The Political Number We’ve Been Missing

Since 1952, the University of Michigan Consumer Sentiment Index has been read like a talisman. Whether you’re familiar with it or not, that number shapes your life – businesses consider it in hiring at scale, and the Fed even watches it before setting rates. This week Kalshi released the v1 of a political equivalent, which could be useful in the future in similar ways. 

The American Power Index (KPOW) measures, on a scale from +50 Democratic to +50 Republican, how much political power each party holds right now and where the market thinks that power is headed. In short, just as a single market crystallizes conventional wisdom about one event into a percentage, a basket of markets can be compiled into a single composite number. It’s an interesting attempt to show one legible number tracking a complicated underlying reality. Like those indices and algorithms, the secret sauce of KPOW is how various markets are weighted as well as what other information is included in the index. Per Kalshi, the index weights the objective facts of the current government against forward-looking prediction market signals about future elections and adjusts for risks like a government shutdown that weaken a governing coalition’s effective power. It’s reweighted weekly. When shutdown odds spike on Kalshi, KPOW should drop for the GOP. When a midterms contract moves toward Democrats, that means the KPOW will too. Goldman Sachs, Bridgewater, and Point72 have entire teams of analysts who pore over numbers like this to divine trends and scratch out an edge. KPOW is the beginning of that sort of intelligence being available to small businesses too. In our view, the comparison to polling is what makes this type of tool interesting. Polling is the instrument we’ve relied on for decades to understand political reality, but it’s increasingly unreliable noise (response rates are low, pollsters keep weighting poorly, etc.). On the other hand, KPOW is based not on what people say they believe or how a pollster weighed a certain demographic, but instead on where they are willing to stake real money. Every student of politics remembers Truman versus Dewey. But polling failures are not ancient history. The polls grossly missed out on the Trump trend of 2016. In 2020, national polls had Biden ahead by an average of more than seven points, but his margin turned out to be about four and a half. Pollsters also missed the scale of Trump’s 2024 victory. And the problem is definitely not getting better; response rates for telephone polls have cratered from 36% in 1997 to single digits today. The industry is working to respond to this through more panel-based polls and better modeling, but this has not been a panacea. Prediction markets don’t have this problem, because if the market price is wrong, someone can profit by correcting it, while no such incentive exists in a survey. As economists Justin Wolfers and Eric Zitzewitz have written, this matters enormously. But KPOW goes beyond any single election prediction. It answers the sprawling, messy question that no individual market can: which way is the wind blowing in American politics, right now, today? American politics is awash in populist sentiment. Last year, 80% of Americans said that “political institutions have been captured by the rich and powerful,” and 75% said “most important decisions in politics happen behind closed doors, without public accountability.” This distrust has metastasized despite the sea of data that now exists in politics, possibly because the existence of data alone is not what matters. What matters is that data is visible, accessible, and understandable by the many, not just the few. When something is poorly understood, the human default is to assume it’s rigged. A single understandable number is a civic primitive. By way of analogy, the stock index made markets legible to ordinary investors. The weather forecast made meteorology legible to anyone planning a picnic. Neither solved the underlying complexity, but they made it easy to understand. KPOW is an attempt to do the same for political power: to take the omnipresent, invisible force that shapes our lives and give everyone a shared, accessible measure of which way it’s moving. And this number is one that comes up from the people rather than down from elites. For decades, even centuries, news about politics has come from a few established gatekeepers in the press, wizened institutions like the New York Times, CBS, and the Times of London. While that information flow from top to bottom may have been a necessary function given logistical and technological constraints, that does not mean it was free of bias. The views and mores of elites were inherently laden within its reports on politics. By deriving its information from mass markets, KPOW reversed that flow. It lets ordinary people’s views actually ascend up the waterfall and influence even the views and actions of elites. KPOW is a battering ram against elite gatekeeping. While this may seem purely academic, it’s very practically usable. If you run a healthcare company watching whether the Affordable Care Act will be overturned by SCOTUS, a defense contractor guessing who will be in power, an energy sector employee waiting to see where the wind will blow on clean energy, a university student trying to anticipate federal funding decisions, or just a regular person, the balance of power in Washington actually does affect your daily life. We are swimming in political information but starving for political clarity. KPOW won’t solve that entirely. But one clean number, built on value rather than vibes, available to everyone rather than just the privileged few, is a heartening development.