Art Hutchinson blogged a couple of unrelated posts that mentioned
Prediction Markets peripherally and used the occasion to make some interesting points
himself. This is one of those rare cases where there’s more material
in the commentary than was evident in the sources. If you follow the
links back, you’ll find somewhat interesting blog entries that barely
touch on the ideas that Art took out of his encounter with them.
It looks like rumors must have abounded in regards to Yahoo!’s acquisition of flickr before the deal was final. The deal was announced late on March 20th, but Yahoo!’s buzz game was hopping by around the 16th. If you look at the chart here, you’ll see that the trading price shot up from 10 to 20 in the days preceding the deal. Unfortunately for those who made the bets, the underlying statistics that set the payoff are searches on Yahoo!, which didn’t respond until the 21st. The masses didn’t know about the rumors, but should have been paying attention to Yahoo!’s buzz.
After some internal conversations about our goals for Zocalo, CommerceNet has agreed that the Zocalo code will be released as Open Source under the MIT
license (AKA the X11 license). The MIT license is short and simple and grants broad rights to use the code. It’s likely that other CommerceNet Lab projects will be released with the same license when they are ready. I’m quite pleased with this choice, since it means the broadest possible usability for the code. Anyone who finds interesting ideas or useful implementation details in the code will be free to use them in any way that makes sense to them.
We’re making good progress on building support for an experiment being planned at George Mason University by Ryan Oprea, Robin Hanson, and David Porter. They’d like to be running the experiment through most of April, and I’m working on getting it ready. I expect to spend 1-2 weeks cleaning up and organizing the code after the code is ready for them so I’ll feel comfortable publishing it. It won’t be done, but it’ll be presentable. From there, we’ll plan out next steps, and look for sensible projects for volunteers to help with. (Yes, we have some offers to help.)
For the moment, I only distracted myself from development long enough to change the copyright notice in all the source files, change the package name in all java files to net.commerce.zocalo, check it all in to our internal source control system, and write this blog entry. Now back to work.
David Pennock‘s fascinating dynamic pari-mutuel market mechanism has finally surfaced in a public prediction market, TechBuzz. It’s a tournament co-sponsored by O’Reilly & Associates to predict future share of search query terms across ~100 “geek buzzwords.”
It was launched during a session on “From the Labs” by YRL director Gary Flake (Ph.D., as he puts it :-). He described the mission of their 30+ staffers as a “hedged portfolio” of long/short, basic/applied, platform/prototype balancing while publishing and collaborating as openly as possible. He quickly summarized our mechanisms for calculating opinions:
- asking a single person;
- asking a single expert;
- asking an aggregate of people (voting);
- asking an aggregate of experts (electoral college/representative democracy);
- and ultimately, aggregating prediction by performance: markets.
They’ve done a great job of working with NewsFutures to skin a custom version of their UI that looks very Yahoo!-style, clear and clean. I con only suppose the performance problems are due to the overloaded wireless at O’Reilly’s Emerging Tech confab where this was launched today; and the fervent trading by the audience members. [I, for one, am up nearly $200 betting on my favorite technologies: Syndic8 and HDTivo, and one bargain-hunting bet on JOTS — and already hammered out of the top-10 by folks with far more bradding rights like Zawodny and some thousand-aire named “plasticbag” :-]
Yahoo! Research Labs: The Tech Buzz Game is a fantasy prediction market for high-tech products, concepts, and trends. As a player, your goal is to predict how popular various technologies will be in the future. Popularity or buzz is measured by Yahoo! Search frequency over time. Predictions are made by buying virtual stock in the products or technologies you believe will succeed, and selling stock in the technologies you think will flop. In other words, you “put your play money where your mouth is.”
1. You’re bullish on podcasting; you buy shares of PODCAST stock
2. Britney announces her next single will be delivered exclusively via podcast
3. Curious tweens everywhere flood Yahoo! with searches about podcasting
4. Your shares skyrocket; you make a bundle
As a technology enthusiast, use the Tech Buzz Game as a window into community sentiment about the future of technology.
As CommerceNet’s latest hire, and Principal Investigator for a new project (“Zocalo”) within the lab, I wanted to introduce myself to the readers of this blog.
I have been interested in Prediction Markets (AKA Idea Futures) for quite a while. Over the last few years, I have been working with a handful of other people to find ways to promote this technology. As a software developer, I have built a couple of prototypes on my own to explore different directions.
When I heard late last year that CommerceNet was starting a lab to explore decentralization and ecommerce, I was very excited to find that they might be interested in including Prediction Markets as a part of the lab. After some preliminary discussions, CommerceNet agreed to fund the development of a more specific proposal and its presentation at the DIMACS workshop on Markets as Predictive Devices in February at Rutgers. The proposal has now been issued as CN-TR-05-02: Zocalo: An Open-Source Platform for Deploying Prediction Markets. The presentation I gave at the workshop is up on the DIMACS web site. And my job is to make it all happen.
