Melanie Swan m@melanieswan.com @lablogga July 14, 2014 Slides: http://slideshare.net/LaBlogga Live Prediction Markets Simulation Big Data Indicators Image: http://wall.alphacoders.com/ SU GPS for the Mind: www.mindtimemaps.com/start/sugp1 SU Prediction Market: gsp14.inklingmarkets.com

1 Prediction Markets July 14, 2014 Workshop Timeline Big Data Quant Methods Introduction 10 min GPS for the Mind Exercise 5 min Prediction Markets Overview 25 min Estimation Exercise 10 min Live Prediction Markets Workshop 60 min

2 Prediction Markets July 14, 2014 About Melanie Swan Trader, philosopher, futurist, entrepreneur, founder DIYgenomics, writer Education: MBA Finance, Wharton; BA French/Economics, Georgetown University; Kingston University London, Paris Univ 8 Work experience: Fidelity, JP Morgan, Arthur Andersen, iPass, RHK/Ovum Current projects: melanieswan.com Sample publications Swan, M. The Quantified Self: Fundamental Disruption in Big Data Science and Biological Discovery. Big Data 2014. Swan, M. Crowdsourced Health Research Studies: An Important Emerging Complement to Clinical Trials in the Public Health Research Ecosystem. J Med Internet Res 2012, Mar;14(2):e46. Swan, M. Multigenic Condition Risk Assessment in Direct-to-Consumer Genomic Services. Genet. Med. 2010, May;12(5):279-88. Swan, M. Translational antiaging research. Rejuvenation Res. 2010, Feb;13(1):115-7. Swan, M. Engineering Life into Technology: the Application of Complexity Theory to a Potential Phase Transition of Intelligence. Symmetry 2010, 2, 150:183. Source: http://melanieswan.com/publications.htm

3 Prediction Markets July 14, 2014 Future Studies & Forecasting Toolkit Short term (0-5 yrs): insight and certainty Forecasting Scanning Business intelligence Trend analysis Market research Time orientation Outlier identification Technology checklist Long term (5-20+ yrs): uncertainty, discontinuity Scenario planning Simulation Frameworks Wild-carding Longitudinal studies Multiple time frames Prediction markets Image: Bill Frymire

4 Prediction Markets July 14, 2014 GPS for the Mind Exercise Plot time orientation: certainty, probability, possibility www.mindtimemaps.com/start/sugp1 Image: http://www.mindtime.com Source: Fortunato, VJ and Furey, JT. The theory of MindTime: The relationships between Future, Past, and Present thinking and psychological well-being and distress. Personality and Individual Differences. January 2011, 50(1), pp. 20-4. http://www.miindtime.com certainty possibility probability

5 Prediction Markets July 14, 2014 Big Data Quantitative Indicators Increasingly complex analysis tools for every level of Internet-based activity Social Networks, Email, Photo-Sharing, Info-Sharing # people ww online, # phones/smartphones, #IoT # daily tweets, hourly YouTube volume, eBook sales MOOCs (Kahn Academy, Coursera, etc.) Bitcoin (cybercurrencies) eLabor Marketplaces, Ideas/IP Markets, Health Social Networks, Quantified Self Problem-solving Communities (eteRNA, FOLDit, Kaggle) Influence, Attention, Inention Measurement: Twitter, Klout, Peer Index, ThinkUp

6 Prediction Markets July 14, 2014 Tweets per Day: 500m (200 bn/year) http://www.internetlivestats.com/twitter-statistics/ (4 pm)

Unprecedented Immediacy and Transmissibility 7 Prediction Markets July 14, 2014 32.8 m (Mar 2014) 0.8 m (Nov 2012) Most Retweets

BitCoin: Growth, Volatility, Robocoin ATMs 8 Prediction Markets July 14, 2014 Source: http://www.coindesk.com/price/, http://bitcoinatmmap.com Bitcoin could become the first trillion dollar non-fiat currency Bitcoin is an open-source protocol enabling the transmission of value across the Internet in the form of a digital asset, digital currency, or payment mechanism; ia decentralized peer-to-peer monetary system

9 Prediction Markets July 14, 2014 Prediction Markets Definition Image: http://www.simExchange.com 1Source: Trepte, K. et al. Forecasting consumer products using prediction markets. MIT. 2009. http://dspace.mit.edu/handle/1721.1/53546 Prediction Markets are a tool for collecting group opinion using market principles Lots of sharable hidden information Prediction markets may beat polls/experts in accuracy1

