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Google's Prediction Market 94

Posted by CmdrTaco
from the i-predict-nothing dept.
Googling Yourself writes "Employees at Google are encouraged to place bets on Google's prediction market — an exchange that tries to forecast events based on the money wagered on a particular outcome. Employees have made wagers with play money (Goobles, as in rubles) on questions like: will Google open a Russia office? will Apple release an Intel-based Mac? how many users will Gmail have at the end of the quarter? One tangible benefit to the company is that the market allows Google to track how information disseminates in the company. A paper called "Using Prediction Markets to Track Information Flows: Evidence From Google" discusses information flows in the company based on the prediction market data and contains many other interesting observations of Google culture. (pdf)"
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Google's Prediction Market

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  • a beta version hitting the Intarweb tubes soon...

    • Re: (Score:2, Funny)

      by rasman1978 (1158339)
      And it will stay "beta" for 2.5 years.
    • by ryanguill (988659)
      I sure hope so. Something like this from google has to be better than the ones that are currently out there. With most of them the user interfaces are dismal at best.
  • by stomv (80392) on Monday January 07, 2008 @11:28AM (#21942230) Homepage
    This exists for everyone with funny money called inkles at Inkling Markets [inklingmarkets.com]
    • by sholden (12227) on Monday January 07, 2008 @12:14PM (#21942698) Homepage
      And with non-funny money at: https://www.intrade.com/ [intrade.com]
      • by jfengel (409917)
        I have been following the Intrade market, and I think that Obama's recent surge on that market may represent a serious blow to the idea.

        I don't need Intrade to tell me what's happening at the polls; I can get that from the news. Intrade is interesting only if it's able to make predictions, and for a long time Clinton was twice as expensive as Obama. Today it's the reverse. That makes it a fine place to gamble, but not an interesting place to get an accurate representation of the future.

        That market is sti
        • by sholden (12227) on Monday January 07, 2008 @03:42PM (#21945442) Homepage
          You might be trying to ferret out the wisdom of crowds. Lots of other people are just gambling, and another entity is interested in collecting transaction fees...
        • Re: (Score:3, Interesting)

          by Spy Hunter (317220)

          I don't need Intrade to tell me what's happening at the polls; I can get that from the news. [...] we're basically counting on Intrade to let the wisdom of crowds ferret out all of that before the polls

          The thing you have to understand about prediction markets is they don't represent a magical source of extra information. Prediction markets work only based on information that is already publicly available. They simply combine and weigh that information better than any other method of making predictions, an

    • by quantaman (517394)

      This exists for everyone with funny money called inkles at Inkling Markets [inklingmarkets.com]
      Doesn't using fake money defeat much of the purpose of a prediction market?

      If you're not betting real money then you lose a lot of the motivation to be completely honest about the odds.
      • If you're not betting real money then you lose a lot of the motivation to be completely honest about the odds.
        It's only fake money until the Chinese start farming it.
  • by $RANDOMLUSER (804576) on Monday January 07, 2008 @11:28AM (#21942240)
    That they use "Goobles" to wager with; I'd have expected Quatloos.
  • My Bet (Score:5, Funny)

    by Nom du Keyboard (633989) on Monday January 07, 2008 @11:31AM (#21942286)

    will Apple release an Intel-based Mac?

    I'm betting yes. So when do my stock options arrive?

  • Like Popular Science (Score:4, Informative)

    by doombob (717921) on Monday January 07, 2008 @11:34AM (#21942322) Homepage
    I wonder what you would learn from the PopSci Prediction Exchange (PPX) [popsci.com]? I've been playing around with it a little bit, but it seems to act more like a commodities market than an actual stock exchange.
  • by ryanguill (988659) on Monday January 07, 2008 @11:35AM (#21942330) Journal

    Google, however, is no ordinary company. As detailed in a footnote, one Google employee, looking to be a profitable trader, wrote the code for an extremely prolific trading robot. As a result, he "was participating in about half of all trades" and made a profit (in Goobles).


    I wonder if he got fired or got a raise?
  • I wonder (Score:4, Funny)

    by GroeFaZ (850443) on Monday January 07, 2008 @11:36AM (#21942342)
    Will this post be moderated +5, Funny?
  • by michaelmalak (91262) <michael@michaelmalak.com> on Monday January 07, 2008 @11:37AM (#21942358) Homepage
    Prediction markets reflect information that is known; they are not perfect crystal balls. They also fall victim to groupthink.

