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TV-famous horse racing pundit: John McCririck.
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John McCririck endorsing BetFair
Forrester recommend to view enterprise prediction markets as…- addition —-not substitution.
Excellent point.
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Prediction Markets Harness The Wisdom Of The Crowd To Predict The Future
Prediction Markets Bring A Market Function To The Gathering Of Information
Most Markets See Accuracy That Is At Least As Good As Traditional Forecasting Methods
Prediction Markets Have Substantive Benefits For The Enterprise…-
…-But Still Need Active Supervision To Ensure Success
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The “-wisdom of crowds”- is capturing the attention of corporate strategists across the globe, and, as a result, many are now looking to prediction markets — speculative markets in which traders collectively predict future events — to generate collective intelligence. For enterprises, prediction markets bring unique value: They focus on the future, aggregate diverse information pools that can be applied to multiple decision-making domains, create streams of actionable data suitable for executive decision-making, and can often cut through corporate politics and pressures at lower cost than traditional forecasting methods. Market researchers will, however, need to have an active hand in the management of these mechanisms, ensuring strong management support, the right incentives for traders, and a focus on appropriate questions. When executed properly, the value to the enterprise is enormous- as a result, Forrester believes that prediction markets will ultimately find a permanent home in the market research toolbox.
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Lewis Sheperd (the Chief Technology Officer of Microsoft’s Institute for Advanced Technology in Governments):
Indeed, it appears to me that [prediction markets] are growing not from corporate or government use, but mostly organically from within academia, stock-futures circles and political-junkie communities. I’-m reading the interesting variety of writers and prediction-marketeers at Midas Oracle, which brings together widely ranging posts from faculty members at Harvard and other universities, daytraders, and even a few “amateurs.”
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Lewis Sheperd notes in his post that a number of for-profit companies (like Google and General Electric) are using private prediction markets (a.k.a. enterprise prediction markets). Non-for-profit organizations (like governmental agencies) would do great, too, using the same forecasting tool —-an “-information aggregation mechanism”- (IAM), more exactly.
Robin Hanson, instead of boring us with philosophy, go evangelizing that newbie.
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UPDATE: Yes, he is willing to learn. 
See his comment.
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Using Prediction Markets to Track Information Flows: Evidence from Google – (PDF file – PDF file) – by Bo Cowgill, Justin Wolfers, and Eric Zitwewitz – 2008-01-06
Blip.TV
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I already published this video. The reason I do it again is that I found out a hidden function in WordPress to increase the dimensions of the embedded video player. I think it is useful in this particular case because Bo shows us some slides, in this video. So, my hope is that those slides will be more readable that way. Let’-s try that. I am pressing “-publish”-…- let’-s see.
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Our previous blog post on the Google paper
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Previous blog posts by Chris F. Masse:
Private Prediction Markets and the Law – (PDF file) – by Tom W. Bell – 2008-05-18
Abstract
This paper analyses the legality of private prediction markets under U.S. law, describing both the legal risks they raise and how to manage those risks. As the label “-private”- suggests, such markets offer trading not to the public but rather only to members of a particular firm. The use of private prediction markets has grown in recent years because they can efficiently collect and quantify information that firms find useful in making management decisions. Along with that considerable benefit, however, comes a particularly worrisome cost: the risk that running a private prediction market might violate U.S. state or federal laws. The ends and means of private prediction markets differ materially from those of futures, securities, or gambling markets. Laws written for those latter three institutions nonetheless threaten to limit or even outlaw private prediction markets, as the paper details. The paper also details, however, how certain legal strategies can protect private prediction markets from violating U.S. laws or suffering crushing regulatory burdens. The paper concludes with a legal forecast, describing the likely form of potential CFTC regulations and a strategy designed to ensure the success of private prediction markets under U.S. law.
