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01 May 2008

Comments

Noam Danon

Great analysis of the prediction markets arena.
There's one point I slightly disagree with - people still don't know what prediction markets are. My experience shows, that 9 out of 10 people you talk to, have never even heard of it.
The interesting thing about them though, is that all 9, after hearing about them, are extra excited and agree they seem like a wonderul idea.

I'm hoping all this is good news for the prediction markets industry...

Art

Nice refinement, Noam. (I'm not sure we really disagree.) Managers may not have had direct experience with the tools and techniques, but the cognitive 'soil' for "getting it" quickly is far more fertile than it was, say, five years ago. I asserted to someone recently that it feels like we've "crossed the chasm". I.e., the market for prediction markets has moved from experimental/fringe (pre-2004) through risk-takers and early adopters (2004-2007, plus or minus) to having enough clear, visible, quantitatively grounded proof points out there that one cannot say "this is too risky for me to waste time on". Naturally, there will always be laggards.

sean silverthorne

Hey,

Thanks for referring to my blog on this subject and sorry it took so long to circle back to your thoughtful comments on what I wrote originally.

Several thoughts.

1. It's Silverthorne, not Silverstone. Error is often made, but my mother cringes.

2. Yes, 50 big companies are looking into PMs, and "countless" other organizations as well (I actually bet you could count them) but these are companies such as Google and HP that can afford to and think it valuable to explore envelope-pushing opportunities. Fifty is not a big number. Tens of thousands middle-and large-companies are clueless on the subject. More to the point, I've heard a Google exec talk about using PMs inside that organization and there is little agreement on their value below the C-level. If Google rank-and-file aren't sold (yet) I doubt this is a technology on the fast track to corporate acceptance.

2. Yes, more and more managers have heard of prediction markets, but it's a big stretch to think they understand how they work or could sell their value to non-converts. Some could; most can't. Prediction markets need more troops on the ground to sell the concept upstairs, IMHO.

3. I'm not sure if we agree or disagree on this, but I think organizational cultural issues are the biggest roadblock to widespread adoption of PMs. Too many hide-bound interests (and managers) are DNA'd against a truthful and public exchange of information in the form of informed bets.

All that said, I think PMs will become a valuable tool in assessing and informing corporate strategy and tactics. I just think the roadmap for this is 5-10 years rather than 2- 5 years.

Sean

Art Hutchinson

Hey Sean - Thanks for stopping by. Apologies on the name thing. My brain has a way of doing that sometimes.

We probably agree more than disagree on this stuff: glass half-full vs. glass half-empty. Fifty on a hockey-stick curve to five thousand is a big deal. Fifty this year and sixty the next is not.

It's hard to tell which is true when you're in it. (Analysts like to predict hockey sticks; the fact that they're wrong a lot doesn't mean they're not right from time to time...)

Re. counting the companies doing random pilots: Yeah, one could add up the number of free trials various vendors have seen. It would be pretty thin at the edges though. E.g., some junior person started a trial on their lunch hour and then forgot about it.

Organizational roadblocks: yeah. And perhaps even roadblocks in human nature. Since I wrote this post, I've had two clients begin implementing prediction markets. In each case there's been some subtle reluctance to go full-bore for them. (One just took time. Now it's working well. The other is punking along far more slowly; culture plays a big part in both.) These things are inherently dis-empowering to management -- even when they feel they *have* to express excitement about them.

To make an extreme analogy, it's as if the CEO stood up in front of a room filled with employees (big enough and dark enough for it to be fairly anonymous) and said: "OK, show of hands, who thinks this new market we're entering is gonna amount to a hill o' beans?" Whatever the answer, he's got to do something with it. He's effectively naked up there while folks vote. And simply asking, he's ceded some control and power. It takes a particular level of personal confidence ('brass ones') to do that. So yeah: culture.

Again, apologies on muffing your name, Sean.

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