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Yesterday, Alex Tabarrok blogged about what his 6-year-old son thought of Robin Hanson’-s party:
It was like this:
“-Blah, blah, blog. My blog, blah, blah, blah. Blog, blah, blog.”-
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That was hilarious enough. But Robin Hanson added that funny comment:
blah blah blah my kid blah blah blah 
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Excellent.
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A 6-year-old report about how he enjoyed being invited at Robin Hanson’-s party —-boring like hell.
Makes me think that the field of prediction markets should research more on data visualization. Kids like great visuals. Boisterous blogging adults haven’-t computed that, yet. When’-s the last time you saw great visuals at Marginal Revolution or Overcoming Bias?
Think data visualization, folks.
Bo Cowgill reads some blogs on that topic, I believe. He could give us some good links, one day.
UPDATE: Mike Linksvayer’-s take on the Robin Hanson incident the Marginal Revolution post. (See also Mike’-s comment, below.)
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Robin Hanson on “-silly”- research topics:
[M]ost people think futarchy (government by [prediction] markets) is silly, even though most think it has a decent chance of performing well […].
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Decision markets and decision-aid markets are 2 great concepts pushed by Robin Hanson, the world’-s #1 researcher in the field of prediction markets. But they are just inventions, not innovations. What is important is to find out which population segment or which class of business executives find this stuff productive and helpful.
In that perspective, his presidential prediction markets at InTrade are good ideas, and the liquidity there (helped by an AMM) is decent enough. But they are just betting supports, right now. I haven’-t seen any opinion leaders taking them as a trusted source of information, which is the damn goal. We will see whether that comes true in the future.
If Robin Hanson were really serious in finding a killer app for his concept of decision-aid markets, he would of course come up with conditional prediction markets in the realm of sports, which is the most popular topic in the real-money prediction markets. Alas, I often have the impression that the academics in the field of prediction markets have profound disdain for sports prediction markets.
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Robin Hanson on seeking decision advice:
[…] We rarely seek out advice, and when we do it is usually on much smaller decisions. […] One reason we avoid getting advice is that it lowers our status relative to those who give advice. Of course this is also makes asking for advice a good way to flatter and supplicate. Not sure if this explains the puzzle though. But all this doesn’-t seem to bode well for fielding decision markets on the biggest organizational decisions.
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Allow me to digress from there. I think that the reading from the prediction markets is like an advice —-in that you have to accept the market message as an authority. If you are an expert with direct access to primary sources of information, I don’-t think you’-d rely on the message from the public prediction markets (which are information aggregation laggards). The big mistake from Robin Hanson and the others has been to sell the public prediction markets as tools for the decision makers. That could happen, but marginally, I believe. Experts and decision makers will firstly want to rely on their primary sources of information and on their analysis.
I think that the population segment which is the more likely to appreciate the consumption of market-generated probabilities would be composed of people who want a chopper view of world events. Prediction market journalism should satisfy this dashboard need.
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[Please note that the thoughts expressed above refer to the public prediction markets (as stated in the post title –think BetFair-TradeFair, InTrade-TradeSports, Betdaq, HubDub, NewsFutures, and Hollywood Stock Exchange) —not the enterprise prediction markets, which is a horse of another color.]
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Robin Hanson on decision-aid markets:
I don’-t recall ever turning down a chance to consult on prediction markets for a Fortune-500 company. If you know of an opportunity that I’-m missing, do let me know.
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Doc, are there more Fortune-500 executives and managers attending a conference on extra-terrestrials or a conference on finance? 
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Emile’-s made up a phrase that means nothing (except in his fertile imagination), “-a proprietary prediction market variant“- —-sounds like a red herring to me.
Unlike Consensus Point, Inkling Markets and Xpree, NewsFutures is the only prediction market software vendor not to have adopted Robin Hanson’-s MSR —-a simplified trading technology now in use in most enterprise prediction markets.
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McKinsey: The Promise Of Prediction Markets
James Surowiecki: The premise is that under the right circumstances, the collective judgment of a large group of people will generally provide a better picture of what the future might look like than anything one expert or even a small group of experts will come up with. […-]
James Surowiecki: The Wisdom of Crowds is not an argument against experts. It is saying that you shouldn’t rely wholly on the judgment of one person or even a very small group of people. But for a crowd to be smart, it needs to satisfy certain criteria. It needs to be diverse, so that people are bringing different pieces of information to the table. It needs to be decentralized, so that no one at the top is dictating the crowd’s answer. It needs to summarize people’s opinions into one collective verdict. And the people in the crowd need to be independent, so that they pay attention mostly to their own information and don’t worry about what everyone around them thinks.
James Surowiecki: […-] One shortcoming is that a lot of people inside organizations don’t find the market mechanism intuitive or easily understood. They find it very challenging to use, which limits the pool of people who participate.
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On James Surowiecki’-s last remark, I would say that Robin Hanson’-s MSR technology (which powers most enterprise prediction exchanges but Google’-s one) brought much needed simplification to trading.
