Technology Review Launches Futures Market

prostoalex writes "MIT Technology Review launched a futures market, allowing people to bet on ideas. A similar concept was at some point introduced by the Pentagon, but later the project was shut down. Currently you can bet on major stock indices, on answers to yes/no questions ('Will Oracle acquire PeopleSoft Inc before March 31st, 2004?') and technological achievements ('When will there be a commercially available electronic device using ultrawideband technology?')" Although the game doesn't use real money, the prizes are pretty swell. I like to think of it as the nerd's version of sportsbook.

Comments

hmm

[kurosawdust]

what's the over/under on the amount of time until emacs becomes self-aware?

I hope they consider making this rule:

[saskboy]

No betting on when a time machine will be invented. Because the person who guesses when, is probably the bastard that did invent it.

If this post didn't make your head spin on your shoulders and implode, then you have a better temproral mind than I.

Re:Whats to stop this

[evanbd]

basically, you have to either run it as a gambling operation or as a securities exchange. As a gambling operation, you can't run it across state lines, so you have to go out of the country. There are a couple such; tradesports.com is the biggest, iirc. If you want to make it an actual exchange, that costs $1M to the SEC. This has so far been prohibitive. The other thing of note is the Iowa Electronic Markets, run by U of Iowa, which bet on the presidential elections. They have special permission from the SEC as a research institution, but are highly limited in what they can trade, who can trade, and how much. So, in short, it's hard to do in the US, but there are places doing it.

Also of note is Foresight Exchange, a long-established play money market. It seems a lot of people are interested in it being real, but unfortunately it seems difficult at present (and the few there are charge high comissions).

Foresight Exchange has been doing this for years

[SiliconEntity]

The Foresight Exchange online game has been doing this since 1994. It was invented by economist Robin Hanson, who was also the mastermind behind the ill fated Pentagon effort.

One of the big problems with these "funny money" based games is the possibility of cheating. Sine it doesn't cost anything to register, you can create as many accounts as you want, for free. What you do is create multiple accounts under different names, and arrange to funnel money from one account to another. You have one account make bad trades so it loses money, which then goes into the other accounts, building up their scores. Since this MIT game is offering valuable prizes, they can expect problems with this kind of cheating.

Re:Whats to stop this

[tessaiga]

What's to stop this from becoming real? Why can't I bet on things like this in Vegas or Atlantic City?

Much of this is already "real". You can already go to the financial markets today to try to profit from what you think is going to happen to the price of commodities (via futures contracts), interest rates (swaps), stocks (options), etc. The key line from the article is:

Innovation Futures is a prediction game. Similar to fantasy stock market games, this one lets players trade on all kinds of events.

The point of this seems to be to take a "real" game (the financial markets) and apply it in a virtual form, not vice versa. I'm sure Vegas and Atlantic City both have stockbrokers sitting around somewhere that would be happy to take your cash.

What I disagree with is this statement later in the article:

Innovation Futures, like any speculative market, aggregates the individual expertise and opinions of well-informed and well-motivated traders into a single easily understood number: a stock's trading price. This number can be taken as indicating the collectively agreed-upon likelihood of a particular outcome in the real-world. Even non-participants may thus benefit from such market signals.

Real markets (and the "terror market" which the US proposed earlier) contain information because people work very hard to make sure their investments perform well and that they don't suffer financial losses. In stock market games, on the other hand, participants aren't penalized for losing money, only for winning huge amounts of it. (The article even prevents you from going bankrupt: "When your account's net worth is below a certain level ... you'll be given a choice of contracts that you can get for free and then resell on the markets against fresh cash.".) What tends to happen here (and I've seen it plenty of times in stock market games where they offer cash prizes to the winners) is that people start loading up on risky ventures, essentially turning the whole contest into a lottery rather than a reasoned investment strategy. I really doubt that under this sort of a situation any valid information can be read from the virtual prices.