Ideakeep blog
Prediction markets and Idea Management

How to select right and far-reaching ideas?

How to test 10 mature ideas instead of wasting time on 100 useless experiments?

Predictive methods are here.


Paul The Octopus Notion Already in 1503 people bet on who will be the papal successor.

According to Paul Rhode and Koleman Strumpf, who has researched the history of prediction markets, there are records of election betting in Wall Street dating back to 1884.

One of the first modern electronic prediction markets is the University of Iowa's Iowa Electronic Markets, introduced during the 1988 US presidential election.

In October 2007 companies from the United States, Ireland, Austria, Germany, and Denmark formed the Prediction Market Industry Association, tasked with promoting awareness, education, and validation for prediction markets. The current status of the association appears to be defunct.

Prediction markets or ideas future is based on crowdsourcing and on a binary event where something either will or won't happen.

The main feature, and for now showing very encouraging results, of the prediction market is the idea that the collective knowledge of many people, each with a different perspective, will almost surely be more accurate than an individual or small group or even experts. (The concept has been championed by academic economists and was popularized by James Surowiecki's 2004 book "The Wisdom of Crowds.")

Many researchers have proven the prediction markets accuracy:

  • In the case of predictive market, each participant normally has diversified information from others and makes their decision independently.
  • The market itself has a character of decentralization compared to expertise decisions. Because of these reasons, predictive market is generally a valuable source to capture the collective wisdom and make accurate predictions.
  • Prediction markets can efficiently aggregate a plethora of information, beliefs, and data.
  • Prediction markets can incorporate new information quickly and are difficult to manipulate.
Companies use prediction markets in diverse spheres: healthcare, finance, IT and even for internal purposes.

Generally, there are 3 types of prediction markets:

  • Binary markets have two outcome options (Yes/No).
  • Scalar markets (range of values) have a range of outcomes.
  • Categorical markets have multiple options.

In 2017 researchers describe 2 crowdsourcing revolutions:

First one is related with new crowdsourcing algorithm which decreased mistakes of the wisdom of the crowd by 22–24%.
The new algorithm is based on the fact that instead of one question, there are…two. The first is the main question (for example, is Paris the capital of France?). And the second is a request to predict what percentage of participants will answer the 1st question "Yes".

The second revolution had the mathematics base and was quite complex:

The authors have mathematically proved the following:

  • The traditional compensation system in crowdsourcing predictions (for example, predictive markets or scientific search) or finding the right answers/solutions) rewards those who gave the right answer or accurately predicted. Such a reward system stimulates the growth of almost all negative psychological effects characteristic of crowdsourcing (herd behavior, anchor mentality, craving for the most popular, the dominance of gulps, etc.) Thus, many factors systematically drop out of consideration, which, taken separately, have a limited predictive power, but capable of contributing to aggregated predictions, if crowdsourcing could be persuaded to pay attention to them.
  • To maximize the group's collective wisdom, people should not be rewarded only for making successful predictions or conclusions. General compensation should not be distributed only among those who were successful or accurate. Instead, awards should primarily be directed at those who have made successful predictions, contrary to the opinion of most participants.
Ideas future What does all that mean for innovation and idea management inside an organization?

How to apply predictions and have great results as Google and HP?

One specific enterprise could use Prediction markets to collect ideas and prognostics from 2 types of most precious idea & innovation generation categories: employees and customers:

  • gather employees predictions about the success of new procedures, methods, motivation systems, financial risks.
  • get customers predictions about the market, new products, and an offers' forecast.
  • get employees predictions about innovation and ideas concerning development trends, new product lines etc.
It could be simple use to predict the opportunity of a good ideas implementation, but more important — it could save millions of costs and years of work!

The success of such systems of evaluation is also based on gamification. You can use a platform for predictive markets that provides virtual currency and small, but good, prizes.

As Qmarkets says:

Whatever the size, geography, or vertical market of the organisation, Prediction Markets is a collective intelligence tool that is only restricted by the creativity of the people who govern it. So, whether you want to achieve accelerated growth through strategic customer alignment, or predict the results of the football fixtures this weekend, Prediction Markets is the product for you! With prediction markets integrated with your Idea & Innovation management systems you:

  • save time from meetings and offline activities
  • collect opinions from employees nevermind their location
  • can reach customers and listen to their hypothesis
  • manage risks
  • accelerate innovation process
  • sort already evaluated ideas
  • avoid bias
  • have access to the wisdom of crowd and expertise of different people.
  • build a positive image and increase loyalty
  • save time and efforts
But be aware: predictive markets are not very convenient for simple prioritization, as Jed Christiansen writes:

If you're using prediction markets for this, I would suggest you stop. As discussed in the New York Times article, the first-movers and influencers are very influential when assessing new ideas. When an idea is new and ill-defined, people put much higher priority on information from their social network instead of their own impressions. If you took the same set of initial ideas to a completely different group of people in your company you may get a very different set of results. This means that you're not judging what people in the group think collectively, you're measuring what that particular group thinks.

Prediction platforms
There is currently a new generation of prediction market platforms.

Prediction markets affiliated with universities, such as the Iowa Electronic Markets or PredictIt, generally focus on political events.

Hivemind

Hivemind is a data science and technology company specialising in the application of human and machine intelligence to complex unstructured data problems. Our cloud-based platform breaks challenging projects down into simple, independent tasks, while helping you mobilise the human resources needed to complete them.

Augur

Augir is a technical reality enabled by the Ethereum blockchain and open source software.

Application:

  • Politics
  • Weather
  • Event
  • Company Forecasting
Gnosis

This platform is also built on Ethereum and represents a decentralized platform.

Application:

  • Futarchy
  • Price discovery
  • Financial and Insurance markets
Sales Forecasting Software: MoData, Teamgate, and others on Capterra reviews (Capterra)

Stox

Stox is an open source, Ethereum based prediction market platform, where users can make their predictions to generate their portion of a stake for a specified event. Stox is developing a fully functional prediction market app.

With Stox you can Generate mass interest in your launch ordering sponsored predictions.

Bodhi
Bodhi Decentralized Prediction Market is available on Web and on desktop. It presents itself as A perfect combination of Augur and Gnosis.

This platform will allow users to create and trade on the outcome of finance, sports, politics, and any other type of events that are publicly verifiable. Bodhi's innovative "replaceable oracle" mechanism, powered by Bodhi's digital token (BOT), will enhance the reliability of the prediction market's decision-making process. 7 books about Predictive markets 1 — Prediction Markets: Fundamentals, Designs, and Applications.Authors: Luckner, S., Schröder, J., Slamka, C., Skiera, B., Spann, M., Weinhardt, C., Geyer-Schulz, A., Franke, M.

2 — Predicting the Markets: A Professional Autobiography, Edward Yardeni

3 — Oracles: How Prediction Markets Turn Employees into Visionaries.Donald N. Thompson

4 — Foundations of Prediction Markets: Modeling, Simulation, and Empirical Evidence. Chen, Shu-Heng

5 — Predicting Market Success: New Ways to Measure Customer Loyaltyand Engage ConsumersWith Your Brand. Robert Passikoff

6 — Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die. Eric Siegel and Thomas H. Davenport

7 — The Wisdom of Crowds. James Surowiecki

Prediction markets are priceless tools for generating accurate forecasting information based on the wisdom of the crowd, your own employees or customers.


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