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).
1. Melanie Swan
Founder
MS Futures Group
+1-650-681-9482
@LaBlogga
m@melanieswan.com
www.melanieswan.com
June 25, 2013
Slides: http://slideshare.net/LaBlogga
Live Prediction Markets Simulation
Futures & Forecasting - Quantitative Methods
Image: http://wall.alphacoders.com/
SU GPS for the Mind: www.mindtimemaps.com/start/sugp1
SU Prediction Market: gsp13.inklingmarkets.com
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Prediction Markets
June 25, 2013
Workshop 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
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Prediction Markets
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About Melanie Swan
Hedge fund manager, futurist, entrepreneur,
founder DIYgenomics, philosopher
Work experience: Fidelity, JP Morgan, Arthur
Andersen, iPass, RHK/Ovum
Education: MBA Finance, Wharton; BA
French/Economics, Georgetown Univ
Current projects: melanieswan.com
Sample publications
Swan, M. The Quantified Self: Fundamental Disruption in Big Data Science and
Biological Discovery. Big Data 2013, In Press.
Swan, M. Crowdsourced Health Research Studies: An Important Emerging
Complement to Clinical Trials in the Public Health Research Ecosystem. J Med
Internet Res 2012, Mar;14(2):e46.
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.
Source: http://melanieswan.com/publications.htm
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Future 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
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GPS for the Mind Exercise
Plot time orientation: certainty, possibility, probability
www.mindtimemaps.com/start/sugp1
Image: http://www.mindtime.com
Source: Fortunato, VJ and Furey, JT. The theory of MindTime: The relationships between Future, Past, and Present thinking and
psychological well-being and distress. Personality and Individual Differences. January 2011, 50(1), pp. 20-4. http://www.miindtime.com
certainty possibility
probability
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Prediction Markets Definition
Image: http://www.simExchange.com
1Source: 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 group
opinion using market principles
• Research has shown that prediction markets can
develop more accurate forecasts than polls or experts1
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History 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 policy
1Source: http://www.midasoracle.org/2007/07/17/history-prediction-markets-timeline
Image: http://www.bookshift.com
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Prediction Markets – ‘Pricing’ Details
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
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Prediction Market view: Obama 2012 (July)
Source: http://www.intrade.com
Blip: May 1, 2011, Osama bin Laden killed
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Prediction Market view: Obama 2012 (Nov)
Source: http://www.intrade.com
Election Day: November 7, 2013 – 4 pm EST
Election Day: November 7, 2013 – 10 pm EST
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HSX – shorting Will Smith
Source: http://www.hsx.com
Monetizing reputation and the likes, attention, intention
thought economy
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HSX Reputation Portfolios
Source: http://www.hsx.com
The Whuffie Economy!!
Monetizing reputation
New forms of valuation and
exchange in the likes,
attention, intention, and
thought economy
Fantasy football leagues for
LinkedIn colleagues,
Facebook friends
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Prediction 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? How
accurately do you think others will answer?
Calibration round(s)
Image: http://www.consensuspoint.com
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Future 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 individuals
become a valuable and personally-tradable currency
Accurate predictor, information steward
Image:http://www.tvrage.com/shows/id-23464
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Broader Context: Markets are the Platform
Types of Markets Resource
allocation
Exchange:
supply &
demand meet
Information
(price)
discovery
Value
identification
& attribution
Utility
creation
Traditional Markets
Prediction Markets
Affinity Capital
Multicurrency Society
Automatic Markets
Idea Management
Marketplaces
Scarcity Management /
Abundance Injection (PSE)
Roles of Markets
Source: Swan, M. New Banks, New Currencies and New Markets in a Multicurrency World: Roadmap for a Post-Scarcity Economy by
2050, presented at Create Futures IberoAmérica, Enthusiasmo Cultural, São Paolo Brazil, October 14, 2009.
http://melanieswan.com/documents/economy_20.pdf
Economy2.0
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Resources
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 Oct
15;306(5695):462-6.
Trepte, K. et al. Forecasting consumer products using prediction
markets. MIT. 2009. http://dspace.mit.edu/handle/1721.1/53546
Chang, W. et al. Simulating prediction markets that include human and
automated agents. MIT. 2009.
http://dspace.mit.edu/handle/1721.1/53097
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Prediction Markets Summary
Image: http://www.simExchange.com
Prediction markets are a tool for collecting group
opinion using market principles
31. Questions?
Melanie Swan
Principal
MS Futures Group
+1-650-681-9482
m@melanieswan.com
www.melanieswan.com
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
SU GPS for the Mind: www.mindtimemaps.com/start/sugp1
SU Prediction Market: gsp13.inklingmarkets.com