Prediction Markets

Collective Intelligence Live Prediction Markets Simulation Melanie Swan Principal MS Futures Group +1-650-681-9482 [email_address] www.melanieswan.com July 28, 2010 Slides: http://slideshare.net/LaBlogga Image: http://wall.alphacoders.com/ “ The future is something which every one reaches at the rate of sixty miles an hour, whatever he does, whoever he is.” - C. S. Lewis SU Prediction Market: https://gsp10.inklingmarkets.com SU Online Polling: http://www.rwpoll.com/

About Melanie Swan
Hedge fund manager, futurist, entrepreneur, founder DIYgenomics
Work experience: Fidelity, JP Morgan, Arthur Andersen, iPass, RHK/Ovum
MBA, Wharton; BA, Georgetown University
Sample publications
Swan, M. Multigenic Condition Risk Assessment in Direct-to-Consumer Genomic Services. Genet. Med. 2010 , May;12(5):279-88.
Swan, M. Translational antiaging research. Rejuvenation Res. 2010 , Feb;13(1):115-7.
Swan, M. Engineering Life into Technology: the Application of Complexity Theory to a Potential Phase Transition of Intelligence. Symmetry 2010 , 2, 150:183. [Summary of Singularity University technology and implication synthesis]
Swan, M. Emerging patient-driven health care models: an examination of health social networks, consumer personalized medicine and quantified self-tracking. Int. J. Environ. Res. Public Health 2009 , 2, 492-525.
Prediction Markets July 28, 2010 Source: http://melanieswan.com/publications.htm

Summary
Prediction markets are a tool for collecting group opinion using market principles
Prediction Markets July 28, 2010
Enterprise prediction markets (social business intelligence) are in use in 100-200 large organizations for project management and revenue forecasting
Consumer prediction markets are becoming widely used for event prediction (election results, product sales, box office receipts)
Image: http://www.inklingmarkets.com

Futurist toolkit for collaborative intelligence
Short term (0-5 yrs): some degree of insight and certainty
Forecasting
Scanning
Business intelligence
Trend analysis
Market research
Outlier identification
Technology evaluation checklist
Long term (5-20+ yrs): uncertainty, discontinuity
Scenario planning
Simulation
Frameworks
Wild-carding
Longitudinal studies
Multiple time frames
Prediction markets
Image: Bill Frymire

Crowd-sourced toolkit for collaborative intelligence
Wikipedia, wikis, Etherpad
Unconferences
Ignite talks
Tag intros
Twitter
Question networks
Quora, formspring, Hunch
Prediction Markets July 28, 2010 http://www.cs.cornell.edu/home/kleinber/networks-book/ Image: http://nmk.co.uk

History of prediction markets Prediction Markets July 28, 2010
Decision markets, idea futures, predictive markets, information markets, event derivatives, virtual markets
Long history of event betting
Election betting, sports betting, stock markets
Modern incarnation – last ~10 years
1988 Iowa Electronic Markets ran first market 1
2002 US DARPA terrorism futures debacle
Proliferation of consumer and enterprise prediction markets
Testbed for financial contracts
Housing and weather futures, carbon trading, movie futures
Futarchy
Notion of using prediction markets in government policy
1 Source: http://www.midasoracle.org/2007/07/17/history-prediction-markets-timeline Image: http://www.bookshift.com

Prediction markets - definition Prediction Markets July 28, 2010
Price: probability of event occurring
Value: leading indicator, expose hidden information
Pay-off: monetary, reputational, indirect
Accuracy: better than conventional forecasting 1
1 Source: Arrow, K.J. et al “The Promise of Prediction Markets” Science, 2008, 320, 5878, 877-878 http://www.sciencemag.org/cgi/content/summary/320/5878/877 Iowa Electronic Markets: 2008 US Democratic Convention Market
Tool for collecting and aggregating opinion using market principles
Clinton Obama Image: http://upload.wikimedia.org/wikipedia/commons/1/13/IEM_DCON2008.svg

Social business intelligence in organizations Prediction Markets July 28, 2010
PMs in use at 100-200 US organizations (July 2010)
Ex: HP, BestBuy, Electronic Arts, Boeing, Amazon, Harvard, GM, Hallmark, P&G, Ford, Microsoft, Chevron, Lockheed Martin, CNN, Adobe, American Express, Bosch
Applications
Project management, risk management
Revenue forecasting, demand planning, capital budgeting
Idea management (rate, filter, prioritize ideas)
Vendors
Consensus Point, Crowdcast, Bright Idea, Qmarkets, Inkling
Image: http://torontopm.files.wordpress.com/2009/06/quarterly-sales-graph.jpg?w=300&h=234 Crowdsourcing vendors: chaordix.com, jovoto.com – marketplace for creative concepts

When to use prediction markets Prediction Markets July 28, 2010
Complexity (ecosystem)
Uncertainty
Many decision points
Clear outcomes
Market liquidity
Diversity of opinion

