Big bets and bubbles in the Internet era

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We live in an era of punditry, where more experts than ever are making predictions, since social media gives everyone a platform from which to spread their opinions.

The idea of how easy it is to make predictions and get away with being wrong most of the time was illustrated well around the time of the latest Nobel prizes, with Fama and Shiller sharing the award. NPR’s Planet Money interviewed them both, and asked Fama what would make him trust Shiller’s predictions regarding bubbles. He wanted ten correct predictions, something Shiller rightly pointed out would be way past his lifetime. I mention some bubbles on my Bubble Watch page, but bubbles are few and far between.

For a shorter timeframe in which we can judge the accuracy better of predictions, we can instead turn to all the new prediction sites popping up. These span a wide range, differing in the areas they cover and their approach, but they’re all very interesting. Let’s have a look at some of them:

Inkling – This is a prediction markets site, where you buy and sell positions in predictions, like on a stock market. The consensus price, or probability, should reflect the wisdom of the crowd. It doesn’t always, probably due to some questions not having enough volume, but a fantastically well-executed site, and a source for insight.

Pundit Tracker – This site takes predictions from various pundits in the field, and allows users to grade their predictions. In a way, you are making your own predictions, but only in the sense of grading others’, and the main purpose is to keep track of which pundits out there are actually making good predictions.

Twediction – Here, you make your own predictions, and their value goes up or down based on whether other people agree or not. The interesting aspect is that it is all done via Twitter, but the downside to that is that it gets a bit messy. Felix Salmon has been known to use this one. He has a prediction going on the value of bitcoin. By the way, he also recently made a bet with Ben Horowitz on NPR’s Planet Money on whether Bitcoin will be around at all in 5 years, but that one doesn’t have a market attached to it, so we can’t join in.

Then, finally, there is the granddaddy of them all – Long Bets, from the Long Now Foundation, at least in terms of length of bets and their scope. No market there, but you can place a vote on whether predictions regarding humans on Mars, etc, will come true. We might not be alive to see the results, but perhaps we can bequeath our predictions to our kids, and hope they will know better.

Photo by Brocken Inaglory (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html), CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/) or CC-BY-SA-2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/2.5-2.0-1.0)%5D, via Wikimedia Commons

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