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

2. 1
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

3. 2
Prediction Markets
June 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

4. 3
Prediction Markets
June 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

5. 4
Prediction Markets
June 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

6. 5
Prediction Markets
June 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

7. 6
Prediction Markets
June 25, 2013
Markets and Crowd Intelligence
Collective
intelligence
Markets
Prediction
Markets
•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

8. 7
Prediction Markets
June 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

9. 8
Prediction Markets
June 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

10. 9
Prediction Markets
June 25, 2013
Prediction Market view: Obama 2012 (July)
Source: http://www.intrade.com
Blip: May 1, 2011, Osama bin Laden killed

11. 10
Prediction Markets
June 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

12. 11
Prediction Markets
June 25, 2013
US Republican Nominee: Iowa caucus 2012
Source: http://www.yahoo.com

13. 12
Prediction Markets
June 25, 2013
Bets of Bitcoin Prediction Markets
Source: http://betsofbitco.in (digital currency)

14. 13
Prediction Markets
June 25, 2013
When to use Prediction Markets
 Complexity (ecosystem)
 Multi-party value chain
 Uncertainty
 Clear outcomes
 Market liquidity
 Diversity of opinion
Prediction Markets books

15. 14
Prediction Markets
June 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

16. 15
Prediction Markets
June 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

17. 16
Prediction Markets
June 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

18. 17
Prediction Markets
June 25, 2013
HSX – shorting Will Smith
Source: http://www.hsx.com
 Monetizing reputation and the likes, attention, intention
thought economy

19. 18
Prediction Markets
June 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

20. 19
Prediction Markets
June 25, 2013
Gaming Prediction Market - SimExchange
Source: http://www.simexchange.com

21. 20
Prediction Markets
June 25, 2013
Iowa Electronic Health Markets
Source: http://iehm.uiowa.edu/iehm/trnmt/trnmt.html?symbol=dengue
 Flu markets
 Disease markets

22. 21
Prediction Markets
June 25, 2013
Health Markets and Disease Eradication
Source: http://iehm.uiowa.edu

23. 22
Prediction Markets
June 25, 2013
Crowdsourced Data as Prediction Market
Source: http://iehm.uiowa.edu
HealthMap
Google Flu Trends

24. 23
Prediction Markets
June 25, 2013
Futurist Prediction Markets – LongBets
Source: http://www.longbets.org/bets

25. 24
Prediction Markets
June 25, 2013
Futurist Prediction Markets – LongBets
Source: http://www.longbets.org/bets

26. 25
Prediction Markets
June 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

27. 26
Prediction Markets
June 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

28. 27
Prediction Markets
June 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
Economy2.0

29. 28
Prediction Markets
June 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

30. 29
Prediction Markets
June 25, 2013
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