Consumer prediction markets Prediction Markets July 28, 2010
Iowa Electronic Markets
Intrade Prediction Markets
simExchange
Hollywood Stock Exchange
Oscar predictions
LongBets
Source: http://www.hsx.com/security/view/INCPT

Consumer prediction markets – LongBets Prediction Markets July 28, 2010 Source: http://www.longbets.org/bets

Consumer prediction markets - simExchange Prediction Markets July 28, 2010 Source: http://www.simexchange.com/stock.php?id=238

Consumer prediction markets - Inkling Prediction Markets July 28, 2010 Source: http://home.inklingmarkets.com/expiring/markets

Consumer prediction markets - Inkling Prediction Markets July 28, 2010 Source: http://home.inklingmarkets.com/markets/28753

Prediction market apps Prediction Markets July 28, 2010 1 Source: Viral Loop: From Facebook to Twitter, How Today's Smartest Businesses Grow Themselves Intrade Viral Loop 1

Prediction market design Prediction Markets July 28, 2010
Structure
Event outcome (win/loss)
Market scoring (continuum)
Participation incentive
Users are anonymous
Time frame
Episodic or continuous
Question design:
What is your opinion?
What do you think others will say?
How accurately do you think others will answer?
Source: http://www.intrade.com/jsp/intrade/common/c_cd.jsp?conDetailID=693480&z=1278982073468

Future of prediction markets
Consumer prediction markets
Opinion capture standard website feature
Digg, bookmarking, socnet, updates, gaming
Two-way XML element
Real-time polling – automatic alerts for opinion entry per interest profile
Enterprise prediction markets
BOL / ERP / supply chain integration
Sales and CRM integration
Knowledge acuity ratings of individuals become a valuable and personally-tradable currency
Accurate predictor, information steward
Market mechanisms become more pervasive
Automatic markets for transparent allocation of fungible resources based on pre-specified preferences
Image:http://www.tvrage.com/shows/id-23464

Summary
Prediction markets are a tool for collecting and aggregating opinion using market principles
Enterprise prediction markets (social business intelligence) are in use in 100-200 large organizations for project management and revenue forecasting
Consumer prediction markets are becoming widely used for event prediction (election results, product sales, box office receipts)
Image: http://www.intrade.com HIGGS.BOSON.DEC10

Resources
Prediction Markets blogs
http://www.midasoracle.org
http://www.ingenesist.com
http://torontopm.wordpress.com
Prediction Markets Cluster
http://pmclusters.com
Prediction Market Industry Association
http://www.pmindustry.org

Questions? Melanie Swan Principal MS Futures Group +1-650-681-9482 [email_address] www.melanieswan.com Slides: http://slideshare.net/LaBlogga Creative Commons 3.0 license Image: http://wall.alphacoders.com/

Prediction markets simulation workshop Prediction Markets July 28, 2010
You are the world’s leading social venture capitalists
Seeking ideas with social, environmental & economic impact
5 teams, $1 billion to invest
Alongside prediction market registering opinion on outcomes
NT – Nanotechnology NCS – Networks & Computing Systems EES – Energy & Environmental Systems AIR – AI & Robotics BIO – Biotech, Bioinformatics, Medicine & Neuroscience

Futures simulation workshop Prediction Markets July 28, 2010
2010 – 2020
Each team creates two plausible future technology ideas to pitch to the other teams
Each person votes by investing in the top technologies
Winning teams and technologies are those that garner the most investment
Image: Natasha Vita-More, Primo Posthuman

Future simulation workshop: 2010-2020 Prediction Markets July 28, 2010
Each team creates two plausible future technology ideas to pitch to the other teams, for example
Technology, product
Startup, research group, non-profit organization, NGO
Policy, social shift, new governance/economic model
Strategy undertaken by existing companies/countries
Water/food/upcycling/space/energy or not
Criteria
Novelty
Social, environmental & economic impact
Trade-off: high-impact idea vs. practical realizability
Present to the group
Concept soundbite (‘eBay for Genomes’)
1-2 minute pitch summarizing the idea
Image:http://bit.ly/csxwqv

Team formation & Inkling intro Prediction Markets July 28, 2010

Futures simulation workshop - debrief Prediction Markets July 28, 2010
What did you realize thinking about energy in 2020? AI in 2030?
How did earlier technology developments influence future outcomes?
How is it best to think about multiple technology areas together?
What did you notice about the simulation and the prediction market together? Reliable?
In what situations could you see using prediction markets? SU?
Image: http://van.embl.de/htfg/img/htfg_logo.png
What did you learn about trying to predict innovation development in long time frames with high uncertainty?

Prediction Markets

by lablogga on Jul 27, 2010

Accessibility

Categories

Upload Details

Usage Rights

1 Embed 4

Statistics

Prediction Markets Presentation Transcript