Conclusion
This paper has described the legal risks facing private prediction markets under U.S. law and how firms that want to runs such markets should respond. To minimize the risk of CFTC regulation, firms should institute mechanisms to ensure that their private prediction markets do not support significant hedging functions and make clear, both in the documentation supporting their markets and in their markets’- structures, that they offer trading not in binary option contracts but rather in conditional negotiable notes. Publicly-traded firms subject to U.S. law can minimize the risks of illegal insider trading by either making public all prices and claims traded on their prediction market or by:
• Keeping trading by traditional insiders separate from trading by others-
• Broadening safeguards against illegal insider trading to cover all traders-
• Treating the market’-s claims and prices as trade secrets- and
• Seeding the market with decoy claims and prices.
Although the skill-based trading emphasized on private prediction markets should in theory remove them from the scope of gambling regulations, a prudent firm could help to ensure that result by:
• Forbidding traders from investing their own funds in the market- and
• Requiring its agents to participate in its market.
As should perhaps go without saying (but as hereby will not), any firm implementing these legal strategies should back them up with ample record-keeping. Each person who trades on a firm’-s market should, for instance, receive clear notification that the market does not deal in CFTC- or SEC-regulated instruments, and that it does not offering services subject to oversight by any state gambling commission. Better yet, traders should be required to access the market only through a click-through agreement in which, among other things, they consent to that stipulation. So go only a few of the provisions that ought to appear in such an agreement- any reasonably competent attorney will think of many worthwhile provisions to add.
Private prediction markets will almost certainly escape the legal uncertainty that now clouds their prospects in the U.S. Even if no legislator, judge, or regulator ever notices them, private prediction markets will come to win de facto legality simply by merit of their widespread use and acceptance. With reflection —perhaps aided by papers such as this one— and practical experience, attorneys will learn how to structure private prediction markets to accommodate the laws that rightfully apply to them and to dodge the effect of laws written for other, materially different markets. There remains some risk, granted, that the CFTC will crush private prediction markets under new regulations. With luck though —and perhaps also with some persuasion— the CFTC will instead allow prediction markets to choose from among several different tiers of regulations. And even in the worse-case scenario, private prediction markets will not disappear- they will simply flee the U.S. for other, freer homes.
Awesome slides in bold.
Brought to you by Koleman Strumpf (circa November 2007):
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Henry Berg, Microsoft <-slides>-
Discussant: Robin Hanson (George Mason Department of Economics) <-slides>-
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Christina Ann LaComb, GE (The Imagination Market- abstract is free, text is gated) <-slides>-
Discussant: Marco Ottaviani (Kellogg School of Management, Management and Strategy) <-slides>-
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Dawn Keller, Best Buy (Best Buy’s TAGTRADE Market) <-slides>-
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Bo Cowgill, Google (Putting Crowd Wisdom to Work) <-slides>-
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Jim Lavoie, Co-Founder and CEO, Rite-Solutions <-slides>-
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David Perry, Co-Founder and President, Consensus Point <-slides>-
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Mat Fogarty, Founder and CEO, Xpree Inc <-slides>-
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Tom W. Bell, Chapman University School of Law <-slides>-
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Adam Siegel of Inkling Markets:
Mike,
The context of that discussion was talking about allowing people to create their own markets vs. having them only be run by a central entity or only through recommendations by a consulting firm.
We were also talking about the insights you may get by running prediction markets that are not readily apparent in the market results.
The original point was, by allowing people to ask as many questions as possible, the questions may be a signal themselves pointing to something that you didn’t previously know about. If someone asks a question about the probability of a risk factor occurring that you never even considered before, for example. That would never have been uncovered, otherwise, because the “prediction market administrators” wouldn’t even have known to ask.
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WOW. This is big.
Andy Mukherjee:
[…] Finally, demand estimation is too important to be left entirely to experts.
Companies such as Google Inc. are harnessing the power of prediction markets —- which gather information from a large number of participants —- to generate useful forecasts.
There’-s no reason why governments can’-t do the same.
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Great idea.
Let’-s shame the 95% of Fortune-500 companies for not using enterprise prediction markets.
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Previous blog posts by Chris F. Masse: