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Thursday, June 16, 2005

Harry Potter and the Bettors of Bungay

No, the title of this post is not the title of a forthcoming Harry Potter book. The sixth book in the Harry Potter series, Harry Potter and the Half Blood Prince, is due out one month from today. Amazon is guaranteeing delivery on July 16th (the release date), so I've preordered mine from them. In fact, I've ordered two copies, since I don't want any conflicts with my older daughter over who gets to read it first. What the heck, they're only $18 per copy, and let's face it, reading Harry Potter is really, really important.

The title of this post refers to interesting betting patterns noted (spoiler alert) in the Guardian. J.K. Rowling (the author of Harry Potter) has "hinted that a major character would meet their death" in Harry Potter and the Half Blood Prince. This hint spawned betting markets all over the world for the purpose of betting on which character would die. As in any betting pool created by bookies, odds are set up to reflect the betting patterns, such that the bookie always gets a riskless cut, and as such, represents the best known information regarding the subject matter. Through mid-May, a large number of characters had plausible odds.

Suddenly, in the town of Bungay (in Britain), which happens to be one of the towns where Harry Potter books are printed (and they are currently being printed worldwide), a large number of bets were placed on one specific character. The odds then collapsed and no further bets are being taken. In other words, we now know which character is going to die (if we've read the Guardian article above). We can guess that someone at the printing company in Bungay sneaked a peak at the book and leaked the information.

There are (at least) two interesting things about this sequence of events. First, the character who dies in Harry Potter VI was predicted by the odds even prior to the leak. This is yet another example of the Wisdom of Crowds - the ability for the masses to accurately predict unknowable future events.

The second thing of interest, is that it lends plausibility to the concept of terrorism futures and/or betting markets. Just as someone was willing to leak information regarding Harry Potter for a profit, so might associates of terrorists be willing to leak information regarding terrorist activities for a profit. The Pentagon proposed a futures market for just that sort of thing, but it was shot down on "moral" grounds by congressmen, who in my opinion, didn't consider the issue carefully enough.

Perhaps they should reconsider it.

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