Tag Archives: enterprise prediction markets

DAYS OF RECKONING: The New York Times is telling the business world that enterprise prediction markets are an essential management tool.

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Via forecasting expert Mat Fogarty of Xpree (cited but not linked to, alas, in that story), the New York Times (2 pages):

“The potential is that prediction markets may be the thing that enables a big company to act more like a small, nimble company again,” said Jeffrey Severts, a vice president who oversees prediction markets at Best Buy, the electronics retailer. The store chain has experimented with prediction markets on everything from demand for digital set-top boxes to store-opening dates. For example, Mr. Severts said that in the fall of 2006, the prices in a prediction market on whether a new store in Shanghai would open on time — in December 2006 — dropped sharply from $80 a share into the $40 to $50 range. Players made yes-no bets, and the virtual dollar drop reflected increasing doubt that the store would open on time. Indeed, Best Buy’s first store in China opened late, in January 2007, but the warning signs from the prediction market helped prevent further slippage. Mr. Severts noted that prices in a current prediction market — betting whether new offerings from its Geek Squad service will be introduced on time in June — are in the $90 range, an encouraging sign. Best Buy plans to move beyond pilot projects in prediction markets to involve more workers throughout the company, starting next month. “It helps on two fronts, the speed and accuracy of information, so that management can move faster to deal with problems or exploit opportunities,” Mr. Severts said.

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Previously: Do Google’s enterprise prediction markets work?

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Previous blog posts by Chris F. Masse:

  • 50% of our prediction market luminaries have a MacBook.
  • STRAIGHT FROM OUR TRUISM DEPARTMENT: Money buys happiness.
  • Ron Paul (R) and Barney Frank (D) ally together to attack “the practical hurdles of the federal law, known as the Unlawful Internet Gambling Enforcement Act, rather than its legitimacy”.
  • Clicking on the “SPHERE: RELATED CONTENT” button, at the bottom of each Midas Oracle post, will bring you a list of external webspots.
  • FRIGHTENING: Jed Christiansen’s prediction market blog was briefly overtaken by web spammers, who inserted invisible links to their commercial sites so as to game the Google PageRank system.
  • InTrade ditch market-leader Bloomberg for low-cost, second-tier data provider eSignal.
  • Drawing a parallel between our reluctance to seek advice and the experts’ reluctance to take the market-generated probabilistic predictions in an un-discriminating, un-critical fashion

YouTube Videos on Prediction Markets

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I have created a &#8220-Prediction Market Videos&#8221- category in my &#8220-Links&#8221- page. I have listed there the InTrade and the Jed Christiansen webspots at YouTube.

Any other link(s) to suggest, folks?

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Jed Christiansen: What is a prediction market?

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Jed Christiansen: How can I use a prediction market for my business?

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Lets face it. The political world doesnt give the first fig about the prediction markets, InTrade, BetFair, Betdaq, NewsFutures, HubDub, Robin Hanson, Justin Wolfers, and the rest of our little clique.

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No GravatarSome of our luminaries have had their vapors and have boldly stated that the public [*] prediction markets would soon take over the free world and become the forecasting tool of choice for decision makers. Since our movement has started, in 2003, that has not happened &#8212-and will never happen (let alone in the year 2020). We were duped by those cocky misleaders. In the coming weeks, I&#8217-m going to try to launch a big intra-industry initiative to find the right usage for the public prediction markets. Stay tuned&#8230- and I hope I&#8217-ll get you on board with me.

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[*] as opposed to the enterprise prediction markets, which is not the topic of my bombastic rant above, which is a horse of another color, and which would deserve a completely different analysis.

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WEB EXCLUSIVE: Here&#8217-s what the political world really cares about&#8230-

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Gallup 1

Gallup 2

Gallup 3

Previous blog posts by Chris F. Masse:

  • Last year’s best April Fool’s Day Joke had something to do with the Wisdom Of Crowds.
  • Will HedgeStreet USA, the hypothetical InTrade USA, and the hypothetical TradeFair USA, be regulated in the future by a merged SEC+CFTC regulatory structure?
  • WORST THAN ELIOT SPITZER (if it were possible): Formula One boss, Max Mosley, had sado-masochist sex with 5 prostitutes, for 5 hours (!!), reenacting a concentration camp scene (!!) in which he played the role of both Nazi guard and inmate.
  • Is BetFair Poker a booby trap for the gullible novices? Does The Sporting Exchange (the operator of the BetFair brands) help gangs plucking down innocent recreational poker players?? To get an inkling, don’t read The Guardian, seeded by the BetFair spin doctor- read Midas Oracle.
  • The video that the technologically retarded BetFair spin doctor should watch.

