Link.
Previous blog posts by Chris F. Masse:
Emile Servan-Schreiber of NewsFutures:
[…-] Also, the mere idea of a Web 2.0 makeover of prediction markets is laughable. To paraphrase a good ol’ song from the 90’s, prediction markets were web 2.0 before web 2.0 was cool.
Yeah, but Emile advertises his mastering of “-Web 2.0 tools”- on the NewsFutures frontpage —-while Inkling Markets and HubDug don’-t even mention the “-Web 2.0″- concept on their frontpage (I checked).
—-
Here’-s a screen shot of the NewsFutures website:
—-
—-
Care to revise your TechCrunch statement, doc?
MP3 file
Read the previous blog posts by Chris. F. Masse:
On Wednesday, January 30, 2008, at 9:00 AM PST (12:00 PM EST- 5:00 PM GMT- 6:00 PM CET), dollar-thirsty Nigel Eccles (pictured above) will be introducing HubDub at DEMO 2008 (one of the best IT conferences, along with eTech, LeWeb, CES, etc.). The DEMO website will be live-streaming the presentation video.
My best wishes go to Nigel Eccles for his presentation. (Is there something to win, at that DEMO conference? Is it a startup contest? Is there a trophy to win, at the end?)
In my view, the launch of HubDub (both a news aggregator and a MSR-powered, play-money prediction exchange) is a milestone.
It’-s not the first time that a prediction exchange adds content to its offerings (they all do that, now, even in small ways), but it’-s the first time that:
The Midas Oracle readers remember that I have been bullish on HubDub since day one. (See my previous post: HubDub wil redefine the play-money exchange landscape.) Others are now following.
I’-m not alone, anymore, in thinking that prediction market pages should published the URLs of the related advanced indicators (i.e., primary sources of information).
Enterprise prediction market consultant Jed Christiansen (pictured above).
Internet usability expert Alex Kirtland (pictured above).
And, after a good discussion, others came in agreement with the no-brainer idea that more external links and more information can be good for the prediction markets. (Next obvious discoveries: The sky is blue- The sun rises from the East- Water is wet- War is bad- The Internet is world wide- The French fries are not fried in France- The French bread is not baked in France- etc. 
)
If you think of it, David Pennock (pictured above) is the man to hire to tackle the problematic of integrating news links/stories with prediction markets —-since he is a world-renowned expert in both microeconomics and search engine technology. We are on his turf, here. Hence, he should be the one leading us —-as opposed to us pulling him.
What should the humans do with the prediction markets? As Michael Giberson knows better than I do, probabilistic predictions are the offspring of the trading activities on the event derivative markets. At inception, BetFair and TradeSports didn’-t give the first fig about those probabilistic predictions, but today, the event derivative industry is being defined both by its betting side and its forecasting side.
And now we can see the main difference between the betting exchange approach and the prediction market approach: promoting (the trading of low-cost event derivatives) to bettors versus promoting (the generating of dynamic, objective probabilistic predictions) to people.
See, the prediction market approach consists in chasing people with news and probabilities. Hence, my personal version of HubDub would feature an aggregation news item (a la TechMeme, Memeorandum, or BallBug), mixed up with the appropriate InTrade/TradeSports/BetFair dynamic chart to give a hint on how the issue at hand will be settled in the near future. Content, first, and then the related prediction market chart —-as an informative appendix to a good scoop or quality analysis. The prediction market page would anti-chronologically list all the relevant news links.
And since the US (not Scotland) is the most fertile place for web search technologies, I bet that we will see soon some US-based HubDub-inspired startups popping up like champagne bubbles in the coming months and years.
