What Do the Tech Overlords Do Now?

Data centers, megadonors, and corruption had a bad Election Night. Prediction markets did just fine, but were probably overhyped. So will the midterm results change how tech leaders move forward? What will a Democratic Congress mean for their businesses? In this episode, "Galaxy Brain" host Charlie Warzel gets into what this election changes for the tech world, how voters saw through AI ads and billionaire donors, and whether we’re moving into a post–Elon Musk political era. - - - Get more from your favorite Atlantic voices when you subscribe. You’ll enjoy unlimited access to Pulitzer-winning journalism, from clear-eyed analysis and insight on breaking news to fascinating explorations of our world. Atlantic subscribers also get access to exclusive subscriber audio in Apple Podcasts. Subscribe today at TheAtlantic.com/Listener. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration blog, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18 plus.

• 0:26Speaker 01

  This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed sponsored jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed sponsored jobs. Get a $75 sponsored job credit at indeed.com/podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed sponsored jobs.

• 0:55Speaker 02

  The reason I feel like there's such intense pushback on the data centers specifically is, and this is not a new idea, but like, it really is this physical manifestation of economic insecurity that like, fighting against AI and the ether is much harder to do. But if you're like, no, this is a giant cube that I hate that is in my backyard that represents my doom ultimately. Like, yeah, that's, that's kind of a layup in a lot of ways, you know? So.

• 1:22Charlie Warzel?

  It's just a national pain sponge, right?

• 1:33Charlie Warzel?

  I'm Charlie Warzel and this is Galaxy Brain. You may have noticed there was an election on Tuesday night. Democrats won big. Elon Musk lost big. Millions of dollars flooded into prediction markets. People across the country cast ballots on data center initiatives, and they told surveyors and exit polls how they felt about mega donors, corruption, and artificial intelligence. One of the big stories of the last few years is the way that many tech leaders and investors have aligned themselves with Donald Trump in his second term. It's an issue that has polarized Silicon Valley and in very important ways changed the trajectory of technologies like AI and crypto. And on Tuesday night, we learned a lot about how Americans feel about that realignment and about the influence that some of Silicon Valley's richest people

• 2:18Charlie Warzel?

  have in our politics. We also got a chance to see how AI, prediction markets, and tech money shaped or didn't shape electoral outcomes. And so today on Galaxy Brain, we are breaking down what the midterms meant for the tech world. Did prediction markets win the night? Was this the AI election? What happens next for Elon Musk? The companies who bent the knee to Trump and the AI labs? We're taping this on Wednesday, right after the midterms, and we're going to be splitting this conversation up into two conversations. First, I'll be talking with Mike Isaac, who has covered Silicon Valley for The New York Times for over a decade, and in December, will be writing about all of it for us here at The Atlantic. Then I'm going to talk about prediction markets with Will Guth Sagan.

• 3:02Charlie Warzel?

  He's my colleague who writes the over/under newsletter for The Atlantic, which covers risk and prediction markets. Mike Isaac joins me to talk about it now.

• 3:18Charlie Warzel?

  Mike Isaac, my future colleague, welcome to Galaxy Brain.

• 3:22Speaker 02

  Thank you for having me.

• 3:24Charlie Warzel?

  What was, in your mind, the biggest story of the night in tech world?

• 3:29Speaker 02

  I mean, personally, the biggest story was it feeling like 2014 Twitter vibes again to me. My favorite, this, it was just very funny culturally. It was like, I saw this term come up. I'm not doom scrolling, I'm hope scrolling. A lot of people have been saying, which is like, you know, obviously huge wipeout for Republicans across the board. But like, as far as tech land goes, you know, it was, there was a very clear referendum across, I want to say 40 something ballots, that data centers and this sort of, you know, inexorable trudge of AI into everyone's towns is not, is, is getting held up. You know, it's getting pushed back by a lot of voters.

• 4:14Speaker 02

  And I think, I think folks in the valley, at least the ones that I've been talking to so far, have been kind of trying to reckon with that and say, okay, how do we change our positions? But you can't really, I think what they'll do, I think what the companies will do and be like, it's a messaging issue. We're not telling the right story. All they've heard from us has been, you know, doom and gloom. You know, certain companies are like, Dario Amadeo over at Anthropic is really screwing us because all he does is talk about like, how this is going to destroy the world and take our jobs, but we need to do it. And so what I guess, what my guess is that they'll try to massage the messaging and say, here's, here's, you know, drug discovery.

