What do you get when you cross the so-called ‘wisdom of crowds’ with a marketplace that allows buyers and sellers to sell/trade in predictions (with real money)?
You have a Prediction Market that arguably provides the most unfiltered, intellectually honest, “skin in the game” motivated distillation of the market net perspective on topics such as:
- Who will win the next presidential election?
- Who will be the next American Idol?
- What the box office returns will be for a given movie?
- What is the likelihood of likelihood of a recession in 2009?
- How will the Dow perform?
- Where the next terrorist attack will occur?
Case in point, in tracking the presidential election, several times a day I go to Intrade, a leading prediction market, not only to get the current share value of a bet on McCain’s (un)likelihood to win the presidency, but also the market’s read on a state by state basis of the likelihood of Obama or McCain to win that particular state.
Needless to say, it’s been fascinating to watch traditional media cover, for example, McCain’s recent decision to stop advertising in Minnesota (basically, an acknowledgment that he will lose that state), when for the past few weeks, Intrade has shown a steady increase in the probability of McCain losing Minnesota (it’s gone for the high 60% probability to 90% probability).
In fact, for the past few weeks, the predictions have pointed to a blowout victory for Obama in the 364 to 174 electoral count range.
What is this data worth? Well, it’s done shockingly well in predicting past congressional election outcomes and the recent flurry of (negative) market moves, and we’ll know soon enough how it performs relative to the presidential election, but most fundamentally, it’s a potent tool to help triangulate on outcomes and their likelihood to play out in the weeks and months ahead.
Here’s a video on Intrade from a 20/20 segment on prediction markets, and do check out the interactive election map HERE.
UPDATE 1: We'll find out soon enough how Intrade did in predicting Obama wins in swing states Missouri, Ohio, Pennsylvania, Virginia, Florida, North Carolina, Nevada, and a total blowout victory for Obama over McCain of 364 electoral votes to 174.
Related Posts:
- The Choice: Three Weeks to Go
- Obama and the Dems: Are they just wimps? On whether Obama is prepared to take off the gloves and go for the kill.
- Why Experience Matters: On Palin, Putin and Prudence.
- Rhetoric - Why it matters: Obama's acceptance speech and where free markets and government meet.
- Base motivations: The Matter of McCain v. Obama.
- The Politics of Fear and Division versus Unity and Hope: The underlying narratives in Obama v. McCain.
