I am not a fan of the prediction market business. I know that many game and social theorists think they're valuable predictors of crowd behavior, but I've seen too many prediction start-ups turn into intellectual wastelands, with a few people controlling the "price" of opinions that are either pointless on the face of it, or bizarrely tilted in one direction or the other.
So I took Parker Barrie's recent pitch for a new feature on Predictify with a grain of salt. On Wednesday, the company is launching a prediction market for the U.S. presidential election, called the Election Showdown. Users will be able to enter their predictions for the election outcomes in 14 battleground states, and the most accurate users will, after the election results are in, divide a pot of $100,000.
Upon hearing this, my hackles rose. Users may predict one thing but vote another, I said, especially when money enters the process. To which Barrie had an answer that rescued the concept for me: "When you ask people to predict what will happen, you separate them from their personal biases and make them consider additional information."
The Election Showdown feature is not, I'm led to believe, so much about predicting the election results as it is about making people think about predicting the election results. "We provide a forum to research, discuss, and predict what you think will happen," Barrie said. And anyway, "We don't position Predictify as precisely accurate as to what will happen." There are polls for that, I guess.
Predict a state, win some money. But mostly, learn something.
(Credit: Predictify)Over the past year, since I first covered the company, Predictify has in fact shifted its focus from providing precise predictions to creating a platform for community engagement. That works for me. I still don't like prediction markets. But I do like sites that encourage people to think in new ways.
Other political prediction markets (thanks, Peter Norvig): Intrade, Iowa Markets, Rasmussen Markets, Betfair, Newsfutures, Inkling.
See also: The Journal of Prediction Markets.
Predictify is a survey engine cleverly masquerading as a prediction market. On the site, users can answer questions that test their predictive abilities in various fields. If they prove to be right, they can win actual real money. Users even get a small payout for answering a question if they end up being wrong.
People and companies wanting to do market research can submit questions to the Predictify audience--for a fee--and the answers that prove to be most accurate split the bulk of "pot" that is attached to the question.
Answer this question right and earn some bucks.
The money is ingenious misdirection. The point of rewarding accuracy is not to actually pay people for being right. The money is there, rather, to ensure that people who answer questions try to be right. Data from a Predictify survey is broken down in many ways for its users who pay for results, and it's that demographic breakdown that Predictify is really selling, not absolute predictions.
For example, suppose a company wants to know how to price a product. It can ask a question, "What do you think the price of this product will be when it hits the market?" The answers will be correlated with demographics, revealing what different groups (gender, age, ZIP code, etc.) think the item is worth. The "winners" who select the right price aren't predicting the price so much as determining it, and the people who select the price point are basing it not on the aggregate wisdom of the crowd but on the pricing level their target demographic has zeroed in on.
It's one of the cleverest Web 2.0 mind games I've seen in a while, and it just might work. Like many prediction markets, though, the community will run out of gas unless there's a strong incentive to keep people engaged. Money is just part of it on this system. Predictify also ranks users, and pays out more to the more accurate ones.
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