1. Prediction Markets
And CI
Tom Davis
1

2. Telecom/Technology CI
& Prediction Markets
2

3. 10 Years Wall St.
10 Years Sprint
3

4. Prediction Market Is?
4

5. Ever Traded?
5

6. Conference
Summary
6

7. CI Geek
7

8. Text
Analyzer
8

9. The
Buzz
9

10. >5,000 Words
10

11. Conference
Summary
11

12. Learn
81
12

13. Competitive
77
13

14. Intelligence
97
14

15. Strat*
38
15

16. Tactic*
6
16

17. Information
37
17

18. Understand
31
18

19. Analy*
29
19

20. Research
27
20

21. Collect*
8
21

22. Value
19
22

23. Innovation
22
23

24. Techniques
21
24

25. Not As
Strong
25

26. Communicat*
14
26

27. Predict*
10
27

28. Future*
10
28

29. People
6
29

30. Early Warning
14
30

31. Conclude
31

32. Wisdom
0
32

33. Crowds
0
33

34. Good News
34

35. Social
14
35

36. Social Network*
14
36

37. People
6
37

38. lg
ia in
ck
or
So y
w uzz
t
eB
Ns
I
38

39. 39

40. Themes
40

41. <1>
Prediction Markets
Accelerating
41

42. <2>
Prediction Markets Are
Perfect For CI
42

43. <3>
Market Design Key
43

44. <4>
Great Prediction Markets
=
Great Social Networks
44

45. Disclaimer
45

46. 46

47. 47

48. Market Design
48

49. Tacit
Information
49

50. 50

51. “We Know More
Than We Can Tell”
51

52. <introduction>
52

53. Prediction Market
Is?
53

54. “Information Markets”
54

55. “Idea Futures”
55

56. “Event Futures”
56

57. Markets
Are Designed
57

58. Information
Aggregation
58

59. What Does That Mean?
59

60. Prediction Markets
60

61. Convenient Way
61

62. Ask Organization
62

63. A Question
63

64. Get A
Good Answer
64

65. 65

66. 1+1+1+...N = ?
66

67. 67

68. 1.) Independent
68

69. 2.) Diverse
69

70. 3.)Decentralized
70

71. Average Guess
3‐5%
Actual Beans
71

72. 72

73. More Accurate
73

74. 1+1+1+...N = ?
74

75. The Wisdom of Crowds
75

76. 76

77. 77

78. 78

79. New York, 2007
79

80. 1974
Nobel Prize
80

81. Famous
Economist
81

82. Hayek
82

83. Friedrich von Hayek
1899 ‐ 1992
83

84. “Knowledge Of The
Particular Circumstances
Of Time And Place”
84

85. Ability Of Prices
To Aggregate
Knowledge
85

86. Tacit
Information
86

87. 87

88. “We Know More
Than We Can Tell”
88

89. Fast Forward
89

90. Web 2.0
90

91. 91

92. Internet
+
Prediction Markets
92

93. Vendors
93

94. </introduction>
94

95. Theme #1
95

96. <1>
Prediction Markets
Accelerating
96

97. ProQuest Articles
200
150
100
50
0
2003 2004 2005 2006 2007 2008
97

98. Global Companies
Accelerating Use
98

99. Source: Cowgill, et al. Using Prediction Markets To Track Information Flows, Jan. 2008. (http://bpp.wharton.upenn.edu/jwolfers/index.shtml)
99