    The best example is that the prediction markets predicted Hillary would win the Democratic nomination by a wide margin. Now the consensus is that it will be Obama by a wide margin.

    • by UbuntuDupe (970646) * on Monday January 07, 2008 @12:01PM (#21942520) Journal

      Prediction markets reflect information that is known; they are not perfect crystal balls. They also fall victim to groupthink.
      Very true, but the question is, compared to what? Prediction markets force people to be honest -- there's real money at stake, and a cost to your arrogance. (Well, not at Google, but at other markets.) It's harder to be a know-it-all when you have to back up your claims with your own money.

      The best example is that the prediction markets predicted Hillary would win the Democratic nomination by a wide margin. Now the consensus is that it will be Obama by a wide margin.
      I'd classify that as a feature rather than a flaw. Changes in odds are useful information too and allow us to avoid hindsight bias. It keeps us from saying, "Well everyone knew Obama would win." You can look at the history of the bets and say, "No, they didn't -- the general consensus was that he had no chance." Furthermore, "Hey, if you really knew it all along, why weren't you swiping up those underpriced Obama bets?"

      One thing I'm interested in seeing is how Candidate/Party X's chance of winning correlates with critical financial metrics like long-term interest rates and oil prices. That is, do traders revise their estimates as a party's chance of winning goes up? Intrade recently started "shock future" bets where you can bet on the changes in such variables on election day (although I think to avoid the noise you should instead look at the long-term correlation rather than one day, which has noise from other factors).

      For all their flaws, prediction markets truly fascinate me.
      • by SQLGuru (980662)
        So, how many states are represented thus far? Why is everyone conceeding victory to Obama (I'm an uninterested party, so I support neither him nor Hillary).

        Prediction markets are only as accurate as their population. Those with small populations or with populations heavily influenced by one demographic do not necessarily represent the country as a whole. Also, since most of them are treated like a stock market, there are those that are taking larger risks just to try to win the "game".....and they have n
        • by mgblst (80109)

          (I'm an uninterested party, so I support neither him nor Hillary).


          Really? So what planet do you live on, because if you live on Earth, you should be damn interested in who is going to be making the major decisions over the next few years. Decisions made by the President in the US have ramifications for all of us in the world. I wish I could be an uninterested party.
          • by SQLGuru (980662)
            These are just the primaries......when the different groups pick their main candidate for the final election in November. I am not a Democrat, so I don't get to have input into that primary....thus, I am an uninterested party with regards to Obama vs Hillary.

            Layne
      • Hey, if you really knew it all along, why weren't you swiping up those underpriced Obama bets?
        Perhaps because of five years in jail due to the 2006 Internet gambling law (SAFE Port Act)?

        Perhaps it won't be applied to prediction markets, and perhaps it won't be applied to individual bettors. On the other hand, if said risk were traded on a prediction market, we would know just how risky betting in a prediction market is.

      • by nelsonal (549144)
        Did you notice the stock market dropped after Obama did well in Iowa? He's running on a more populist campaign, it happens most election years.
        • by sheldon (2322) on Monday January 07, 2008 @05:15PM (#21946694)

          Did you notice the stock market dropped after Obama did well in Iowa? He's running on a more populist campaign, it happens most election years.


          Did you notice the day after Obama did well in Iowa, there was a sudden storm front that hit the west coast?

          He's running a Godless campaign, it happens most election years.

          [hint: The market tanks because of a jobs report that came out from the labor dept]
      • by DragonWriter (970822) on Monday January 07, 2008 @03:37PM (#21945376)

        Prediction markets force people to be honest -- there's real money at stake, and a cost to your arrogance.


        They don't "force people to be honest". Prediction markets — if they are positioned to influence the events they are used to "predict", like political futures markets are — are simply a form of advertising (or, viewed another way, campaign donations). Sure, they cost real money, so does buying TV ads. But, (1) they aren't regulated, the way political advertising and donations are, and (2) they are also negative cost if they succeed, unlike regular ads or campaign donations.

        People expend real money on campaign donations and political advertising all the time without any concern for "honesty". To think that political futures markets would somehow, by using "real money", force people to be honest is absurd. Any system where action can influence the perception of political reality will be gamed by those interested in influencing that perception—especially since the perception influences the reality here—and if you make it so that the limiting factor on the degree of influence is the ability to spend money then, like most aspects of the political system, the results will be skewed by the interests of those most able to burn money to acheive their political ends.
        • Obviously, not everyone's going to be honest. The point is, having your assets depend on whether your statement is true increases the returns to honesty significantly. Yes, people can bet heavily on a candidate without regard for real truth. However, there is more than one prediction market, and to really influence revealed odds, they have to bet in all of them, or else other traders will "Dutch book" them until they can't invest anymore.

