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Prediction Markets - Singularity University 2013

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Prediction Markets - Singularity University 2013

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Prediction markets are a tool for collecting and aggregating opinion using market principles. Enterprise prediction markets are in use in 100-200 large organizations for project management and revenue forecasting. Public prediction markets are used for event prediction (election results, product sales, box office receipts).

Prediction markets are a tool for collecting and aggregating opinion using market principles. Enterprise prediction markets are in use in 100-200 large organizations for project management and revenue forecasting. Public prediction markets are used for event prediction (election results, product sales, box office receipts).

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Prediction Markets - Singularity University 2013

  1. 1. Melanie Swan Founder MS Futures Group +1-650-681-9482 @LaBlogga m@melanieswan.com www.melanieswan.com June 25, 2013 Slides: http://slideshare.net/LaBlogga Live Prediction Markets Simulation Futures & Forecasting - Quantitative Methods Image: http://wall.alphacoders.com/ SU GPS for the Mind: www.mindtimemaps.com/start/sugp1 SU Prediction Market: gsp13.inklingmarkets.com
  2. 2. 1 Prediction Markets June 25, 2013 Workshop Timeline  Quantitative Methods Introduction 10 min  GPS for the Mind Exercise 5 min  Prediction Markets Overview 25 min  Estimation Exercise 10 min  Live Prediction Markets Workshop 60 min
  3. 3. 2 Prediction Markets June 25, 2013 About Melanie Swan  Hedge fund manager, futurist, entrepreneur, founder DIYgenomics, philosopher  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. The Quantified Self: Fundamental Disruption in Big Data Science and Biological Discovery. Big Data 2013, In Press.  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. Source: http://melanieswan.com/publications.htm
  4. 4. 3 Prediction Markets June 25, 2013 Future Studies & Forecasting Toolkit  Short term (0-5 yrs): insight and certainty  Forecasting  Scanning  Business intelligence  Trend analysis  Market research  Time orientation  Outlier identification  Technology checklist  Long term (5-20+ yrs): uncertainty, discontinuity  Scenario planning  Simulation  Frameworks  Wild-carding  Longitudinal studies  Multiple time frames  Prediction markets Image: Bill Frymire
  5. 5. 4 Prediction Markets June 25, 2013 GPS for the Mind Exercise  Plot time orientation: certainty, possibility, probability www.mindtimemaps.com/start/sugp1 Image: http://www.mindtime.com 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 certainty possibility probability
  6. 6. 5 Prediction Markets June 25, 2013 Prediction Markets Definition Image: http://www.simExchange.com 1Source: Trepte, K. et al. Forecasting consumer products using prediction markets. MIT. 2009. http://dspace.mit.edu/handle/1721.1/53546  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
  7. 7. 6 Prediction Markets June 25, 2013 Markets and Crowd Intelligence Collective intelligence Markets Prediction Markets •Google+ •Question networks (Quora, formspring) •Crowdsourced labor marketplaces •Competitions (Kaggle, foldIT, eteRNA) •Wikipedia, wikis, Etherpad •Unconferences •Ignite talks •Tag intros •Twitter http://www.cs.cornell.edu/home/kleinber/networks-book •Crowdfunding (Kickstarter, Indiegogo) •Resource allocation (Airbnb, Uber, Gettaround) •Group purchasing (Groupon) •Reverse group purchasing (Loopt u- deals, Ringleadr) •Affinity capital •P2P lending •Gift economy
  8. 8. 7 Prediction Markets June 25, 2013 History of Prediction Markets  Decision markets, idea futures, information markets, event derivatives, virtual markets  Long history of event betting  Election betting, sports betting, stock markets  Modern incarnation – last ~20 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 1Source: http://www.midasoracle.org/2007/07/17/history-prediction-markets-timeline Image: http://www.bookshift.com
  9. 9. 8 Prediction Markets June 25, 2013 Prediction Markets – ‘Pricing’ Details  Price: probability of event occurring  Value: leading indicator, expose hidden information  Pay-off: monetary, reputational, indirect  Accuracy: better than conventional forecasting1 1Source: 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 Clinton Obama Image: http://upload.wikimedia.org/wikipedia/commons/1/13/IEM_DCON2008.svg  Tool for collecting and aggregating opinion using market principles
  10. 10. 9 Prediction Markets June 25, 2013 Prediction Market view: Obama 2012 (July) Source: http://www.intrade.com Blip: May 1, 2011, Osama bin Laden killed
  11. 11. 10 Prediction Markets June 25, 2013 Prediction Market view: Obama 2012 (Nov) Source: http://www.intrade.com Election Day: November 7, 2013 – 4 pm EST Election Day: November 7, 2013 – 10 pm EST
  12. 12. 11 Prediction Markets June 25, 2013 US Republican Nominee: Iowa caucus 2012 Source: http://www.yahoo.com