100. Prof. Andrew McAfee
100

101. 101

102. 102

103. 103

104. Uses?
104

105. Financial Forecasting
105

106. Project Management
106

107. Market Research
107

108. Real Time
Competitive
Intelligence
108

109. Examples?
109

110. 110

111. 111

112. 112

113. 113

114. 114

115. 115

116. 116

117. 117

118. 118

119. You Prefer?
You Like?
119

120. What Is
Going To
Happen?
120

121. Prediction Markets
Accelerating
</1>
121

122. Theme #2
122

123. <2>
Prediction Markets Are
Perfect For CI
123

124. ?
124

125. 2 Kinds
Prediction Markets
125

126. ‐1‐
Aggregate
Primarily Internal
Information
126

127. ‐2‐
Aggregate
Primarily External
Information
127

128. Internally Focused
Markets
128

129. debate:
TMI
129

130. “too much information”
130

131. 131

132. CI
Outwardly
Focused
132

133. “Knowledge Of The
Particular Circumstances
Of Time And Place”
133

134. Tacit
Information
134

135. 135

136. Normalize Into
Price Or Probability
136

137. Common CI Uses
137

138. Forecast Competitor
Metrics
138

139. Industry M&A
Activity
139

140. Forecast Trade
Association Metrics
140

141. Forecast Patent & IP
Activity
141

142. Forecast Regulatory
Actions
142

143. Raise Awareness Of
Competition
143

144. ABCs
Why Work?
144

145. <A>
Accurate
145

146. <A>
Anonymous =
Speak True Mind
146

147. <B>
Bias Corrected =
Equal Voice
147

148. <C>
Consensus Building =
Credible, Impartial
Observer
148

149. <D>
Incentives To
Discover
149

150. <E>
Expensive =
Metrics
ROI
150

151. <F>
Fast Set‐Up
151

152. <G>
Highly Scalable =
Many Participants
152

153. Summarize
153

154. Market Design
154

155. Tacit Information
155

156. 156

157. “We Know More
Than We Can Tell”
157

158. Prediction Markets Are
Perfect For CI
</2>
158

159. Theme #3
159

160. <3>
Market Design Key
160

161. ?
161

162. You Can Design
Better Markets
162

163. Lessons Learned
163

164. Single Regulator
164

165. 165

166. 166

167. 167

168. 168

169. 169

170. Leverage
170

171. 171

172. Market
Failure
172

173. Ex‐Meltdown
173

174. Market Mechanisms
174

175. 175

176. 176

177. Market
Failure
177

178. Not Hard
178

179. Design Right
179

180. Concerns?
180

181. <i>
181

182. Self‐Fulfilling
Prophecy
182

183. <ii>
183

184. Manipulation
184

185. <i>
Self‐Fulfilling
Prophecy?
185

186. Market
Reality
186

187. Pro‐Cyclical Feedback Loop
187

188. Distorts
Outcome
188

189. Mis‐application
189

190. No Clear
190

191. Event
Or
Measure
191

192. Outcome
Poorly Defined
</i>
192

193. <ii>
Market Manipulation?
193

194. 2
Varieties
194

195. ‐1‐
Price Manipulation
195

196. ‐2‐
Outcome Manipulation
196

197. ‐1‐
Price Manipulation?
197

198. Distorted
Price Action
198

199. Price Reality
Time
199

200. Intentional Losses
To Deceive
200

201. Not Sustainable,
Adds Liquidity
201

202. Good Design
Price Manipulation
202

203. ‐2‐
Outcome Manipulation?
203

204. Outcome Changeable
204

205. Small Group
205

206. Traders Or
Non‐Traders
206

207. Price Reality
Time
207

208. E.g.
208

209. Vice President?
209

210. Good Design
Outcome Manipulation
210

211. Summarize
211

212. Self‐Fulfilling
Prophecies A Form
Manipulation
212

213. Possible To
Manipulate
213

214. Adds To
Liquidity
214

215. Poor Excuse
215

216. All Forecasting Systems
216

217. Manipulable
217

218. Error
218

219. Bias
219

220. 220

221. Summarize
221

222. Market Mechanisms
222

223. 223

224. 224

225. Market Failures
225

226. Not Hard
226

227. Design Right
227

228. Market Design Key
</3>
228

229. Theme #4
229

230. <4>
Great Prediction Markets
=
Great Social Networks
230

231. ‐1‐
Social Media =>
Fresh Activity
231

232. ‐1‐
Prediction Markets =>
Create New Markets
232

233. ‐2‐
Social Media =>
Ask
For Engagement
233

234. ‐2‐
Prediction Markets =>
Traders
Suggest New Markets
234

235. ‐3‐
Social Media =>
KISS
235

236. ‐3‐
Prediction Markets =>
KISS
236

237. ‐4‐
Social Media =>
Know Your Audience
237

238. ‐4‐
Prediction Markets =>
Know Your Trading
Community
238

239. ‐5‐
Social Media =>
What’s Happening Now
239

240. ‐5‐
Prediction Markets =>
Short Term Markets
Hold More Interest
240

241. ‐6‐
Social Media =>
User Interface
Makes Or Breaks
241

242. ‐6‐
Prediction Markets =>
User Interface
Increases Trading
242

243. ‐7‐
And on and on...
243

244. The Future?
244

245. et
rk
a
M
245

246. et
rk Is
a
M dy
ea
lr
A
246

247. Great Prediction Markets
=
Great Social Networks
</4>
247

248. Summarize
248

249. 249

250. 250

251. Market Design
251

252. Tacit
Information
252

253. 253

254. “We Know More
Than We Can Tell”
254

255. Ability Of Prices
To Aggregate
Knowledge
255

256. 256

257. Prediction Markets
And CI
With thanks to Lawrence Lessig and Dick Hardt For Presentation Inspiration
Tom Davis
257