          The comparison to honesty in political donations is about the worst
          • Obviously, not everyone's going to be honest. The point is, having your assets depend on whether your statement is true increases the returns to honesty significantly.

            So what? Notional experts' assets—that is, their reputation and ability, therefore, to make money as predictors of future outcomes—already depend on the success of their predictions. And—unlike with prediction markets—there is no easy way to limit exposure. So, as far as individuals making predictions go, because they a

            • So what? Notional experts' assets--that is, their reputation and ability, therefore, to make money as predictors of future outcomes--already depend on the success of their predictions. And--unlike with prediction markets--there is no easy way to limit exposure.

              Experts are rarely held to account for wrong predictions, and rarely make the kind of quantifiable, objectively observable predictions that go into futures markets.

              So, as far as individuals making predictions go, because they are essentially anonymous
              • Experts are rarely held to account for wrong predictions, and rarely make the kind of quantifiable, objectively observable predictions that go into futures markets.

                Maybe in some fields. In the specific case of political futures, experts frequently make exactly the kind of quantifiable, objectively falsfiable predictions that futures markets are held out as a substitute for expert prediction in. And they are frequently mocked and ridiculed after the fact for failure (moreso recently, as the increasing access

      • by dangitman (862676)

        It's harder to be a know-it-all when you have to back up your claims with your own money.

        Not if you're a rich "know-it-all." There are plenty of dishonest idiots with money.

    • And if you predicted Obama would win the nomination 6 months ago, you'd have made a whole lot of fake money (or in the case of Intrade, real money). Even more so for Huckabee. This isn't much different from a stock market: if you had predicted Enron would tank about 3 months before it happened, you could have sold it short and made a whole boatload of money, or at the very least gotten out early.
    • by TheLink (130905)
      "Prediction markets reflect information that is known; they are not perfect crystal balls. They also fall victim to groupthink"

      Figure out who really are the smart ones in the group for various questions and then weight accordingly. Add a bit of recursion/meta and voila ;).

      BTW I heard that at least one person in the world has a neuron specializing in Halle Berry.

      Maybe consciousness is what happens when your "simulation" extremely recursively tries to predict itself.

      Predicting external objects and creatures w
      • by foobsr (693224)
        Maybe consciousness is what happens when your "simulation" extremely recursively tries to predict itself.

        Interesting – my TaiChi master tries to get across that it is important to direct attention to what will happen in the not so distant future (to 'observe' what will happen), because you are always late if you observe what happens 'now'. My own idea on the issue was that you at least partially determine the future this way.

        CC.
    • They are not perfect - of course. On what basis do you say they fall victim to groupthink, however? An election itself is subject to groupthink, and as events occur during an election process then it is reasonable for a prediction market to change to reflect group reactions to those events. Predictions should change as e.g. Obama wins the Iowa caucus. For evidence of groupthink, you need to show a prediction that is out of line with a reasonable interpretation of the available facts. For something as unpred
      • An election itself is subject to groupthink
        Elections are rigged. Even if you don't accept that, enough people believe it that it affects prediction markets. A lot of people such as myself believed that Hillary was the one annointed by the power elite, based in part on the cooperation between Bush Sr. and Bill Clinton in the tsunami aftermath. We were all wrong. It now appears that Obama is the annointed one.
  • by RealGene (1025017) on Monday January 07, 2008 @11:43AM (#21942400)
    ..who had this as a significant plot element in his novel, The Shockwave Rider
    --Gene
  • Then I'm not very worried for the great data mine of google.
  • by Thelasko (1196535) on Monday January 07, 2008 @11:59AM (#21942500) Journal
    Wikipedia has a pretty good article [wikipedia.org] on the topic that I read a few months ago. Be forewarned Websense views some of these prediction market sites as gambling. So, I wouldn't view them at work. Specifically Intrade.
  • What does it say about the outcome of the HD-DVD/Blu-Ray battle? I want to buy my player now!
  • Another day, another story about G wackiness...
    I only feel sorry that /. was not around when MS was the rising star, I would love to read the "old" stories about how great and wonderful was MS at the time.
    What will be the next one - someone there changes their underwear?
  • if we're trying to *predict* a future event without any prior data to forecast upon, then it's merely a form of legalized gambling.