A highly accurate prediction market has little value if other mechanisms can provide similar accuracy at a lower cost, or if few substantial decisions are influenced by accurate forecasts on its topic.

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No GravatarRobin Hanson

Robin Hanson – Overcoming Bias –

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Robin Hanson

Robin Hanson at LinkedIn

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Robin Hanson:

Info Value = the added accuracy the markets provide relative to other mechanisms, times the value that accuracy can give in improved decisions, minus the cost of maintaining the markets, relative to the cost of other mechanisms.

A highly accurate market has little value if other mechanisms can provide similar accuracy at a lower cost, or if few substantial decisions are influenced by accurate forecasts on its topic.

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Robin Hanson:

[&#8230-] I meant trying to field the highest value applications. That is naturally measured in accounting terms – value minus cost. Measures of popularity or familiarity would not at all be the same thing.

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Robin Hanson:

[One should] try to offer a cost-benefit calculation. You could count how many employees had ever gone to a TQM meeting, but that wouldn&#8217-t tell you if TQM is valuable or not.

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[Here&#8217-s Robin Hanson&#8217-s website. For your information (if you are a newbie), Robin Hanson is the most advanced researcher in the field of prediction markets. He co-invented the modern-day prediction markets, the concept of decision markets, and a new marked design, the Market Scoring Rule.]

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Related Info:

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

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Previous blog posts by Chris F. Masse:

  • Last year’s best April Fool’s Day Joke had something to do with the Wisdom Of Crowds.
  • Will HedgeStreet USA, the hypothetical InTrade USA, and the hypothetical TradeFair USA, be regulated in the future by a merged SEC+CFTC regulatory structure?
  • WORST THAN ELIOT SPITZER (if it were possible): Formula One boss, Max Mosley, had sado-masochist sex with 5 prostitutes, for 5 hours (!!), reenacting a concentration camp scene (!!) in which he played the role of both Nazi guard and inmate.
  • Is BetFair Poker a booby trap for the gullible novices? Does The Sporting Exchange (the operator of the BetFair brands) help gangs plucking down innocent recreational poker players?? To get an inkling, don’t read The Guardian, seeded by the BetFair spin doctor- read Midas Oracle.
  • The video that the technologically retarded BetFair spin doctor should watch.

Info Value = the added accuracy the markets provide relative to other mechanisms, times the value that accuracy can give in improved decisions, minus the cost of maintaining the markets, relative to the cost of other mechanisms.

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Robin Hanson:

A highly accurate market has little value if other mechanisms can provide similar accuracy at a lower cost, or if few substantial decisions are influenced by accurate forecasts on its topic.

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[Here&#8217-s Robin Hanson&#8217-s website. For your information (if you are a newbie), Robin Hanson is the most advanced researcher in the field of prediction markets. He co-invented the modern-day prediction markets, the concept of decision markets, and a new marked design, the Market Scoring Rule.]

Previous blog posts by Chris F. Masse:

  • Collective Error = Average Individual Error – Prediction Diversity
  • When gambling meets Wall Street — Proposal for a brand-new kind of finance-based lottery
  • The definitive proof that it’s presently impossible to practice prediction market journalism with BetFair.
  • The Absence of Teams In Production of Blog Journalism
  • Publish a comment on the BetFair forum, get arrested.
  • If I had to guess, I would say about 50 percent of the “name pros” you see on television on a regular basis have a negative net worth. Frightening, I know.
  • You can’t measure the usefulness of a system by how many resources it consumes.

YIPPEEEEEEEE!!!!… Praying mantis celebrating the arrival of transparency in the sub-field of enterprise prediction markets.

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No GravatarGOOOOOOOOOOOOAL!&#8230-

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Parying Mantis

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Adam Siegel of Inkling Markets is out of the woods on business strategy&#8230- and David Perry of Consensus Point, ignited by our Google-paper post, has vowed to tell all&#8230- (I still can believe it, but it sounds true, he really said it.)&#8230- while David &#8220-Sweetie&#8221- Pennock is applauding&#8230-

Where on Earth are NewsFutures and Xpree?? Are they napping?

