Nintendo Co., Ltd (TYO:7974), (OTCMKT:NTDOY) is just after finishing up one of the best E3 performances of all time. If you listen to the firm’s most ardent fans, there’s nothing that can stop Nintendo now. Those fans might want to learn a little something about Robin Hanson’s “futarchy.”
That concept, explained in more detail below, is based on the idea that predictions have power. The Japanese gaming concern’s biggest fans have long been comfortable making big predictions. So too have the firm’s detractors. Every prediction has something in common though, nobody has anything real on the line. That makes them ready and willing to make predictions based on nothing. Futarchy offers a way to change that.
Embrace the Futarchy
Futarchy is a proposed new system for governments. It’s at once simple and powerful. First governments are democratically elected based on their welfare goals i.e. higher GDP, higher life expectancy etc. The state would, however, define government policy by means of betting markets.
A goal is set, say lets improve life expectancy, by the government. Next a range of policies are put on the prediction market. The policy which the market thinks has the best chance of success is chosen. If it’s a success those that bet on it get a payout. If not, they lose their money.
The central idea, summed up by the system’s creator Mr. Hanson, is “vote on values, bet on beliefs.” Because of its focus on real outcomes, Futarchy puts a premium on verifiable knowledge. Would we still have so many people denying a link between gun control and gun violence if we had a betting market in place to decide on the policy?
Not only would this type of market allow us to make better policy, according to futarchy, it would also allow us to learn a huge amount. With cash on the line, bettors may be more willing to experiment. There’s a reason why so many interesting new techniques emerge from Wall Street. People there actually want to test what works, rather than line up on some percieved team. It’s not always perfect, but it is always developing. That ever-learning evolution has never been an attribute of the console wars.
Wait, what does this have to do with Nintendo?
If people had to really bet on their beliefs about Nintendo Co., Ltd (TYO:7974), (OTCMKT:NTDOY), if they lost money by being wrong, would we have so many inane predictions? Hanson reckons when you force people to “put their money where their mouth is” you get more educated beliefs represented. People are willing to study in order to make sure they end up victorious.
If we had a similar market for Nintendo we could bet on ideas like: “Nintendo will sell more than 10 million Switches this year.” We could also address more complicated questions with conditional statements. An example is, “if the next Starfox sells more than 1 million copies, Nintendo will sell more than 10 million Switches.”
If we could ask those questions directly, video games would benefit. Those who really want to argue about their team can do so. They won’t be taken seriously, however, unless they bet on it.
How do I even bet on the future of Nintendo?
Currently there’s no such thing as a fuctioning video game prediction market. simExchange was an attempt founded in 2007. Right now it appears to be dead. At any rate that platform always used “virtual money.” With nothing real on the line, the predictions are much less likely to represent studied beliefs.
There is one way for those predicting success for Nintendo to bet on the firm. The firm’s stock is on the open public market. It trades in both Tokyo and New York, and anybody with the cash can buy in. The firm’s New York traded stock costs just $40. With a huge amount of low-cost trading platforms out there, there’s never been an easier time to become an investor.
Unless fanboy prediction markets become a big revolution in gaming, betting on Nintendo stock is the only way to really put your beliefs to the test. If their examined beliefs are as strong as their fiery rhetoric, the firm’s loudest fans should be willing to do just that.
Daring Nintendo fanboys to put their money where their mouth is
We all know someone who is a true fanboy. They don’t just play games as a hobby, they follow their favorite conglomerate like a sports team. They’re quick to defend almost any decision made by firms, and quick to predict instant success from any sort of positive news. People who fall into this category tend to be poor at examining their beliefs and updating them when the context changes.
This is exactly the behavior that futarchy is intended to prevent. It’s meant to force people to make predictions they actually care about by putting some skin in the game. For most people this is likely too much work to bother. What you end up with is a collection of the more determined, well-thought-out opinions on the subject. That’s the theory at least.
We could try out the same idea with fans of Microsoft Corporation (NASDAQ:MSFT) or Sony Corporation (NYSE:SNE), but it’s much more difficult. Both have hidden their gaming divisions in a complicated forest of business segments. Nintendo, on the other hand, is a pure video games firm. It will rise and fall with the success of the Nintendo Switch sales numbers.
That makes the firm’s stock a great proxy for how the business that gamers are interested in progresses. The fortunes of shareholders are likely to rise and fall with key releases like Pokemon for the Nintendo Switch, and the next Metroid release.
Nintendo could end the console war
The Nintendo Switch is, without a doubt, a great, original console. It seems to be doing well, and Nintendo stock has been soaring in recent months. Given the firm’s pure-gaming focus, now may be the time to bring belief-based betting to the console wars. Forcing people to take the time and examine their ideas may just be enough to suck out some of the venom.
So if you really believe in Nintendo Co., Ltd (TYO:7974), (OTCMKT:NTDOY) and the Nintendo Switch, why not step out of your comfort zone and put your money where your mouth is? If you really know what you’re talking about there’s money to be made. If you don’t, then perhaps there’s a reason you can’t follow through on your beliefs? It may be time to reexamine them.