    and seriously......"Goobles"? They have to chose a name that sounds like one coming from a semi-dictator regime (Putin)? Whatever happened to "Googo" (like euro) or "Ginar" (like dinar) or "Ganc" (like franc) or even "Grona" (like krona) ?
  • Ummm.... (Score:1, Offtopic)

    by Otter (3800)
    Given the smartestest people in the world, the revolutionary free lunch policy and the room of rubber balls, shouldn't they be producing something exciting by now? Experimenting with libertarian enthusiasms from 2003 while their lawyers acquire and rebrand other people's Web 2.0 startups seems a bit of a letdown after the hype.
    • by KimmoV (1062430)
      I am still waiting for someone to throw in unlimited amount of monkeys equipped with typewriters and see if they can improve on Shakespear.
      • by SQLGuru (980662)
        That's the problem. They have enough money for all of the monkeys they need except that last one (infinity + 1 and all)......so, click on more of their AdWords so they can start the project.

        Layne
    • by TheLink (130905)
      1) Personally I think Google's finance team could easily make pots of money in investments and commodities trading given the info in Google's computers, and the resources they have.

      Of course if they did that sort of thing openly people might stop using them for search, email, etc.

      2) If I were the NSA I would prefer to have something like Google around just so that it's easier to keep an eye on stuff.

      The rest of the smart people can spend their whole day getting free massages and food it doesn't really matte
  • by steveha (103154) on Monday January 07, 2008 @12:39PM (#21943000) Homepage
    Earthweb [amazon.com] is a novel by Marc Stiegler [skyhunter.com].

    In Earthweb [amazon.com] prediction markets have a major role in the plot. Prediction markets are used to harness the wisdom of the crowds over the whole planet; this is what the title references. The book also speculates on some of the problems that might happen with prediction markets, such as people who just try to figure out an expert's prediction and just bet the same as that expert. (This expert-following skews the results; the followers are not adding any more insight to the market, and they might be lending their support to someone who might be wrong.)

    The book is really a bunch of cool future Information Age ideas, with just enough plot to stitch them together. The action sequences are as energetic and implausible as a Tomb Raider game. It's not Shakespeare but I enjoyed it.

    P.S. The book also tells, as part of its backstory, about a bunch of inexpensive computing devices with networking built in being air-dropped over the poorest parts of the world, to give poor children some sort of an education. He wrote this years before OLPC.

    steveha
    • by stemcel (1074448)
      This was my first thought when I read the article summary. The book is fantastic and provides an encouraging (though probably pretty optimistic) idea of how useful this sort of prediction market can be.
      Think of it as using Mechanical Turk to tell the future...
  • I find prediction markets very fascinating and a powerful prediction system, when manned by experts of the field. Indeed, such a system was used to find a H-bomb that had been lost at see back in the 60s, as well as the missing submarine Scorpion. Read "The Blind Man's Bluff" for details, but there are excerpts online. Also see Bayes subjective probability.
  • by mi (197448) on Monday January 07, 2008 @12:52PM (#21943178) Homepage

    Pentagon tried just this in 2003 — use the method [gmu.edu] to predict terror attacks. The Congressional outcry about "trading in blood" was such, that the program was scrapped shortly after being announced...

    Quoting from MSNBC report [msn.com]:

    The Pentagon Tuesday agreed to abandon the plan, the Senate Armed Services Committee chairman said, after Senate Democrats Monday blasted the plan as nothing more than state-sponsored "gambling on terrorism."
    • This is one of the not-so-few times Congress got it right, as that's what it is.
      • Re: (Score:3, Informative)

        by mi (197448)

        Congress was only calling the spade a spade.

        Alright, teacher of the people. Could you define, what "trading in blood" means?

        Or did you simply fall for somebody else's demagoguery?

        This market may or may not be efficient in predicting terrorist attacks, but there is nothing morally wrong with it.

    • by sheldon (2322)
      Every once in a while Congress get's something right.

      Prediction markets are pretty terrible at predicting. Instead what they show is the wisdom of the crowds.

      If we were to create a prediction market for blu-ray over HD-DVD, it would have suddenly shifted to blu-ray winning by a greater margin right after Warner bros announced it was going blu-ray exclusive. Now how was that a prediction? It's not.

      Then next week, when HD-DVD makes some announcement, the market will adjust back some other direction.

      This is
      • by mi (197448)

        Every once in a while Congress get's [sic] something right. Prediction markets are pretty terrible at predicting.

