Live blogging from prediction markets seminar
June 7th, 2006
I am in Chicago, that toddlin’ town, today attending a KM Cluster workshop on prediction markets. Ever since I read The Wisdom of Crowds by Jim Surowiecki two years ago, I became interested in the possibilities of prediction markets as tools to support deeper strategic thinking and more effective innovation in associations.
I’m neither a mathematician nor an economist, so I will not presume to explain the underlying theories that drive how these markets work. To put it the simplest possible terms, prediction market participants trade contracts on the possible outcomes of very specific future issues, questions or events. Traders buy and sell those contracts over a defined period of time, thereby creating useful predictive information about the likelihood of a given outcome for that situation by drawing on the diverse perspectives of the various participants.
For example, the Iowa Electronic Markets are mostly publicly-accessible markets that predict election results, and companies such as Corning, Eli Lilly, H-P and Google use prediction markets to advance different kinds of organizational decision-making processes. Prediction markets are a compelling alternative to the traditional ways of gathering information from a broad range of people. They are an especially attractive in a time when it is very difficult for leaders to develop a full picture of what is happening in their strategic environments. Prediction markets can also be useful in managing an innovation portfolio within an organization, with a particular focus on improving resource allocation by making better judgments about which projects are most likely to succeed in a broader marketplace.
We’re at about the midpoint of the seminar, and it is very intriguing stuff, but also quite technical and thus highly tedious to someone like me. (The fact that I was up at 3 am to catch my 6 am flight to Chicago doesn’t help the situation at all.) I definitely see potential for prediction markets in the association community, but I think I’ll need a little time and distance from today to tease them out. For now, let me just recommend that you take a look at the links included in this post and begin your education on the topic of prediction markets. I know I’ll be writing about them again, and I suspect they will enter into broader awareness in associations in the very near future.
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Entry Filed under: Principled Innovation Blog, What's New?, Innovation, Associations, Extreme Makeover
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