Congratulations to Stanford,
who won DARPA’s Autonomous
Vehicle race on Saturday, and to
Carnegie Mellon, who had
two vehicles in close contention all day. DARPA also deserves kudos
for running a website that was tracking the vehicles as the race
progressed, showing where each vehicle was on the course and which
ones were still moving. It would be nice if they had enough funding
left to turn the site into something of continuing value–visitors
ought to be able to replay the race, given all the statistics DARPA
collected.

But the reason I’m able to categorize this post under the Prediction
Markets label is that the markets on the claim didn’t do anywhere as
well as the robotic cars. There wasn’t much participation in the
markets (14 coupons in circulation, and 57 total trades in the
yes/no
market and 7 coupons traded 19 times in the

scaled claim.) More importantly, there was a 30 point spread in
the prices offered. The morning of the race, the highest anyone was
offering on the yes/no claim was 25, and the lowest ask was at 50.

Observers must have learned last year’s lessons too well: a year ago,
the best vehicle traveled only 7 miles. This year, all but one of
the 23 finalists beat that mark, with 7 traveling more than 50 miles
through tough, visually confusing terrain, and 5 finishing the course
(4 within the alloted 10 hours.)

Before the race, the rhetoric was very positive. It seemed that most
of the teams were bragging that they had run their own practice
courses, and saying that the real course shouldn’t pose any new
problems. I would have expected that people close to one of the
teams would have been able to gauge their practice successes and
failures and conclude that if the team you know about has a 50 percent
chance of finishing, and there are 25 teams, then someone ought to be
able to finish. The only conclusions that make sense to me are that
no one active on the FX market knew someone who knew someone on one of
the teams, or that everyone was worried that the DARPA course would
hold some new challenge that none of the teams would be prepared for.
But they all already knew that tunnels (cutting off GPS reception),
cattle guards (fooling depth perception), narrow passes and mud
puddles were on the route.

Oh, well. We try not to claim that Prediction Markets can reliably
predict everything; just that they do a better job of coordinating
predictions than any other mechanism we know of. Here’s another
example of a weak prediction. Did any other mechanism do better?

The meeting has been rescheduled for December 2 in order to accomodate more participants.

Collabria, which hosts
discussions on new technologies for collaboration and knowledge
management, will be hosting a discussion on
Prediction Markets in San Francisco on October 21stDecember 2. They have a
presence in several
other cities, and plan to host similar discussions in other
locations. Their modus operandi is to get a small group (~25
people) together, have a few presentations (sans PowerPoint), and
discuss the implications of the ideas.

The San Francisco discussion
features Bernardo Huberman, Ely Dahan, Eric Zitzewitz and me. Bernardo‘s
recent papers (with Tad Hogg) are about techniques to
correct for some
inefficiencies they’ve identified in small, internal corporate
prediction markets. Ely teaches
marketing at UCLA, and uses Prediction Markets as a replacement for
focus groups to get consumers to
predict what
product feature mix will be most desirable. Eric has written
about how Prediction Markets can
contribute to policy discussions, and demonstrating that the
prices in well-structured markets
correspond to probabilities.

I expect to give an
introduction to the idea of Prediction Markets (because I’m speaking
first), talk about how they can be valuable in policy setting and
business planning, and give an update on Zocalo’s status.

Kevin Compton, star VC at Kleiner, Perkins, has invested personally in a venture more closely related to the NHL than EAI… Protrade appears to be a market that tracks prices set by the house, based on detailed models of “player performance” — the game (of skill) is to track that synthetic index, it seems.

This is well short of gambling, I’d wager :)

New Net venture: Sports stock mart / Online startup to trade ‘shares’ in pro athletes

New Net venture: Sports stock mart
Online startup to trade ‘shares’ in pro athletes
Benny Evangelista, Chronicle Staff Writer
Monday, September 19, 2005

Sports fans may soon be wondering whether their “shares” in 49ers quarterback Tim Rattay are falling or whether they should add Raiders wide receiver Randy Moss to their portfolio.

That’s because a San Mateo startup called Protrade Inc., which has key backing from well-known sports figures such as Brent Jones, Jeff Moorad, Bill Walsh and Jerry West, plans to launch an online venture that assigns a value to pro athletes as though they were publicly traded companies.”It’s much more similar to a sports stock market than a fantasy sports league,” said Protrade co-founder Mike Kerns. The other co-founder is Jeff Ma, onetime member of the infamous team of blackjack players from the Massachusetts Institute of Technology, which devised ways to beat Las Vegas casinos.

Kerns and Ma plan to open the firm’s Web site, at www.protrade.com, to the public today.

Read more

Courtesy of Marginal Revolution’s Tyler Cowen, I read about the bet between Matthew Simmons (a Peak Oil pundit) and John Tierney (a NY Times columnist). It looked like another case of interesting public bets demonstrating that there was a contentious issue going unresolved in the public debate, so I proposed a claim for the FX market modeled on my previous claimNLud on a 1995 bet between Kevin Kelley and self-proclaimed Neo-Luddite Kirkpatrick Sale. I persevered, even in the face of James Annan, claiming that it was all a publicity stunt, and that Simmon’s bet shouldn’t be taken seriously, and even pointing out the financial markets where similar claims could be traded. Today I read EconBrowser’s take on it all (thanks to Tyler for the pointer) and decided to withdraw the claim.

EconBrowser points out (as James tried to tell us) that Simmons is making a cheap public bet when he could be making an extremely lucrative investment ($130,000 return for a little more than the $5000 he put in the bet, or $1.3 Million in 5 years if he believed it enough to invest $50,000) if he believed what he was saying. If he made the investment (at much better odds than his cheap public bet) he would be telling the market that oil is getting rarer in way that the market would react to. As it is, I’m sure those who trade in oil futures either laughed at Tierney’s article or ignored it entirely. A friendly bar bet (even at $5000) doesn’t impress the traders the way a change in the price or number outstanding of call options would. So I’m going to withdraw the claim. I was already convinced that it wouldn’t trade at interesting prices; apparently everyone else knew it, too.

The Wall Street Journal (registration required; bugmenot didn’t work) has an article on rising prices at the pump, titled “New Options for Saving at the Pump”. Most of the article discusses credit card enticements, membership club inducements and websites that help you find the cheapest gas in town. But they also have a paragraph on a web site that is now accepting wagers on the price of gas. The side bar (see image) suggests that “one way to cut fuel costs” is to “bet on the price of gas.”

One Web site, Pinnaclesports.com, started taking wagers earlier this month on where gas prices are headed. The site effectively allows people with long commutes to hedge their exposure. For example, if you think average gas prices in New York or Los Angeles will hit $3 by Jan. 1, you can bet $110 to win an additional $100. If you think prices won’t hit that level, you can bet $110 to win an additional $100.     [chris: that’s the same as .476 bid/.485 ask].

Among my top few prediction Market sites, the only other one that is covering gas prices is Foresight Exchange. There was a recent spike (to 90¢!), but the odds there are 22% for the national average to reach $3 by the end of the year.

Two responses to the WSJ article:

• Is the WSJ going to make a habit of looking for market odds or a betting market whenever they can connect it to a story? This would be good built-in advertising for any provider that can move quickly to add topical claims.
• Pinnaclesports.com doesn’t meet even pretty loose definitions of a prediction market. The odds seem to be set by a bookie rather than by offsetting bets of people with different opinions, and the odds are presented in a few different gambler-centric formats that are hard to read as probabilities.