This past week, The Economist wrote on the yet-unfulfilled promise of prediction markets. At CrowdCast (ex-Xpree), we believe prediction markets are not yet mainstream because the current solutions are built on mechanisms designed for the stock market, not for the enterprise.
The stock trading metaphor works for a large, liquid stock market, but is unsuitable for enterprise forecasting. The concept of shorting and covered calls is far from intuitive for your average employee, and the stock mechanism makes it hard to ask the simplest of questions relevant for corporate forecasters. For example, buying or selling a collection of virtual stocks representing probabilities of sales falling in particular ranges is an incredibly obtuse way of asking for a single sales forecast. Finally, the stock mechanism relies on copious liquidity to ensure meaningful metrics, which is often not available with the limited crowds available in the enterprise.
However, innovation moves on and we question the assumption that prediction markets have to rely on the stock market analogy. At CrowdCast, we have been working on a new mechanism, that takes into account participant behavior and aptitude as much as market efficiency. The product we are launching in April will deliver easy, engaging, and expressive information exchanges, without the limitations of traditional notions of stock markets.
When you get the questions, incentives, and mechanism right, a prediction market can be an incredibly powerful management tool. Employees share insights anonymously and are measured and rewarded for their intelligence. Widely deployed, this has the potential to fundamentally change the nature of the organizational contract, moving from information flow based on hierarchy and silos, to enterprise-wide direct communication.
A whole new take on prediction markets- available from CrowdCast in April 2009.
Mat Fogarty
CrowdCast CEO
Cross-posted from the Xpree blog
Previously: Are collective intelligence solutions being oversold?
I agree with this approach. As long as incentives are in place and participants can update their predictions, there is nothing special about the double auction market format, which at this point has some baggage like it or not. In general it seems like non-market averaging mechanisms like HP BRAIN have been slighted by PM enthusiasts. One reason is opacity, but it may be possible through blind signature cryptography for participants to verify that relevant parameters are kept constant.. if that is desirable.
Jason, CDA and MSR are not proprietary system. Once you are out of your Afghan cave, you will see that the Internet prefers openness (open-source software, open knowledge like Wikipedia, etc.)
What I fear with CrowdCast is that they go the NewsFutures way: proprietary.
That doesn’t really have anything to do with my comment.
True. It was a side comment. Your use of the word “opacity” prompted me to comment about open-source versus proprietary.