        Well, this may or may not be true (although Google appears to disagree), but that was not the Congress' reasoning. At all.

        The Democratic demagogues insisted, the thing would be somehow immoral and must be scrapped for that reason. Whether it will actually work or not was never discussed in the Senate...

        • by sheldon (2322)

          The Democratic demagogues insisted, the thing would be somehow immoral and must be scrapped for that reason.


          Funny. If the Democrats had proposed it and the Republicans halted it, you'd be cheering that as proof that Republicans care about morals and values.

          Take your partisan hackery elsewhere.
          • by mi (197448)

            Take your partisan hackery elsewhere.

            An attempt to change the subject noted and duly ridiculed.

  • I've read that the CIA used a similar approach to predict the location of a soviet Gulf II sub which was lost in the Pacific. I guess the resulting predictions were pretty darn close.
  • Look at the political markets which didn't price Mike Huckabee in until a month ago, never minding the best bet is always the governor of a southern state (and there is only one this election cycle!!!).

    Look at football gambling. Every week some group of people actually bets the road favorites heavily even though it is a fact that a home team underdog stands a consistently better chance. In football, homefield advantage is overwhelming, so much so that if you consistently bet on the home team underdogs th

    • by daveo0331 (469843)
      What you're saying about football betting happens because, due to gambling laws, it's an inefficient market. If betting on football were as easy and free of juice as stock trading, wealthy investors could easily bet all the home underdogs and the market prices would be more correct. Because this isn't the case (having to physically travel to Nevada, 10% juice, online books existing in a legal gray area, etc.), the mistakes made by "squares" are able to affect the betting lines.
      • Remember the days when Republicans were the party of fiscal responsibility?
        I think very few people alive remember when Warren G. Harding was president.
      • I suspect that even in an efficient market the home underdog phenomenon would persist. Also, I'll offer the stock market is far from an efficient market for information... although I know there's a 9/11 conspiracy theory that says otherwise.

        The basic problem is that the markets don't process information at all. They process attitudes and assumptions, which are often very different from information.

        Look at stuff like the political markets for the Democrats. All the information about Obama and Clinton wa

  • by imstanny (722685) on Monday January 07, 2008 @02:09PM (#21944120)
    The best predictions are made by an aggregate of opinions. You need look no further than "Who wants to be a Millionaire". When they poll the audience, the audience has a very high success rate (over 90%, though I forget the precise figure). The reason for this is that people that don't know for the answer account for random choices, which allows for those that do know the answer to make the correct answer rise to the top.


    There's a fascinating book that addresses all these points called "More Than You Know" by Michael J. Mauboussin. I have recently been at one of his lectures at an investment conference (and got an autographed copy of his book). He gave a poignant example about prediction quality of a group vs the individual:


    He put jelly beans in a jar and made his students guess the amount of beans the jar contained. He offered a small monetery reward as incenctive, to better ensure educated guesses. With the exception of 2 students, the class average came close to guessing the amount of beans in the jar than any one individual. His book offers interesting examinations of psychology and group behavior applied to financial markets.

    • The "Who Wants To Be A Millionaire?" example always bothered me. If you watch the show, the contestant had a strong tendency to use Ask the Audience early in the game, and Phone a Friend later. (People trust their friends more than a random studio audience, for better or for worse.) But I can't find a reference that says that the "smart audience" effect still happens when you control for the "level" of the question.
  • Bo Cowgill, who wrote the paper on Google's prediction market, will be talking about their project at our Money:Tech conference in New York Feb 6-7. See http://conferences.oreillynet.com/money2008 [oreillynet.com] for details.

    I've been spending a lot of time thinking about parallels between Web 2.0 and Wall Street. Because of course, the stock market is one of the largest prediction markets of all.

    But it doesn't end there. There are lots of fascinating things to learn by studying the parallels, including why Web 2.0 will
  • hi,

    john brunner's 1975 novel "shockwave rider" spent some time sketching out the social implications of a prediction market -- he called it a "delphi pool" and made it an integral part of the narrative -- a somewhat prosaic wikiview of the novel is at http://en.wikipedia.org/wiki/The_Shockwave_Rider [wikipedia.org] -- if you are interested in this topic, the novel is worth the read -- it is often labeled as the grand-daddy of cyber-punk and came off the presses ~10 years before neuromancer -- brunner's previous books "stan
  • Sounds like Shockwave Rider concept. Perhaps healthier due to complex social culture of Google culture.

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