Google's Prediction Market

Googling Yourself writes "Employees at Google are encouraged to place bets on Google's prediction market — an exchange that tries to forecast events based on the money wagered on a particular outcome. Employees have made wagers with play money (Goobles, as in rubles) on questions like: will Google open a Russia office? will Apple release an Intel-based Mac? how many users will Gmail have at the end of the quarter? One tangible benefit to the company is that the market allows Google to track how information disseminates in the company. A paper called "Using Prediction Markets to Track Information Flows: Evidence From Google" discusses information flows in the company based on the prediction market data and contains many other interesting observations of Google culture. (pdf)"

Comments

Information, not crystal ball

[michaelmalak]

Prediction markets reflect information that is known; they are not perfect crystal balls. They also fall victim to groupthink.

The best example is that the prediction markets predicted Hillary would win the Democratic nomination by a wide margin. Now the consensus is that it will be Obama by a wide margin.

Re:Information, not crystal ball

[DragonWriter]

Prediction markets force people to be honest -- there's real money at stake, and a cost to your arrogance.

They don't "force people to be honest". Prediction markets — if they are positioned to influence the events they are used to "predict", like political futures markets are — are simply a form of advertising (or, viewed another way, campaign donations). Sure, they cost real money, so does buying TV ads. But, (1) they aren't regulated, the way political advertising and donations are, and (2) they are also negative cost if they succeed, unlike regular ads or campaign donations.

People expend real money on campaign donations and political advertising all the time without any concern for "honesty". To think that political futures markets would somehow, by using "real money", force people to be honest is absurd. Any system where action can influence the perception of political reality will be gamed by those interested in influencing that perception—especially since the perception influences the reality here—and if you make it so that the limiting factor on the degree of influence is the ability to spend money then, like most aspects of the political system, the results will be skewed by the interests of those most able to burn money to acheive their political ends.

Re:Information, not crystal ball

[sheldon]

Did you notice the stock market dropped after Obama did well in Iowa? He's running on a more populist campaign, it happens most election years.

Did you notice the day after Obama did well in Iowa, there was a sudden storm front that hit the west coast?

He's running a Godless campaign, it happens most election years.

[hint: The market tanks because of a jobs report that came out from the labor dept]

Someone at Google has been reading John Brunner...

[RealGene]

..who had this as a significant plot element in his novel, The Shockwave Rider
--Gene

Great idea, just don't tell Congress

[mi]

Pentagon tried just this in 2003 — use the method to predict terror attacks. The Congressional outcry about "trading in blood" was such, that the program was scrapped shortly after being announced...

Quoting from MSNBC report:

The Pentagon Tuesday agreed to abandon the plan, the Senate Armed Services Committee chairman said, after Senate Democrats Monday blasted the plan as nothing more than state-sponsored "gambling on terrorism."

I'm suddenly skeptical

[jfengel]

I have been following the Intrade market, and I think that Obama's recent surge on that market may represent a serious blow to the idea.

I don't need Intrade to tell me what's happening at the polls; I can get that from the news. Intrade is interesting only if it's able to make predictions, and for a long time Clinton was twice as expensive as Obama. Today it's the reverse. That makes it a fine place to gamble, but not an interesting place to get an accurate representation of the future.

That market is still predicting that Huckabee's victory in Iowa will be short-lived, and it's still convinced that Romney's chances are low, but it's still heavily influenced by McCain's recent surge in the New Hampshire polls.

The campaign contains relatively few surprises. Candidates do not radically change their opinions or introduce truly novel programs. A sudden revelation can tank a candidate, but we're basically counting on Intrade to let the wisdom of crowds ferret out all of that before the polls, not after them.

Intrade may still redeem itself. The polls may be introducing a lot of volatility that will ultimately settle down. But it predicted Clinton vs Giuliani by wide margins for a very long time, and I'll put a lot less faith in its predictions if it's just tracking the state-by-state polls.