering than others, you may get extra degrees of freedom. It seems to me that the market will often predict that the stock price will be lower if a CEO is let go before the end of the quarter simply because there is a significant probability that some sort of disaster or scandal will hit the company for which the CEO will be let go even if it was out of his control.

And, since some companies may be more prone to this sort of PR maneuvering than others, you may get extra degrees of freedom.

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