At CityOdds we are finding that our House Price derivatives (or predictions) for example are providing good insight into the outlook for house prices. I believe this has great value as the consensus can offer guidance to demand/supply for housing, consumer confidence and perhaps can act as a leading indicator to the actual movement of house prices (yet to be verified).

Prediction markets can be very useful. The great stock exchanges around the world are simply monetized prediction exchanges and provide an uniquely useful way to raise company funds and to re-allocate capital efficiently.

Can you give some references for the evidence shoving that prediction markets are not an effective tool? I would argue that there is a lot of evidence showing exactly the opposite – that prediction markets actually do a very good job as an enterprise tool, e.g.

Intel on how to manage demand risk with prediction markets:
http://www.inte.../1-abstract.htm

HP on their success with using prediction markets in sales forecasting:
http://www.hpl....er/ms020408.pdf.

Jeff Severts from Best Buy in a Mckinsey video interview on how Best Buy use prediction markets:
http://www.mcki...com/Video?vid=3

General Electric whitepaper on why idea markets are superior in idea generation:
http://www.spri...3116758u2l4324/

Also, I think it is important to distinguish between prediction markets and idea markets.

One of the very positive findings from HP is that prediction markets are efficient with as little as 12 participants. Getting efficient prediction markets is more about involving people with relevant knowledge and information than just involving large crowds of people.

Getting people to participate is another game. It’s a game of user adoption, usability and motivation. These are in my view general challenges for any (enterprise) software, be it prediction markets, time tracking or idea management. I would argue that prediction markets (or idea markets) are actually better at creating participation, because they actually give people incentives to participate.

As I read your comment, your point is “… the volume of content and the fact
that people have day jobs, dramatically reduces the activity rate within a
company prediction market system”. Please correct me if I’m wrong, but again I would argue that this isn’t limited to prediction or idea markets.

Regarding content, I acknowledge that in idea generation a lot of content is created, especially when involving many people. I would argue that you would need to read through the same amount of content whether using a software like yours or using an idea market like our Idea Exchange http://nosco.dk/product.html. But the beautiful thing about a market is that nobody need to know everything about everything since the price mechanism serves an efficient coordination mechanism of peoples knowledge and information (as Friedrich Hayek proves in The Use of Knowledge in Society). Voting mechanisms does not do the same.

Also, whether you vote or buy shares in ideas doesn’t affect participants’ time consumption. The only difference is, that you have an incentive to keep following and collaborating on the idea when you own shares in it.

Best,

Oliver Bernhard Pedersen
http://www.nosco.dk

Bookmarked your post over at Blog Bookmarker.com!…

I found your entry interesting do I’ve added a Trackback to it on my weblog …

The PM Cluster network has been tracking the explosive growth in prediction markets and collective intelligence since 2004. There have been some small regulatory and political bumps along the way, but there is enormous growth, popularity and success. The next PM Summit and Collective Intelligence Coference is next week in SF.

http://www.pmcl...r.com/SFO09.htm

Registration is open and all are welcome.

-j

Not so fast. Many large corporations are achieving enormous benefits w/prediction markets. They are not experiencing any of the problems you claim. In fact, outstanding results have been achieved with rather small populations. Visit the PM Cluster for more information…

http://www.pmcluster.com

Also, nice to hear from you again and Happy NY!

Cheers,

-j
http://www.link...m/in/jheuristic

I am writing a paper on this right now, but I can share just one of the problems…

Pubic domain prediction markets benefit by having access to millions of internet users – and so the number of potential visitors to these sites is relatively high. Given a large number of potential visitors, is is not impossible to get good traction. Moreover, when the prediction market is on a simple task where there is great interest, such as an election or working out who will win the World Cup football (soccer!) there may even be a reasonable amount of trading going on.

In a company world, the dynamics are quite different. People do not have time to waste to go into a system, read a large number of ideas or options, and make a reasonable judgment. Also there are obviously fewer employees in a company than there are global internet users – which means that you are playing with fewer potential visitors and contributors to start with.

In a company world, you would like to process several topics at the same time, not a simple ‘yes or no’ option for a known problem. The time it takes to cognitively process the idea and related content is not trivial when you are looking at 20 – 50 ideas… and this session duration rapidly extends to being ‘unreasonable’ in terms of time (ideally a session in a volunteer system like these should take 4 – 6 minutes, and not more than 12 minutes – unless it is part of your day job). So the volume of content and the fact that people have day jobs, dramatically reduces the activity rate within a company prediction market system.

Having said all of that, there are other ways of tapping into the collective genius – mass intelligence – whatever you want to call it – to solve problems faster, better, cheaper. I would urge people to have a look at Imaginatik (www.imaginatik.com) as we have coimbined web technology with a people and leadership process to actually deliver real benefits. For example, just in cost savings alone we have firms like Wal-Mart reporting $36m+ benefits from using crowd intelligence to save money on electricity consumption. Our web site, incidentally, has several case studies on the topic.

Thanks for the article!

Mark Turrell
CEO, Imaginatik plc
http://www.imaginatik.com

Not a prediction market per se but an interesting way to help people make decisions.

What?? Heard of Intrade?

You’re right – his return to Apple in the 90’s is what saved the Company. Let’s just hope that the next person to take the helm has what Steve refers to as his ‘vision thing’ skill.

http://tinyurl.com/jugar263

Steve’s resume: http://tinyurl.com/4rdhmc

Robin Ogden

Steve’s resume: http://tinyurl.com/74b74

Robin Ogden

Look at dotblu
http://www.quan....com/dotblu.com

They have about 1/2M uniques and are growing another 500K and they can offset with their tech expenses with some direct response and branded advertising.

That being said they are probably a bit late too the game and need to have a unique distribution strategy.

I mean can they transform this predictions site into a marketplace where people can bet on predictions? NO, because that would amount to gambling, which is illegal in many countries. So what’s left – ads? Yuck.