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Google Putting Crowd Wisdom to Work
daveperry writes "The Google Blog has a post about their use of prediction markets to forecast certain events that are relevant to their business. From the article: "Our search engine works well because it aggregates information dispersed across the web, and our internal predictive markets are based on the same principle: Googlers from across the company contribute knowledge and opinions which are aggregated into a forecast by the market. Sometimes, just feeling lucky isn't enough, and these tools can help." In related news, some software was recently open sourced that enables people to set up their own prediction markets."
1. Predict Market
2. Act on Prediction
3. Cause Market Impact
4. Need New Prediction!
World is quickening
Hmm... prediction markets... Ahh: http://en.wikipedia.org/wiki/Prediction_market
Wonderful, Google realizes that many people think they're absolutely wonderful and finds a way to put those people to work for them. As for the possible MSN/AOL deal about to occur and "kill" Google, with ideas like this and a willing user base Google isn't threatened at all.
Support alternatives to Paypal: http://www.e-gold.com
"Group wisdom" is a misnomer for "herd mentality."
I predict that when you herd sheep from field A to field B, they will eat whatever is in field B rather than return to field A.
Read any good sonnets lately?
You just don't know what you're talking about. Why would you think you need a much larger sample if you're not trained in statistics? You must just be completely guessing! Look, the predictions it generates are supposed to be an estimate of what the general population feels the probablility of the event is, not the actual probabililty of the event. Since many times humans have a hard time with probabilities (grossly overestimating rare events, terrorism, etc.), the results have to be interpreted correctly! Futures markets are really interesting though from a financial/statistical point of view.
with terrorism? It's too bad people got all pissy since this method of prediction works fairly well.
I like how you put this in bold and still managed to catch an Informative...
What I'm listening to now on Pandora...
This is really cool, but I hope they control for two of the less-than-ideal behaviors of markets.
1) There are two ways to "be right" in a market. First, I can make the right choice as to the actual ending outcome. This a buy-and-hold strategy. Or, second, I can make the right choice as to the direction of price movements in the market. This is the speculator's buy-and-sell strategy. The first strategy means the the market converges on the "true" expected value. The second strategy leads to bubbles and crashes that don't provide as much useful data on the actually variable being modeled by the market. Google wants to encourage the first type of trading, but not totally suppress the second type of trading because speculators provide liquidity in markets.
2) Manipulators can "cause" events to occur in the way that maximizes their return, but suboptimizes Googles performance. If I bet that a given project will be done in October and it looks like its getting done early, what stops me from causing a small delay? Of if the project is being delayed too much, what stops me from descoping the project or doing a fast, low-quality job to complete the project within my chosen time frame. In either case, I can manipulate the outcome to win in the market, but hurt Google.
Note that I don't include insider trading in the list problems. Google doesn't really care if the market is fair, only that it provides accurate predictions. In fact, Google might encourage insider trading as a way to encourage communication inside the company. The more people that share their "inside" information on upcoming strategic, the better.
Two wrongs don't make a right, but three lefts do.
That's only useful if those emails pick up before anyone else's stock predictions. In order to make money in the stock market, you not only have to predict the future, but you have to do it better than your competitors. If your forecast comes after everyone else's, then the price will have inflated or deflated by the time you can buy or sell, meaning you cannot profit.
The Pentagon was ahead of its time I think.
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.
Rather than USENET, I believe the O.P. was referring to gmail. Web based or not, people (perhaps wrongly) have an expectation of privacy in their personal communications. For Google to be snarfing this out of gmailed data would be extremely evil (violating one of their core principles.)
While the suggestion that Google is monitoring gmail for stock activity is really funny, in real life it wouldn't happen for several reasons. First, they'd be violating their user's privacy. Next, they might be seen as taking advantage of insider information. While companies may have a policy in place about not discussing stock information over email, and most people won't violate their employers rules, human behavior does suggest they'll still talk ABOUT their company.
Finally, if it was revealed that Google ever tried this, you can bet the scammers would immediately start exchanging gmails about some company as part of a pump'n'dump scheme!
BTW, traffic analysis is amazing stuff -- it's been suggested that the pizza delivery businesses in Washington D.C. know when something is up before the rest of us because they deliver more midnight pizzas than usual to the Pentagon.
John
Yahoo has launched one of these to the public back at in March of 2005 at the O'Reilly Etech conference. They actually had a contest where the top performer got a Mac-mini.
sigs are a waste of space
What Google is doing is interesting, but it's no magic bullet. And I'm not even sure I'd use this system to place money on the markets.
I certainly will, if many people use the system. It is extremely useful to know what the majority believes. It is one thing to predict accurately what will happen, and another thing to gauge to what extent this knowledge is already factored into market prices. the point of reading the headlines of financial publications has always been to know where the herds are going, as far as I am concerned.
Didn't John Poindexter propose something similar as a way of predicting terrorist attacks? Didn't the community beat up on him until DARPA was glad to drop the idea? What's different now?
CmdrTaco has been trying to do this for years with his comment moderation system. I think a key problem is that he dosen't use a big enough sample size. It only takes a few people to moderate a comment up to the highest level. The rules of crowd wisdom state that the larger your sample size, the more likely you are to arrive at the "correct" answer. Granted, with something like a story comment, there is no "correct" answer, only interesting and relevant responses. CmdrTaco's goal was not to tease out the interesting comments though, it was to filter out the irrelevant and wasteful spam.
In essence, CmdrTaco had no choice. Spam was starting to choke slashdot comments and making them less than useful. The moderation system saved the comment system, but didn't, as many people assume that it should have done, make the comments more interesting.
I believe that if the prevailing attitude among slashdot developers is to "weed out the spam", we'll see a slow decline of slashdot's popularity until it's made irrelevant by RSS feed aggregators.
IMHO, the attitude *SHOULD* be to exploit slashdot's major differentiator over simple aggregators, which is the community it has created. In other words, they should invert the "weed out the spam" attitude into a "make the comments more interesting" attitude. It's a subtle difference and, on the face of it, it would appear that one begets the other. I contend that weeding out spam does not make comments more interesting and conversely, making comments more interesting won't weed out the spam. Thus we come to the root of the problem, two crosswise goals.
CmdrTaco has to worry about the system from a performance standpoint. Weeding out the spam means less bandwidth and storage costs. That's immediate ROI, and a good thing on many levels. The community, however, needs more than 1,2,3,4 or 5 to determine what comments to read and which to ignore, to make them interesting. I can conjecture at a few ideas that would make it better, but I do not know the ultimate solution, and I doubt anyone else does either. I believe the problem requires more than just CmdrTaco playing whack-a-mole with ideas, meta-ideas and meta-meta-ideas etc. It requires serious PhD dissertation level study.
*Condense fact from the vapor of nuance*
Well, I'll trust Hal Varian before I trust you. He's the well-respected UC Berkeley economics professor that helped google set it up.