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PowerSet sold to the Evil Empire for $100 million.

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UPDATE: Interview.

UPDATE: ValleyWag.

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Barney Pell, then an “Enterpreneur In Residence” for a VC, co-founded PowerSet and became its first CEO —and then moved on to another position at PowerSet. (Barney Pell was probably a minority investor in PowerSet.)

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In a 2005 blog post, comes the explanation on how the prediction market virus disseminated into Barney Pell‘s body and mind:

I have been interested in this idea ever Robin Hanson (the founder of the field of prediction markets) and I were summer students in the AI Lab at NASA Ames Research Center, both working under Peter Cheeseman. This was right around the time when Robin wrote his first papers on the topic: “Idea Futures: An idea whose time has come?”, and “Could gambling save science?“. In order to match the work its NASA funding, Robin created a demonstration of how a set of Mars Rovers could place bets on the presence of scientific interest at different locations on Mars. The result would be the emergence of consensus beliefs that could be more accurate than the knowledge of any individual.

I also remember the time Robin hosted Murder Mystery evening with a prediction market as an added twist. Like a normal such party, actors would read out each scene. But in Robin’s version, the audience members would then place bets on the identity of the murderer by buying options. Based on the market dynamics, a ticket marked “This ticket is worth $1 if Professor Plum was the murderer” might start out having equal value as the other suspect tickets (so that you could be the whole set of them for $1), but then the price would fluctuate as [events] unfolded until the prices ultimately went to $0 for all but the actual murderer. It was really fun, an improvement on the original version.

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What odds a hot 2008

About 20%, if you just want the executive summary (at least, that is the market “consensus”). If you want the details, read on…

Via Chris Masse at Midas Oracle, I see that Intrade has a betting market on 2008 global mean temperature being in the top 5 hottest years. As Chris [Caveat Bettor, actually ] observes, the contract is perhaps a bit vague but for the purpose of this post I will assume they will use the global land-ocean index analysis of NASA GISS, meaning the contract pays for a Jan-Dec mean of 0.55 or more.

The current price of the contract is $20 per $100 (bid-offer spread of $15-$25), ie an implied odds of 20%. At first glance, that felt cheap to me, so I had a closer look. 8 years out of the last 10 have satisfied the “top 5″ test, which is not too surprising given the overall warming trend. However, temperatures are now in for Jan and Feb 2008, and they are very cold, at +0.12 and +0.26 respectively (note how “very cold” is still well above the 1951-1980 baseline). So it will require a mean anomaly of 0.62 for the remaining 10 months to trigger the payout. That has happened precisely once before, in 2005. Clearly it is not impossible, but it can’t be considered likely. We can do a little more analysis to look at the persistence of monthly anomalies. After detrending, the typical e-folding decorrelation time scale of anomalies looks like 4 months or so, suggesting that the relatively cold temperatures will persist for some time to come. That means the latter part of the year will have to really heat up to bring the average up to the top 5 threshold. I’d be more tempted to sell than buy on the contract at the current price, although I’ve not actually checked the seasonal predictions of modelling centres which could influence my attitude.

Meanwhile, in a parallel universe, some people are making noises about “falsifying global warming” by looking at the last few years of temperature data. I suppose one could perhaps ask what observations would falsify gravity (and for that matter, such observations have been made, although AIUI the interpretation is still disputed). Observations of all LW radiation passing straight through CO2 with no absorption would certainly falsify the theory, but I don’t expect to see that any time soon. More seriously, the IPCC explicitly predicted a trend of about 0.2C per decade over the next 30 years, if the trend is substantially different from that then (in the absence of some strong external factor) certainly we’ll need to revise some aspects of our calculations. But readers may recall that the Hadley Centre have already explicitly predicted a couple more below-trend years before a continuation of the general warming trend, so I wouldn’t get too excited about a few “cold” years, especially when “cold” actually mean “far warmer than most of the historical record, albeit not breaking any global records”.

What I like in the man is that he is a serious scientist… but he always manages to stuff some British humor (or “humour”, as they spell it) in his blog posts (or e-mails to me). I got my biggest laughs online thanks to James Annan.

James Annan’s blog

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[Note to InTrade's John Delaney: Couldn't you make use of James Annan BEFORE launching the contracts, man???]

by NASA

• Great Fun, Accurate Predictions, and Huge Trading Profits… for All

“Earth Rise” by NASA

The information will probably end up saving lives, as we can more efficiently allocate finite resources to global warming research and reduction (vs. preventative healthcare, disease control, micro loans, etc.). For instance, we spend a lot of money on the AIDS pandemic in Africa, but polluted water and malaria each claim more victims. The investment allocations could be tweaked, quite a bit.

In today’s WSJ, Goddard Institute of Space Studies finds that:

The latest twist in the global warming saga is the revision in data at NASA’s Goddard Institute for Space Studies, indicating that the warmest year on record for the U.S. was not 1998, but rather 1934 (by 0.02 of a degree Celsius).

