Risks pay off -sometimes. – [VIDEO]

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Peter Diamandis on risks and innovation:

Peter Diamandis:

ACCEPTING RISK:

Finally I’d like to address the issue of risk. In contrast to individuals who speak about reducing exposure to risk, I want to speak in favor of accepting more risk.

There is no question that there is risk involved in winning the X PRIZE, as well as risk in going to the moon or Mars or opening any portion of the space frontier. BUT, this is a risk worth taking!

As American many of us forget the debt we owe to early explorers. Tens-of- thousands of people risked their lives to open the ‘-new world’- or the American west. Thousands lost their lives and we are here today as a result of their courage.

Space is a frontier and frontiers are risky! As explorers and as Americans, we must have the right to take risks that we believe are worthwhile and significant. We owe it to ourselves and future generations. In a time when people are risking their lives in motor sports or bungee jumping, it seems a bit shallow to be concerned about the risk involved exploring space.

It is also critical that we take risk in our technology development and that we allow for failure. Without risk and without room for failure we can not have the very breakthroughs we so desperately need.

A breakthrough, by definition, is something that was considered a “-crazy idea”- the day before it became a breakthrough. If it wasn’t considered a crazy idea, then it really isn’t a breakthrough, is it? It would have simply been an incremental improvement.

Remember those immortal words, “-Failure is not an option?”- If we live and work in an environment where we cannot fail, than breakthroughs may not be an option either.

I urge both this Committee and NASA to take steps which will help the American people understand that space exploration is intrinsically risky, yet a risk worth taking. Let’-s make space explorers heroes once again.

Why does the CFTC allow the Cantor Exchange and not InTrade?

Joe Weisenthal has a small opinion piece on why the CFTC allows real-money prediction markets on movie business, and bans those on politics or sports. The problem in the piece is that Joe is 100% wrong.

  1. Joe says that there can’-t be hedging in politics. Wrong. You can hedge your political ads on InTrade.
  2. Joe says that there can’-t be hedging in sports. Wrong. Businesses that operate inside a stadium could hedge the risk of the home team losing (which means less business for them).

So. why does the CFTC shy away from hedging on sports and politics? –-&gt- Politics. The CFTC is afraid of the US Congress, who would object to politics and sports “-gambling”-.

The CFTC is a weak institution, in the DC sphere of power. In the recent past, the CFTC lost one important battle against other parts of the US government —-even though it was the CFTC that was on the right side of the issue at the time. With politics and sports betting, the CFTC does not want to lose another battle. It is a question of survival.

Rejection of the patent claims involving a method of hedging risks in commodities trading

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Wikipedia:

The applicants (Bernard L. Bilski and Rand Warsaw) filed a patent application (on 10 April 1997) for a method of hedging risks in commodities trading. Such patent claims are often termed business method claims. [...] Bilski’-s method claim was patent-ineligible because it did not “transform any article to a different state or thing.” [...]

It has been widely reported that the Bilski decision will call into question the validity of many already issued business method patents. [...]

Read the whole thing.

Via our Jason Ruspini

How Paul Volcker will save the world

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Paul Volcker:

The specific points at issue are ownership or sponsorship of hedge funds and private equity funds, and proprietary trading — that is, placing bank capital at risk in the search of speculative profit rather than in response to customer needs. Those activities are actively engaged in by only a handful of American mega-commercial banks, perhaps four or five. Only 25 or 30 may be significant internationally.

The Commodity Futures Trading Commission and Securities and Exchange Commission will have authority to decide what derivatives must be centrally cleared rather than letting private parties make the call.

“-Central clearing interposes a regulated clearinghouse between the original counterparties in a derivatives transaction and so creates an opportunity to make dealing more transparent.”-

CNBC video


Enterprise prediction markets help organizations mitigate risks.

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IT Business Edge – (I love the name of this magazine):

Seeking opinions from a diverse group of employees rather than just the usual decision-makers helps organizations mitigate risk, says Adam Siegel, co-founder and CEO of Inkling, Inc., a provider of prediction market software. “You want as much information as possible upfront so you can react to possible problems,” he says.

Siegel reads the 10K statements of potential clients to help identify their hot-button issues. When they express interest in the markets but wonder what kinds of questions to pose, he suggests establishing markets examining risk factors such as how pricing fluctuations affect the market for a company’s products or how acquisitions may impact the competitive landscape.

A drawback of prediction markets is that they won’t reveal the factors behind the bets. But, says Young, “If a red flag is raised about a particular issue, it’s not hard to go back and investigate” to determine the root causes of problems. “The bigger problem for most companies is they just don’t know what’s going to happen, and the red flag never goes up.”

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- Excellent article.

- If you have missed our previous post, see here our little excerpt of the Forrester report.

- Adam Siegel is CEO of Inkling Markets, as you all know. His company website is very interesting to read. If you have never done it, do it right now. The general concept of prediction markets is explained, and they go down and dirty on how to set up your own enterprise prediction markets.

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Business Risks & Prediction Markets

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Previous blog posts by Chris F. Masse:

  • Red Herring’s list of the top 100 North-American high-tech startups includes Inkling Markets —but not NewsFutures, Consensus Point, or Xpree.
  • Professor Koleman Strumpf explains the prediction markets to the countryland people.
  • Professor Koleman Strumpf tells CNN that a prediction market, by essence, can’t predict an upset.
  • Time magazine interview the 2 BetFair-Tradefair co-founders, and not a single time do they pronounce the magic words, “prediction markets”.
  • One Deep Throat told me that this VC firm might have been connected with the Irish prediction exchange, at inception.
  • BetFair Rapid = BetFair’s standalone, local, PC-based, order-entry software for prediction markets
  • Michael Moore tells the Democratic people to go Barack Obama in Pennsylvania (a two-tier state), but the polls and the prediction markets tell us that that won’t do the trick.