What do our research scientists think?

Would you re-formulate it?

Not a bad idea, but not the best idea they could have.

The EPS prediction markets were a better idea, because they have many more primary indicators.

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But if a prediction market is an information aggregation mechanism, should you ask just any question before ever checking that there is indeed something to aggregate? For instance, can a prediction market foretell whether your competitor’s molecule will be approved by the FDA? I would say that it can’t in case your own competitive intelligence department can’t. That’s worth checking with them before setting up that prediction market.

NO PRIMARY INDICATORS = NO PREDICTION MARKETS

RELATED APPENDIX: See the comments here about primary indicators and prediction markets.

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Here’s what I wrote in October 2008:

InTrade are going to open prediction markets on the future price of art. These innovative prediction markets will fail miserably.

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The InTrade prediction market on the Mei Moses Fine Art Index has attracted only 6 trades, so far.

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In November 2007, I said that the BetFair prediction markets on global warming (HSBC Investable Climate Change Index & ECX CFI Futures Contract) were “flawed products”. A few weeks later, they disappeared. Even the BetFair prediction markets on the highest and lowest UK temperature (which I was a bit more positive about) have now disappeared —and the “Climate” sub-category (under their “Special Bets” category) has totally disappeared in cyberspace.

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In both cases, I explained to my readers why those prediction markets would fail. Read my archives if you are curious.

NO PRIMARY INDICATORS = NO PREDICTION MARKETS

I even made the suggestion, one day, that the creator of any prediction market should be compelled to list the related primary indicators and their URLs —as a barrier to prevent futile prediction markets to be put on the Web.

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In the seven days leading up [Joe Biden's] share price on Intrade went up about three and a half times. In the seven days leading up his share price on Intrade went up about three and a half times. In a field of about four or five different viable candidates he became the clear leader on Intrade more than about 48-72 hours before he was named, even before anyone was floating his name as a serious candidate.

Chad Rigetti suggests that there was insider trading at work, which informed the InTrade prediction market on Joe Biden —well before the leak and/or announcement.

I have a different reading. The reality is that the Barack Obama campaign had been leaking the fact that they needed a VP experienced in foreign affairs (so as to counter-balance Barack Obama’s inexperience in this crucial area –that was before the financial crisis), and it happened that in the short list of potential VPs, Joe Biden was the only one who was fitting this narrative. It was thus easy for journalists (and for the InTrade traders) to anticipate that Barack Obama would choose Joe Biden.

This is typical of the overselling done by the InTrade pushers —they suppress the existence of the primary indicators (which event derivative traders rely on to get informed), and they tell gullible reporters that InTrade has magical power. It’s total bullshit. The life of the InTrade prediction market on “Joe Biden as the VP nominee” represented the simple reflection of what event derivative traders could read in the Press. There was no magic whatsoever.

Financial Times

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At first glance, that looks like a very bad idea. Indeed, I don’t see what primary indicators will be used by the event derivative traders to inform their betting decisions.

Is it another bad move from Chad Rigetti?

P.S.: I wish I am wrong, and this becomes an instant success for InTrade. (I would rather see them experimenting with the 5-minute prediction markets.)

Providing that the trading employees have access to all the primary indicators —which is a point missing in that self-serving afadavit linked to above.

Some blogger says his wife is fantastic.

New York Times portrait of Joe Biden.

UPDATE: Barack Obama‘s speech + Joe Biden‘s speech

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I think it is the worst pick ever. What a blunder. Joe Biden (a D.C. insider) is unpopular and gaffe prone. Plus, that choice shows that Barack Obama is insecure when it comes to foreign policy. An emphasis on the economy and, thus, on a successful gubernatorial experience would have been better.

Kathleen Sebelius was the one to pick. She is my vice president. (And Ron Paul is my president. )

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I have over-estimated the secretiveness of Barack Obama’s decision process. The chart above obviously shows that the Joe Biden narrative leaked out to reporters was beamed out for a purpose: testing the Obama-needs-a-VP-who-is-strong-in-foreign-policy argument, and letting the Press do the final vetting on gaffe-prone Joe Biden.

InTrade CEO John Delaney (along with the HubDub and BetFair people) will now brag on his marketing material that his prediction exchange did forecast Joe Biden as the Democratic vice president nominee.

What’s bad in all that (other than I have an egg on my face [*] ) is that we won’t have a public debate on the different quality of the various primary indicators, and how that conditions the accuracy of the prediction markets.

[*] I have an egg on my face, but Caveat Bettor has a whole omelet on his.

Prediction markets fed on primary indicators —and, in this case, there aren’t any.

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