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Cashing in on Online Prediction Markets
garzpacho writes "BusinessWeek takes a look at the use of prediction markets to forecast business success. These markets have been taking the form of games online--the Hollywood Stock Exchange, for example, allows players to bet on the success of movies. Hollywood is currently one of the largest consumers of prediction market data, in part because movies' broad appeal leads to a large number of players, but also because the markets have been surprisingly accurate--92% in picking Oscar winners over the last three years. Because of this success, other industries are taking a look; pharmaceutical and tech storage businesses are currently working to set up their own markets."
Only 92%? I'm sticking with The DaColbert Code.
The Oscars are a popularity contest, so of course a prediction market will be accurate. Plus everyone knows if you throw in a mentally challanged main character or uglify a hot actress you're 10 times more likely to win the Oscar.
Developers: We can use your help.
The Hollywood Stock Exchange
When Google went IPO, I wanted to join in but had no idea what price it was going to emerge at and didn't want to overbid. Then I found out an exotic derivative was being marketed, betting on Google's IPO price. I watched the price of the derivative over the next few weeks; it stayed fairly stable, and I used its value to choose my price. The end result? I placed several bids at different values, and the lowest value I chose was $4/share over the final IPO price, meaning my entire order was executed (though neither I nor anyone else got the full boat).
Maybe we should do this for Source Forge projects? Then we know which ones we shouldn't waste or time on.
Or, we could do this with Linux Distros so we know which ones we should just abandon before wasting all our efforts.
Distrowatch does this... shows the popularity of different distros. It sometimes influences me to try knew distros that manage to make it to the top of the list even if I have never heard of them.
Or, if the market because large enough, producers could use it as a hedge against failure and do more innovative things, not less. Although betting on your own movie to fail when everyone else also thinks it will fail probably isn't much of a hedge.
Who do you get to be an expert to tell you something's not obvious? The least insightful person you can find? -J Roberts
Plus everyone knows if you throw in a mentally challanged main character or uglify a hot actress you're 10 times more likely to win the Oscar.
Yeah, I was hopping mad when I saw how Ron Howard used CGI to digitally reduce Jennifer Connolly's bountiful bosoms in "A Perfect Mind". Anyone who saw her in "The Hot Spot" and "Career Opportunities" knows that something big was missing in Howard's film. Look, it was kinda neat how they removed Gary Senise's legs digitally in "Forest Gump" but removing the breasts of the most wonderfully stacked actress in Hollywood today was crossing the line in unnecessary CGI effects. I can't believe the Academy falls for such cheap tricks.
The BBC have been running Celebdaq for years now. They used to have a weekly show for it on BBC3. That is based on media coverage over the past week though.
I find these games entertaining on some small level. I've played Tradeover a little bit while I'm at work, that's a more realistic stock game. It would be stupid though to base the actual markets on the game, it's meant to work the other way around.
Big money moves the markets. Wherever the big money goes at the point of sale is what matters most.
Can they possibly get any worse? I guess they could start making "reality movies," not in-depth commentaries on society like documentaries, but more along the lines of the vacuous dribble on MTV, Fox, et al.
insert inflammatory anti-microsoft comment here
I predict:
A:
the gullibility of the american public, the inability of business groups to decide anything for themselves and the first step to trashy AI created and produced movies for mass consumtion.
Q:
What do computerized predictions really predict?
May the dung beetles from 1000 camels crawl up your man-dress!
(Apologies to Johnny Carson and American Dad)
-What's the speed of dark?
StrategyPage runs a prediction market on geopolitical events, with a similarly high success percentage.
If you'll recall, a similar terrorism futures market was planned by DARPA; it fell victim to political pressure, got deep-sixed, and the proponent, John Poindexter, resigned in a cloud. But the truth is that the idea works well. Here's a summary of the controversy: http://www.wired.com/news/politics/0,1283,59818,00 .html.
Is 92% "surprisingly accurate"? Only if Oscar winners are somewhat hard to pick, which they aren't. I'd bet I can pick more than half of the big categories correctly, despite never actually watching the movies; the surrounding hype is enough. Any competent film critic should achieve 90%.
I just did a search and found two but I am not sure if they are any good:
http://www.intrade.com/ where you can in many political, entertainement and world events
http://www.tradesports.com/ Mostly sports but also a bit of world events
Yahh, hiii haaaaa! -Major Kong, from Dr. Strangelove
This is actually a fairly old field of statistics. The story goes that a mathematician at a state fair saw there was a contest to see who could guess the weight of a pile of recently slaughtered beef. Everyone was allowed to guess at it: farmers, house wives, butchers, etc. In the end, the experts (i.e. the butchers) didn't win, and their answer was off by about 10%. However, the total of all the answers, averaged, was off by only .2 lbs.
This sparked the idea that the knowledge of the whole group can lead to better answers than the knowledge of a select group of experts. It's also been shown to be true with things like artificial intelligence and mathematical proof programs.
So it seems like hollywood and the like have just finally realized that the entire group of people can do better at predicting movie success than just some panel of marketing experts.
Perception and hype are not the same as reality. For instance, TB kills more people than AIDS, yet which is perceived to be more important to treat? There's a lot of discussion and hype about breast cancer, yet prostate cancer is more serious.
Perception drives our irrational thinking.
Engineering is the art of compromise.
Anyway, RTFA. It's not about using the market predictions to determine whether effects or story will dominate in a film production.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
Even without groups of people, individual predictions of phenomena for which there is a common intuition can be surprisingly accurate. See "Optimal predictions in everyday cognition", reviewed in the Economist.
...is that BusinessWeek's webserver is about to burst into flames!
Well, the market seem to sift out players that make more or less arbitrary trades. If you can't identify any valuable traits of the stocks in the market, you will eventually to loose your (virtual) money. From the perspective of the player who looses, one can argue that very few people like to play any game where the results of their actions seem arbitrary (because they don't understand the game) and the loose. From the market perspective, theese players haven't got any noticeable influence on price formation.
At HSX they do adjust the stock value when each movie actually hits the theaters, paying out a bonus to anyone who managed to predict the turnover of the movie during the opening weekend. On the other hand, players who overestimated the price will loose accordingly. This feedback to the players helps them learn what the movies are really worth.
My view of prediction markets is that it is an open challenge to all participants: find any way to assess the value of something, and get paid (in some or other currency) if you get it right. Due to the openness of the problem, solving it can be done in a multitude of ways, which unlocks a lot of creative thinking.
Your "beauty contest" idea is only right, if it also works that way in real life - that it does make the movies more popular. Otherwise any player who follows a "buy only good looks" will loose his/her money.
...discussed here where you can buy stock in your favorite flu virus. Apparently it performs well in predicting flu outbreaks.
Doesn't it make you feel good to know that our freedoms are protected by politicans, lawyers and journalists.
This is a well known phenonena, and has been used for a long time now. If you ever read the book "The Shockwave Rider" by John Brunner, and shame on you if you haven't, you will recognize the "Delphi Boards". They were basically a legalized betting system that allowed you to wager on the possiblity of something happening...for example, a cure for cancer. I won't go more into the story, but you can check it out for yourself!
It is technically known as the Delphi Effect, and you can read more about it here:
http://en.wikipedia.org/wiki/Delphi_effect
ttyl
Farrell
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