Overall, a good roundup, but the conference speakers should have mentioned Robin Hanson’-s pioneering work, and McKinsey should have invited him. He would have towered anybody and given great insights.
See Jed Christiansen for other remarks.
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As an aside, I’-d say I prefer the sketch that is supposed to represent Bo rather than the real photo. The sketch makes him look like he is subtitle, charming, smiling, humble, and modest —-quite a quantum leap.
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Bo Cowgill – Economics at Google
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Previously: Do Google’s enterprise prediction markets work?
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Previous blog posts by Chris F. Masse:
Robin Hanson:
[…-] We rarely seek out advice, and when we do it is usually on much smaller decisions. […-] One reason we avoid getting advice is that it lowers our status relative to those who give advice. Of course this is also makes asking for advice a good way to flatter and supplicate. Not sure if this explains the puzzle though. But all this doesn’-t seem to bode well for fielding decision markets on the biggest organizational decisions.
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It would not make sense for political experts to spend their work days reading the political prediction markets, only. They are paid to produce poll reports and analysis, which then inform the event derivative traders. The polls and the political memos are the primary sources of information, which determine the direction of the political futures markets.
In the same vein, it would not make sense for us to be seeking advice all the time. We will learn more in our lives by making mistakes and correcting them. Maybe that’-s the reason we don’-t like seeking advice: we know we get better by discovering ideas, making good and bad decisions, and learning from all that on our own.
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Previous blog posts by Chris F. Masse:
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Robin Hanson:
A highly accurate market has little value if other mechanisms can provide similar accuracy at a lower cost, or if few substantial decisions are influenced by accurate forecasts on its topic.
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[Here’-s Robin Hanson’-s website. For your information (if you are a newbie), Robin Hanson is the most advanced researcher in the field of prediction markets. He co-invented the modern-day prediction markets, the concept of decision markets, and a new marked design, the Market Scoring Rule.]
Previous blog posts by Chris F. Masse:
Our Master Of All Universes moans that the Free World’-s private and public decision makers rarely or never ask him for advice —-even though he sits on many “-Boards Of Advisors”- (like NewsFutures‘- one), which are, by definition, set up to provide advice —-or so he thought, at inception. How come CEOs and heads of states are not imploring him for advice to help them run the word, he asks. He blogs that advisers are probably paid primarily for the prestige value that they lend to the company.
Which leads me to realize that I pay zero French franc for having economist Michael Giberson on our Scientific Advisory Board, which is quite about what his prestige is worth in the field of prediction markets, as of today. That might change in the future, though —-especially if I continue to flatter him publicly in posts like this present one. He might suffer from ego inflation and charge me for using his so-called “-prestige value”-. All economists, be damned. They are as greedy as the people they study.
Robin Hanson – Overcoming Bias –
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Robin Hanson at LinkedIn
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Robin Hanson:
Info Value = the added accuracy the markets provide relative to other mechanisms, times the value that accuracy can give in improved decisions, minus the cost of maintaining the markets, relative to the cost of other mechanisms.
A highly accurate market has little value if other mechanisms can provide similar accuracy at a lower cost, or if few substantial decisions are influenced by accurate forecasts on its topic.
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Robin Hanson:
[…-] I meant trying to field the highest value applications. That is naturally measured in accounting terms – value minus cost. Measures of popularity or familiarity would not at all be the same thing.
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Robin Hanson:
[One should] try to offer a cost-benefit calculation. You could count how many employees had ever gone to a TQM meeting, but that wouldn’-t tell you if TQM is valuable or not.
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[Here’-s Robin Hanson’-s website. For your information (if you are a newbie), Robin Hanson is the most advanced researcher in the field of prediction markets. He co-invented the modern-day prediction markets, the concept of decision markets, and a new marked design, the Market Scoring Rule.]
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Related Info:
Using Prediction Markets to Track Information Flows: Evidence from Google – (PDF file – PDF file) – by Bo Cowgill, Justin Wolfers, and Eric Zitwewitz – 2008-01-06
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Previous blog posts by Chris F. Masse:
VIDEO – (it’-s a Guatemala-based website) – 2007-10-24
I have clicked on the second blue link, on that webpage, and Window Media Player opened, and now I am watching The Master Of All Universes lecturing a group of politics students…-
The main difficulty in developing efficient public policies is misinformation and false beliefs. The traditional information institutions are the media academics, and informal communications. These institutions have limitations in providing reliable, efficient, useful and enough information to make decisions. Speculative markets base their profits on the prediction of price patterns and are proving to be an efficient information institution. Betting markets have been better and faster predictions than experts because manipulators develop more accurate information. Therefore, speculative and betting markets have to become the central institution on political institutions in order to have effective public policies.
Click here to read the chapter “-Decision Markets for Policy Advice”-.
Great. But the second part of the video is more painful to follow. The students’- questions are sometimes inaudible.
Previous blog posts by Chris F. Masse: