Oracles By economist Don Thompson

Oracles: How prediction markets turn employees into visionaries. By economist Don Thompson.

A link to an excellent  interview with Sarah Green from the Harvard Business Review, IdeaCast here:.

For those that don’t know what a Prediction Market ( E.g, NZ’s I’Predict) is:
A prediction market is a type of  Stock Exchange that deals with events or ideas instead of the value of a business. (Equities)
 Brokers in a traditional Stock Exchange will predict the value of a business at a point in time.
A prediction market gives you (Joe Bloggs) access to a market to invest in “idea stocks’. You are asked whether something will happen or what an outcome will be. It tells you the strength of peoples views and how they change over time.

‘Oracles discusses how prediction markets are more accurate than polls. Bad news David Farrar 🙂
In a prediction market, people’s ego and and personal financial investment into the outcome is involved so there is more research into the prediction outcome.
The Iowa Electronic Prediction Market is very accurate despite the participants being white males, university educated males in their 20’s. Everything that a statistician would tell you cannot accurately predict an outcome, but this market does.  The two main prediction markets in the US have constantly outperformed longstanding poll such as the Gallup, CNN and New York Times polls in calling presidential races since 1988.

The interview touches on how companies might use prediction markets. For example to replace meetings where homogenity of employee and the need to save face in front of fellow employees prevents innovation.

My Comment:

I am not a fan of compulsory Kiwisaver. I am with Chris Trotter in believing that some of the hype around retirement savings, however well meaning, is softening up the populace. Arguably, those who will mainly benefit from increased personal savings are those that clip our savings ticket.
As the saying goes: “In a gold rush the only people that get rich are those selling the shovels”.

Far better to give employees the means to invest in the company that employs them. Increase our financial literacy to boost financial and retirement outcomes. The widened use of Prediction Markets might achieve this in some measure:
 A company called Right Solutions has set up a Mutual Fund Market within the business. Effectively the company is now run by it’s employees. (The CEO accepts he is not the smartest person in the business)
The net worth of the company and that of the employees is increased due to the more efficient running of the business that pulls in knowledge through the Mutual Fund from managers through to secretaries.