Using enterprise prediction markets too early in the innovation process is BAD.

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Jed Christiansen:

I don&#8217-t think that prediction markets need to be the incentive.

I think that when it comes to generating ideas, you need to be as open and inclusive as possible. The process should allow anyone that submits or helps develop an idea to share in any rewards from that idea. Once it&#8217-s developed, then it can move to a stage where you can do forecasting via a prediction market.

Using a prediction market too early can do two things:
1- Poor forecasting due to social influence.
2- Limit revolutionary new ideas.
It&#8217-s too easy to short an idea that looks strange, when in fact it looks odd because it&#8217-s revolutionary. The idea process should foster and develop ideas, not make them compete against each other.

I&#8217-m glad to have sparked a little discussion here.

Previously: Innovation Mechanism = Voting Mechanism + Prediction Market Mechanism

Innovation Mechanism = Voting Mechanism + Prediction Market Mechanism

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Xpree&#8217-s Mat Fogarty (responding to Jed Christiansen, even though Jed didn&#8217-t talk to him but to Emile Servan-Schreiber :-D &#8212-argh, kids, today, interrupting adults&#8217- conversations :-D ):

We have had success combining voting to rank the ideas, then prediction markets to analyze the potential of the top ranked ideas. The phrasing in the prediction market needs to be quite specific, if we invested in idea A, how long would it take to get to market? how much would we sell in the first year? If the company does not invest in idea A, then the money bet in the market is returned to the user.

With long development cycles this can be challenging as it requires keeping the market active until ship, or for the sales estimate, one year after ship.

Of course, you could use a preference market – but this has issues of information cascades and rewarding of group think.


Here&#8217-s the Xpree stuff which Mat is talking about.

Previous blog posts by Chris F. Masse:

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