Tag Archives: prediction markets

Transparency is an Imperative, but so are Speed, Access and Understanding.

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InTrade:

Transparency is an Imperative, but so are Speed, Access and Understanding

Tuesday, Oct 14, 2008

TRANSPARENCY IS AN IMPERATIVE, BUT SO ARE SPEED, ACCESS AND UNDERSTANDING
Prediction Markets Have a Big Role to Play

Historic volatility, unprecedented coordinated bailouts, nationalizations, and bankruptcies of some of the doyennes of the financial elite are just some of the new realities we are all faced with.

Many may well be impressed with the speed and scope of the response to this crisis. I am, but it seems to me that Intrade and all in the prediction market industry have an increased obligation and opportunity to contribute to solutions in avoiding future crises.

Since Enron, WorldCom, Tyco et al and again since this crisis ignited we are being told that maximum transparency, disclosure, and better risk management tools are the answer. These solutions are exactly what prediction markets look to and can deliver.

But is something really transparent if it is buried within a 200 page document or if you need a degree in accounting to decipher it? Likewise, if the costs of producing or gaining access to the information is such that only a few benefit, is that maximum transparency and disclosure?

The Sarbanes-Oxley Act (SOX) introduced after the Enron / WorldCom debacles is considered a success by most. However, in light of recent events and comments from Henry Paulson, John Thain and even former AIG chief Hank Greenberg, who all believe SOX threatens the US competitive position in the global marketplace, it hardly seems a panacea.

This is where prediction markets can really help now and in the future. We offer real-time aggregated collective intelligence that is easy to access and interpret. E.g. recession, tax rates, unemployment, offshore drilling, OPEC actions, bank failures, etc. Prediction markets provide a single number &#8212- the probability or risk of something happening. Right now there seems to be a 75% probability that the US will be in recession in 2009.

To get the best predictive information barriers to entry for participants and providers must fall so that adoption and diversity can grow. To contribute their maximum to society (which we expect will befit Intrade and other leaders in our industry) prediction markets need to be embraced, encouraged, and considered part of a solution to managing risks and change. Only when this happens will there be such diversity and adoption that the markets can reach their full potential in aggregating information on the most important issues.

In addition to new and revised regulations, the time is right for expanded coverage of those regulations to include prediction markets and the innovative solutions they offer. If ever there was a time to embrace innovative solutions for assessing and managing risk it seems that time came before I started to write this short note.

Prediction markets are far from perfect, but they typically deliver incentivized real-time, efficient, aggregated probability estimates on uncertain future risks and events. They have never had a more important role and potential than right now.

I welcome your comments.

John Delaney

CEO

Intrade

john.delaney@intrade.com

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Previously: What John Delaney told the CFTC.

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Robin Hanson is now Chief Scientist of Consensus Point.

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Robin Hanson is now Chief Scientist of Consensus Point.

Here&#8217-s the expanded list of Consensus Point customers &#8212-Fortune-500 firms, mainly.

Here&#8217-s their definition of what is a prediction market.

Here&#8217-s their product page.

With Inkling Markets and NewsFutures, Consensus Point is the co-leader in the enterprise prediction markets space.

Best wishes to all of them.

TradeFair was first branded as a serious financial prediction exchange, but it didnt work out, and TradeFair is now actually an operator that applies gambling (not betting) to the financial markets.

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Take a look at their ad:

Three remarks:

  • They got carried away from the prediction market approach (which, unlike InTrade, they never understood fully, anyway).
  • This gambling approach of the marketing of the prediction markets is very interesting in terms of potential revenue growth. I encourage InTrade, TradeSports, BetFair, NewsFutures and HubDub to adopt it.
  • However, it remains to be seen whether TradeFair is the right venue for gambling. TradeFair was supposed to be a serious financial prediction exchange (the British equivalent of HedgeStreet), and it is now the online equivalent of Macao or Las Vegas. Hummm&#8230- Will these 2 different worlds mix well together? Could La Callas sell pork sausages? Could Yehudi Menuhin sell used condoms?
  • And I won&#8217-t mention the issue of problem gambling, which I predict will be made worse thanks to TradeFair Hi &amp- Lo and BetFair Arcades.

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Once the previous bet is resolved, you can start off anew with another 5-minute bet on the FTSE &#8212-from the level that was the basis for the settlement of the previous bet.

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Midas Oracle thanks these guys for participating (by publishing posts and/or comments) in our ongoing discussion about the social utility of the prediction markets.

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Tom W. Bell – Tom Bell – Post Archive at Midas Oracle – (Post Feed) – Professor – Law (Chapman University) – Blog: Agoraphilia – California, U.S.A.

Caveat Bettor [pseudonym] – Post Archive at Midas Oracle – (Post Feed) – Event Derivative Trader – Blog: Caveat Bettor – North America

Bo Cowgill – Post Archive at Midas Oracle – (Post Feed) – Quantitative Marketing Manager – Google – Blog: Bo Cowgill – California, U.S.A.

Nigel Eccles – Post Archive at Midas Oracle – (Post Feed) – CEO – HubDub – Blog: HubDub – Scotland, United Kingdom, E.U.

Michael Giberson – Mike Giberson – Post Archive at Midas Oracle – (Post Feed) – Energy Economist (Center for Energy Commerce, Rawls College of Business, Texas Tech University) – Site: Michael Giberson – Blog: Knowledge Problem – Texas, U.S.A.

Robin Hanson – Post Archive at Midas Oracle – (Post Feed) – Professor – Economics (George Mason University) – Blogs: Overcoming Bias – Virginia, U.S.A.

Chris Hibbert – Post Archive at Midas Oracle – (Post Feed) – Software Architect (Zocalo) – Site: My Druthers – Blog: PanCrit – California, U.S.A.

Alex Kirtland – Post Archive at Midas Oracle – (Post Feed) – Internet Usability Expert – Blog: Usable Markets – New York, U.S.A.

Mike Linksvayer – Post Archive at Midas Oracle – (Post Feed) – Vice-President of Creative Commons – Blog: Mike Linksvayer – California, U.S.A.

David Pennock – Post Archive at Midas Oracle – (Post Feed) – Principal Research Scientist at Yahoo! – Yahoo! Research – Blog: Odd Head – New York, U.S.A.

Jason Ruspini – Post Archive at Midas Oracle – (Post Feed) – Financial Research Analyst, Vice President at Conquest Capital Group – Blog: Risk Markets &amp- Politics – New York, U.S.A.

Emile Servan-Schreiber – Post Archive at Midas Oracle – (Post Feed) – CEO – NewsFutures – Blog: NewsFutures – Maryland, U.S.A. &amp- France, E.U.

Adam Siegel – Post Archive at Midas Oracle – (Post Feed) – CEO – Inkling Markets – Illinois, U.S.A.

Koleman Strumpf – Post Archive at Midas Oracle – (Post Feed) – Professor – Economics (University of Kansas) – Kansas, U.S.A.

George Tziralis – Post Archive at Midas Oracle – (Post Feed) – Doctoral Researcher – National Technical University of Athens – George Tziralis&#8217-s Home Page – Site: Ask Markets – Greece, E.U.

Eric Zitzewitz – Post Archive at Midas Oracle – (Post Feed) – Professor – Economics (Dartmouth College) – Site: Zitzewitz.net – California, U.S.A.

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Pssttt&#8230- Let me know if I should make a change in a label, or add a link, or else.

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Max Keiser is going to practice (an entertaining form of) prediction market analysis for BBC World News.

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Max Keiser:

CAUGHT OFF GUARD BY GLOBAL FINANCIAL MELTDOWN? NOT IF YOU HAD WATCHED THE ORACLE!

Max Keiser looks into the future every Friday on BBC World . . . coming soon

BBC World News is working with Max Keiser, the creator of the Hollywood Stock Exchange, to produce &#8220-The Oracle,&#8221- a weekly entertaining look into the future with the help of today&#8217-s headlines and prediction market charts.

The Oracle&#8217-s partners include Eldorado Pictures, the production company of Emmy award winning star, Alec Baldwin.

BBC World News Head of Programmes, Paul Gibbs, says: &#8216-If Max had been on our screens a year ago the current global financial crisis would not have been a surprise. It might not even have happened.&#8217-

Alec Baldwin, who has enjoyed a relationship, both personal and professional, with Keiser for nearly 30 years says, &#8220-I&#8217-m excited to be working with Max on The Oracle. Keiser combines blazing intellect, total irreverence and searing honesty to put forth news and commentary like no one else can.&#8221-

The Oracle is planned to air every weekend from early 2009 on BBC World News. Celebrity and expert guests join Max to pore over the prediction market charts to see where people are predicting today&#8217-s news might lead.

Max Keiser, has a long and amazingly accurate history of looking at market prices in order to predict the future.

As the creator of the world&#8217-s first prediction market, the Hollywood Stock Exchange, Max presented &#8220-Rumble at the Box Office&#8221- for NBC&#8217-s Access Hollywood accurately predicting box office.

Max went on to predict the present economic turmoil in a series of ten films for the Aljazeera English magazine series, People and Power.

As early as 2006, Max predicted in these films –

* the crisis in the global banking system to be triggered by subprime debts,
* the rescue of the financial system by wholesale government intervention,
* the rise in the price of gold,
* the Russian invasion of Georgia,
* economic meltdown in Iceland,
* and more.

Max continues to stay one step ahead of the game with his weekly radio show in London on Resonance 104.4 FM and in his writing for the Huffington Post and Intrade, the prediction market site.

The producers of the program will be in Mipcom and available for meetings.

InTrade should ditch their prediction markets on the InTrade prediction markets, and run a continuing series of 5-minute prediction markets instead.

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I don&#8217-t like the concept.

It has received criticism.

I don&#8217-t spot much volume.

I think that TradeFair&#8217-s 5-minute prediction markets are based on a much, much better concept and usability.

Time for John Delaney to act decisively. There is a reason the trash can was invented: to ditch the bad products.

BetFair Predicts = a new WordPress-powered website concocted out of San Francisco, California… -whose informational value is close to zero.

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BetFair Predicts

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UPDATE: The guy in charge says in the comment area that this is just an early beta website, which is going to be much improved soon.

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WHAT I LIKE IN BETFAIR PREDICTS

  1. BetFair Predicts is a (clumsy) response to some of the (harsh) criticism I directed at them. So, it shows that they listen up.
  2. They chose WordPress as the content management system (CMS) for this project &#8212-it’s the right choice. (DruPal would have been OK for a more sophisticated project.)
  3. They are web-hosted on an independent domain name (as opposed to a sub domain on the betfair.com website.) It’s good because it gives them freedom to use whatever information technology they want. (For security reason, they get limitations on their main website. That’s why the BetFair blog had to be run on MovableType, and not on WordPress.) – [UPDATE: The website now redirects to http://predicts.betfair.com/.]
  4. The architecture of this new website is well done. It’s standard. (Unlike the BetFair blog, which is a price of crap, technically.)
  5. They created a new compound chart on the 2008 US presidential elections. (I have hot-linked to it, just below.)

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WHAT I DISLIKE IN BETFAIR PREDICTS

  1. It was an error to call this project BetFair Predicts“, singular. “BetFair Predict”, plural, would have been better, because the wisdom of crowds requires both a collective judgment mechanism (here, a predition exchange named BetFair) and the event derivative traders associated with that prediction exchange. By using the singular, BetFair appropriates a predictive power that should be credited to a community (lead by BetFair).
  2. Overall, it’s a very thin website. It does not bring much to the kitchen table. (That new compound chart above is really the novelty at this time. But it’s not Earth shattering, since the BetFair Politics Zone already displays compound charts, which are dynamic, and which can be hot-linked to.)
  3. That compound chart is probably not a dynamic one (that is, a chart that will update itself in the future). This compound chart is just an image that has been uploaded from the BetFair exchange to this new BetFair Predicts blog, I doubt that that image will be updated in the future.
  4. And they seem light-years behind when it comes to embeddable chart widgets. (They claim on the frontpage that you can “embed” their charts in your blog, but what they offer is just static charts. Those idiots don’t know what they are talking about.)
  5. Their explainer on prediction markets is&#8230- so-so.
  6. Their blog is written by a “Joe Seither”, whose background is not disclosed. The writings (well, only 2 posts, as of today) are typical of any copy-writer who would have been instructed about the mechanism of the prediction markets the day prior to undertaking this project. You won’t find any insights- just banalities. What I see is worthless.
  7. They can’t spell “RSS”. (See below. :-D )

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TAKEAWAY:

  1. BetFair is still struggling with the web publishing technologies.
  2. BetFair is still struggling with the prediction market approach, embodied by InTrade.
  3. BetFair has a hiring problem: they pick up incompetents on the job market and put them in charge too quickly. The result is the disaster detailed above, and chronicled in the Midas Oracle archives since 2006.