prediction markets
DESCRIPTION
Prediction markets are a tool for collecting and aggregating opinion using market principles. Enterprise prediction markets (social business intelligence) are in use in 100-200 large organizations for project management and revenue forecasting. Consumer prediction markets are becoming widely used for event prediction (election results, product sales, box office receipts).TRANSCRIPT
Melanie Swan Principal
MS Futures Group+1-650-681-9482
July 28, 2010Slides: http://slideshare.net/LaBlogga
Collective Intelligence Live Prediction Markets Simulation
Image: http://wall.alphacoders.com/
“The future is something which every one reaches at the rate of sixty miles an hour,
whatever he does, whoever he is.”- C. S. Lewis
SU Prediction Market: https://gsp10.inklingmarkets.com SU Online Polling: http://www.rwpoll.com/
2
Prediction MarketsJuly 28, 2010
About Melanie Swan
Hedge fund manager, futurist, entrepreneur, founder DIYgenomics
Work experience: Fidelity, JP Morgan, Arthur Andersen, iPass, RHK/Ovum
MBA, Wharton; BA, Georgetown University Sample publications
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. [Summary of Singularity University technology and implication synthesis]
Swan, M. Emerging patient-driven health care models: an examination of health social networks, consumer personalized medicine and quantified self-tracking. Int. J. Environ. Res. Public Health 2009, 2, 492-525.
Source: http://melanieswan.com/publications.htm
3
Prediction MarketsJuly 28, 2010
Summary
Prediction markets are a tool for collecting group opinion using market principles
Enterprise prediction markets (social business intelligence) are in use in 100-200 large organizations for project management and revenue forecasting
Consumer prediction markets are becoming widely used for event prediction (election results, product sales, box office receipts)
Image: http://www.inklingmarkets.com
4
Prediction MarketsJuly 28, 2010
Futurist toolkit for collaborative intelligence
Short term (0-5 yrs): some degree of insight and certainty Forecasting Scanning Business intelligence Trend analysis Market research Outlier identification Technology evaluation
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
Prediction MarketsJuly 28, 2010
Crowd-sourced toolkit for collaborative intelligence
Wikipedia, wikis, Etherpad
Unconferences
Ignite talks
Tag intros
Question networks Quora, formspring, Hunch
Image: http://nmk.co.uk
http://www.cs.cornell.edu/home/kleinber/networks-book/
6
Prediction MarketsJuly 28, 2010
History of prediction markets
Decision markets, idea futures, predictive markets, information markets, event derivatives, virtual markets
Long history of event betting Election betting, sports betting, stock markets
Modern incarnation – last ~10 years 1988 Iowa Electronic Markets ran first market1
2002 US DARPA terrorism futures debacle Proliferation of consumer and enterprise 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
7
Prediction MarketsJuly 28, 2010
Prediction markets - definition
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
8
Prediction MarketsJuly 28, 2010
Social business intelligence in organizations
PMs in use at 100-200 US organizations (July 2010) Ex: HP, BestBuy, Electronic Arts, Boeing, Amazon, Harvard,
GM, Hallmark, P&G, Ford, Microsoft, Chevron, Lockheed Martin, CNN, Adobe, American Express, Bosch
Applications Project management, risk
management Revenue forecasting, demand
planning, capital budgeting Idea management (rate, filter,
prioritize ideas) Vendors
Consensus Point, Crowdcast, Bright Idea, Qmarkets, Inkling
Image: http://torontopm.files.wordpress.com/2009/06/quarterly-sales-graph.jpg?w=300&h=234
Crowdsourcing vendors: chaordix.com, jovoto.com – marketplace for creative concepts
9
Prediction MarketsJuly 28, 2010
When to use prediction markets
Complexity (ecosystem)
Uncertainty
Many decision points
Clear outcomes
Market liquidity
Diversity of opinion
10
Prediction MarketsJuly 28, 2010
Consumer prediction markets
Iowa Electronic Markets Intrade Prediction Markets simExchange Hollywood Stock Exchange
Oscar predictions LongBets
Source: http://www.hsx.com/security/view/INCPT
11
Prediction MarketsJuly 28, 2010
Consumer prediction markets – LongBets
Source: http://www.longbets.org/bets
12
Prediction MarketsJuly 28, 2010
Consumer prediction markets - simExchange
Source: http://www.simexchange.com/stock.php?id=238
13
Prediction MarketsJuly 28, 2010
Consumer prediction markets - Inkling
Source: http://home.inklingmarkets.com/expiring/markets
14
Prediction MarketsJuly 28, 2010
Consumer prediction markets - Inkling
Source: http://home.inklingmarkets.com/markets/28753
15
Prediction MarketsJuly 28, 2010
Prediction market apps
1Source: Viral Loop: From Facebook to Twitter, How Today's Smartest Businesses Grow Themselves
Intrade Viral Loop1
16
Prediction MarketsJuly 28, 2010
Prediction market design
Structure Event outcome (win/loss) Market scoring (continuum)
Participation incentive Users are anonymous Time frame
Episodic or continuous Question design:
What is your opinion? What do you think others
will say? How accurately do you
think others will answer?
