McKinsey: The Promise Of Prediction Markets

James Surowiecki: The premise is that under the right circumstances, the collective judgment of a large group of people will generally provide a better picture of what the future might look like than anything one expert or even a small group of experts will come up with. [&#8230-]

James Surowiecki: The Wisdom of Crowds is not an argument against experts. It is saying that you shouldn’t rely wholly on the judgment of one person or even a very small group of people. But for a crowd to be smart, it needs to satisfy certain criteria. It needs to be diverse, so that people are bringing different pieces of information to the table. It needs to be decentralized, so that no one at the top is dictating the crowd’s answer. It needs to summarize people’s opinions into one collective verdict. And the people in the crowd need to be independent, so that they pay attention mostly to their own information and don’t worry about what everyone around them thinks.

James Surowiecki: [&#8230-] One shortcoming is that a lot of people inside organizations don’t find the market mechanism intuitive or easily understood. They find it very challenging to use, which limits the pool of people who participate.

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On James Surowiecki&#8217-s last remark, I would say that Robin Hanson&#8217-s MSR technology (which powers most enterprise prediction exchanges but Google&#8217-s one) brought much needed simplification to trading.

Overall, a good roundup, but the conference speakers should have mentioned Robin Hanson&#8217-s pioneering work, and McKinsey should have invited him. He would have towered anybody and given great insights.

See Jed Christiansen for other remarks.

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As an aside, I&#8217-d say I prefer the sketch that is supposed to represent Bo rather than the real photo. The sketch makes him look like he is subtitle, charming, smiling, humble, and modest &#8212-quite a quantum leap.

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Bo Cowgill – Economics at Google

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• PhotoShop designers improve the look of models on glossy magazine covers.
• Sketchy artists improve the look of testosteroned, ultra-serious, ambitious, young business managers.

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Previously: Do Google’s enterprise prediction markets work?

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Previous blog posts by Chris F. Masse:

• Collective Error = Average Individual Error – Prediction Diversity
• When gambling meets Wall Street — Proposal for a brand-new kind of finance-based lottery
• The definitive proof that it’s presently impossible to practice prediction market journalism with BetFair.
• The Absence of Teams In Production of Blog Journalism
• Publish a comment on the BetFair forum, get arrested.
• If I had to guess, I would say about 50 percent of the “name pros” you see on television on a regular basis have a negative net worth. Frightening, I know.
• You can’t measure the usefulness of a system by how many resources it consumes.