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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 - Singularity University 2013

  1. 1. Melanie SwanFounderMS Futures Group+1-650-681-9482@LaBloggam@melanieswan.comwww.melanieswan.comJune 25, 2013Slides: http://slideshare.net/LaBloggaLive Prediction Markets SimulationFutures & Forecasting - Quantitative MethodsImage: http://wall.alphacoders.com/SU GPS for the Mind: www.mindtimemaps.com/start/sugp1SU Prediction Market: gsp13.inklingmarkets.com
  2. 2. 1Prediction MarketsJune 25, 2013Workshop 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. 2Prediction MarketsJune 25, 2013About Melanie Swan Hedge fund manager, futurist, entrepreneur,founder DIYgenomics, philosopher Work experience: Fidelity, JP Morgan, ArthurAndersen, iPass, RHK/Ovum Education: MBA Finance, Wharton; BAFrench/Economics, Georgetown Univ Current projects: melanieswan.com Sample publications Swan, M. The Quantified Self: Fundamental Disruption in Big Data Science andBiological Discovery. Big Data 2013, In Press. Swan, M. Crowdsourced Health Research Studies: An Important EmergingComplement to Clinical Trials in the Public Health Research Ecosystem. J MedInternet Res 2012, Mar;14(2):e46. Swan, M. Multigenic Condition Risk Assessment in Direct-to-Consumer GenomicServices. 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 Theoryto a Potential Phase Transition of Intelligence. Symmetry 2010, 2, 150:183.Source: http://melanieswan.com/publications.htm
  4. 4. 3Prediction MarketsJune 25, 2013Future 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. 4Prediction MarketsJune 25, 2013GPS for the Mind Exercise Plot time orientation: certainty, possibility, probabilitywww.mindtimemaps.com/start/sugp1Image: http://www.mindtime.comSource: Fortunato, VJ and Furey, JT. The theory of MindTime: The relationships between Future, Past, and Present thinking andpsychological well-being and distress. Personality and Individual Differences. January 2011, 50(1), pp. 20-4. http://www.miindtime.comcertainty possibilityprobability
  6. 6. 5Prediction MarketsJune 25, 2013Prediction Markets DefinitionImage: http://www.simExchange.com1Source: 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 groupopinion using market principles• Research has shown that prediction markets candevelop more accurate forecasts than polls or experts1
  7. 7. 6Prediction MarketsJune 25, 2013Markets and Crowd IntelligenceCollectiveintelligenceMarketsPredictionMarkets•Google+•Question networks(Quora, formspring)•Crowdsourced labormarketplaces•Competitions (Kaggle,foldIT, eteRNA)•Wikipedia, wikis,Etherpad•Unconferences•Ignite talks•Tag intros•Twitterhttp://www.cs.cornell.edu/home/kleinber/networks-book•Crowdfunding(Kickstarter, Indiegogo)•Resource allocation(Airbnb, Uber,Gettaround)•Group purchasing(Groupon)•Reverse grouppurchasing (Loopt u-deals, Ringleadr)•Affinity capital•P2P lending•Gift economy
  8. 8. 7Prediction MarketsJune 25, 2013History 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 policy1Source: http://www.midasoracle.org/2007/07/17/history-prediction-markets-timelineImage: http://www.bookshift.com
  9. 9. 8Prediction MarketsJune 25, 2013Prediction Markets – ‘Pricing’ Details Price: probability of eventoccurring Value: leading indicator,expose hidden information Pay-off: monetary,reputational, indirect Accuracy: better thanconventional forecasting11Source: Arrow, K.J. et al “The Promise of Prediction Markets” Science, 2008, 320, 5878, 877-878http://www.sciencemag.org/cgi/content/summary/320/5878/877Iowa Electronic Markets:2008 US Democratic Convention MarketClintonObamaImage: http://upload.wikimedia.org/wikipedia/commons/1/13/IEM_DCON2008.svg Tool for collecting and aggregating opinion usingmarket principles
  10. 10. 9Prediction MarketsJune 25, 2013Prediction Market view: Obama 2012 (July)Source: http://www.intrade.comBlip: May 1, 2011, Osama bin Laden killed
  11. 11. 10Prediction MarketsJune 25, 2013Prediction Market view: Obama 2012 (Nov)Source: http://www.intrade.comElection Day: November 7, 2013 – 4 pm ESTElection Day: November 7, 2013 – 10 pm EST
  12. 12. 11Prediction MarketsJune 25, 2013US Republican Nominee: Iowa caucus 2012Source: http://www.yahoo.com
  13. 13. 12Prediction MarketsJune 25, 2013Bets of Bitcoin Prediction MarketsSource: http://betsofbitco.in (digital currency)