The goal of the project is the development of an open source toolkit for creating Prediction Markets and of a community of interested users. Prediction Markets are markets based on financial securities that pay the holder an amount that depends on the outcome of particular events. Markets in these artificial commodities generate forecasts that have been shown to improve on other prediction methods (pundits, expert panels, polls, focus groups) whenever participants have relevant information about the likelihood of the events. These markets decentralize decision-making by creating reliable predictions based on wide-spread expertise from people who wouldn’t be consulted in any conventional forecasting procedure.
Chris Masse continues to
connect to interesting new people and events in Prediction Markets. I
followed his pointer to
a Blog focusing on Prediction Markets written by Art Hutchinson that I hadn’t seen
before. The newest entry there is a
call for speakers for a panel on Prediction Markets at the
Conference Board in NYC in late May.
The panel will focus on “prediction markets as a means to
measure/assess the future market prospects of various innovations”.
Art is looking for a few more “corporate speakers who have done
something with PMs inside their organization.”
For many years, game items such as swords or gold have been traded online: virtual objects are sold for real money to the tune of at least $100m a year.
… This month, an “Ultima Online” player set up a scheme to let players donate items and currency to raise money for tsunami relief. Currency exchanges even allow gamers to move funds from one game to another.
…Trading can also be a symptom of mismanagement of the in-game economy. Inflation is rampant in most games, due to the convention that killing a monster yields a monetary reward: rising prices then fuel real-world trading. But newer games have more control over the money supply, which seems to reduce such trading.
(from A model economy)
Chris Masse’s year end summary of Prediction Markets activity for 2004 gave a pointer to an article from Time Magazine back in July that I had skimmed earlier. When I looked at it again, I found references to internal markets at Microsoft, Eli Lilly, and Intel that I hadn’t noticed before. It seems worth the time to gather together references to all the internal market experiments I’ve heard about, since most of them haven’t been written up formally as far as I’ve been able to tell.
|HP||sales level||Charles Plott||Time, Plott & Chen|
|Eli Lilly||drug efficacy||Eli Lilly||Time|
|Microsoft||developer acceptance of new releases||Todd Proebsting||Time|
|Intel||assignment of chip production to plants||Tom Malone||Time|
|British Petroleum||Pollution Credit trading *||internal||Tom Malone: The Future of Work|
|Siemens||software development scheduling|| Gerhard
* I should mention that the BP case was trading internal pollution credits, while all
the others seem to have been Idea Futures markets.
I’ve added several more examples to a copy of
this table on the CommerceNet wiki. They include Google, Corning, and Rite Solutions
Canadians can place online bets for next CEO to get boot
By Del Jones, USA TODAY
People who want to do more than just read about CEOs getting booted now can try and cash in on the next executive suite ejection.
Online site Betfair this month introduced wagering on the fates of CEOs of nine troubled companies. While this might have you reaching for your credit card with plans to bet on who will be the next to suffer the fate of someone like Franklin Raines of Fannie Mae, put your wallet away. The betting is only on CEOs of Canadian companies, and it’s not open to U.S. gamblers.
Gambling on non-sporting events such as CEO job security is illegal in the USA and almost certain to remain that way. Laws vary state by state. Even Nevada, which allows sports gambling, does not permit betting on non-sporting events such as the Oscars, says Anthony Cabot, a partner at Lionel Sawyer & Collins in Las Vegas and an expert on gaming law. CEOs can rest assured that there won’t be any rush by states to allow betting on their fate, Cabot says.
Betfair, a British firm, says it accepts no U.S. bets, at least not since 2002 when the 3rd Circuit Court of Appeals upheld the seizure of $490,000 wagered by Americans on another British Web site.
CEO wagering is legal in the United Kingdom but is not available because the Brits are bored by the prospects of CEOs getting sacked, says Jordan Ferguson, Betfair’s head of international sales.
Brits use Betfair to wager on everything from snooker to U.S. football, but the only gamblers interested in CEOs are North American, and U.S. laws make Betfair restricted to Canada, Ferguson says.
Betfair does not back wagers but acts as a middleman for customers wishing to take different sides of a bet. Betfair’s revenue comes from keeping 2% to 5% of the winning bet, Ferguson said.
Volume has been light. Less than $100,000 was wagered for or against CEOs in the first two weeks, Ferguson says.
Arthur Millholland, CEO of Calgary-based oil exploration company Oilexco, has been the most likely to lose his job by April 30, 2005, according to Monday’s betting on the Betfair site. Someone who bets $10 that Millholland will still be around next spring would get about $20 if he survives.
Relatively safe, at least among the nine CEOs on the hot seat, is American Bill Owens, CEO of Nortel Networks, an Ontario-based telecom giant that has seen its stock price cut by more than half since February. A $10 bet that Owens will survive until April 30 returns about $14.50.
Asked for comment about the wagering over Owens’ fate, Nortel spokeswoman Tina Warren said in an e-mail: “Mr. Owens is committed to Nortel and excited by its prospects for the long term.”
Five other Canadian companies contacted, including Oilexco, had no comment or did not return calls or respond to e-mail.