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Previous blog posts by Chris F. Masse:

  • Last year’s best April Fool’s Day Joke had something to do with the Wisdom Of Crowds.
  • Will HedgeStreet USA, the hypothetical InTrade USA, and the hypothetical TradeFair USA, be regulated in the future by a merged SEC+CFTC regulatory structure?
  • WORST THAN ELIOT SPITZER (if it were possible): Formula One boss, Max Mosley, had sado-masochist sex with 5 prostitutes, for 5 hours (!!), reenacting a concentration camp scene (!!) in which he played the role of both Nazi guard and inmate.
  • Is BetFair Poker a booby trap for the gullible novices? Does The Sporting Exchange (the operator of the BetFair brands) help gangs plucking down innocent recreational poker players?? To get an inkling, don’t read The Guardian, seeded by the BetFair spin doctor- read Midas Oracle.
  • The video that the technologically retarded BetFair spin doctor should watch.

Googles Bo Cowgill takes a swipe at the prediction market software vendors.

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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

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Bo Cowgill:

[&#8230-] Trade-by-trade data can reveal characteristics of specific working groups: What they know, how they feel, how they process and share information and how all of that changes over time. I didn&#8217-t try to put any of this in the paper because the conclusions would be sensitive, and I thought this application was pretty obvious to anybody who understood our methodology. [&#8230-]

Bo Cowgill:

I&#8217-ve also heard that other companies would find it impossible to analyze the interaction between their market and the organization. Why? Lack of data. [&#8230-]

Bo Cowgill:

Some more remarks about applications that combine prediction markets and organizational data (org charts, social networks, seating locations). The obstacle to these applications is not a lack of data. Jed mentions privacy concerns &#8212- and if he thinks this is a big obstacle then I&#8217-d be interested in discussing his thoughts.

A bigger problem is that that current prediction market vendors and consultants cannot support these applications. At heart, these vendors are software engineers and salespeople at heart, not statisticians or data miners. They want to write one system that can support lots of clients. At conferences, one hears PM vendors complain about having to do &#8220-customization&#8221- work for clients.

This approach would not work for the applications I describe for two reasons:

  1. The inputs for different clients won&#8217-t be the same. Each client&#8217-s organizational data will likely take a different structure. This makes it difficult for prediction market vendors to architect a single system that can served many clients (yet another challenge with integrating markets with other corporate IT services).
  2. The outputs for different clients won&#8217-t be the same. The business relevance and statistical power of each analysis will differ with each client&#8217-s data.

Prediction market vendors may also need to familiarize themselves with the statistical learning methods necessary to fully utilize these rich datasets. So what&#8217-s the solution? First, move to a software-and-consulting model. By &#8216-consulting,&#8217- I don&#8217-t mean &#8216-consulting on how to implement the market.&#8217- I&#8217-m talking about helping the client solve its problem using a variety of data, including prediction market data.

Second, the vendors also need to pitch prediction markets as more than a forecasting tool. People in the business world commonly identify as data junkies &#8212- probably more so than they identify with the &#8216-wisdom of crowds&#8217- ethos. It is unclear how much companies really care about accurate forecasting anyway.

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On a related note, there is something that only the prediction market software vendors could do, at this time, for those who are in capacity to do so: setting up inter-industry prediction markets &#8212-or at least, handing over (with everybody&#8217-s agreement) anonymized prediction market data on industry topics to anyone else in the industry who is a client of that PM firm. I don&#8217-t know about NewsFutures or Inkling Markets, but if you look at Consensus Point&#8217-s list of clients, you&#8217-ll see that David Perry&#8217-s firm is strong in the (consumer) electronic industry &#8212-Motorola, Qualcomm, Siemens, Nokia. Use your imagination, or ask David Perry directly, for more&#8230- (I can&#8217-t talk- otherwise, next thing, I&#8217-m a dead blogger.)&#8230-

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Previous blog posts by Chris F. Masse:

  • Last year’s best April Fool’s Day Joke had something to do with the Wisdom Of Crowds.
  • Will HedgeStreet USA, the hypothetical InTrade USA, and the hypothetical TradeFair USA, be regulated in the future by a merged SEC+CFTC regulatory structure?
  • WORST THAN ELIOT SPITZER (if it were possible): Formula One boss, Max Mosley, had sado-masochist sex with 5 prostitutes, for 5 hours (!!), reenacting a concentration camp scene (!!) in which he played the role of both Nazi guard and inmate.
  • Is BetFair Poker a booby trap for the gullible novices? Does The Sporting Exchange (the operator of the BetFair brands) help gangs plucking down innocent recreational poker players?? To get an inkling, don’t read The Guardian, seeded by the BetFair spin doctor- read Midas Oracle.
  • The video that the technologically retarded BetFair spin doctor should watch.

