Q: Didn’t the Internet craze die back in 2001? Why launch an Internet business?
A: The Internet craze didn’t die in 2001. Companies with no path to profitability, no plan, and excessive irrational behavior died in 2001. The possibilities of the Internet in relation to consumer behavior and transforming business are still as potent as ever.

Q: Where did your idea come from?
A: Our idea came from doing consulting for several large companies and working in one for several years. We watched the lack of quality information flow between the hierarchies. We saw how people with relevant knowledge, whose input should be key in strategic decisions, were completely left out of the process, and we saw broken business processes for innovation and coming up with new ideas. We also read a lot about collective intelligence and the wisdom of crowds, paired our understanding of those two worlds, and out came the idea to do Inkling. We certainly weren’t the first to say prediction markets should be used by corporations, but we think we’re taking an approach that sets us apart from our predecessors and current competitors. [*]

Q: What is your elevator pitch?
A: Inkling helps you capture the collective wisdom of a diverse group of people to give you insight about what may happen in the future vs. relying solely on high paid consultants or individual experts. This is important because it can help you mitigate risk, make better strategic decisions, spawn innovation and entrepreneurship, and change your corporate culture.

Q: How is your proposition different from earlier generations of online business?
A: Online business services, beyond eCommerce solutions, still usually required an expensive consulting component. There also was not traditionally a focus on ease of use. We’ve tried to address both by creating “do it yourself” tools to allow anyone to manage their own prediction marketplace. We’ve taken something as complex as trading in a stock market mechanism and made it easy enough for our Mom’s to use. Related we’ve obsessed on our user-interface and iterate on it constantly to make sure people can use it. After all, you can’t say you sell software that helps you capture the wisdom of a crowd if the crowd can’t use your software.

Q: How will you make money?
A: We make money by selling service agreements to large and small businesses to set up and maintain prediction marketplaces. We also do a fair amount of customization work for our larger clients.

Q: Why will you succeed? What are your biggest successes so far?
A: In less than a year we have attracted several thousand users to our public marketplace and have about 20 clients. We are working with Abbott Labs here in Chicago, ABC-KGO in San Francisco, the Government of Singapore, AlderTrack, think tanks, a video game maker, and an array array of small businesses and non-profits. We think we will continue to see success because of our well designed product and because we think this is a blue sky market that people are just beginning to think about as a way to changing the way they do business. We also think we’re going to be successful because we are largely self-funded. When the success of your business means you can or cannot pay the mortgage and your bills, it makes you a little hungrier.

Q: What is your age and previous business experience?
A: The two co-founders of Inkling are Adam Siegel and Nate Kontny. We are 33 and 29 respectively. Adam worked at Accenture here in Chicago for 10 years in the Accenture Technology Labs and was a senior manager when he left. Nate worked at Accenture as well in the same group and left as a consultant to work as a senior developer at Digital River.

Q: Have you received funding? If so, how much and from whom?
A: We received a small amount of funding (18k) from yCombinator when we incorporated but have taken no funding since.

SMOCKIN’!!!…

[*] I think that what separates Inkling from the rest of the pack is that they have integrated the “Web 2.0″ factor.

Psstt… I would like so much Inkling to do CDA, too, by the way.

June 2006:
Hollywood Stock Exchange launches the Sports Stock Exchange® with special securities covering the 2006 FIFA World Cup.

April 2006:
HSX Research wins contract for building Storage Markets, an innovative prediction market platform providing insight into the data storage industry.

January 2006:
HSX Research introduces Long Lead Box Office Forecasts, a report series providing projections of box office receipts for individual film titles a full six months prior to release.

October 2005:
Black Entertainment Television (BET) selects Hollywood Stock Exchange for development of The Ultimate Hustler Xchange, an online trading game associated with the Ulitmate Hustler reality TV show.

June 2005:
Hollywood Stock Exchange formally launches Virtual Specialistâ„¢, a white label prediction market solution that enables companies to leverage the power of HSX’ patented market-maker technology.

October 2004:
HSX provides The Globe and Mail, Canada’s national newspaper, share price information. The Globe will now feature HSX share prices for new releases in its Friday film section on a regular basis.

March 2004:
Hollywood Stock Exchange introduces TVStockâ„¢ as a recurring trading option on the Exchange.

December 2003:
IMX presented to the AFI Enhanced TV (eTV) Workshop as an AFI awarded leading-edge interactive television concept.

May 2003:
The Hollywood Stock Exchange crosses the one million mark in registered traders.

January 2003:
A live IMX television show, supporting the new music market, begins airing weekdays on FUSE Networks.

December 2002:
HSX launches IMX, the Interactive Music Exchange, a newly designed Virtual SpecialistTM ASP music market licensed to FUSE Networks (formerly muchmusic usa).

