Open source markets

December 16, 2006 8:17 AM

Prediction markets trade uncertainty for collective wisdom, and have been proven to be more accurate than other mechanisms for predicting outcomes such as polls. Many corporate entities (HP, Intel, Google, Yahoo, Siemens, etc.) are said to be using them internally. Several successful prediction markets already exist, such as Hedgestreet, NewsFutures, the Iowa Electronic Markets, Hollywood Stock Exchange, and Inkling Markets. A spinoff of DARPA's Policy Analysis Market, prediction markets might be to markets what open source was to software.
posted by localhuman (18 comments total)

Crooked timber has had good discussions on the merits of predictive markets.
posted by afu at 8:53 AM on December 16, 2006 [1 favorite]

I was reading a couple articles on this a while back. Lance Fortnow is a professor who worked with a couple Yahoo! guys on predicting senate and gubernatorial races.
posted by The Straightener at 9:29 AM on December 16, 2006

Yahoo just held a "microconference" on prediction markets last week that you might want to check out if you're interested in the topic. There are webcasts on the site.

Todd Proebsting from Microsoft had the best, most engaging, (and funniest) talk I think, and the HP and Yahoo speakers both had a lot of useful insight into the areas of their research. (Typically, the Google presentation was blissfully content free, although in this case it seems more of intrinsic lack of interestingness vs willful obsfucation).
posted by lhl at 9:52 AM on December 16, 2006

thanks for the links!
posted by localhuman at 10:40 AM on December 16, 2006

Game theory. The smart money will always be in position to profit from the prediction before it is announced, and before the prediction fails.
posted by Brian B. at 10:51 AM on December 16, 2006

Given the propensity for making predictions here on MeFi, could #1 spin our gasbaggery collective wisdom into a lucrative service and make us all rich?
posted by Quietgal at 11:04 AM on December 16, 2006

And there is the ancient 1841 tome entitled: Extraordinary Popular Delusions And The Madness Of Crowds. The idea of "open-source" process leading to profitable conclusions may have some short-term validity, but contrary sentiment is also often shown to be the more insightful and valid approach.
posted by wallstreet1929 at 11:41 AM on December 16, 2006

Didn't they overwhelmingly predict a Republican victory this last election?
posted by destro at 11:48 AM on December 16, 2006

Chris Masse's 2005 awards.
posted by Kwantsar at 12:21 PM on December 16, 2006

Didn't everybody predict Iraq had WMD?
posted by notyou at 12:34 PM on December 16, 2006

Shouldn't someone mention open source open source markets?
posted by tmcw at 1:37 PM on December 16, 2006

So instead of whoever will answer the phone, people actually involved in your area of business are polled. Of course this would include your competitors, but might be more reliable than astrology for predicting the future.
posted by Cranberry at 2:33 PM on December 16, 2006

Actually there are a lot of fields where prediction fails miserably. Prediction markets are good ways to determine what mobs will do, but they're not good and a lot of other things, supposedly.
posted by delmoi at 2:48 PM on December 16, 2006

There are also gambling related ones. Tradesports.com I believe was the innovator in the sports betting market; they started with mostly sports-bettor clients but have established themselves as a pretty big futures market for everything under the sun. Big political happenings, weather, stock markets, etc etc etc.
posted by cklennon at 3:42 PM on December 16, 2006

delmoi,
Actually there are a lot of fields where prediction fails miserably.

As someone wary of the more extreme claims being made for prediction markets I find this interesting - care to elaborate?

And, what wallstreet1929 said. Extraordinary Popular Delusions is one of the most awesomeist books about markets, ever.
posted by Opposite George at 3:45 PM on December 16, 2006

I actually found Motley Fool's CAPS from a previous MeFi post. It aims to predict the performance of stocks in similar ways to these prediction markets and I find myself spending tons of time there. I'm doing pretty well on CAPS so far, let's just hope a little bit of that translates into real life as I only just started investing in the real world.
posted by haveanicesummer at 4:19 PM on December 16, 2006

you all might be interested in James Surowiecki's (economics writer for the new yorker) book 'The Wisdom of Crowds'. Hear him talk about it here (at an MIT conference on the all hailed Open Content Economy.
posted by localhuman at 5:33 PM on December 16, 2006

forgot this ')'.
posted by localhuman at 5:34 PM on December 16, 2006