10 Prediction Markets July 14, 2014 Markets and Crowd Intelligence Collective intelligence Markets Prediction Markets Google+ Question networks (Quora, formspring) Crowdsourced labor marketplaces Competitions (Kaggle, foldIT, eteRNA) Wikipedia, Twitter Health Social Networks DIYscience http://www.cs.cornell.edu/home/kleinber/networks-book Crowdfunding (Kickstarter, Indiegogo) Resource allocation (Airbnb, Uber, Gettaround) Group purchasing (Groupon) Reverse group purchasing (Loopt u- deals, Ringleadr) Affinity capital P2P lending Gift economy

11 Prediction Markets July 14, 2014 History of Prediction Markets Decision markets, idea futures, information markets, event derivatives, virtual markets Long history of betting on events Election betting, sports betting, stock markets Modern incarnation last ~20 years 1988 Iowa Electronic Markets first market1 2002 US DARPA terrorism futures debacle Main forms: enterprise and consumer prediction markets Testbed for financial contracts Housing and weather futures, carbon trading, movie futures Futarchy Notion of using prediction markets in government policy 1Source: http://www.midasoracle.org/2007/07/17/history-prediction-markets-timeline Image: http://www.bookshift.com

12 Prediction Markets July 14, 2014 Prediction Markets Pricing Details Price: based on probability of event occurrence Value: leading indicator, expose hidden information Pay-off: monetary, reputational, indirect Accuracy: better than conventional forecasting1 1Source: Arrow, K.J. et al The Promise of Prediction Markets Science, 2008, 320, 5878, 877-878 http://www.sciencemag.org/cgi/content/summary/320/5878/877 Iowa Electronic Markets: 2008 US Democratic Convention Market Clinton Obama Image: http://upload.wikimedia.org/wikipedia/commons/1/13/IEM_DCON2008.svg Tool for collecting and aggregating opinion using market principles

13 Prediction Markets July 14, 2014 US Congressional Control for Nov. 2014 Source: https://iemweb.biz.uiowa.edu/graphs/graph_Congress14.cfm

14 Prediction Markets July 14, 2014 Anatomy of a Re-Election Prediction Market: Obama 2012 (July) Source: http://www.intrade.com Blip: May 1, 2011, Osama bin Laden killed

15 Prediction Markets July 14, 2014 Real-time Prediction Market: Obama 2012 Source: http://www.intrade.com Election Day: November 7, 2014 4 pm EST Election Day: November 7, 2014 10 pm EST

16 Prediction Markets July 14, 2014 Bitcoin Prediction Markets Source: https://www.fairlay.com/

17 Prediction Markets July 14, 2014 Bitcoin Prediction Markets Source: https://www.fairlay.com/ Bitcoin Prediction Markets White Paper available on Github: https://github.com/psztorc/Truthcoin/tree/master/docs Predictious, Fairlay, Bitcoin Bull Bear

18 Prediction Markets July 14, 2014 When to use Prediction Markets Complexity (ecosystem) Multi-party value chain Uncertainty Clear outcomes Market liquidity Diversity of opinion Prediction Markets books

19 Prediction Markets July 14, 2014 Types of Prediction Markets Enterprise Revenue forecasting, demand planning, capital budgeting Innovation life cycle management (rate, filter, prioritize ideas) Project management, risk management Consumer Event prediction (politics: election results; economics: box office receipts, product sales; health: pandemic prediction) Surfacing relevant content (information valuation) Source: http://www.hsx.com

20 Prediction Markets July 14, 2014 Enterprise Prediction Markets Aggregate hidden organizational opinion and expertise PMs in use at 100-200 US organizations (June 2014) Ex: Paypal, HP, BestBuy, Electronic Arts, Boeing, Amazon, Harvard, GM, Hallmark, P&G, Ford, Microsoft, Chevron, Lockheed Martin, CNN, Adobe, American Express, Bosch Prediction market vendors (enterprise idea management) Consensus Point, Inkling, Spigit/Crowdcast, Bright Idea, Qmarkets Crowdsourcing and creative concepts market vendors Chaordix, Jovoto Image: http://torontopm.files.wordpress.com/2009/06/quarterly-sales-graph.jpg?w=300&h=234

21 Prediction Markets July 14, 2014 Consumer Prediction Markets Iowa Electronic Markets Hollywood Stock Exchange (film) simExchange (gaming) CROWDPARK (general) LongBets (futurist) Source: http://www.hsx.com Release Date