October 2002:
Alexander Costakis is appointed the new Managing Director of Hollywood Stock Exchange.

March 2002:
HSX secures sale of its research product to legendary motion picture studio, MGM.

May 2001:
Cantor Fitzgerald L.P., a leading financial services provider, acquires the Hollywood Stock Exchange.

March 2001:
HSX launches HSX Research (www.hsxresearch.com), a subscription-based market research application which strives to become a leading provider of information to the entertainment research community.

January 2001:
Alexander Costakis joins the Hollywood Stock Exchange as Vice President of Sales. [see * just below]

October 2000:
Launched Virtual Producer (www.virtualproducer.com), an immersive online experience that allows consumers to participate in every aspect of the production of a film.

June 2000:
Deal signed with Pacific Century CyberWorks’ (Now.com) to create content based on HSX Movies Market®.

May 2000:
Daily Web show, Buy, Sell or Hold, launched on HSX.TV.

March 2000:
O2K (Oscar 2000) at House of Blues featuring Moby and Earth Wind.

September 1999:
Patent received for Virtual Specialist Technology.

July 1999:
Weekly radio show launched on 97.1 FM in Los Angeles.

June 1999:
Music Market® launched in NYC at Jupiter Plug.In Conference.

March 1999:
Oscar Party at House of Blues featuring Beck and Crystal Method.

April 1996:
The Hollywood Stock Exchange is established. [*]

[*] The Hollywod Stock Exchange was founded on April 12, 1996, by Max Keiser and Michael Burns. I hate when an organization deletes the names of its founders —it’s pitiful.

(Max Keiser lives now in the South of France.)

Previous: Why the Hollywood Stock Exchange was sold to Cantor Fitzerald. – An insider’s account. + Two Tipping Points for Inkling Markets and Market Scoring Rule — CORRECTION

Psstt… The HSX Research website has been revamped. Their webpage on prediction markets:

HSX is the longest continuously running Prediction Market in existence. [*] Prediction markets are virtual stock exchanges that operate using many of the same principles as real stock markets. In a Prediction Market traders come to buy and sell shares to express their expectations of how a product or service will perform in the real world. The stock prices found on a Prediction Market quite often foretell outcomes better than leading experts in the given field. This remarkable success has garnered attention from academics and the media. [**]

Prediction Markets aggregate the knowledge of a group. When a company is looking to forecast their future sales, or industry trends, they can use this powerful tool to accurately and anonymously gauge opinions. This last point is important. Our clients have found that Prediction Markets provide more accurate results than traditional employee polling because they are a forum removed from office politics. In a sense, Prediction Markets are the modern, scientific version of the suggestion box.

A Prediction Market can be empolyed in virtually any research or commercial application, and the end-user group can range from the general public to subject-matter experts. [...]

[*] Is HSX the “longest continuously operating prediction market”??? – REDUX — The reality check is that the longest continuously running [***] prediction exchange in existence is the Foresight Exchange (then named “Idea Futures”), which was co-founded in 1994 by Ken Kittlitz (and godfathered by professor Robin Hanson).

[***] Which excludes the Iowa Electronic Markets, launched internally in 1998 and on the Web in the mid-nineties, but which was not “continous”, if I understand well.

What’s funny is that, five minutes ago, Alex Costakis blamed (rightfully) Adam Siegel of Inkling Markets ABC7 for a historical mistake he made while being interviewed on camera, a day he was ill. Maybe Alex Costakis could put his own house in order before blaming (rightfully) a young competitor of him a media that cited a young competitor of him. See: Does Inkling CEO Adam Siegel deserve capital punishment, really!??

[**] Our Barry Ritholtz begs to differ: Misunderstanding Prediction Market Failures

Previous: Email Interview: Ken Kittlitz

—

Addendum: Letter from HSX’s Alex Costakis…

[...] Just to be sure, my comments were entirely addressed to KGO ABC7 fault and their writing, producing and editorial staff’s lack in conducting background before reporting in written form and in broadcast. I made absolutely no comment about a competitor.

Media, of which you are a part of, has a special and unique role to insure accuracy, triangulation of sources and verification of background are especially important. I would encourage you to read my comments about KGO ABC7′s reporting before inaccurately reporting that I “blamed” a young competitor. [...]

—

[...] [M]y commentary is regarding that very reputable station, KGO ABC7, not having done standard background before printing a story or airing a scheduled interview. This is very a standard procedure to insure reporting integrity.

Precision: I had read the ABC7 story and Alex Costakis’ dual comment. It’s true that Alex Costakis’ remark is directed at ABC7. However, as everyone can see clearly in the ABC7 story, nowhere does this media claim that their prediction exchange is “a first”, as the HSX executive claims. As I reported in my previous story, it’s the Inkling CEO who appears to make the historical mistake:

Adam Siegel: “For the first time really, the regular public is going to be exposed to this kind of technology, and really be able to participate in something like this.”

