Prediction Markets: Are they a good bet?
many of these participants go on to provide liquidity in should break down this barrier and show that prediction
the serious markets.” markets offer strategic planners and decision makers
another valuable tool to help them in their drive for the
The barrIers most accurate forecast.
So are prediction markets set to become established
as the norm within large organisations for planning InnovaTIon
and decision making? Despite growing popularity and Innovation provides an ideal area for some organisations
mounting evidence to suggest they are an accurate to start experimenting with prediction market solutions.
prediction tool, many organisations remain sceptical and Many companies run continuous improvement and
are reluctant to experiment. innovation schemes where employees submit new ideas
to solve all sorts of business problems or to create new
revenue opportunities. Choosing the right ideas to invest
“The beauty of prediction markets is that they can
in is often left to a small panel of experts. A prediction
deliver a message (sometimes an uncomfortable
market could offer an alternative approach to let the
message) that cannot be denied. A large part of
people decide what next big idea to invest in. (Indeed,
the value of such a market is not only in predicting
RBS Problem Debt management have launched just
the answer to a specific question accurately but
such an initiative in conjunction with Riskdaq trading
also in getting overall information and knowledge
called Research Lab. Virtual currencies are allocated to
out of the market to make better decisions. It’s a
users to invest in/vote on preferred ideas).
great way to get rid of the filtering between the
bottom and top of an organisation and bring up
The fuTure – who can PredIcT IT?
the topics that no one wants to talk about
6
”.
So, will prediction markets become embedded in
Todd Proebsting, Microsoft
the decision making process of organisations? Many
organisations are already finding that decision making
One reason for this may be a perception that the is enhanced by using such markets to harness the
potential benefits do not justify the cost of setting up collective intelligence of staff or customers. The explosion
and running these markets. To counter this, there is a in social networking, a growing body of evidence from
growing number of software solutions such as ‘Inkling organisations successfully employing prediction markets
Markets’, Qmarkets, Zocalo and Foresight Technologies and increasing availability of competitively priced
that provide solutions and services to help companies software solutions, suggest that prediction markets have
set up and run their own markets. a valuable role to play in the future.
1
http://ngm.nationalgeographic.com/2007/07/swarms/miller-text
Another challenge can be the perceived threat that
2 Wisdom of Crowds, James Surowiecki (2004), ISBN-13: 978-0385721707
3
http://www.hpl.hp.com/personal/Kay-Yut_Chen/paper/ms020408.pdf
existing experts within the organisation may feel from
4
http://googleblog.blogspot.com/2005/09/putting-crowd-wisdom-to-work.html
5
http://www.mckinseyquarterly.com/Strategy/Strategy_in_Practice/The_promise_of_prediction_markets_2114_abstract
prediction markets. Experimentation and education
6
http://www.readwriteweb.com/archives/prediction_markets_report_yconfab.php
Perspectives on the future | 21
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