The power of markets to predict, and the power to predict markets

The driving force behind prediction markets is something called information aggregation. Traditionally, it has been the realm of professionals such as pollsters or weather forecasters or the CIA. Those experts tend to be knowledgeable but are prone to certain limitations: personal bias, groupthink, clashing personalities. “In companies, not only are people afraid to get an answer, they are afraid of asking the question,” says Emile Servan-Schreiber, CEO of NewsFutures Inc., which sells markets programs to corporations. So a market can benefit from outsiders’ views that are reflected, in real time, in the form of prices. The dirty secret is that markets are often as good as the experts at making predictions.

Read Place Your Bets! from Time, Market Magic from CFO Magazine and Workers, Place Your Bets from Business Week. More from MetaFilter, Wikipedia, C|Net and the Read/Write Web.

Previously from WNM: Markets as Conversations and Rumor Aggregation: Blog buzz and market effects

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Filed under A democratic medium?, Business 2.0, Networks, Open Source, The Politics of New Media, The Semantic Web, When New Meets Old

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