• 4:59Speaker 02

  Here's ways that AI can improve the world. Here's, you need to learn how to have it augment your job rather than, you know, replace you entirely. But I think that's, you know, it's always going to come back to that because fundamentally, there are, there are people who just think it's not good for the world. Developing this technology, certain versions of this technology is not good for the world. And I think that doesn't square with a lot of the worldviews in, among some camps in Silicon Valley, who do think it's just an unmitigated good, no matter how many rocky patches we go through. Like, how do you, how do you wrestle with that on a fundamental level, on a human level, when people are repudiating

• 5:42Speaker 02

  everything you're trying to do, you know?

• 5:45Charlie Warzel?

  I'm curious, there was some debate going into this, like, you know, this is going to be the AI election. And then there was, I believe, our, our mutual friend, Casey Newton, argued in, in his newsletter Platformer last week that this would not be the AI election. And in some of that was like, voter anxieties were, you know, like, economic concerns were much, were much more a factor than something like, you know, AI and data centers. Turns out, maybe that, that wasn't necessarily true. But also, I think what Casey was referring to is the idea that, you know, people were worried about a lot of AI deepfakes or, you know, potential misinformation or chatbots leading people, you know, to different, you know,

• 6:30Charlie Warzel?

  canonical answers about who to vote for or whatnot. And I'm just curious, in your mind, was this the AI election? An AI election? How should we be framing that?

• 6:41Speaker 02

  That's a really good point. I do, so I do actually believe that people can care about what role AI has in society and not make it like their platform issue. Right? Like, I do think at the end of the day, a lot of voters were like, I care that gas is now three times what it was before and that I can't afford groceries. And I'm not sure why we're at war abroad in, with a country that I don't think about in my daily life. Like, I, I absolutely think those are pretty high on the priority list for a lot of voters who turned out. And that is, so that, in that regard, I don't think it's necessarily the AI election.

• 7:24Speaker 02

  But like, it goes back to like, okay, at the end of the day, I can't afford to feed my family. I have this company or whatever, sort of changing things in my community in a way that I don't like or I'm worried about. And I have, you know, you know, folks may be saying like, China's going to come get me or whatever. We're going to be like, unprepared for the future. But I'm not as much worried about the future as I am just like, getting my day-to-day life sorted out and trying to figure out how to put food on the table. And so in, in that sense, I think it's, it's also not the AI election. Or at least like, I'm, I'm starting to give voters more credit

• 8:05Speaker 02

  as far as like, you know, seeing through some of the, the like, online is going to control your minds sort of stuff in a way that I don't think was as present as maybe, maybe folks had been worried about just a few years ago, if that makes sense.

• 8:21Charlie Warzel?

  No, I think so. And I think you see it in the, you know, the ways that propaganda and like, AI slop and all that kind of stuff has factored into this election. Like, it's not moving people to believe most of the time.

• 8:39Speaker 02

  Yeah.

• 8:39Charlie Warzel?

  There's obviously always exceptions, but it's not most of the time leading people to believe a reality that doesn't exist. It seems to be like a tool to augment the kind of political messaging that we're always very used to. Right? Like crazy attack ads. I saw an analysis from the AI detection company Copyleaks that 47% of governor races publish an AI-generated campaign ad of some kind in this cycle.

• 9:04Speaker 02

  Wow. Bring back human-centered oppo.

• 9:09Charlie Warzel?

  But, but I think it speaks a little too. It's like, yeah, this is just a, a way that we're going to illustrate a lot of this stuff. Right? We're going to make people look, look bad in this way. And it's not to say that it doesn't matter, but that it's sort of slotting into something that people are used to and that people really know how to navigate. Right? Like, people understand, I think, now this far into elections dominating, you know, the American psyche is, you know, you see a lot of attack ads and you're either sort of like, oh, God. Or you're like, oh, that's interesting. Or. I think you're so right to just be giving voters and like, normal people a lot more credit for navigating this information environment in this cycle.

• 9:54Speaker 02

  So I'm wondering, especially with some of the young voter turnout, if we're hitting this new generation of folks that can see through that much easier. And I'm also fearing the moment where I start getting duped by stuff and I've hit the cliff of my BS detector.

• 10:12Charlie Warzel?

  It's, well, the AI agent stuff and the spoofing, like, I'm not so worried about it with politics. I am worried about, you know, it with my bank account. Speaking of money, I want to talk about the money that poured into this. One of the obviously major stories of Tuesday night was that Elon Musk donated almost $500 million this election cycle, single largest non-candidate donor in any election ever. A lot of that money went towards the Texas Senate race where James Talarico drubbed Ken Paxton. And I

• 10:54Charlie Warzel?

  am curious, what in your mind did Musk think he was buying?