Better Prediction Markets = A Better World
Read the previous blog posts by Chris. F. Masse:
Niall O’-Connor (who maybe ate grilled snake for his Sunday morning breakfast ):
The current trend to promote almost illiquid betting markets as being predictive, looks set to backfire bigstyle. In a nutshell, to date the so called “-prediction markets”- have called it wrong in New Hampshire (Democrats), Michigan (Republicans) and South Carolina (Republicans). Prediction market advocates, in many instances weighed down with the baggage of being too closely associated with the prediction market industry, are guilty of churning out subjective, biased research, in an attempt to promote the industry and lure traders into the markets. Unscientific comparisons are continually made between prediction markets and polls, and, moreover, markets are deemed to have been predictive, when all they have actually done is [respond] to the unwinding of the vote count. The publication of such utter garbage does nothing but a big disservice to the fledgling prediction market industry. Moreover, it is unfortunate that prediction market industry watchers, who purport to be independent and subjective, indulge the writers of such nonsense, in the process revealing themselves to be nothing more than placemen and sycophants of unquestioning loyalty. […]
Names, please, Niall.
By the way…- I will have the charts of the expired BetFair contracts, soon, I hope- and I will publish them here for all to see.
Even a prediction market fanboy feeds on the polls —-first and foremost. Steve Dubner, the journalist and co-author of Freakonomics, is, along with his two blog colleagues (Steve Levitt and Justin Wolfers), a strong supporter of the prediction markets. They all have blogged enthusiastically on prediction markets, since the inception of their blog. Steve Levitt calls the InTrade-TradeSports people in Ireland his “-friends“-. Wow. The Freakonomics blog even has a “-Prediction Markets”- blogroll (i.e., a list of external weblinks to the best resources on prediction markets) —-where, of course , Midas Oracle is the cornerstone. To sum it all up, Steve Dubner and his colleagues are true believers in the predictive power of the prediction markets. Good.
Until you analyze this Steve Dubner’-s Freudian lapsus:
[…-] (Fascinating aside: according to a recent Times poll cited in the article linked above, the Florida G.O.P. race is as of now a virtual deadlock between four candidates: Huckabee, Giuliani, McCain, and Romney. This will almost certainly shift as a result of interceding activity, but still, what a spectacle!)
Which forecasting tool does Steve Dubner use to get a sense of the political race du jour? Not the prediction markets…- but the polls.
That speaks volume on the nature of the prediction markets, as forecasting tools.
) use to write their reports.I think that:
—-
ADDENDUM: In fairnesses to Steve Dubner, it should be noted that, in the same post, he put up a blunt challenge to polling methodology:
[…-] As for the discrepancy between the two polling questions, take note: that’s the difference between a fill-in-the-blank polling question (i.e., “Which is the most important problem …”) versus a leading polling question (”Do you view crime as a ‘very serious problem’?”). The next time you read a poll and think it may be hinky, ask yourself what question the pollsters actually asked. […-]
Previous blog posts by Chris F. Masse:
Tom Davenport:
- Confidence that executives have valuable roles to play even if they don’t always have the right answer-
- A high level of trust in the intelligence and capabilities of employees-
- The willingness to follow numbers and analysis wherever they lead (as long as they are more-or-less consistent with common sense)-
- A pretty strong analytical and financial orientation (since futures markets aren’t something that every Joe or Jane understands).
Read the previous blog posts by Chris. F. Masse:
Sean Park (after a long, boring introduction to the subject):
[…] The ‘failure’ of New Hampshire was the result of primarily two factors:
- It wasn’t a failure. No market is always right. More importantly markets reflect the information available to and the interests of their participants. Basically markets are very efficient mechanisms (I would claim the most efficient) for processing information. No more, no less.
- In this particular instance, the probability of the market producing an erroneous forecast was high due to the lack of liquidity. This is a problem of all political markets in the US. Show me a market on the New Hampshire primaries with tens of thousands of participants and millions of dollars traded and I will show you a market that creates more valuable information. BUT it would still on occasion be ’surprised.’
Basically I guess what I’m trying to say is the expectations seem to be set all wrong by many inside the community. I think “prediction markets” – creating markets in information and outcomes is a wonderfully important and valuable thing to do. Equally however I think that anyone that represents such markets as being able to predict the future is a charlatan. What they can do is collect and synthesize powerfully and efficiently all the dispersed available information – using money as the relevance filter. This is very valuable in its own right and is defensible. Promoting prediction markets to true sceptics (ie mainstream American politicians) on the basis that they are a Delphic Oracle is surely a path to certain tears and ultimately is almost guaranteed to fail. [*]
Markets don’t compute unknown unknowns. That doesn’t mean they are useless, just that they have to be understood in context.
