Jed Christiansen:

It’s obvious that John wants InTrade to be much more successful than it has been, but he still clearly believes that InTrade can still be very successful. He mentioned that one key in their business is market makers- a few of their former market makers left, and that had a significant impact in the categories in which they participated. The new gambling laws in the US has had a significant impact on their business, but John is optimistic about the long-term potential of the industry in the States.

Regarding InTrade and TradeSports, John was clear that the companies are separate legal entities, with different management and employees. That said, he said that like a divorce, there are still connections between the two that take some time to replace. They are also looking into ways that individuals can submit contracts to trade on the exchange, similar to what you can do at Inkling. Clearly this would still be fairly tightly controlled, and judgement of the contracts would be done outside of InTrade by an independent entity.

John is disappointed that InTrade hasn’t grown more than they have. At the same time, he seems to be very optimistic about InTrade because their employees are still very motivated and morale continues to be strong. He also said he would fly to the US, but it would need to be for a good reason.

Finally, John addressed the infamous North Korea missile market. He was asked, “Was it a mistake?” He said both No and Yes. It wasn’t a mistake in that the market was judged according to a strict interpretation of the rules. At the same time, it was a mistake in that they didn’t handle the PR issue particularly well. His lesson learned was that they simply need to be incredibly careful regarding their market definitions.

On that last point, being the courageous web journalist at the center of this NKM storm, let me say this:

1. It was a mistake to state in the contract that the (only) expiry source was to be the US DOD. The Military&#8217-s vocation is not to tell the truth, but to protect the US citizens &#8212-by way of lying, sometimes, if needed. (And we know now that, in all matters related to North Korea, the US DOD&#8217-s policy is to abstain from making public, precise, detailed comments.) Any event futures contract should state that the prediction exchange (betting exchange) will make any effort to gather the facts (i.e., the truth) &#8212-by all means possible (official source of information, the media, direct investigation, etc.).
2. It was a mistake not to void all bets and all trading, or not to compensate the victims (the traders who did correctly predict that a missile would be fired, and lost their money due to &#8220-a strict interpretation of the rules&#8221-), when it became clear that the US DOD was not telling the truth completely (that is, they didn&#8217-t hand out all the details needed by InTrade-TradeSports to expire the prediction market on the &#8220-yes&#8221- side).
3. It was a mistake to retaliate against Chris Masse in the purest Irish tradition: suppression of a subside I never asked for- insults sent from anonymous e-mail accounts- rumors spread around saying that Chris Masse is bitter coz he didn&#8217-t get the money he asked for- e-mails sent by a second-tier, phone-booth, vendor conference organizer (paid by Intrade-TradeSports) to my contacts asking them to cut off all links with Chris Masse- etc. All this in vain, since CFM and Midas Oracle remain the two most popular and prestigious resources on prediction markets &#8212-and growing.
4. It is a mistake to come forward with regrets during a small venue, as opposed to make up with disappointed people and traders in popular web publications.

Previously: BetFair seems to say that InTrade-TradeSports’ illegal approach is not the best, on the long term. + InTrade expired the Larry Craig prediction market too early.

– Crowdsourcing The Crystal Ball – by Forbes&#8217-s James Surowiecki – 2007-10-15

[…] So what&#8217-s the catch? Only this: We&#8217-re still not sure how far into the future prediction markets can really look, or whether they&#8217-re going to be able to foresee the kind of world- or business-altering events that Tetlock, for instance, asked his experts about.

So far, prediction markets&#8217- track record has been built on predicting events that will occur in the near future, and where the range of variables that might determine that future is reasonably small and well defined. (Elections, sales forecasts and product launch dates all fall into this category.) But prediction markets haven&#8217-t, for the most part, been used to try to predict things like the fall of the Soviet Union, and so it&#8217-s not clear whether a market would really be able to foresee events that represent a dramatic break with the past, rather than an evolution from it.

This hardly means that prediction markets are of little use: The kind of forecasting problems that these markets are good at are fundamental to any business. Using prediction markets internally should have a beneficial effect on a company&#8217-s bottom line.

But it is fair to say that we don&#8217-t know enough yet to say that prediction markets really solve the crystal-ball problem when it comes to the long-term future. What we need now is to start using prediction markets to ask bigger questions, which will eventually help us understand what the problem with forecasting really is: Is it how we&#8217-re trying to predict the future? Or is it that we&#8217-re trying to predict the future at all?

What do you guys/gals think? I&#8217-d go with the idea that it&#8217-s quite impossible to use prediction markets to forecast the long-term future.