• 10:59Speaker 02

  I mean, the more I've been thinking about this playing out, like Musk has always been, and like, money in politics, obviously not a new thing, but it's always been this thing of like, here comes the richest man in the world, and he can do what he wants, and he can throw all this money and everything. And I'm just wondering if part of this race was a referendum on, is like, is there political baggage being attached to him at this point? You know, like, I don't know how much the average person cares about Elon Musk, but I do think that, you know, getting blitzed with ads for a candidate who was, in Paxton's case, very unpopular to begin with in Texas, and seen as a risk for Trump to throw weight

• 11:44Speaker 02

  behind him instead of Cornyn, was like, a real, was a real interesting moment on, you know, is money just going to work here? Can you just use those millions of dollars and push this candidate? I think it's very clear that didn't work, obviously. And now Musk is in like, a real sticky situation on what's gonna, what his businesses are gonna look like in Texas. But like, I'm very curious. Do you think that, like, being attached to Musk, like, does that change in this new environment? You know, like, it's, it makes me wonder about, like, kind of how being attached to Trump and, and, you know, even now, the coverage is shifting from, are we in a post-Trump world or whatever? Are we, are we like, moving to a post-Musk era of politics, if that makes sense?

• 12:25Charlie Warzel?

  Well, I think that, you know, unfortunately for Musk, he really represented every single faction that on Tuesday night, America said that they were tired of, right? Like, he is a oligarch. He's one of the, you know, he's the richest man in the world. He is in the business of AI, but also explicitly building data centers in communities, including, like, historically black communities. He is totally aligned with the MAGA movement, obviously, and with Doge and all that stuff. It's all rolled into one person, right? And

• 13:06Charlie Warzel?

  so I do think, in some ways, even, like, it was just tailor-made that it was going to be a little bit of a referendum on him, or you can see how easily that worked. Obviously, you know, Talarico and others made this election in a lot of ways about someone buying it, right? About, you know, either Musk or other mega donors buying that election. And so I think that that was, that was very interesting. To your other point, I want to get to that in a second. But the way that I was kind of thinking about what he was also trying to buy, though, is, I think, he is always, like, he's a master storyteller, right? Like, and

• 13:48Charlie Warzel?

  I think that the way that you see that, you know, with SpaceX, with Tesla, he builds things that are consequential and that matter. But he's also somebody, like, when you look at all of Elon Musk's companies, the price to earnings ratio is, is different than a lot of, you know, regular companies that build things in the real world, meaning that the market values them a lot more than their revenues suggest the market should value them, because of the stories that Elon Musk tells. And I kind of think that spending that money, the ways that he has in these last two elections, being the largest donor, being just very clear about that, I think in a way, it rhymes a little bit, right? It

• 14:31Charlie Warzel?

  tells a story, win or lose, about Elon Musk as this person who can drop half a billion dollars and have that loss made up in, you know, 45 seconds of SpaceX trading on the stock exchange. And I think that there is just something of, like, it adds to the myth of Elon Musk in this way. It makes him central. Like, there's no reason we should be talking about him in this election. You know, he's a CEO of a bunch of companies, and yet, he is one of the headlining stories because of all of that.

• 15:09Speaker 02

  He does kind of have main character energy, like, all the time, right? I think he, like, it seems like he likes that. Like, he always likes redirecting, like, the spotlight towards himself in some ways, maybe might become a liability in some of this stuff. I don't know, you know?

• 15:24Charlie Warzel?

  I think that that is what is gonna be really interesting here, because Musk, with all this, did ingratiate himself to this movement, right? He's, in a way, maybe not single-handedly, but independently, kept some of these campaigns afloat, kept them from, you know, totally crashing to the ground. And it's an odd thing, because he has further yoked himself to this movement that now feels no longer ascendant. But also, at the same time, I don't know that they can just turn their back on him. He is, he does seem to

• 16:06Charlie Warzel?

  be like, you know, a real chance for them. I'm not, I'm not sure. I mean, do you get the sense that everyone's gonna drop Musk like a bad habit after all of this?

• 16:19Speaker 02

  You know, it's really, as you're talking about this, I do think there are parallels to reckoning with the role of Trump in the Republican Party and the role of Musk in the Republican Party, right? And like, I think there was, because Trump has remade the party and his image for the past decade, and now voters seem to say there are limits to that, I think the GOP has to, like, really reckon with what that means, and what does that look like for campaigning in the future. I really think there's probably gonna be a similar sort of thinking about what that means with Musk and attaching yourself to Musk for a number of candidates. I don't think that means drop it like a bad habit.