  14. 14. 13Prediction MarketsJune 25, 2013When to use Prediction Markets Complexity (ecosystem) Multi-party value chain Uncertainty Clear outcomes Market liquidity Diversity of opinionPrediction Markets books
  15. 15. 14Prediction MarketsJune 25, 2013Types 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 officereceipts, product sales; health: pandemic prediction) Surfacing relevant content (information valuation)Source: http://www.hsx.com
  16. 16. 15Prediction MarketsJune 25, 2013Enterprise 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 creativeconcepts market vendors Chaordix, JovotoImage: http://torontopm.files.wordpress.com/2009/06/quarterly-sales-graph.jpg?w=300&h=234
  17. 17. 16Prediction MarketsJune 25, 2013Consumer 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. 17Prediction MarketsJune 25, 2013HSX – shorting Will SmithSource: http://www.hsx.com Monetizing reputation and the likes, attention, intentionthought economy
  19. 19. 18Prediction MarketsJune 25, 2013HSX Reputation PortfoliosSource: http://www.hsx.com The Whuffie Economy!! Monetizing reputation New forms of valuation andexchange in the likes,attention, intention, andthought economy Fantasy football leagues forLinkedIn colleagues,Facebook friends
  20. 20. 19Prediction MarketsJune 25, 2013Gaming Prediction Market - SimExchangeSource: http://www.simexchange.com
  21. 21. 20Prediction MarketsJune 25, 2013Iowa Electronic Health MarketsSource: http://iehm.uiowa.edu/iehm/trnmt/trnmt.html?symbol=dengue Flu markets Disease markets
  22. 22. 21Prediction MarketsJune 25, 2013Health Markets and Disease EradicationSource: http://iehm.uiowa.edu
  23. 23. 22Prediction MarketsJune 25, 2013Crowdsourced Data as Prediction MarketSource: http://iehm.uiowa.eduHealthMapGoogle Flu Trends
  24. 24. 23Prediction MarketsJune 25, 2013Futurist Prediction Markets – LongBetsSource: http://www.longbets.org/bets
  25. 25. 24Prediction MarketsJune 25, 2013Futurist Prediction Markets – LongBetsSource: http://www.longbets.org/bets
  26. 26. 25Prediction MarketsJune 25, 2013Prediction 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? Howaccurately do you think others will answer? Calibration round(s)Image: http://www.consensuspoint.com
  27. 27. 26Prediction MarketsJune 25, 2013Future 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 individualsbecome a valuable and personally-tradable currency Accurate predictor, information stewardImage:http://www.tvrage.com/shows/id-23464
  28. 28. 27Prediction MarketsJune 25, 2013Broader Context: Markets are the PlatformTypes of Markets ResourceallocationExchange:supply &demand meetInformation(price)discoveryValueidentification& attributionUtilitycreationTraditional Markets     Prediction Markets   Affinity Capital   Multicurrency Society  Automatic Markets  Idea ManagementMarketplacesScarcity Management /Abundance Injection (PSE)  Roles of MarketsSource: Swan, M. New Banks, New Currencies and New Markets in a Multicurrency World: Roadmap for a Post-Scarcity Economy by2050, presented at Create Futures IberoAmérica, Enthusiasmo Cultural, São Paolo Brazil, October 14, 2009.http://melanieswan.com/documents/economy_20.pdfEconomy2.0
  29. 29. 28Prediction MarketsJune 25, 2013Resources 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 Oct15;306(5695):462-6. Trepte, K. et al. Forecasting consumer products using predictionmarkets. MIT. 2009. http://dspace.mit.edu/handle/1721.1/53546 Chang, W. et al. Simulating prediction markets that include human andautomated agents. MIT. 2009.http://dspace.mit.edu/handle/1721.1/53097
  30. 30. 29Prediction MarketsJune 25, 2013Prediction Markets SummaryImage: http://www.simExchange.com Prediction markets are a tool for collecting groupopinion using market principles
  31. 31. Questions?Melanie SwanPrincipalMS Futures Group+1-650-681-9482m@melanieswan.comwww.melanieswan.comSlides: http://slideshare.net/LaBloggaCreative Commons 3.0 licenseImage: http://wall.alphacoders.com/DIAMANDIS KURZWEILWell, Ray, we’re stillwaiting for the jet packFuturism 2050DIAMANDIS KURZWEILWell, Ray, we’re stillwaiting for the jet packFuturism 2050SU GPS for the Mind: www.mindtimemaps.com/start/sugp1SU Prediction Market: gsp13.inklingmarkets.com

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