Inkling Markets, one year later

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Much, much better. Last year at the same time, in March 2007, I was selectively critical of some of the statements they did put in their (now old) version of their website. Adam Siegel has made good progress in mastering and conveying the problematic of enterprise prediction markets. I think that if Inkling Markets can truly deliver a service that can help companies mitigate business risks, and if they can prove positive results, then their client roll could be multiplied by a factor of 1,000 or so in the next 10 years.

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Adam Siegel:

Two years ago the only way to run a prediction marketplace was to roll your own or call a vendor/consultant and have them set up software and run markets for you. It took many weeks, often months. Today with Inkling Markets it take seconds. […]

[#1] Improve forecasting of key performance indicators
Track and raise awareness of key success metrics to identify and mitigate risk factors before it&#8217-s too late.

[#2] Expose product quality problems early
Identify design and production anomalies before a product (physical or virtual) is brought to market to avoid expensive repairs and recalls.

[#3] Predict risk to your supply chain
Run a &#8220-web&#8221- of markets about the risk factors to your supply chain to predict internal and external events that would cause inefficiencies or disruptions.

[#4] Foster a culture of innovation
Determine which new ideas and process improvements will have real business impact vs. the &#8220-nice to have.&#8221-

[#5] Create new interactions with users
Build a dedicated community of users around a marketplace of questions relevant to your business area and brand. […]

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Adam Siegel (Inkling Markets CEO) in Forbes:

[Prediction markets] can significantly:

  1. improve forecasts of key performance indicators,
  2. provide a more realistic understanding of project-completion dates,
  3. identify quality-control problems early in the development life cycle,
  4. improve demand forecasts within the supply chain,
  5. and allocate resources more appropriately across research-and-development projects.

[I have edited the formatting of this excerpt.]

Enterprise Prediction Markets … Without Office Politics

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Google&#8217-s Bo Cowgill, as reported by IT Business:

[&#8230-] If you let people bet on things anonymously, they will tell you what they really believe because they have money at stake. This is a conversation that&#8217-s happening without politics. Nobody knows who each other is, and nobody has any incentive to kiss up. [&#8230-]

[In one example,] the market was predicting that [a project] was behind. A manager says what&#8217-s going on here, &#8230-starts investigating and finds some glitches. [&#8230-]

Read the previous blog posts by Chris F. Masse:

  • Ratted by his bank, sex-addict New York governor Eliot Spitzer (alias “Client 9”) resigns.
  • BBC’s coverage of politics is dull like taxes, death and German sausages.
  • Never talk when you can nod, and never nod when you can wink, and never write an e-mail because it’s death. You’re giving prosecutors all the evidence we need.
  • Is Justin Wolfers a libertarian? Probably not.
  • The information technology that caught Eliot Spitzer
  • Eric Zitzewitz’s 10 minutes of fame
  • Fun with conditional probabilities

Nokias Enterprise Prediction Markets = Competitive Advantage

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Thus, the Nokia executives are pretty secretive about it. Bad luck for them, there&#8217-s a group blog on the Web that specializes on prediction markets and that digs deep. :-D So, here&#8217-s an inkling into Nokia&#8217-s enterprise prediction markets. The material was gathered from the World-Wide Web.

Maximilian Kammerer (Nokia&#8217-s Vice President CMO Global Customer Care) – (PDF file):

What technologies did you need for real-time information feedback among people working in 120 different countries?

KAMMERER: One sample element within the whole system is the Nokia Care Information Market. Like a stock exchange with a Web-based platform, people deal with information derivatives. They wager on the success of new strategies, innovations, solutions and projects. If their estimates change—the prices change. The price index creates an enormous transparency. The effectiveness of information markets relies on the fact that the collective intelligence is higher then every individual intelligence—even than that at management levels. Having understood that, our strategic decision-making is no longer purely based on historical data or expert opinions but on the intelligence of all concerned.

Translation: Nokia is embracing James Surowiscki&#8217-s wisdom of crowds. It&#8217-s my understanding that it&#8217-s the first time that that is said publicly by Nokia.

Now, let&#8217-s dig a bit. This interview was posted on the website of &#8220-1492&#8220-, a consulting firm from Austria. Now, the good question is&#8230- Which prediction market firm does supply &#8220-1492&#8243- with software and advice (which are resold to Nokia)? Suspense, suspense.

Gexid

Bernd

ANSWER: GEXID

Congrats to them.

As everybody knows in the field, prediction market firms very often have to sign NDAs before undertaking clients, which means that the public gets to know the names of those firms only when their clients allow this information to be published.

APPENDIX: Nokia is also listed as a client on Consensus Point&#8217-s website.