The document outlines a workshop led by Melanie Swan on prediction markets, including its definition, history, and usage in various industries for improving forecasting accuracy. It details the structure of the workshop, the types of prediction markets, and resources available for further exploration of the topic. Swan also highlights her expertise in the field and the potential future developments of prediction markets in organizational settings and public opinion capture.

1. Live Prediction Markets Simulation Image: http://wall.alphacoders.com/
Futures & Forecasting - Quantitative Methods
Melanie Swan
SU GPS for the Mind: www.mindtimemaps.com/start/sugp1
SU Prediction Market: gsp12.inklingmarkets.com Founder
MS Futures Group
+1-650-681-9482
@LaBlogga
July 20, 2012 m@melanieswan.com
Slides: http://slideshare.net/LaBlogga www.melanieswan.com

2. Workshop timeline
 Quantitative methods introduction 10 min
 GPS for the Mind exercise 5 min
 Prediction markets lecture 25 min
 Estimation exercise 10 min
 Live prediction markets workshop 90 min
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3. About Melanie Swan
 Hedge fund manager, futurist, entrepreneur,
founder DIYgenomics
 Work experience: Fidelity, JP Morgan, Arthur
Andersen, iPass, RHK/Ovum
 Education: MBA Finance, Wharton; BA French/
Economics, Georgetown Univ
 Current projects: melanieswan.com
 Sample publications
 Swan, M. Crowdsourced Health Research Studies: An Important Emerging
Complement to Clinical Trials in the Public Health Research Ecosystem. J Med
Internet Res 2012, Mar;14(2):e46.
 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.
 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 Source: http://melanieswan.com/publications.htm
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4. Forecasting and future studies toolkit
 Short term (0-5 yrs):  Long term (5-20+ yrs):
insight and certainty uncertainty, discontinuity
 Forecasting  Scenario planning
 Scanning  Simulation
 Business intelligence  Frameworks
 Trend analysis  Wild-carding
 Market research  Longitudinal studies
 Time orientation
 Outlier identification
 Technology checklist
 Multiple time frames
 Prediction markets Image: Bill Frymire
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5. GPS for the Mind exercise Image: http://www.mindtime.com
 Plot time orientation: certainty, possibility, probability
www.mindtimemaps.com/start/sugp1
probability
certainty possibility
Prediction Markets Source: Fortunato, VJ and Furey, JT. The theory of MindTime: The relationships between Future, Past, and Present thinking and
psychological well-being and distress. Personality and Individual Differences. January 2011, 50(1), pp. 20-4. http://www.miindtime.com 5
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6. Prediction markets definition
 Prediction markets are a tool for collecting group opinion
using market principles
• Research has shown that prediction markets can
develop more accurate forecasts than polls or experts1
July 2011
July 2012
Images: http://www.intrade.com
Prediction Markets
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Source: Trepte, K. et al. Forecasting consumer products using prediction markets. MIT. 2009.
http://dspace.mit.edu/handle/1721.1/53546 6
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7. Nexus of markets and collective intelligence
Collective
Markets
intelligence
•Group purchasing •Google+
(Groupon) •Question networks
•Reverse group (Quora, formspring,
purchasing (Loopt u-
Prediction Hunch)
deals, Ringleadr) Markets •Wikipedia, wikis,
•Real-time economy Etherpad
feed (Blippy) •Unconferences
•Affinity capital •Ignite talks
•P2P lending •Tag intros
•Gift economy •Twitter
http://www.cs.cornell.edu/home/kleinber/networks-book
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8. History of prediction markets
Image: http://www.bookshift.com
 Decision markets, idea futures, information markets,
event derivatives, virtual markets
 Long history of event betting
 Election betting, sports betting, stock markets
 Modern incarnation – last ~15 years
 1988 Iowa Electronic Markets ran first market1
 2002 US DARPA terrorism futures debacle
 Proliferation of enterprise and consumer prediction markets
 Testbed for financial contracts
 Housing and weather futures, carbon trading, movie futures
 Futarchy
 Notion of using prediction markets in government policy
 Really re-inventing government
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Source: http://www.midasoracle.org/2007/07/17/history-prediction-markets-timeline
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9. Prediction markets - definition
 Tool for collecting and aggregating opinion using
market principles
Iowa Electronic Markets:
 Price: probability of event 2008 US Democratic Convention Market
occurring
 Value: leading indicator,
expose hidden information Clinton
 Pay-off: monetary, Obama
reputational, indirect
 Accuracy: better than Image: http://upload.wikimedia.org/wikipedia/commons/1/13/IEM_DCON2008.svg
conventional forecasting1
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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 9
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10. Prediction market view: Obama in 2012
Blip: May 1, 2011, Osama bin Laden killed
Prediction Markets Source: http://www.intrade.com
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11. Intrade active markets
Prediction Markets Source: http://www.intrade.com
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12. U.S. republican nominee: Iowa caucus 2012
Prediction Markets Source: http://www.yahoo.com
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13. When to use prediction markets
 Complexity (ecosystem)
 Multi-party value chain
 Uncertainty
 Clear outcomes
 Market liquidity
 Diversity of opinion
Prediction markets books
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14. Types of prediction markets
 Enterprise collective intelligence (organizational)
 Revenue forecasting, demand planning, capital budgeting
 Idea management (rate, filter, prioritize ideas)
 Project management, risk management
 Consumer prediction markets (public)
 Event prediction (politics: election results; economics: box office
receipts, product sales; health: pandemic prediction)
 Surfacing relevant content (information valuation)
Prediction Markets Source: http://www.intrade.com
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15. Enterprise prediction markets gather hidden
social business intelligence in organizations
 PMs in use at 100-200 US organizations (July 2012)
 Ex: HP, BestBuy, Electronic Arts, Boeing, Amazon, Harvard,
GM, Hallmark, P&G, Ford, Microsoft, Chevron, Lockheed
Martin, CNN, Adobe, American Express, Bosch
 Prediction market vendors
 Consensus Point, Crowdcast,
Bright Idea, Qmarkets, Inkling
 Crowdsourcing and creative
concepts market vendors
 Chaordix
 Jovoto
Image: http://torontopm.files.wordpress.com/2009/06/quarterly-sales-graph.jpg?w=300&h=234
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16. Consumer prediction markets
 Iowa Electronic Markets
 Intrade Prediction Markets
 Hollywood Stock Exchange (film)
 simExchange (gaming)
 CROWDPARK (general)
 LongBets (futurist)
Prediction Markets Source: http://www.hsx.com
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17. HSX – shorting Tom Cruise
Prediction Markets Source: http://www.hsx.com
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18. Gaming prediction market - simExchange
Prediction Markets Source: http://www.simexchange.com
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19. Iowa Electronic Health Markets
 Flu markets
 Disease markets
Prediction Markets Source: http://iehm.uiowa.edu/iehm/trnmt/trnmt.html?symbol=dengue
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20. Health markets and disease eradication
Prediction Markets Source: http://iehm.uiowa.edu
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21. Crowdsourcing as early prediction market
HealthMap
Google Flu Trends
Prediction Markets Source: http://iehm.uiowa.edu
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22. Futurist prediction markets – LongBets
Prediction Markets Source: http://www.longbets.org/bets
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23. Prediction market design
 Structure
 Event outcome (win/loss)
 Market scoring (continuum)
 Time frame
 Episodic or continuous
 Participants
 Anonymous users
 Participation incentive Image: http://www.consensuspoint.com
 Question design:
 (the question) What is your opinion?
 (the feedback loop) What do you think others will say? How
accurately do you think others will answer?
 Calibration round(s)
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24. Future of prediction markets
 Public prediction markets
 Opinion capture as a standard feature
 Activity icon cloud: like, +1, tweet, share,
comment, bookmark, register opinion
 Two-way XML element
 Ubiquitous real-time polling – automatic
alerts for opinion entry per interest profile Image:http://www.tvrage.com/shows/id-23464
 Enterprise prediction markets
 BOL / ERP / supply chain integration
 Sales and CRM integration
 Reputation: knowledge acuity ratings of individuals
become a valuable and personally-tradable currency
 Accurate predictor, information steward
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25. Broader context: markets are the platform
Roles of markets
Types of markets Resource Exchange: Information Value Utility
allocation supply & (price) discovery identification & creation
demand meet attribution
Traditional markets     
Prediction markets   
Affinity capital   
Multicurrency society  
Automatic markets  
Ideas marketplaces 
Scarcity management /
abundance injection (PSE)
  