Canadian and amateur climate researcher Stephen McIntyre discovered that NASA made a technical error in standardizing the weather air temperature data post-2000. These temperature mistakes were only for the U.S.; their net effect was to lower the average temperature reading from 2000-2006 by 0.15C.

The new data undermine another frightful talking point from environmentalists, which is that six of the 10 hottest years on record have occurred since 1990. Wrong. NASA now says six of the 10 warmest years were in the 1930s and 1940s, and that was before the bulk of industrial CO2 emissions were released into the atmosphere.

Those are the new facts. What’s hard to know is how much, if any, significance to read into them. NASA officials say the revisions are insignificant and should not be “used by [global warming] critics to muddy the debate.” NASA scientist Gavin Schmidt notes that, despite the revisions, the period 2002-2006 is still warmer for the U.S. than 1930-1934, and both periods are slightly cooler than 1998-2002.

Still, environmentalists have been making great hay by claiming that recent years, such as 1998, then 2006, were the “warmest” on record. It’s also not clear that the 0.15 degree temperature revision is as trivial as NASA insists. Total U.S. warming since 1920 has been about 0.21 degrees Celsius. This means that a 0.15 error for recent years is more than two-thirds the observed temperature increase for the period of warming. NASA counters that most of the measured planetary warming in recent decades has occurred outside the U.S. and that the agency’s recent error would have a tiny impact (1/1000th of a degree) on global warming.

If nothing else, the snafu calls into question how much faith to put in climate change models. In the 1990s, virtually all climate models predicted warming from 2000-2010, but the new data confirm that so far there has been no warming trend in this decade for the U.S. Whoops. These simulation models are the basis for many of the forecasts of catastrophic warming by the end of the century that Al Gore and the media repeat time and again. We may soon be basing multi-trillion dollar policy decisions on computer models whose accuracy we already know to be less than stellar.

What’s more disturbing is what this incident tells us about the scientific double standard in the global warming debate. If this kind of error were made by climatologists who dare to challenge climate-change orthodoxy, the media and environmentalists would accuse them of manipulating data to distort scientific truth. NASA’s blunder only became a news story after Internet bloggers played whistleblower by circulating the new data across the Web.

Cross-posted from CavBet

Consumer Tech and Entertainment
SYMBOL NAME PRICE CHANGE % CHANGE
APPLEPC iPhone Increases Apple’s Computer Market Share 52.00 1.00 1.96
BLUBY09 Blu-ray vs. HD-DVD Format War 73.75 -0.75 -1.01
DRMRIP Major Record Labels Drop DRM 53.25 0.00 0.00
FCELL Fuel-Cell-Powered Laptop 51.00 0.00 0.00
HDVSBLU HD-DVD Sales 51.75 0.00 0.00
IPHACK iPhone Hack in First Two Months 93.50 -1.75 -1.84
IPRECAL iPhone Recall in First Three Months 13.00 -0.75 -5.45
IPSALES iPhone Sales 66.00 0.25 0.38
LCDVSPLAS LCD vs. Plasma 91.25 0.00 0.00
MACVLINUX Linux vs. OS X Market Share 47.75 0.00 0.00
MADDEN Madden Most Popular Game of 2007 58.50 0.00 0.00
NEWIPOD New Touchscreen iPod 58.50 0.00 0.00
PS3WINS PlayStation 3 Wins Console Wars 25.25 1.00 4.12
SPOREQ2 Spore Released Q2 2008 63.25 0.00 0.00
SUBPC Apple Ultraportable 45.75 0.00 0.00
TRANSF Transformers Summer Box Office 6.00 0.75 14.29
ZUNFON Zune Phone in 2007 42.75 -2.25 -5.00

Military, Aviation & Space
SYMBOL NAME PRICE CHANGE % CHANGE
A380FLIES Commercial A380 Flight in 2007 66.50 -0.50 -0.75
INDIAMN India’s Manned Mission to the Moon 62.50 1.25 2.04
ISSDONE ISS Completed by 2010 39.00 0.75 1.96
LANDR X-Prize Lunar Lander Challenge Success 58.50 0.00 0.00
ORION NASA’s Orion Capsule in Use by 2014 50.00 0.00 0.00
ROCKT Rocket Racing League Starting by 2008 21.25 0.25 1.19
SCRAMJET Scramjet Reaches Mach 15 55.50 5.50 11.00
SEGWIN Winner at the Space Elevator Games 50.00 0.00 0.00
SHUTL Four ISS Shuttle Missions in 2007 41.25 0.75 1.85
SKYDV Skydiving Altitude Record Broken 64.75 0.00 0.00
SPACEX SpaceX Falcon 1 Rocket Launch 57.50 0.00 0.00
SPCHOTL Space Hotel by 2012 40.25 0.25 0.63
V22FLY V-22 Osprey in Active Duty 61.50 0.00 0.00
V22SAFE V-22 Osprey Safe 54.00 0.00 0.00
VRGNFLTS Space Tourism Safety 57.25 0.00 0.00
VRGNGAL Virgin Galactic Launch 55.50 -0.25 -0.45

