Prediction Markets - Singularity University 2013
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Transcript of Prediction Markets - Singularity University 2013
Melanie Swan Founder
MS Futures Group+1-650-681-9482
www.melanieswan.com
June 25, 2013Slides: 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 MarketsJune 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 MarketsJune 25, 2013
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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Prediction MarketsJune 25, 2013
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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Prediction MarketsJune 25, 2013
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 MarketsJune 25, 2013
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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Prediction MarketsJune 25, 2013
Markets and Crowd Intelligence
Collectiveintelligence
Markets
PredictionMarkets
• Google+• Question networks
(Quora, formspring) • Crowdsourced labor
marketplaces • Competitions (Kaggle, foldIT,
eteRNA)• Wikipedia, wikis,
Etherpad• Unconferences
• Ignite talks• Tag intros• Twitter
http://www.cs.cornell.edu/home/kleinber/networks-book
• Crowdfunding (Kickstarter, Indiegogo)
• Resource allocation (Airbnb, Uber, Gettaround)
• Group purchasing (Groupon)
• Reverse group purchasing (Loopt u-
deals, Ringleadr)• Affinity capital• P2P lending• Gift economy
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Prediction MarketsJune 25, 2013
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 MarketsJune 25, 2013
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 MarketsJune 25, 2013
Prediction Market view: Obama 2012 (July)
Source: http://www.intrade.com
Blip: May 1, 2011, Osama bin Laden killed
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Prediction MarketsJune 25, 2013
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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Prediction MarketsJune 25, 2013
US Republican Nominee: Iowa caucus 2012
Source: http://www.yahoo.com
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Prediction MarketsJune 25, 2013
Bets of Bitcoin Prediction Markets
Source: http://betsofbitco.in (digital currency)
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Prediction MarketsJune 25, 2013
When to use Prediction Markets
Complexity (ecosystem) Multi-party value chain
Uncertainty
Clear outcomes
Market liquidity
Diversity of opinion
Prediction Markets books
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Prediction MarketsJune 25, 2013
Types of Prediction Markets
Enterprise Collective Intelligence (organizational) Revenue forecasting, demand planning, capital budgeting Innovation life cycle management (rate, filter, prioritize ideas) Project management, risk management
Consumer Prediction Markets (public) Event prediction (politics: election results; economics: box office
receipts, product sales; health: pandemic prediction) Surfacing relevant content (information valuation)
Source: http://www.hsx.com
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Prediction MarketsJune 25, 2013
Enterprise Prediction Markets
Aggregate hidden organizational opinion and expertise PMs in use at 100-200 US organizations (June 2013)
Ex: Paypal, HP, BestBuy, Electronic Arts, Boeing, Amazon, Harvard, GM, Hallmark, P&G, Ford, Microsoft, Chevron, Lockheed Martin, CNN, Adobe, American Express, Bosch
Prediction market vendors (enterprise idea management) Consensus Point, Inkling,
Spigit/Crowdcast, Bright Idea, Qmarkets
Crowdsourcing and creative concepts market vendors Chaordix, Jovoto
Image: http://torontopm.files.wordpress.com/2009/06/quarterly-sales-graph.jpg?w=300&h=234
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Prediction MarketsJune 25, 2013
Consumer Prediction Markets
Iowa Electronic Markets Intrade Prediction Markets Hollywood Stock Exchange (film) simExchange (gaming) CROWDPARK (general) LongBets (futurist)
Source: http://www.hsx.com
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Prediction MarketsJune 25, 2013
HSX – shorting Will Smith
Source: http://www.hsx.com
Monetizing reputation and the likes, attention, intention thought economy
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Prediction MarketsJune 25, 2013
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 MarketsJune 25, 2013
Gaming Prediction Market - SimExchange
Source: http://www.simexchange.com
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Prediction MarketsJune 25, 2013
Iowa Electronic Health Markets
Source: http://iehm.uiowa.edu/iehm/trnmt/trnmt.html?symbol=dengue
Flu markets Disease markets
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Prediction MarketsJune 25, 2013
Health Markets and Disease Eradication
Source: http://iehm.uiowa.edu
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Prediction MarketsJune 25, 2013
Crowdsourced Data as Prediction Market
Source: http://iehm.uiowa.edu
HealthMap
Google Flu Trends
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Prediction MarketsJune 25, 2013
Futurist Prediction Markets – LongBets
Source: http://www.longbets.org/bets
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Prediction MarketsJune 25, 2013
Futurist Prediction Markets – LongBets
Source: http://www.longbets.org/bets
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Prediction MarketsJune 25, 2013
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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Prediction MarketsJune 25, 2013
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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Prediction MarketsJune 25, 2013
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
Ec
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om
y 2
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Prediction MarketsJune 25, 2013
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 MarketsJune 25, 2013
Prediction Markets Summary
Image: http://www.simExchange.com
Prediction markets are a tool for collecting group opinion using market principles
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
SU GPS for the Mind: www.mindtimemaps.com/start/sugp1 SU Prediction Market: gsp13.inklingmarkets.com