prediction market 4 טל גת.ppt [compatibility mode]

8/6/2019 prediction market 4 .ppt [Compatibility Mode]

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Tal Gat - confidential

agendaagendaIntroductionIntroductionInformation issues at the organization :Information issues at the organization :

Management doesnt have all available informationManagement doesnt have all available information Wisdom of the crowdWisdom of the crowd

New solution : Prediction MarketNew solution : Prediction Market Examples for marketExamples for market it works !it works ! What we usually work; potential benefitWhat we usually work; potential benefit It worked for us ! Here is the proveIt worked for us ! Here is the prove

SummarySummary
http://www.pdfonline.com/easypdf/?gad=CLjUiqcCEgjbNejkqKEugRjG27j-AyCw_-AP


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IntroductionIntroduction ,, ,, ,, .."" --

,, ..


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Information at the organizationInformation at the organizationBig organization are hierarchicalBig organization are hierarchical

Managers get the information from the levelManagers get the information from the levelbelow thembelow them

They get most of it from one level below, sometimeThey get most of it from one level below, sometime22 levels belowlevels below

Important (sometime critical) information isImportant (sometime critical) information is

at the bottom, at the level the work is beingat the bottom, at the level the work is beingdonedone Naturally many times it doesnt go up, or it goes upNaturally many times it doesnt go up, or it goes up

only one levelonly one level It combines from pieces, it is not an executiveIt combines from pieces, it is not an executive

summarysummary


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Crowd wisdomCrowd wisdom what is knownwhat is knowntodaytoday

With the right conditions, groups areWith the right conditions, groups aresignificantly more intelligent from fewsignificantly more intelligent from fewexperts in the teamexperts in the teamGroups donGroups don t have to be managed byt have to be managed bysomeone with superiorsomeone with superior intelligenceintelligence inin

order to be intelligent or clever as a grouporder to be intelligent or clever as a group


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Predicting the future ?Predicting the future ?Predicting the demands for different products isPredicting the demands for different products iscritical to plan the production linecritical to plan the production linePredicting sales is important to manage yourPredicting sales is important to manage yourfinancefinancePredicting a schedule of a project can be criticalPredicting a schedule of a project can be criticalto meet market goalto meet market goal

Today it is being done inside the firm by theToday it is being done inside the firm by theowner with very few experts.owner with very few experts.The accuracy is not good enough : firms wasteThe accuracy is not good enough : firms wastetime, money and resourcestime, money and resources


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Wisdom of the crowdWisdom of the crowd

JanuaryJanuary 28 28 thth 19861986 : the: the Challenger disasterChallenger disasterThe stock market immediately collapsed. InThe stock market immediately collapsed. Inparticular, stocks of particular, stocks of 4 4 companies that werecompanies that wereinvolved in building the spaceinvolved in building the space--shuttle: shuttle:

Rockwell, Lockheed, MartinRockwell, Lockheed, Martin- -Marietta, Morton ThiokolMarietta, Morton Thiokol

The day later stock market recovered, exceptThe day later stock market recovered, exceptThiokolThiokol -- the producer of solid fuelthe producer of solid fuelacceleratorsacceleratorsHalf a year later the committee published itsHalf a year later the committee published itsreport :report : Thiokol was found responsibleThiokol was found responsible

No one in this world, so far as I know, has ever lost money by underestimating the intelligence of

the great masses of the plain people."-H. L. Mencken


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Crowd wisdomCrowd wisdom success criteriasuccess criteria

For the crowd (group) to be intelligent we need :For the crowd (group) to be intelligent we need :Opinion diversityOpinion diversity

Each of the participants has some private knowledgeEach of the participants has some private knowledge many view points, many specializations: leads tomany view points, many specializations: leads to

better decisionsbetter decisionsIndependenceIndependence

PeoplePeople s opinions are not affected by otherss opinions are not affected by othersDecentralizationDecentralization

Power is not located in a central locationPower is not located in a central location Diminishes the influence of strong individualsDiminishes the influence of strong individuals

AggregationAggregation There is a mechanism to channel peopleThere is a mechanism to channel people s privates private

decisions to a common decisiondecisions to a common decision


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Common current solutions to getCommon current solutions to getinformationinformation

Hierarchical modelHierarchical model Each level reports up one levelEach level reports up one level