• 17:03Speaker 02

  I think, at least not for everyone, you know? But I feel like there's gonna be at least a little bit of, you know, backpedaling in a way that doesn't completely alienate oneself from Elon's dollars, which are, as you said, pretty important in a lot of ways. So I just feel like this period is gonna be such a struggle to, for both the candidates and the CEOs at some of these companies beyond Musk, trying to figure out, what is our next move and really our next talking points?

• 17:44Speaker 00

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18 plus.

• 18:10Speaker 01

  This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed sponsored jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed sponsored jobs. Get a $75 sponsored job credit at indeed.com/podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed sponsored jobs.

• 18:40Charlie Warzel?

  You know, I was, I was interested in your read on, on a tweet that Sam Altman put out last night. He wrote, "People should always be in control of the future. OpenAI is against the notion it would be acceptable for people to be relegated to a role of doing things that AI systems think makes sense to rewarding humans. People should not cede control of the future to superintelligence." It sounds a little, yep, I understand now we're going to be maybe regulated in some way, or that there will be some constraints to us, you know, it, I'm curious your read

• 19:19Charlie Warzel?

  on, on that and, and if that felt to you like an acknowledgement that, that things were maybe going to have to change a little bit.

• 19:28Speaker 02

  Yeah, I mean, it was funny. That's like the only big CEO that I've seen really say anything even remotely a little bit political so far. The only other thing was Musk deleting his like, "Go vote for red" tweets, which was kind of funny. But, uh, I hope everyone didn't see it. But I do think that, uh, I think it sets up an interesting dynamic. Right now, OpenAI and Altman are staring very hard at Anthropic on the eve of their IPO in the next couple of weeks. And their strategy has really been to paint themselves as a foil to Dario Amade and Anthropic being the bad guys here and, and sort of trying to

• 20:10Speaker 02

  cast themselves as the sane ones where Dario is this doomer who thinks, you know, AI is, is gonna kill us all and lead the charge and only they are the ones that can harness it because it is inevitable. It wasn't that long ago that Sam was talking about these things in a very similar way. But I do think if, if you're the CEO of an AI company and you see a pretty strong repudiation of, you know, AI data center building across the board, you have to start talking in a way where it's like, actually, we're the good AI company and we want to give you control. And it's these other guys that are trying to push

• 20:52Speaker 02

  this stuff down your throat. And, uh, and also, you know, Dario is kind of hamstrung in what he can say because they're in this quiet period, uh, before the IPO. So it's just like, I really admire how ruthless OpenAI is at every turn on their messaging, especially when they're trying to go after. It reminds me a lot of Zuckerberg, too. They just, Anthropic is the punching bag of the day. And that's, that's, that's how I read a lot of their statements these days.

• 21:21Charlie Warzel?

  I'm curious where you think we're headed here. And so I, I saw, I saw some people posting about, you know, oh, there's, there's going to be televised trials of, of big tech executives and things like this. And Senator Ed Markey posted on X last night, quote, "They are going to need to plant new forests for all the subpoenas we'll be printing."

• 21:50Speaker 02

  Oh, wow. Oh, my God.

• 21:52Charlie Warzel?

  Which is, you know, kind of, uh, kind of intense. Definitely signals a, a real, almost like frothing desire to, to, you know, make an example out of some of these people. Obviously with, with Musk, you know, and Doge and all these things, there, there could be that bringing, you know, him to bear or investigating his companies in some way. But I, I am curious with this, if you think there is, A, what you think is, could, could

• 22:30Charlie Warzel?

  potentially happen, but B, I see this a little bit and, and also worry that like, there could be like an overplaying of the hand, like very quickly. So I am curious what you think might happen. And also if there is, if you feel any of this, you know, concern about, you know, maybe even just like re-radicalizing them again and just this ping ponging cycle of, of tech lash embrace, tech lash embrace.

