“-You’d better compare it with other existing tools or widely-used mechanisms, finally leveraging on the supremacy of one over the others.”-
– Nate Silver: 0.6032
– InTrade: 0.3699
InTrade looks much better than Nate Silver on the Oscars 2009.
Waiting for the HubDub numbers, now. Nigel, are you napping or what?
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?
Adam Siegel:
Niall,
You are right to question this stuff. There is a lot of bullshit out there and frankly I cringe when I see articles or statements about the “accuracy” of markets because it hurts everyone in the long run. It’s why we’ve written 3 or 4 times on our blog about what “accuracy” in a marketplace really means – that you can’t just look at 5 or 10 markets and say “we nailed it.” Unfortunately it’s something we have to deal with because the application is called a “prediction” market after all so it’s the first question that naturally comes to mind. That said I wish Chris wouldn’t make blanket statements [*] about “the vendors, e.g. Inkling Markets” getting the use cases all wrong in enterprise prediction markets. Because frankly, for quite some time “accuracy” has been a secondary argument to a number of other advantages we discuss about markets (in fact on the page on our website that describes the value proposition to companies, we don’t even list “accuracy” as a key benefit). This is also an expectation we set with our clients right from the beginning.
Anyways, I made the statement about business increasing year over year based on our own experience/numbers and as Jed mentioned, by looking at the activity of some of our competitors who have made hires, added clients, etc. I also base the statement on the types of professional services companies we are working with/hearing from and our discussions about prediction markets and what they are going to try and do in the future. I don’t think so many would be interested in adding markets to their toolset and expending resources putting together offerings if they didn’t see them as a long term, worthwhile business capability. So for those that agree with Chris that 6 years is enough time to evaluate a new business capability, I’d like to politely disagree. I could be wrong but these things haven’t been used beyond the experimental/pilot stage in companies for more than 2 or 3 years. We’re just at the cusp of understanding what benefits they’re going to bring. We’ve seen some promising trends, we’ve also seen people try to use Inkling for something and it failed miserably. This is just standard lifecycle stuff, especially for a capability that is designed, as I said in my blog post, to bring about more transparency and break down organization barriers.
[*] Adam, it was not a “-statement”-, it was a 2-choice hypothesis.
ADDENDUM
An uncertain future – A novel way of generating forecasts has yet to take off. – by The Economist – 2009-02-26
HubDub:
Hubdub does not permit markets on the impending death (for example how or when) of people, or markets considered to be death tolls, unless expressly approved at the discretion of the Category Editor. This rule will apply even in the context of a mainstream news story. This rule applies to all markets created after February 10, 2009.
Nigel, welcome to Reality 2.0.
The danger of vendor conferences without any editorial line: It backfires against the whole prediction markets industry —-big time.
I warned my readers many times against the vendor conferences organized by the San Francisco man. He is so desperate that he invites anybody who will pronounce the word “-prediction”- and “-markets”- in the same paragraph. Many of the invited speakers haven’-t the slightest knowledge of the field of prediction markets. As for the vendors, they are incapable of producing one single case study featuring a success in the use of enterprise prediction markets. Not a single one. (And I won’-t mention the “-flow of information”- —-the worst research ever published on prediction markets.) Their vendor websites publish lists of clients, which, at first glance, look impressive, but many of those so-called customers are in fact ancient clients who have ended pilot programs years ago. To add insult to injury, this fake conference is sold $400 to gullible attendees. It is not even worth 4 cents.
The Economist reporter who attended the San Francisco conference realized what I [*] realized long ago: The field of enterprise prediction markets is all smokes and mirrors. The more the prediction market vendors will participate in such crappy conferences, the more the media will realize that the prediction market vendors are all hat and no cattle, and the more they will publish news stories bursting the prediction market bubble. And in the end of 2009, we will end up with 10 news articles in major media telling the world that prediction markets were a fad. Live by the hype- die by the hype.
The only way to get out of this debacle is to come back to basics: Do the research right, do discover the real value of enterprise prediction markets (velocity), and, then, only when you have something to show for it, go out in postings and conferences.
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[*] I follow the field of prediction markets since 2003. I saw it in all shapes and stripes. You can fool your mother, but you can’-t fool me.
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APPENDIX:
An uncertain future – A novel way of generating forecasts has yet to take off. – by The Economist – 2009-02-26
– But although they have spread beyond early-adopting companies in the technology industry, they have still not become mainstream management tools. Even fervent advocates admit much remains to be done to convince sceptical managers of their value.
– Koch says the results so far have been pretty accurate compared to actual outcomes, but stresses that markets are complementary to other forecasting techniques, not a substitute for them.
– A big hurdle facing managers using prediction markets is getting enough people to keep trading after the novelty has worn off.
– Another reason prediction markets flop is that employees cannot see how the results are used, so they lose interest.
– Bosses may also be wary of relying on the judgments of non-experts.
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Inkling Markets:
“-Yet to take off,”- however, does not equate to “-bad idea.”- The facts are that uptake among companies has been increasing year over year, more business schools are covering prediction markets in their curriculum, industry analysts have begun to track progress in the space, and an increasing number of management consulting firms, market research firms, and system integrators are adding prediction markets to their repertoire of services.
Inkling Markets
Previously:
– How vendors are scuttling the field of enterprise prediction markets —and the prediction market industry, as a whole
– The Economist: The enterprise prediction markets are flopping, big time.
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Will the marriage of President of France Nicolas Sarkozy to Carla Bruni survive for more than 2 years?
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When will Nicolas Sarkozy and Carla Bruni break up ?
Panos Ipeirotis:
Actually, I would like to see for such collective events (senate races, oscars etc), to see a “meta-market” in each exchange:
“How many events is our exchange going to guess correctly?”
In principle, it should be possible to price correctly such contracts using the reported probabilities and their dependencies. This should give some extra attention to the fact that markets are not supposed to get everything correctly to be accurate.
Panos Ipeirotis’-s blog [*] and website
[*] Great name (”-Behind The Enemy’-s Lines”-) —-but where does the name come from?
The boom of public and private prediction markets started after the 2004 US elections. InTrade claimed to have nailed “-all 50 states”-. InTrade’-s performance in the 2008 US elections was less stellar, and in line with polls. Hence, the bust we are in.
If true, the good performance of HubDub in the Oscars 2009 forecasting race could lead to a small boom. We will see. We should first analyze the HubDub data. Nigel, care to share?