As I said in my previous story, if Inkling Markets CEO Adam Siegel makes here reference to Robin Hanson’s Market Scoring Rule (and I would add today, “AND to the concept of user-created prediction markets”), then, yes, Adam Siegel does make a truthful statement, in my view. (Washington Stock Exchange also uses MSR, but does not have any user-created contract technology.)

TAKEAWAY: Literally, Chris Masse was wrong to say that Alex Costakis “blamed” Adam Siegel —the HSX executive indeed blamed the media (ABC7) for something that his young competitor actually said in front of a TV camera, a day he was ill. I suppose that Alex Costakis wanted ABC7 to add a paragraph giving historical credit to the Hollywood Stock Exchange. But my second look at the Adam Siegel statement (as I hinted in my previous story) can be understood as a veiled (because of cuts?) reference to two Inkling-enabled technologies: their innovative MSR mechanism design and their user-created contract capability.

Addendum #2: Letter from HSX’s Alex Costakis…

Please note, I don’t think I mentioned anything about KGO ABC7 claiming that anyone’s prediction market is ‘a first’.

“…nowhere does this media claim that their prediction exchange is “a first”…”

Rather, I was referring to KGO ABC7 gathering proper background for verification of information prior to publishing a written story, or airing a scheduled interview. Doing this type of background enables a reporter to ask questions such as “well, what about… XYZ….?”. Or, in a written article, adding a line or two of historical perspective. Nevertheless, thanks again for printing the correction – I hope KGO ABC7 sharpens up their reporting in the future.

Yeah, but the ABC7 story was more like an announcement for a new co-branded prediction exchange —not really a big picture story on all the prediction market scene. There are many news articles of this type in the New York Times or in the Wall Street Journal. Sometimes, the jounalos will put the highlight on one brand or one organization, and if the story is very short, they won’t bother writing a historical paragraph.

Anyway. Sunday is Oscar time!!!! And who says “the Oscars” says… the Hollywood Stock Exchange!!!!

Addendum: I regretted that the names of the two HSX founders (Max Keiser and Michael Burns) were not clearly spelled out on the HSX website. Well, here’s from HSX’s Alex Costakis:

I just saw your post about HSX nomination forecast accuracy. Chris, good one. But first I think the congratulations really should be directed to our traders. It’s their collective wisdom that generates our predictions. HSX is the facilitator, they are the brain power. And, beyond that, your point is well taken. The visionary founders of this innovative website should be listed. We will correct that. Happy Oscar Night.

FANTASTIC. We should reward entrepreneurs for wealth and job creation.

See: HSX – Oscars Nominations Prediction Markets – Accuracy

#1. Stanford professor Eric Zitzewitz uses Inkling Markets (and thus MSR) for his class.

#2. ABC7-KGO San Francisco launches play-money prediction markets using Inkling Markets (and thus MSR). — abc7.inklingmarkets.com = ABC7 Futures Markets — Will San Francisco Mayor Gavin Newsom be re-elected in November 2007? Yes, it seems —what a shame (the guy slept with his assistant’s wife!!).

—

ABC7 (story + video):

a) Note that their mantra is “the wisdom of crowds” —not much the “prediction markets” terminology.

b) Adam Siegel describes Inkling as a “prediction market”, not as a prediction exchange —he didn’t get my memo.

c) Eric Zitzewitz seems to forget that there exists out there polls asking people’s opinion on people’s opinion (“opinion opinion polls” –bizarre naming).

d) Why replicating HSX or InTrade at a smaller scale? That said, the San Francisco Mayor event derivative contract makes sense. What about other local prediction markets that the other big betting exchanges won’t do?

e) Each time a sub-exchange is created, does it reduce the potential liquidity of the mother ship? Would HSX have reached such a giant size if it had splitted liquidity during its expansion? I’m asking this question because I typed “san francisco mayor” (without the quotes, actually) in the Inkling Markets search box, and that yield nothing —so the ABC7 prediction markets are not connected with the rest of the Inkling prediction exchange. No good to have isolated pockets of trading.

—

A) Adam Siegel raises the spectre of manipulation at InTrade (a real-money betting exchange). He didn’t get the Hanson memo.

B) As for the opportunities to manipulate play-money prediction markets on local politics, would a solution involve the hiring of a sheriff who would monitor the legitimity of suspicious trades?

—

Addendum: Eric Zitzewitz…

It’ll be nice if this experiment works, as it will expose prediction markets to a new audience. Log on and trade if you have time. At current prices, there is a lot of money (or at least Inkles) on the table …