• 23:04Speaker 02

  Yeah. I mean, I do think, I think accountability often can play well in these moments, especially when a lot of folks have felt helpless at a, you know, a president who's been very, you know, very willing to sort of push through, um, his agenda and the agenda of like a lot, a large vocal faction of his, uh, of his party. I, like, I'm not fully convinced that, like, just being a full anti-tech platform is necessarily a winning platform across the board immediately, just because I do think it's, it's an issue for many, but it's

• 23:46Speaker 02

  not the primary issue. But that doesn't mean, that doesn't mean, you know, don't do anything or don't like have investigations that they feel they need to have. I think those are probably gonna go on, but I, and I think they're, they're going to, uh, I think there's gonna be some senators and some representatives who are very fixated on this, who are gonna ask, you know, have investigations into what went down in Doge and is there real accountability here? Like, I think that's a real thing. But like, I still think at the end of the day, people are just very upset with the economy and like their ability to like exist and function in, in the United States as like a, a family that, you know, can work

• 24:27Speaker 02

  and afford to feed and clothe oneself, you know? And so, um, does that mean, uh, does that mean no reining in of unlimited tech power or, or like, um, you know, these CEOs just going to Washington and getting a rubber stamp on whatever they're trying to do? No, I think there's going to be real questions around whether that was a good thing or whether that should continue. And that is the prerogative of, of folks in different, uh, places. I guess the other thing I would say is like, the reason I feel like there's such intense pushback on the data center specifically is, and this is not a new idea, but like, it really is this physical manifestation of economic insecurity that like, fighting

• 25:10Speaker 02

  against AI and the ether is much harder to do. But if you're like, no, this is a giant cube that I hate that is in my backyard that represents my doom ultimately, like, yeah, that's, that's kind of a layup in a lot of ways, you know? So.

• 25:24Charlie Warzel?

  Yeah, I've, I've thought about it as a, as just, it's just a national pain sponge, right? You could just direct all of your, your frustrations to it. But also, I think very, very truly, like, not only is it the, is it the physical manifestation and the, and the, the, um, the cube of doom in your town, but it's also, you can go to a meeting and yell at somebody about it and then they will maybe, you know, pull the contract or do whatever, right? Whereas we have, we have seen, you can yell a lot at, uh, any of the tech executives and it's probably not, probably not a whole heck of a lot.

• 26:07Speaker 02

  That's right. Yeah. They go to Congress and they take their drubbing and the viral social media clips come out of it with Zuckerberg, you know, looking like he got called into the principal's office. And then they go home and do whatever they want, basically. And like, I think that's far less satisfying to the average person than, yeah, going to your town hall and, and saying directly to someone, "We don't want this" and them having to listen to you, basically.

• 26:31Charlie Warzel?

  So I want to end by doing like the absolutely most annoying media thing, which is an election just happened. And then we're going to talk about the next one.

• 26:42Speaker 02

  Oh, God.

• 26:42Charlie Warzel?

  That is legitimately two years away. And, uh, I, I am, I'm only curious though, from the idea that OpenAI's top lobbyist, Chris Lehane, is doing some, some lobbying right now, telling prospective 2028 candidates that artificial intelligence is going to define their bids for the White House. You're seeing that, that posturing. Do you think that AI is going to be a much bigger deal? Like, we have, in this conversation, gone back numerous times in a way that I think is super important, that like, the economy, affordability, these basic issues of being able to live are like the, the core things

• 27:26Charlie Warzel?

  and all these other things bubble up around them and, and, you know, impact the way that people vote and they talk about it. But I am curious, you know, we're on this trajectory with artificial intelligence where it just become, it's just moving faster and faster and faster, having more and more consequential stakes in our lives. How are you thinking about the role it, it might play in 2028?

• 27:54Speaker 02

  I mean, look, I, I think you can tie it to exactly the things we keep returning to, which is if you believe that this is the trajectory, then these two are on a collision course. It's going to reshape the, I mean, it already has reshaped our economy in a lot of ways in the way that you've talked about with the stock market and basically how the entire stock market and, and our retirement funds are propped up on the strength of big tech and, and data center build out and, and, and large swaths of employment. So I think that is, that is certainly a key issue and that's unavoidable in a lot of ways. Um, the thing that always kind of drives me insane around AI discussions that a lot of folks, a lot of prominent commentators frame it as just sort of like this air of

• 28:38Speaker 02

  inevitability that I just don't subscribe to. I think this is, let's say, an election is actually the best way to look at that, which is like, people have agency and they have choices to what things are going to be a part of their lives and how we are deciding what to build or what not to build, you know? And, I think now as let's say existential risks, or at least like safety, if not going as far as to wipe out humanity, but let's say like cybersecurity problems or bio, you know, bioterrorism questions, you know, as this, as this becomes a more mainstream discussion, I think people are going to have, uh, people are going to actually have opinions on it

• 29:22Speaker 02

  and what they want, rather than sit back and be told by the influencer of the week that this is coming, you have to prepare for it no matter what. And like, I think that's an empowering message. I think you can talk to people like human beings and say, you should have a seat at the table and decide, do you want this to be a part of our lives or not, you know? And, and, um, where I'll come to common ground with tech executives here is that messaging may be an issue here because I do think people should learn about it and understand it, but as they decide whether or not they want to, you know, push back on it. And that, but I think that's a, that's a good thing. That's part of a, to end on like a corny note, that's part of a healthy democracy. And so maybe we'll get there in the next election.

