The prospects for wider adoption of prediction markets in organizations have intrigued me since attending the New York Prediction Markets Cluster event early 2006. Searching for prediction market applications to reference in our recent article a 2005 Bo Cowgill piece on Google's use was the most readily accessible.
The Consensus Point hosted Prediction Market Conference September 24 in New York revealed I was clearly not looking in the right places. Hats off to David Perry and Ken Kittlitz for a rich gathering and update on the prediction markets landscape. You answered my questions and more about what companies are using, for what business objectives, and why prediction markets are not more visible. Following are some highlights.
1. Hearing Robin Hanson Speak
It's interesting knowing about a tool and then discovering oneself in a room talking with the person credited with being the "the first to set up and run a corporate prediction exchange —at Xanadu, Inc., in April 1989". Robin Hanson is an "associate professor of economics at George Mason University, and a research associate at the Future of Humanity Institute of Oxford University." His presentation is laced with graphs and focuses on how value is created. Devoting time to exploring his presentations is recommended.
2. Getting Insight into How Leading Companies are Applying Prediction Markets
Hearing the experiences of companies the caliber of GE Research, Misys Banking Systems, NBC Universal, Best Buy and Qualcomm using prediction markets to improve decision-making and project management is attention getting. That answered my question about what companies are adopting. Learning Consensus Point serves companies that do not reveal prediction market applications for data sensitivity and competitive intelligence reasons helps understand why this tool doesn't have a higher profile.
3. Hearing from "The Wisdom of Crowds" Author James Surowiecki About Challenges
Essentially implementing prediction markets challenges traditional hierarchical organizational structures, notions of power, and mindsets, "the deep seated impulse to find the one person with the right answer." I heard Surowiecki say:
"Prediction markets are not just about improving decision-making. Also about transforming organizations as a whole."
4. Listening to Jed Christiansen and being Reminded of the Growing Demands for Analytical Skills in Organization
Jed presented his London School of Economics thesis study results investigating prediction markets to group forecast rowing race winners. (His Mercury's Blog includes video presentations explaining prediction markets and how they can help companies.)
Listening to Jed talk about calibration, accuracy measures, scoring rules, trader distributions, data scatter, linear best fit, and probabilities you cannot escape recognizing the increasingly quantitative talent demands of 21st century business.
5. Noting the People Connecting Impact of Prediction Market Initiatives
A thread among the presenters was how prediction markets expand people connections in organizations. Through market participation employees from disparate parts of organizations discover unknown people with similar interests and unexpected talents. Market activity becomes a thread in employee conversations. Previously unrecognized expertise emerges through successful trading and listing on leader boards.
Smart companies are exploring use and adopting prediction markets to connect intelligences and improve decision-making and forecasting. But doing so demands leadership that is not threatened by discovering what the collective wisdom can tell them, especially when the information shared is not what they want to hear.
Considering Robin Hanson's first corporate prediction exchange dates to 1989, and Ken Kittlitz has been developing exchanges for fourteen years, gives some insight into the realities of putting prediction markets to work in organizations. Has their time come?
~ Jenny Ambrozek