Social Media, Markets and The Presidential Debate

Posted by Jeff Carter
on October 4th, 2012

Markets are better predictors of outcomes than individuals or polls. It’s a fact of the human existence and also why decentralized free markets allocate all things more efficiently than central planning.

Ignore the spinmeisters from both sides. Ignore the anchors. Romney wasn’t “acting”, and Obama wasn’t “distracted”. Let’s try and see what the market for information is telling us about last night’s debate.

Topsy is a social media service that analyzes things like Twitter. Here is what they think:

Finally, could we tell who came out on top based on results from Twitter? In terms of number of mentions, Mitt Romney was mentioned by name or Twitter handle 3,463,169 times (54% of the time) during the debate timeslot (9-10:30pm EDT), while Obama was mentioned 2,966,914 times (46%).

Twitter is sort of like a marketplace of ideas. It’s not a perfect marketplace, because the costs to Tweet are so low. But there are some cost/opportunity cost relationships. It’s worth clicking over to the Topsy analysis and reading the whole thing because it really is interesting.

For what it’s worth, my liberal Facebook friends didn’t update their status and my conservative friends were all over Facebook updating statuses. It’s not a random sample by any means, but ties in with the Twitter data.

On the other hand, there are the Iowa Prediction Markets. People actually go to the trouble of setting up an account and investing cash to make a prediction. The only downside to them is the volume is not heavy. But it’s a true market.

The best thing about a priced market is there is no skew or sloppy statistics to delve through. They are transparent. When I see a number, I don’t have to worry about the estimates behind it. Quick and dirty analysis suffices. Anyone can grab a lot of information in a hurry about something when they see a price.

In that market, Obama’s value dropped, and Romney’s rose significantly. They also run a winner take all market. Obama went from 77% to 69%, and Romney went from 23% to 31% in the same time period.

At another prediction market, Intrade. Obama tanked on big volume. September 30, he traded at around 77%. Now he is at 66% and falling. Romney spiked in the same time period from 22% to 34%.

What this clearly shows is that support for Obama is topping out and tanking. Romney is getting momentum. Social media allows you to make that hypothesis, and two marketplaces confirm it.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.