• 30:06Charlie Warzel?

  It, it's also an opportunity, I think, right? Like I, I saw, uh, I saw Derek Thompson talking about this today, this idea that if you are anti any regulation whatsoever, and you are investing in a way that is reckless, or that, you know, could lead to a bubble that pops and dramatically crashes the stock market and, you know, has all these super, super negative effects in the world and also on the development of the technology. That's bad if you're these technology companies. If you build it responsibly with, you know,

• 30:49Charlie Warzel?

  some meaningful consensus of, you know, the constituents of the world or your country or whatever. And you, you know, you, you build it in such a way that if, if a bubble pops a little bit, there's not as much economic fallout and people don't get hurt and then are totally negatively polarized against you. That's good for the technology. So I think to kind of close it out, like there's an opportunity here, I think, for these companies, if they want to see it, if they want to do that, as you said, that, that self-reflection and that building the consensus around something that all of us are going to have to use and live with and, and, and have it affect our lives. So.

• 31:34Speaker 02

  Self-aware tech CEOs 2028? Question mark. That's my headline.

• 31:39Charlie Warzel?

  It's a big question mark. It's a big question mark. Um, Mike, this is a delight. Thank you for coming on Galaxy Brain and hashing it out with all of us.

• 31:50Speaker 02

  It's an honor to be here. I can't wait to be your colleague very soon.

• 31:54Charlie Warzel?

  First of many, first of many.

• 31:55Speaker 00

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up require compatibility and availability varies 18 plus.

• 32:29Speaker 01

  This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed sponsored jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed sponsored jobs. Get a $75 sponsored job credit at indeed.com/podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed sponsored jobs.

• 32:58Charlie Warzel?

  Will, welcome to Galaxy Brain.

• 33:03Speaker 04

  Thanks for having me, Charlie.

• 33:05Charlie Warzel?

  I've seen a lot of postmortems saying that prediction markets won the night. Is that framing feel true to you? Or is that overstated?

• 33:16Speaker 04

  Yeah, I would say it's overstated. I don't love that framing for a few reasons. The first reason is that it's not clear to me what these markets are bringing to the table that's not already out there, right? In, in the ether. I think one of the original ideas behind prediction markets, right, is that they sort of surface the wisdom of the crowd. People in the world go out and they see what's around them and they bring that information to the market. And then they make bets on that information and it informs, you know, the ultimate probability that these platforms put out there. I think we saw that in many of these races, people seem to be sort of making bets on the polls,

• 33:57Speaker 04

  right? Other election forecasts, things they saw on late night TV broadcasts. Um, it's hard to know exactly what goes into the predictions that traders are making, but it doesn't, it's not always clear to me that in every race, they're bringing something new to the table. And so in that way, it's not clear to me that the night was a huge win for prediction markets. I also think it's important to remember, you know, these are sort of just sports betting platforms with prediction market, like they're sports betting platforms with politics functions kind of slapped on. Uh, these are a small portion of the total volume. I mean, it's true of both Kalshi and Polymarket. Sports

• 34:38Speaker 04

  is really at parlays and crypto. These are sort of where the action is. Uh, and last night didn't change that really. I mean, we saw a huge sort of marketing campaign around these platforms' ability to properly forecast elections. We saw billboards go up. We saw massive like, you know, blockbuster ad campaigns, videos, but it's not clear to me, yeah, that, that the calculus has changed that much for the people who are actually using these platforms and making money on them or not making money on them.

• 35:09Charlie Warzel?

  That, that's an interesting thing about the, them being sports betting platforms with, with politics kind of tacked on because I've heard it argued that elections should be the, the best proof of concept for prediction markets, right? Cause there's lots of time for these narratives to develop, lots of data in terms of pretty consistent polling and things happening in the news. There are these big events and, and, and the markets theoretically should be pretty liquid, meaning that there's a lot of trading volume in them, a lot of money going into them. Are they the best test, you think, for the efficacy of a prediction market? Or is this really just, as you say, sports betting with a political veneer?

