THE FORECAST EXCHANGE Decrease Risk and Increase Information Flow

What is the Forecast Exchange?

The Forecast Exchange is a tool to decrease risk and increase information flow in project oriented businesses.

It is a project performance analysis tool where shares in project success are bought and sold on a company stock market.

What is the Forecast Exchange?

The result is quantified crowd-sourced project intelligence where the price of a stock reflects the likelihood of success. It gives senior management a unique insight into popular opinion.

Think of it like a "real time" health check of KPIs

What is crowdsourcing?

Crowdsourcing, a modern business term coined in 2005, is defined by Merriam-Webster as:

“The process of obtaining needed services, ideas, or content by soliciting contributions

from a large group of people.”

What are prediction markets?

Prediction Markets are exchange-traded markets created for the purpose of trading the outcome of events. The market prices can indicate what the crowd thinks the probability of the event is.

A prediction market contract trades between 0 and 100%. It is a binary option that will expire at the price of 0 or

100%.

A stock market without money?

A common belief among economists and the financial community in general is that prediction markets based on play money cannot possibly generate credible predictions. However, the data collected so far disagrees.

Analyzed data from existing prediction markets concluded that market prices predicted actual outcomes and/or outcome frequencies in the real world

Has it worked before?

Has it failed before?

As it turns out, people don’t like the idea of trading stock in the

likelihood of terrorist attacks as much as they like trading in the

success of hollywood actors.

Forecast Exchange 101

A binary forecast is selected to be tracked. An example of such a forecast might be "Production of Widgets is

on schedule and will be delivered to the client by March 1st". Note that the forecast will be either true (the Widgets will be delivered on time) or false (they won't).

Key to the theory behind the Forecast Exchange is that as many people as possible have access to shares - it is based on the principle that there exist a lot of informal networks and information sharing within a company that standard analysis tools don't capture.

Forecast Exchange 101

All employees are awarded a set number of shares in the Widget forecast, which at the time of launch are worth $50 each. On March 1st the Widget forecast will be closed and the true value of the stock will be awarded - $0 if the Widgets were not delivered and $100 if they were.

Just as on the real stock exchange, an employee can sell all their

shares and use the money to invest in other forecasts they feel more confident about, or they can hedge within this forecast.

Forecast Exchange 101

Forecast Exchange 101

As the closing date approaches, the value of the Widget forecast will draw closer to one value or another

This is the moving indicator in "real time" of employee faith in the forecast and percentage likelihood of success.

Challenges

In order to accurately reflect the trending value of a stock, trades must be made frequently and at a relatively high volume. Employees need to be rewarded for their active participation in the game.

There is a (hopefully very small) risk that employees could take the

game too seriously and try to "manipulate" the market - actively sabotaging a project to provoke a $0 value. Note: this is one of the reasons the US Government’s terrorist market was – in retrospect – a terrible idea!

Contact Celina (project manager) or Halvard (lead developer) at:

forecastexchange@gmail.com

More information?