This is the 175th installment of The Labyrinthian, a series dedicated to exploring random fields of knowledge to give you unordinary theoretical, philosophical, strategic, and/or often rambling guidance on daily fantasy sports. Consult the introductory piece to the series for further explanation.

As I’m writing this sentence (the morning of Friday, December 22, 2017), Bitcoin is trading at around $12,130, down from its all-time high five days ago of $18,867 (give or take). Everyone who invested in the cryptocurrency a month ago — after hearing about it for hours over Thanksgiving dinner — has to be freaking out. Even many long-time holders of BTC are probably nervous: It’s not easy to see a portion of one’s wealth lose one-third of its value in less than a week. Of course, the people who bought a month ago acquired their position when BTC was still trading below $10,000, and the people who bought no later than June got in below $3,000 . . . so all of these people (new and not-so-new investors alike) are still up a significant percentage.

That’s what Sam Hinkie might call “having the longest view in the room.”

The Beauty of Speculation Markets

People don’t want to think of the crypto exchanges as speculation markets, but that’s what they are. I don’t mean to say that crypto doesn’t have real value. There are underlying reasons for the worth of BTC, Ethereum, etc. The blockchain technology is important, and many people (for a variety of reasons) can appreciate the idea of decentralized and secure coinage. But an investment in crypto at this early stage is speculative.

That’s a good thing. Speculation is good. Not enough people speculate. Not enough people bet or take positions on events or back up their beliefs by putting #SkinInTheGame. (Hat tip to Nassim Nicholas Taleb.)

The beauty of speculation markets is that they force the participants — if they have any hope of being profitable — to analyze situations closer than they otherwise would. They serve as ecosystems of evolution. Markets are about survival of the fittest. Either people become fit — sharp — razors — or they die.

Everything is a market. DFS is a market. In fact, DFS is a tripartite market. The benefit of markets is that they give people the opportunity to turn their opinions into investments. Phrased differently: Markets force people to cut through their own bullsh*t. If you have a belief that you’ve actually put money behind, that means something. You have skin in the game. If you have a belief that you’re not willing to invest in, then you have an opinion. And opinions are not that different from excuses — and we know what excuses are like.

If you’ve invested in a belief, then it’s likely that (at least to some degree) your belief is based on truth, facts, and data. That doesn’t mean you’re right — even if your process is sound you still might be on the losing side of a bet — but at least in the aggregate you’ll win more than you lose. If, though, you’re not invested in a belief, then it’s possible (maybe probable) that your belief is based on bullsh*t.

Markets ultimately force people to examine themselves. We see ourselves in the mirrors of speculation. I don’t often channel my inner Bill Parcells, but we are what the mirror reveals us to be. I’ve said this before: Often good advice doesn’t exist unless you’re getting it from the person in the mirror.

All of this brings me back to the crypto market, which right now is forcing people to decide what they believe. It’s easy to be invested in an asset when it’s value is climbing. It’s hard to stay invested when it’s falling. This is a market moment of truth: Till death due us part. The people who are actually invested in crypto will likely use this present downturn in the market to put even more skin in the game, while the people less convinced of crypto’s future will use this as an opportunity to divest before they risk losing more money. The market in time will determine which decision is more profitable.

I’m not saying that one position is right and the other is wrong. I’m saying that the market is making people decide where they stand — and that’s a good thing. That’s what markets do, whether people are playing DFS, wagering on sports, investing in stocks, speculating in crypto — or badgering their family members into betting on the consequences of the GOP tax bill.

How to Ruin Christmas

If you want to ruin Christmas — or an article loosely connected to fantasy sports and betting — start needlessly talking about the GOP tax bill. As big as the fall of crypto is, it’s not the biggest thing in the world that’s happened this week. That distinction belongs to the passing of the GOP tax bill.

I don’t care who you are, where you’re from, or what you did — you probably hate the Backstreet Boys and have an opinion on this tax bill.

If I can be reductive for the purposes of illustration: If you’re liberal, you might think this bill was passed by a bunch of wealthy politicians concerned only with their own interests and those of their backers. If you’re conservative, you might think this bill is already a success because some companies announced that they will give bonuses and raises to employees.

Both of these perspectives have nothing to do with the longest view in the room. If you want to be a long-term market player, you have to be sharper. In the big picture, it’s irrelevant (although troubling) if some politicians acted out of self-interest. It’s also irrelevant (although promising) that some companies will give more money to workers. What matters — regardless of why congresspeople voted for it or how companies and people respond to it in the short term — is whether the GOP tax bill in the long term will benefit the United States as a whole.

There are many ways to judge the success or failure of this bill. Here’s what I suggest: Put some numbers to it. Quantify it. Research it. Analyze it. Think about the people who might be helped or hurt by this bill and how one could determine the degree to which they are helped or hurt. And then, after all of that, put some skin in the game.

If you think the bill will be a success because the country’s gross domestic product will increase by XX percentage points over the next year (or over the next three years), then bet on it. If you think the bill will be a failure because the national debt will increase by XX trillion dollars over the next three years (or five years), then bet on it. Whatever metric you think is the best one to use in evaluating the future success or failure of this bill over whatever period of time you think is important, find someone willing to take your action and then use that metric to set an over/under line.

Again, speculation markets are worthwhile because they force us to examine our positions. If you’re not willing to put money behind your belief that the GOP tax bill is good or bad, then what is your belief actually worth? What is it based on? If you’re not willing to bet a hundred dollars that your position is correct, what makes you confident that the GOP tax bill is on the winning or losing side of a trillion-dollar proposition?

My suggestion: If some drunk uncle at Christmas starts talking about politics, ask him how much money he’s willing to put on his position. If he is *sshole enough to bring up politics during the holidays, then he deserves to be challenged with a bet. Best case scenario: He is foolish enough to accept the wager. Side note: I don’t spend Christmas with family because I want to avoid situations exactly like this, because I’m an *sshole.

But you already knew that.

Happy Festivus!

Too many people in the world think in absolutes. They are too sure of their opinions. They have too much certainty when it comes to the rightness of their beliefs and the wrongness of the beliefs of others. I doubt many of these people have tested their beliefs in the market. If they have, they either rule the world or have no skin.

People who are actively in the market appreciate just how uncertain everything is: The throw of a football, the shot of a basketball, the outcome of a college bowl game, the end of Game of Thrones, the parentage of Rey, the short-term outlook of BTC, and the long-term consequences of the GOP tax bill. They appreciate the probabilistic nature of life itself.

No one knows what the future holds — but the people willing to bet on it probably have a better idea than the people unwilling to bet. What are you willing to bet on?

One closing thought: In the Christmas narrative, what makes the biblical magi wise isn’t that they see something special in the baby. What makes them wise is their willingness to put money behind their beliefs. They are wise because they invest in the future of the world.

They are wise because they put skin in the game.

By the way, as I write this sentence BTC is back up to $13,130: #TrustTheProcess.


The Labyrinthian: 2017.80, 175

Matthew Freedman is the Editor-in-Chief of FantasyLabs. He has a dog and sometimes a British accent. In Cedar Rapids, Iowa, he’s known only as The Labyrinthian. Previous installments of the series can be accessed via the series archive.