• 35:52Speaker 04

  I think it's just like, what do you want your betting platform to be? What do you want it to do for you? You know what I mean? Like, I think that it's important narratively for these companies, um, that election forecasts work as they're expected to. And I think there's a lot of evidence that they do kind of work as they're expected to, right? Like especially when you have a lot of volume. I think in lower volume situations, you can get like sort of these whiffs of manipulation, right? Like, um, you know, it's not to say they're rigged, they're not rigged, but it's like, you can have a smaller bet, smaller amount of money that moves the market more just because there's not a lot of, you know, money sloshing around in the market. Um, when you've got a lot of volume, these things do kind of work as they're expected to. Uh, the problem is that narratively,

• 36:37Speaker 04

  if you're these companies, you have to convince the regulators, uh, many of which are against you. You have to convince, uh, you have to convince the American people, um, many of which are against you or skeptical of you, that you're doing something for them that is more than just speculation. And so election forecasts are important for that narrative in some ways. Um, you know, they have, you know, these platforms have other ways of trying to make that point too, but elections are, are, you know, are part of that. And like I said, right? Like the volume situation hasn't totally changed. People do use these platforms for speculation. They do also use them for other reasons, but the proportion

• 37:20Speaker 04

  between those two things is just really wildly out of whack.

• 37:23Charlie Warzel?

  What is your sense as to whether this legitimized the prediction markets? Whether it did what they needed, which is give them that, that veneer of, uh, utility is, you know, not just a speculative market?

• 37:38Speaker 04

  I do think it's too soon to tell, but I also think that if it had gone the other way, right? And Republicans had staged a comeback, or if there were really prominent races where, uh, people were like, wow, the prediction markets really missed. And there were a couple of races where, you know, the favorite didn't win. Um, but if it, if there was no blue wave, say, um, I think we would have seen some, some major pushback, uh, in terms of the credibility and the reputation of these platforms. Cause sort of like I was saying, I mean, people don't, you know, most Americans are opposed to betting on elections. You know, these markets need to be markets, really. They can't just be sort

• 38:22Speaker 04

  of like pure information harvesters. Um, but yeah, it's, it's, it's not clear to me whether that's going to go away based on last night.

• 38:35Charlie Warzel?

  Well, it's also interesting, too, because in some ways you could interpret this election as a bit of a referendum on some of this corruption, on some of this feeling that markets are out of control, that people are betting on everything, the insider trading idea, and the prediction markets, kind of, I don't know, it feels interesting to me in that sense that this could be a good night for them, but also it does seem like

• 39:14Charlie Warzel?

  people are starting to get kind of tired of the hollow speculative feeling. When CNN announced its partnership with Calci, and anecdotally, it felt like I kept hearing about these prediction markets integrating themselves, intertwining themselves in with like media systems, both traditional and not. I spent some time watching some of these election night broadcasts, didn't really see a ton of that integration, or as much as I expected. I didn't see like the Calci big board here on CNN. It was a lot of John

• 39:53Charlie Warzel?

  King just doing what he normally does, which is look at the results as they come in. I also didn't feel like it was a dominant factor. It kind of felt like we put prediction markets on this pedestal, right? We talk about them a lot. And then when the rubber meets the road, when the returns are coming in, it's sort of felt like, okay, now it's time for the adults to step up, like Decision Desk, AP, like the people who call the shots. Did that feel like an accurate description of what you saw?

• 40:31Speaker 04

  Totally. I think like another thing I'd add to that is that these markets, they're built to resolve after a certain outcome happens in the world. And with a lot of these elections, that outcome was basically when the networks called it. So there were cases where the markets would basically hone in on a 99% probability of a candidate winning. But then there'd be a couple more hours of trading. Like, in other words, the prediction markets sort of called it early. I mean, even on their social media, they would call it early. But at the end of the day, the thing that stopped the trading was the networks calling it. So there's a way in which they're still relying on the old system. The incumbents

• 41:13Speaker 04

  aren't gone in the way that some of these firms might like them to be. There's been a narrative that prediction markets are better than polls. I mean, they're not polls. So they're kind of apples to oranges in that regard. But yeah, I would also say like, some of this is probably just like inertia, right? Like, these are weird tools. These are weird phenomena. I mean, people aren't ready in some ways to accept them as a part of like, election night. I mean, Calci had midterms watch parties. Polymarket had a midterm stream that was going on. But I think for most people, they're not necessarily tuning into these in the way that maybe finance people are starting to.