Prediction Markets Source: Swan, M. New Banks, New Currencies and New Markets in a Multicurrency World: Roadmap for a Post-Scarcity Economy by
2050, presented at Create Futures IberoAmérica, Enthusiasmo Cultural, São Paolo Brazil, October 14, 2009. 25
July 20, 2012 http://melanieswan.com/documents/economy_20.pdf

26. Resources
 Prediction Markets blogs
 http://www.midasoracle.org
 http://www.ingenesist.com
 http://torontopm.wordpress.com
 Prediction Market Industry Association
 http://www.pmindustry.org
 Important papers
 Prelec D. A Bayesian truth serum for subjective data. Science.
2004 Oct 15;306(5695):462-6.
 Trepte, K. et al. Forecasting consumer products using prediction
markets. MIT. 2009. http://dspace.mit.edu/handle/1721.1/53546
 Chang, W. et al. Simulating prediction markets that include
human and automated agents. MIT. 2009. http://dspace.mit.edu/
handle/1721.1/53097
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27. Well, Ray, we’re still
waiting for the jet pack
DIAMANDIS KURZWEIL
Futurism 2050
Image: http://wall.alphacoders.com/
Questions?
SU GPS for the Mind: www.mindtimemaps.com/start/sugp1
SU Prediction Market: gsp12.inklingmarkets.com Melanie Swan
Slides: http://slideshare.net/LaBlogga Principal
MS Futures Group
+1-650-681-9482
m@melanieswan.com
Creative Commons 3.0 license www.melanieswan.com