How to Buy Election Insurance
**Disclaimer: Politics is inherently a controversial topic, and Politics + Math don’t usually mix well. Please realize this is a casual article, not a treatise on political science…just thought it was fun idea to talk about!**
You don’t need to be following American Politics closely to know that last November’s U.S Presidential Election was full of strong emotions. Both candidates garnered such loathing that opposition on both sides descried them as a the beginning of the end of America as we know it.
Given that both sides fear the consequences of their candidate losing, it is important to ask the question
How can I feel better about an important Election?
It is clear from a quick survey I conducted that most American respondents have very strong opinions about the 2020 Presidential candidate they are not voting for:
Over 75% of respondents expressed a hatred for the opposing candidate
What’s powerful about these responses is the dislike & hate goes beyond policy disagreements. It seems a significant portion of American voters disliked the opposing candidate as a person. And sadly, this aligned with my personal experience about how difficult it is to have a conversation about politics in this election — even just choosing a side has major social implications (47.5% of respondents expressed that their dislike of the candidate effected their opinion of their supporters)
And if you are feeling similar emotions (which is likely) it’s hard to be comfortable given how close the polls were. There is a lot at stake for something that has, from most recent polls prior to voting, a 50/50 odds. Who would want to wager so much on a coin toss?
While the November election is over, those feelings still persist. How can we help calm the nation’s nerves for future elections? Before we can answer this question, we need to first do something much more enjoyable: fantasizing about large sums of money 💸
Buying the Election
In the same survey where I asked about Voter’s opinion of the other candidate, I ask posed the following scenario:
A Genie gives you $100,000 to use however you wish. How much of your newly acquired money would you be willing to spend to GUARANTEE the other candidate would lose?
Before you read on, take a moment to consider what your answer would be. It will inform the rest of the article
For those that responded that they disliked or hated the other candidate, they were willing to give up $40,000 on average to ensure their candidate won. That is a SIGNIFICANT amount! 💰 💰 💰
There also is an underlying question here, which is:
How much, in dollars, is this election worth to you?
If you responded that you would not spend all of the money or more to guarantee the election result (which included 88% of respondents) then that means there is some monetary amount in your mind that is worth accepting The Other Guy ️winning.
If you were willing to spend up to $75,000 to buy the election (out of $100K), then it would be logical that you would be willing to accept a larger amount, like $80K, to concede the election.
While you may not have $100K burning a hole in your pocket, you could start to think about the funds you actually have available. How much would you be willing to pay to decide the election? If it isn’t all of your money, then likely is an equilibrium point here as well of a payout your would be willing to accept for an unfavorable presidential decision.
Hedging & Insurance
Hedging is a term from investing that refers to the act of buying assets that protect against the risks in your portfolio.
Meaning that if you have a large amount of risky stocks, you may take out a “hedge” in gold, because stocks and gold are typically inversely related. If stocks go up (like you hope), your gold value will go down. BUT if your stocks go down (because you have no idea how to invest), your gold will grow in value, hopefully protecting you from financial ruin.
Here is the above scenario, but with a visual. Assume you’ve bought $1,000 in stocks, and have the option of buy $300 in gold (and assume stock and gold follow each other exactly):
You can see how buying the gold helps to regulate the expected outcomes — you may not win as much, but you also won’t lose as much. In the real world, the chances of success/failure will obviously not be as clear cut as the above example, but I think it helps highlight how “hedging bets” work to mitigate the impact of worst case scenarios.
Insurance is a form of hedging.
You pay a small amount of money every month to some insurance company. If nothing happens to your car/house/face, you simply lose that payment. But if something does happen to your car/house/face, the insurance company’s payout hopefully acts as a hedge to the help you in the worst case scenario (and I hope everything is alright)
How do genies and gold hedges have to do with the Presidential Election? Well it means that…
You now know the cost of election insurance!
Election Insurance is placing a hedged bet on the candidate you hope loses, ensuring that either your candidate wins OR you win a large sum of money.
For a visual, here are the possible outcomes:
Essentially, but placing a large bet on the other candidate to win, particularly if you chose that equilibrium point we discussed in the Genie Question section, you can ensure that the outcome (expected value!) is more favorable overall.
Sure, if your candidate wins, you will not win your bet and get the insurance payout, BUT you can still treat this as you “buying the election,” which, while pricey, is hopefully a political outcome you are excited about (or at least not terrified about).
And now if your candidate loses, instead of the world ending, your election insurance payout will hopefully act as a true hedge and help you handle this scenario. If you truly “took our election insurance,” then they payout should be a significant amount of money that hopefully will make your personal life a lot more comfortable.
Back to Reality
I have had several casual conversation about this with friends, and few are comfortable with it at first glance. Their complaints typically align with:
Counterpoint #1: If I bet on XX, I am basically supporting XX to win!
Counterpoint #2: Betting on XX when I don’t want them to win is bad vibes to send out into the universe!
I think these reservations are totally fair, and don’t think we need people enthusiastically betting against their own interests. But really if you treat this as an insurance policy, these complaints seem kind of silly:
Counterpoint #1: If I get house insurance, I am basically telling everyone I want my house to set on fire
Counterpoint #2: Getting car insurance when I don’t want to get in a car accident is bad vibes to send out into the universe
Likely this disconnect is based on how much control one feels they have on the outcome of an election. If they feel like they have little control on it’s happening, an election insurance policy makes sense. If they feel they have a role to play in picking Elected Officials, I hope they don’t let my Medium article get in the way of that.
Regardless, I’m not here to convince anyone, only to pose an fun idea to think about (and maybe give you a new Family dinner topic conversation to smooth over any touchy Political Talk)
Hope you enjoyed!