Finding Footing Wherever Prediction is Key

Universities represent our collective future. Although universities hand out diplomas to individuals, it’s our future doctors, CEOs and world leaders who toss up their hats at the end of the ceremony, right?

A recent CNET article highlighted an exercise at Singularity University’s executive program. Melanie Swan, a Silicon Valley hedge fund manager, had groups of students dream up revolutionary product ideas and also had them bet in an online prediction market on which group would get the most venture capital if their idea were real. The reporter writes:

Despite the fact that some technical problems got in the way, the point was made: prediction markets, given enough active participation, are increasingly seen as an excellent way to arrive at the answers to any number of questions, whether it’s sales figures, who will win presidential elections, or who will get the most VC funding. Indeed, the winning technology concept–a pill that could cure cancer–and team were accurately prognosticated by the market.

The university’s study is certainly forward thinking. That said, one should note that they’re not really running a prediction market – they’re running an idea market. This is an important distinction to make. When the students gear their bets towards ideas they think investors will find attractive, this means that the final outcomes of the market will be biased to the norm. We’ve discussed why idea markets are flawed and this is where Crowdcast differentiates its forecasting philosophy — gathering individual expertise to make more informed predictions around critical, quantitative metrics, rather than ideas.

Prediction markets everywhere are managing to find sure footing in uncertain times. From financial prediction markets on CFO, to the University of Iowa’s prediction markets on H1N1 virus outbreaks and vaccine levels, prediction markets are enabling us to get clarity around areas that were once opaque. Where else will we see the crowdsourced predictions put to work? The real-estate market? The struggling fashion industry?

Let’s put this very question to the wisdom of the crowds — send us your thoughts!