Ops reviewsOps reviewsOpen forumsOpen forums

Progress reportsProgress reportsIndicatorsIndicatorsHowever, all these doesnt have what weHowever, all these doesnt have what wehave just seenhave just seen 2 2 slides ago :slides ago :

Opinion diversity, Independence, Decentralization,Opinion diversity, Independence, Decentralization,

AggregationAggregation


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Available solutionAvailable solution

Markets are the most effective mechanism forMarkets are the most effective mechanism for

assigning resources to their most valuableassigning resources to their most valuableuses without relying on a single agent withuses without relying on a single agent withcomplete information memorycomplete information memory


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Potential benefitPotential benefitImagine you could get all the knowledge /Imagine you could get all the knowledge /information of all people in your organizationinformation of all people in your organizationImagine you could aggregate the knowledge fromImagine you could aggregate the knowledge fromall people to address specific questionsall people to address specific questionsImagine you could use the above to predict withImagine you could use the above to predict withhigh probability a key question you havehigh probability a key question you have

E.g. what will be the demand for a specific product in QE.g. what will be the demand for a specific product in Q2 2so I can plan accordinglyso I can plan accordingly

Wouldnt it significantly improve decision qualityWouldnt it significantly improve decision qualityand by this increase the bottom line ?and by this increase the bottom line ?This is achievable and investment is quiteThis is achievable and investment is quiteaffordable. Stay with us affordable. Stay with us


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Prediction market usagePrediction market usage

Companies that are using it :Companies that are using it : GoogleGoogle MicrosoftMicrosoft YahooYahoo HPHP ArcelorArcelor Procter & GambleProcter & Gamble Eli LillyEli Lilly Yes, Intel as well !Yes, Intel as well !

What for they use it :What for they use it : predicting product salespredicting product sales pricing a productpricing a product predicting market pricespredicting market prices meeting project schedulemeeting project schedule Predicting next generation technologiesPredicting next generation technologies


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My experienceMy experience

I have run prediction market for aboutI have run prediction market for about 20 20markets (questions) duringmarkets (questions) during 2 2 year periodyear periodHelp I got to make it as effective as possible :Help I got to make it as effective as possible :

I worked with IT research that cooperates with CaltechI worked with IT research that cooperates with Caltechand run it to predict different CPUs quarterly demandand run it to predict different CPUs quarterly demand

Daphne Raban, PhD from Haifa university businessDaphne Raban, PhD from Haifa university businessschool, an expert in this area, helped as a consultant.school, an expert in this area, helped as a consultant.

I (actually the market) was able to predict thatI (actually the market) was able to predict thatsomething is not going to happened whilesomething is not going to happened whilemanagement didnt have a clue (see next slide)management didnt have a clue (see next slide)I was able to motivate people to attendI was able to motivate people to attendIt is simple, takesIt is simple, takes 5 5 minutes only to predict !minutes only to predict !There is a proven working system.There is a proven working system.


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Predicting a quarter aheadPredicting a quarter ahead

0

100

200

300

400

500

600

700

800

28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

ww22 Official: 36 Round I

ww22 Official: 36 Round II

ww26 Official: Round I

ww26 Official: Round II

ww31 Official: 36 Round I

ww31 Official: 36 Round II

ww35 Official: Round I

ww35 Official: Round II


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Explanation to the graphExplanation to the graphThe question put on market : Date when of The question put on market : Date when of 66 66%%of suppliers are ready with SFP+ Opticsof suppliers are ready with SFP+ OpticsIt was supposed to happen in wwIt was supposed to happen in ww36 36Usually most people predict the POR (they listenUsually most people predict the POR (they listentoo much to analyststoo much to analysts ), so it is like a Gaussian), so it is like a Gaussian The pick is wwThe pick is ww36 36, and it goes down to, and it goes down to 0 0..Suddenly in wwSuddenly in ww45 45 we see another pick.we see another pick. People invested in this option because it was thePeople invested in this option because it was the

latest possible date. It means they predict will notlatest possible date. It means they predict will nothappen, or will happen way afterhappen, or will happen way after

In wwIn ww35 35 market management still thought it ismarket management still thought it isgoing to happen in wwgoing to happen in ww36 36 Using this method they could have known itUsing this method they could have known it 3 3 monthsmonths

ahead of timeahead of time


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prediction market 4 טל גת.ppt [compatibility mode]

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