Assessing the usefulness of enterprise prediction markets

No Gravatar

Do you need to have experience in running an enterprise prediction exchange in order to assess the pertinence of enterprise prediction markets?

Paul Hewitt:

Hi Jed…

As for qualifications, I have been making business decisions for almost 30 years. I am a chartered accountant and a business owner. Starting in university and continuing to this day, I have been researching information needs for corporate decision making. As Chris points out, I’m not a salesperson for any of the software developers. In fact, if I have a bias, it is to be slightly in favour of prediction markets. That said, I still haven’t seen any convincing evidence that they work as promised by ANY of the vendors.

As for whether I have ever run or administered a prediction market, the answer is no. Does that mean I am not qualified to critique the cases that have been published? Hardly. You don’t have to run a PM to know that it is flawed. Those that do, end up trying to justify minuscule “improvements” in the accuracy of predictions. They also fail to consider the consistency of the predictions. Without this, EPMs will never catch on. Sorry, but that is just plain common sense.

The pilot cases that have been reported are pretty poor examples of prediction market successes. In almost every case, the participants were (at least mostly) the same ones that were involved with internal forecasting. The HP markets, yes, the Holy Grail of all prediction markets, merely showed that prediction markets are good at aggregating the information already aggregated by the company forecasters! They showed that PMs are only slightly better than other traditional methods – and mainly because of the bias reduction. Being slightly better is not good enough in the corporate world.

I think I bring a healthy skepticism to the assessment of prediction markets. I truly want to believe, but I need to be convinced. I am no evangelist, and there is no place for that in scientific research. Rather than condemn me for not administering a PM, why not address the real issues that arise from my analyses?

Paul Hewitt&#8217-s blog

Previously: The truth about CrowdClarity’s extraordinary predictive power (which impresses Jed Christiansen so much)

Leave a Reply

Your email address will not be published. Required fields are marked *