Extreme Science
SYMBOL NAME PRICE CHANGE % CHANGE
BOSON “God Particle” Discovery in the U.S. 54.00 0.00 0.00
BOTS Androids Beat Humans in Soccer 47.75 0.00 0.00
DIETDRUG OTC Diet Drug Alli Recalled? 45.25 0.00 0.00
NFLHGH NFL Allows Medical Use of HGH 44.75 0.00 0.00
SOLSTRM Solar Storms Cause Massive Blackout 37.00 0.00 0.00
STMCURE Stem Cells Cure Major Disease 86.50 0.00 0.00

Energy and the Environment
SYMBOL NAME PRICE CHANGE % CHANGE
BULBS Compact Fluorescent Lightbulbs Gain Market Share 99.25 0.00 0.00
CO2MKT U.S. Carbon Trading Law 70.75 0.00 0.00
DONGTAN Dongtan Inhabited by 2010 52.00 0.00 0.00
DRYWST Water Crisis In U.S. West 51.50 0.00 0.00
ETHNOL Ethanol’s Long-Term Future 55.00 0.00 0.00
GASTRTY China-U.S. Greenhouse-Gas Treaty 47.25 0.00 0.00
H5N1 Bird Flu in North America 49.25 0.00 0.00
HIGAS Gas Prices Hit Record High 64.25 -2.75 -4.10
HURICAN Major U.S. Hurricane in 2007 88.50 0.00 0.00
OLYMPAIR Air Pollution Postpones Olympics 52.25 -0.25 -0.48
USMPG U.S. MPG Standards Upgraded Again 60.00 -0.50 -0.83
VRGEARTH Virgin Earth Challenge 56.50 0.00 0.00

Web Trends
SYMBOL NAME PRICE CHANGE % CHANGE
DIGGRIP Legal Trouble Shuts Down Digg.com 31.25 0.00 0.00
DOWNLD Future of Video DRM 53.25 0.00 0.00
ERADIO Internet Radio’s Survival 46.00 0.50 1.10
FACEBOOK Facebook.com IPO in ’07 40.75 0.00 0.00
FIREFOX Firefox Market Share 61.25 0.00 0.00
GOOGL Google Overtakes Yahoo 99.75 0.00 0.00
GOOGOS Google OS by 2010 67.00 0.00 0.00
YOUSUE Google vs. Viacom 63.25 0.00 0.00

Automotive Tech
SYMBOL NAME PRICE CHANGE % CHANGE
CHVOLT Chevy Plug-In Hybrid Produced 61.50 0.00 0.00
FLYINGCAR Flying Car by 2025 54.75 0.25 0.46
HYBRID Hybrid Cars More Than 40 Percent of Vehicles Sold 70.50 0.00 0.00

The PopSci’s PPX and The Sim Exchange are the two best things that happened to the field of prediction markets since the arrival of Inkling Markets in 2006.

[A New York Times Magazine (July 1, 2007) article] looks at NASA’s attempts to use public competitions with large cash prizes (up to $2 million) to lure amateurs into developing better space technologies —from a more efficient astronaut’s glove to a new lunar lander.

Slate

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by NASA

My Question: Do you see any kind of connection between natural language search and prediction markets?

Addendum (November 7): In a 2005 blog post, comes the explanation on how the prediction market virus disseminated into Barney Pell’s body and mind. One usual suspect (pun intended, see below) is involved:

I have been interested in this idea ever Robin Hanson (the founder of the field of prediction markets) and I were summer students in the AI Lab at NASA Ames Research Center, both working under Peter Cheeseman. This was right around the time when Robin wrote his first papers on the topic: “Idea Futures: An idea whose time has come?”, and “Could gambling save science?”. In order to match the work its NASA funding, Robin created a demonstration of how a set of Mars Rovers could place bets on the presence of scientific interest at different locations on Mars. The result would be the emergence of consensus beliefs that could be more accurate than the knowledge of any individual.

I also remember the time Robin hosted [a] Murder Mystery evening with a prediction market as an added twist. Like a normal such party, actors would read out each scene. But in Robin’s version, the audience members would then place bets on the identity of the murderer by buying options. Based on the market dynamics, a ticket marked “This ticket is worth $1 if Professor Plum was the murderer” might start out having equal value as the other suspect tickets (so that you could be the whole set of them for $1), but then the price would fluctuate as [events] unfolded until the prices ultimately went to $0 for all but the actual murderer. It was really fun, an improvement on the original version.