• 42:01Charlie Warzel?

  I have a question about the logistics of this, which is if everyone bet on the conventional wisdom, right? Democrats were going to have a pretty good night. Prediction markets are showing that because people are betting that way. It's the way the polls are looking. And then it worked out, roughly speaking, across the board. Did these companies lose a lot of money? Like, help me understand how this works on a very basic level. If this is good business for them, if they kind of go chalk on the predictions and everything works out exactly the way it's supposed to be?

• 42:40Speaker 04

  Sure. I would say that the way these platforms make money is trading fees, in large part. And the more trades you got, the more fees they're raking in. So in some ways, volume is king in this regard. And that's why a lot of the revenue here comes from sports. Like I said, this didn't really move the needle. I mean, there was an uptick in volume, clearly. But when it comes to the bottom line for these platforms, sports is where it's at. And I'm not going to say it's de minimis politics, but it's certainly

• 43:22Speaker 04

  a very small piece of the pie. So it's hard to say that they were either going to make or lose a lot of money from one night in this case.

• 43:33Charlie Warzel?

  Was there anything that unfolded over the last couple of days, and especially on election night, that surprised you? You've been covering this, anticipating this moment. Was there anything that stood out or shocked you?

• 43:47Speaker 04

  I think what shocked me, if anything shocked me about this, I think it's sort of a corollary to what you were saying earlier, right? We have known that these platforms have been gunning to be these accurate, unbiased sources of information. They've been making these big claims about the fact that they can call races early, the fact that they can aggregate all sorts of new information and bring it to market. And like you said, I think there's just not a sense that a lot of people are buying into this yet. I mean, certainly finance people are. Certainly people who are on the cutting edge of tech are into this stuff. But there's such a skepticism. I mean, even anecdotally, from people in

• 44:31Speaker 04

  my life, I tell them, like, I was watching the Calci midterm stuff all night, and they're like, they just raise an eyebrow. Like you said, I think there might be a reason that this stuff has almost been downplayed on cable news. It's just like not something that people are ready for yet. In certain ways, I mean, in some ways, they are, right? There's quote unquote, product market fit. Like, people love to bet on these platforms. But when it comes to elections, there's an inherent weirdness there that I think people aren't ready to grapple with.

• 45:08Charlie Warzel?

  What did Tuesday's results change, if anything, about how the platforms might be regulated or treated going forward by lawmakers?

• 45:22Speaker 04

  It's a really good question. I think the expectation broadly is that a lot of these sort of, you know, this sort of roughly ambiguous legal status of whether these things are quote unquote gambling, whether they are, as they say, prediction markets, whether they're straight up markets, right? Whether we're trading swaps on these platforms or not. I think a lot of that has the potential to be decided in a Supreme Court case. And so until then, you're going to see a little bit of what's been going on already. There's sort of a patchwork of state regulations that have been pretty loosely applied to

• 46:02Speaker 04

  these companies. And I think like, you know, just like, sort of like I was saying earlier, the more Dems you have that are sort of opposed to these platforms, in theory, maybe you're going to get some more hostile regulation.

• 46:21Charlie Warzel?

  I think that we are living in this, as we talked about, this very interesting space where prediction markets got the blue wave, the blue tsunami, whatever you want to call it, correct. And as a result, they are now much more open to potential regulation or slaps on the wrist, or simply just an askance eye from the Congress that they've helped predict is going to come into session. I think that alone is a weirdness and a really interesting wrinkle to this whole phenomenon.

• 47:05Speaker 04

  Yeah, it's sort of, they were rooting for this outcome because that's what betters were forecasting. And if they won, it would sort of help lend credence to this idea that Polymarket and Calci are good election forecasters. But right, like you're saying, there is a potential downside to this on the regulatory side.

• 47:23Charlie Warzel?

  I think that's a great place to leave it. Will, thank you so much for joining Galaxy Brain. Thank you for your service in tracking all this. And we will continue to follow along with Over Under.

• 47:35Speaker 04

  Thank you.

• 47:44Charlie Warzel?

  That's it for us here. Thank you to my guests, Will and Mike. If you liked what you saw here, new episodes of Galaxy Brain drop every Friday. You can subscribe on the Atlantic's YouTube page, or on Apple, or Spotify, or wherever you get your podcasts. And if you want to support this work and the work of my fellow colleagues, you can subscribe to the publication at theatlantic.com/listener. That's theatlantic.com/listener. Thanks so much, and I'll see you on the internet.