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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.
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...
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
Please place all american-bashing statments under this comment. Thank You.
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.
Visualize the world of wine
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."
If al-quieda sign up will they get taken to court for insider trading?
Working for the (other) man
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.
"I Know You Are But What Am I?"
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).
Ny Times 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.
Karma: T-rexcellent.
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.
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.
Don't blame Durga. I voted for Centauri.
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.
The author of this post asserts his moral rights.
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.
Consciousness is an illusion caused by an excess of self consciousness.
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.
I assert that my comment is only my opinion, not that of any employer, past, present or future.
The society for a thought-free internet welcomes you.
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.
$8.95/mo web hosting
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!"
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...
Isn't that a little like Greenspan running a pool betting on when and by how much the interest rates will change?
there is a similar idea already running online:
http://www.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.
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).
This creates an incentive for terrorism by insane individuals.
Remember the case where someone tried to manipulate the stock market by putting cyanide in Tylenol?
I might not have the facts exactly right, but the idea is the same. The potential exists for someone to use this to make money, by finding a way to encourage the terrorist acts to come true.
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]
The right to offend is far more important than the right not to be offended. (Rowan Atkinson)
The Iowa Electronic Markets operated by the University of Iowa Tippie College of Business has been n operaton since 1988. 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.
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.
Integrate Keynote and LaTeX
This is *not* a good idea. Why? Because this kind of market is open to manipulation more than any other market. You can't prevent "insider trading." Who would stop individuals connected with terrorists from buying futures on the next suicide bomber? This idea simply gives them very easy access to money. This is the stupidest idea (and most disturbing) I've ever heard. Though the idea of buying future contracts on the date that Saddam will be ousted was funny when I first heard it, it's the same thing. It's not right, and is easy to manipulate.
Leave finance to the finance people. Bush should not mess with Wall Street, he's already given everyone down there a headache and no one needs this. Ha, is he expecting to be re-elected after this? I'm sure the Bible-belt approves of this idea...
"Time is long and life is short, so begin to live while you still can." -EV
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!
"Times have not become more violent. They have just become more televised."
-Marilyn Manson
Here's DARPA's FutureMAP website which explains a little more about the idea than the article did. Note that this is a follow-up to a previous, similar program.
"Share your knowledge. It's a way to achieve immortality." -- Dalai Lama
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?
Aren't you just so glad that Poindexter is in charge of the department that comes up with such useful ideas?
LE
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?
It would be nice to be sure of anything the way some people are of everything.
The book Blind Man's Bluff 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.
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.
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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.
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.
... shares were repurchased at a drastically lower price ... and terrorists probably gained financially from information they had about the upcoming events.
... waiting for the terrorists to come claim their prize.
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
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
This is the science behind it
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 (Google). The $8 million program is under the control of Admiral John Poindexter who brought us Total Information Awareness. The Policy Analysis Market starts taking registrants this week and betting/trading begins in October. Senator Byron L. Dorgan of North Dakota, said the idea seemed so preposterous that he had trouble persuading people it was not a hoax.
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?
They have never released any information on the parties who purchased the put options on the airlines and the company that covered the insurance on the WTC. Info is just sitting there waiting to be discovered on this. It would be very simple to track down, but it has never been done. This cover story that the options have never been claimed is rubbish. The options had to be bought from a trading account or brokerage somewhere in the system. It's like saying you have a check in your hand that hasn't been cashed and claiming that you can't look at the account number on the bottom of the check and tell who wrote the check.
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.
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.
it was originally slated to become a piece of TIA.
This is interesting if only because funding for the TIA was cut by Congress in the 2004 Defense Appropriations Act and killed by the Senate's 2004 defense appropriations bill 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.
As reported in Yahoo News 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.
Looks like the images are gone/slashdotd/censored... so here's a mirror
Jordanian overthrow,
bidding on assassinations,
cool graphics...
--
What is the sound of this sentence?
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.
He who refuses to do arithmetic is doomed to talk nonsense.
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 actually thinks it will work!/ doesn't deserve your confidence.
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 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...
-- Waht? Tehr's a preveiw buottn?
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.
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.
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).
As we New Yorkers like to say: fuckin' A.
... the trail went to a German bank, and I couldn't find any more info than that.
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
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