Prediction Markets is a relatively new field of study which embraces using speculative markets to make better decisions. The idea is that if you can abstract a complex decision into a commodity which can be traded, and thus priced, the signal that you get back from the market will cut through the noise and lead you to better decision-making.
Wednesday evening Yahoo held a confab on Prediction Markets on the main Sunnyvale campus. We heard from James Surowiecki, author of The Wisdom of Crowds, a hugely influential book for me, and Robin Hanson, infamous for his idea that a prediction market could be used to accurately determine the next terrorist attack. We also heard from folks from HP, Google, Microsoft, and Yahoo who described how prediction markets are used within their companies. Finally, we heard from a couple of vendors of prediction market software including inklingmarkets which offers a hosted solution for companies interested in setting up their own prediction markets and used the event to announce their beta site, worthio, which applies digg-like voting mechanism to the US stock market.
In a fortunate coincidence of timing, the very same moment 200-odd people were debating the value of running markets to gleen information and the importance of making participation simple in order to get maximum participation, Yahoo Answers was hosting an event for 40-50 of their top moderators right downstairs.
In terms of harnessing collective intelligence, Answers has been a huge success and it was fascinating to see the emotional attachment members of the service have to the site. I was lucky to catch part of the awards ceremony and saw one of the users (I didn’t catch her name or handle) actually hug one of the product managers as she came up to receive her award.
I only wish I had the foresight to invite attendees of the prediction markets confab downstairs to see what was going on. With a basic framework, a few simple rules, and the wonderful platform known as the internet, the 60 million users of Answers had created an incredibly powerful, human-powered Oracle of Knowledge that anyone with a web browser could tap into.
This was the power of community. The emotion and support of those at the party downstairs showed me more than any presentation, metrics report, or banner ad the power that you can tap into if you let people, not algorithms, define your product.
“Connect people to their passions” yeah, that pretty much sums up what we do.