Source: http://www.intrade.com/jsp/intrade/common/c_cd.jsp?conDetailID=693480&z=1278982073468
17
Prediction MarketsJuly 28, 2010
Future of prediction markets
Consumer prediction markets Opinion capture standard website feature
Digg, bookmarking, socnet, updates, gaming Two-way XML element
Real-time polling – automatic alerts for opinion entry per interest profile
Enterprise prediction markets BOL / ERP / supply chain integration Sales and CRM integration
Knowledge acuity ratings of individuals become a valuable and personally-tradable currency Accurate predictor, information steward
Market mechanisms become more pervasive Automatic markets for transparent allocation of fungible resources
based on pre-specified preferences
Image:http://www.tvrage.com/shows/id-23464
18
Prediction MarketsJuly 28, 2010
Summary
Prediction markets are a tool for collecting and aggregating opinion using market principles
Enterprise prediction markets (social business intelligence) are in use in 100-200 large organizations for project management and revenue forecasting
Consumer prediction markets are becoming widely used for event prediction (election results, product sales, box office receipts)
Image: http://www.intrade.com HIGGS.BOSON.DEC10
19
Prediction MarketsJuly 28, 2010
Resources
Prediction Markets blogs http://www.midasoracle.org http://www.ingenesist.com http://torontopm.wordpress.com
Prediction Markets Cluster http://pmclusters.com
Prediction Market Industry Association http://www.pmindustry.org
Questions?
Melanie SwanPrincipal
MS Futures Group+1-650-681-9482
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
21
Prediction MarketsJuly 28, 2010
Prediction markets simulation workshop
NT – Nanotechnology
NCS – Networks & Computing Systems
EES – Energy & Environmental Systems
AIR – AI & Robotics
BIO – Biotech, Bioinformatics, Medicine & Neuroscience
You are the world’s leading social venture capitalists Seeking ideas with social, environmental & economic impact 5 teams, $1 billion to invest Alongside prediction market registering opinion on outcomes
22
Prediction MarketsJuly 28, 2010
Futures simulation workshop
Image: Natasha Vita-More, Primo Posthuman
2010 – 2020 Each team creates two
plausible future technology ideas to pitch to the other teams
Each person votes by investing in the top technologies
Winning teams and technologies are those that garner the most investment
23
Prediction MarketsJuly 28, 2010
Future simulation workshop: 2010-2020 Each team creates two plausible future technology ideas
to pitch to the other teams, for example Technology, product Startup, research group, non-profit organization, NGO Policy, social shift, new governance/economic model Strategy undertaken by existing companies/countries Water/food/upcycling/space/energy or not
Criteria Novelty Social, environmental & economic impact Trade-off: high-impact idea vs. practical realizability
Present to the group Concept soundbite (‘eBay for Genomes’) 1-2 minute pitch summarizing the idea
Image:http://bit.ly/csxwqv
24
Prediction MarketsJuly 28, 2010
Team formation & Inkling intro
25
Prediction MarketsJuly 28, 2010
Futures simulation workshop - debrief
What did you realize thinking about energy in 2020? AI in 2030?
How did earlier technology developments influence future outcomes?
How is it best to think about multiple technology areas together?
What did you notice about the simulation and the prediction market together? Reliable?
In what situations could you see using prediction markets? SU?
Image: http://van.embl.de/htfg/img/htfg_logo.png
What did you learn about trying to predict innovation development in long time frames with high uncertainty?