  13. 13. 12 Prediction Markets June 25, 2013 Bets of Bitcoin Prediction Markets Source: http://betsofbitco.in (digital currency)
  14. 14. 13 Prediction Markets June 25, 2013 When to use Prediction Markets  Complexity (ecosystem)  Multi-party value chain  Uncertainty  Clear outcomes  Market liquidity  Diversity of opinion Prediction Markets books
  15. 15. 14 Prediction Markets June 25, 2013 Types of Prediction Markets  Enterprise Collective Intelligence (organizational)  Revenue forecasting, demand planning, capital budgeting  Innovation life cycle 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) Source: http://www.hsx.com
  16. 16. 15 Prediction Markets June 25, 2013 Enterprise Prediction Markets  Aggregate hidden organizational opinion and expertise  PMs in use at 100-200 US organizations (June 2013)  Ex: Paypal, HP, BestBuy, Electronic Arts, Boeing, Amazon, Harvard, GM, Hallmark, P&G, Ford, Microsoft, Chevron, Lockheed Martin, CNN, Adobe, American Express, Bosch  Prediction market vendors (enterprise idea management)  Consensus Point, Inkling, Spigit/Crowdcast, Bright Idea, Qmarkets  Crowdsourcing and creative concepts market vendors  Chaordix, Jovoto Image: http://torontopm.files.wordpress.com/2009/06/quarterly-sales-graph.jpg?w=300&h=234
  17. 17. 16 Prediction Markets June 25, 2013 Consumer Prediction Markets  Iowa Electronic Markets  Intrade Prediction Markets  Hollywood Stock Exchange (film)  simExchange (gaming)  CROWDPARK (general)  LongBets (futurist) Source: http://www.hsx.com
  18. 18. 17 Prediction Markets June 25, 2013 HSX – shorting Will Smith Source: http://www.hsx.com  Monetizing reputation and the likes, attention, intention thought economy
  19. 19. 18 Prediction Markets June 25, 2013 HSX Reputation Portfolios Source: http://www.hsx.com  The Whuffie Economy!!  Monetizing reputation  New forms of valuation and exchange in the likes, attention, intention, and thought economy  Fantasy football leagues for LinkedIn colleagues, Facebook friends
  20. 20. 19 Prediction Markets June 25, 2013 Gaming Prediction Market - SimExchange Source: http://www.simexchange.com
  21. 21. 20 Prediction Markets June 25, 2013 Iowa Electronic Health Markets Source: http://iehm.uiowa.edu/iehm/trnmt/trnmt.html?symbol=dengue  Flu markets  Disease markets
  22. 22. 21 Prediction Markets June 25, 2013 Health Markets and Disease Eradication Source: http://iehm.uiowa.edu
  23. 23. 22 Prediction Markets June 25, 2013 Crowdsourced Data as Prediction Market Source: http://iehm.uiowa.edu HealthMap Google Flu Trends
  24. 24. 23 Prediction Markets June 25, 2013 Futurist Prediction Markets – LongBets Source: http://www.longbets.org/bets
  25. 25. 24 Prediction Markets June 25, 2013 Futurist Prediction Markets – LongBets Source: http://www.longbets.org/bets
  26. 26. 25 Prediction Markets June 25, 2013 Prediction Market Design  Structure  Event outcome (win/loss)  Market scoring (continuum)  Time frame  Episodic or continuous  Participants  Anonymous users  Participation incentive  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) Image: http://www.consensuspoint.com
  27. 27. 26 Prediction Markets June 25, 2013 Future of Prediction Markets  Public Prediction Markets  Opinion capture as a standard feature  Activity Chiclets: Like, Vote Up/Down, +1, tweet, share, comment, bookmark, opine  Quality, Valence, Value/Interesting-ness  Two-way XML element  Ubiquitous real-time polling  Automatic markets per interest profile  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 Image:http://www.tvrage.com/shows/id-23464
  28. 28. 27 Prediction Markets June 25, 2013 Broader Context: Markets are the Platform Types of Markets Resource allocation Exchange: supply & demand meet Information (price) discovery Value identification & attribution Utility creation Traditional Markets      Prediction Markets    Affinity Capital    Multicurrency Society   Automatic Markets   Idea Management Marketplaces  Scarcity Management / Abundance Injection (PSE)    Roles of 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. http://melanieswan.com/documents/economy_20.pdf Economy2.0
  29. 29. 28 Prediction Markets June 25, 2013 Resources  Prediction Markets Twitter Handles and Blogs  @CassSunstein, @JustinWolfers  http://www.midasoracle.org  http://www.ingenesist.com  http://torontopm.wordpress.com  Prediction Market Industry Association  http://www.pmindustry.org  Relevant 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
  30. 30. 29 Prediction Markets June 25, 2013 Prediction Markets Summary Image: http://www.simExchange.com  Prediction markets are a tool for collecting group opinion using market principles
  31. 31. Questions? Melanie Swan Principal MS Futures Group +1-650-681-9482 m@melanieswan.com www.melanieswan.com Slides: http://slideshare.net/LaBlogga Creative Commons 3.0 license Image: http://wall.alphacoders.com/ DIAMANDIS KURZWEIL Well, Ray, we’re still waiting for the jet pack Futurism 2050 DIAMANDIS KURZWEIL Well, Ray, we’re still waiting for the jet pack Futurism 2050 SU GPS for the Mind: www.mindtimemaps.com/start/sugp1 SU Prediction Market: gsp13.inklingmarkets.com

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