22 Prediction Markets July 14, 2014 Friday (170), Saturday (180) Sunday (185), Monday (200)

23 Prediction Markets July 14, 2014 HSX: Actor Markets, TV Markets (new) Source: http://www.hsx.com Monetizing the reputation economy: likes, ideas, attention, intention

24 Prediction Markets July 14, 2014 Gaming Prediction Market - SimExchange Source: http://www.simexchange.com

SciCast: Science & Tech PMs 25 Prediction Markets July 14, 2014 Source: https://scicast.org

26 Prediction Markets July 14, 2014 Iowa Electronic Health Markets Source: http://iehm.uiowa.edu/iehm/markets/trnmts/1/london_cholera

27 Prediction Markets July 14, 2014 Iowa Electronic Health Markets Source: http://iehm.uiowa.edu/iehm/trnmt/trnmt.html?symbol=dengue Flu markets Disease markets

28 Prediction Markets July 14, 2014 Crowdsourced Data as Prediction Market Source: http://iehm.uiowa.edu HealthMap Google Flu Trends

29 Prediction Markets July 14, 2014 Futurist Prediction Markets LongBets Source: http://www.longbets.org/bets

30 Prediction Markets July 14, 2014 Futurist Prediction Markets LongBets Source: http://www.longbets.org/bets

31 Prediction Markets July 14, 2014 Prediction Market Design Structure Event outcome (win/loss) Market scoring (continuum) Time frame Episodic or continuous Participants Anonymous users Participation incentive Question design: (the question) What is your opinion? (the feedback loop) Rate your certainty. What do you think others will say? How accurately will others answer? Calibration round(s) Image: http://www.consensuspoint.com

32 Prediction Markets July 14, 2014 Future of Prediction Markets Public Prediction Markets Opinion capture as a standard feature Activity Chiclets: Like, Vote Up/Down, +1, tweet, share, comment, bookmark, opine Quality, Valence, Value/Interesting-ness Two-way XML element Ubiquitous real-time polling Automatic markets per interest profile Enterprise Prediction Markets & Information Modulation BOL / ERP / supply chain integration Sales and CRM integration Reputation: knowledge acuity ratings of individuals become a valuable and personally-tradable currency Accurate predictor, information steward Image:http://www.tvrage.com/shows/id-23464

33 Prediction Markets July 14, 2014 Broader Context: Markets are the Platform Types of Markets Resource allocation Exchange: supply & demand meet Information (price) discovery Value identification & attribution Utility creation Traditional Markets Prediction Markets Affinity Capital Multicurrency Society Automatic Markets Idea Management Marketplaces Scarcity Management / Abundance Injection (PSE) Roles of Markets Source: Swan, M. New Banks, New Currencies and New Markets in a Multicurrency World: Roadmap for a Post-Scarcity Economy by 2050, presented at Create Futures IberoAmrica, Enthusiasmo Cultural, So Paolo Brazil, October 14, 2009. http://melanieswan.com/documents/economy_20.pdf Economy2.0

34 Prediction Markets July 14, 2014 Resources #PredictionMarkets @CassSunstein, @JustinWolfers http://www.midasoracle.org http://www.ingenesist.com http://torontopm.wordpress.com Prediction Market Industry Association http://www.pmindustry.org Relevant Papers Prelec D. A Bayesian truth serum for subjective data. Science. 2004 Oct 15;306(5695):462-6. Trepte, K. et al. Forecasting consumer products using prediction markets. MIT. 2009. http://dspace.mit.edu/handle/1721.1/53546 Chang, W. et al. Simulating prediction markets that include human and automated agents. MIT. 2009. http://dspace.mit.edu/handle/1721.1/53097

35 Prediction Markets July 14, 2014 Prediction Markets Summary Image: http://www.simExchange.com Prediction markets are a tool for collecting group opinion using market principles

Questions? Melanie Swan Principal MS Futures Group +1-650-681-9482 m@melanieswan.com www.melanieswan.com Slides: http://slideshare.net/LaBlogga Image: http://wall.alphacoders.com/ DIAMANDIS KURZWEIL Well, Ray, were still waiting for the jet pack Futurism 2050 DIAMANDIS KURZWEIL Well, Ray, were still waiting for the jet pack Futurism 2050 SU GPS for the Mind: www.mindtimemaps.com/start/sugp1 SU Prediction Market: gsp14.inklingmarkets.com Courage consists in agreeing to flee rather than live tranquilly and hypocritically in false refuges Gilles Deleuze, Anti-Oedipus: Capitalism and Schizophrenia