[*] How to promote the prediction markets, then? As information collecting tools? Who should use these tools, then? Experts or ignorants? Sean Park does not elaborate further. None of the questions I have asked are answered.
David Leonhart in his New York Times blog, last week:
The political prediction markets just went through their version of the dot-com bubble. […]
Intrade’s odds have had a very good forecasting record over the last few years, having correctly called every Senate race in 2006, every state in the 2004 presidential election and all but one state in the 2004 Senate races. The odds also correctly called New Hampshire for John McCain this week and now make him the favorite for the Republican nomination- he is given a 38 percent chance, while Rudolph W. Giuliani is given a 29 percent chance.
Intrade’s executives, as well as the academic researchers who study the site, are careful to point out that its contracts provide only odds, not certainties. An outcome that’s given a 20 percent chance of happening should happen 20 percent of the time — not never. […]
The question I asked yesterday was: What would happen if that warning label were to be sticked on InTrade before each election, as opposed to after each predictive debacle? My bet is that, if you suppress the mention of InTrade’-s magical touch, the Irish real-money prediction markets will be far less appealing to people. They want magic. All of the sudden, InTrade is not a psychic anymore, but simply a forecasting tool of convenience for busy people who don’-t want to check the polls in details. This issue is crucial if we want to be able to define what is the “-prediction market approach”- —-as opposed to the “-betting exchange approach”-.
Give me one reason why the political analysts should follow the US primaries thru the prism of the InTrade prediction markets instead of thru the polls. [My question is still unanswered, you will notice. Which shows to you the embarrassment of the prediction market luminaries (or so they think they are).]
Once the true nature of the prediction markets appears more clearly, it becomes evident that they are not tools for the experts, but tools for the ignorants, rather. Which is great, provided that this is said clearly from the start.
Emile Servan-Schreiber:
[…] The classic first line of defense in these cases is to remind people that market “predictions” are really just probabilities, so any one outcome cannot invalidate the approach. The argument is sound and backed up by loads of data. But it would of course be much more convincing if we, as an industry, would remember to show at least as much humility when our market “predictions” appear correct instead. If you’re going to spread the idea that your market called all 50 states in the last U.S. presidential election because each correct outcome was predicted with over 50% chance, then you can’t hide behind probabilities when an 80% prediction comes to naught, as in Obama’s NH collapse. […]
Emile Servan-Schreiber makes a good point —-see also Panos Ipeirotis, in the same vein.
But the over-selling is the reason [*] why InTrade (and not NewsFutures) has managed to infiltrate so many US media. If you suppress the magical touch, then InTrade is just a forecasting tool of convenience —-for those too busy to look at the polls.
Give me one reason why the political analysts should follow InTrade instead of the polls, then?
What is the true nature of the prediction markets? How to use the prediction markets? Who should use the prediction markets? For what benefits? Once you have the answer to these 4 questions, you can tackle the next two problematics: How to market the prediction markets without over-selling them. How to report news thru the prism of the prediction markets while respecting their true probabilistic nature.
Welcome to the version #2 of the prediction market industry. Quite a horse of another color, now.
—-
[*] UPDATE: The over-selling aspect is the topping over the real-money and the liquidity dimensions. The over-selling aspect wraps all that.
After the New Hampshire fiasco, 16 18 people came to defend the prediction markets, so far. So far, the best takes are from:
), and Steve Roman.AWOLs (so far): PMIA, AEI-Brookings, InTrade, TradeSports, BetFair, TradeFair, NewsFutures, Emile Servan-Schreiber, Jed Christiansen, Koleman Strumpf, Bo Cowgill, Richard Borghesi, Chris Hibbert, David Perry, Ken Kittlitz, Paul Tetlock, David Pennock, Mike Linksvayer, Brent Stinsky, David Yu, Mark Davis, David Jack, James Surowiecki, Tyler Cowen, Greg Mankiw, Donald Luskin, John Delaney [*], etc.
[*] Steve Bass tells us that John Delaney’-s pre-NH CNBC appearance was awesome. I was up that day, waiting for that CNBC segment, but failed to spot it. If somebody sends me the YouTube link, I’-ll publish it here.