I first became interested in the idea of prediction markets and ideas stock exchanges when I first came across the Hollywood Stock Exchange back sometime in around 1998 / 99.  It always appealled to me as something that would have some use internally in trading ideas, but brief investigations at that time didn’t reveal anything really suitable.

Fast forward to 2006 and I read Wisdom of Crowds, which convinced me that my inner belief there was some use for these kinds of tools could in fact translate to a real application.   I’ve been looking around again and recently came across Inkling Markets.   I had the opportunity to speak with them in my “day job” and I learnt a lot of things about how to apply a prediction market internally.

What I took away from this were three things:

1. No prediction market will function effectively without a metric on which you can measure the success of the prediction.
2.  Small prediction markets are pointless — it’s wisdom of crowds not wisdom of a few.  If you’re going to trial it, get as many people involved as you can.
3. The market has to be dynamic to keep peoples interest (ie. no point asking them to list 10 ideas and leave them open for 3 months — they’ll rank them in the first week and stop trading).  This means opening new markets all the time, and ensuring that there are changes to the stocks (either new IPOs or de-listings) in existing markets on a regular basis.

Some of the features of Inkling Markets which I like, is the tools that it supports to allow you to blog effectively about your market, including embedding graphs etc.  As soon as I can think of an effective public market I’ll have to start one up and try it out as well as the internal ideas markets that I’ll be experimenting with.

As we trial our internal market, I’ll be sharing some of the pros and cons of that experience here.  If you’d like to know more feel free to drop me a comment.

This entry was posted on Saturday, May 19th, 2007 at 11:24 am and is filed under Innovation, Web 2.0. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.