A tax on bullsh*t

A tax on bullsh*t

A tax on bullsh*t

Betting, as the saying goes, is a tax on bullshit. Opinions are easy  — you can have as many as you choose, often crowding contradictorily around the same topic. But a wager where there is something significant to be gained or lost tends to filter out all but the most serious perspectives. Usually, however, predictions about the future are conveniently forgotten or reshaped before the results are in. The tax on an egregiously formed piece of bullshit too rarely comes due.

So it was somewhat delicious news this past January that the wager Warren Buffet entered into with investment manager Protege Partners ten years ago had been settled. Buffet had bet $1 million that over a decade a passively managed S&P 500 fund would outperform Protege’s basket of actively managed hedge funds. The b.s. taxman cometh: the S&P fund had returned a 7.1% compounded annual gain, while the hedge funds returned just 2.1%.

While Buffet’s bet got ample attention, what did not was the engaging website Long Bets, created in 2003 (and funded by Jeff Bezos), which allows individuals to wager — very publicly — on their predictions about the future. One can make a prediction, and someone else can then take the other side for a bet. Buffet’s bet with Protege was memorialized there with the original justifications from each side. To date there are 751 predictions on the site, a number of have been turned into wagers. Among the winners and losers: a 2002 bet that within eight years a VOD service would offer 19k titles to 5M subscribers (it did), a 2008 bet that the Euro would not be the currency of France, Italy or Germany in 10 years (it was), and a 2002 bet that the US men’s soccer team would win the World Cup before the Red Sox win the World Series (uh, no and imo easy money) which was successfully challenged by Cheers bartender Ted Danson.

Lastly, for those of you who smell an arbitrage opportunity here, we have a book recommendation. Wager away!

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