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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."
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.
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.
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.
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.
...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.