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Google Putting Crowd Wisdom to Work

CmdrTaco posted more than 8 years ago | from the just-don't-start-a-stampede dept.

Google 190

daveperry writes "The Google Blog has a post about their use of prediction markets to forecast certain events that are relevant to their business. From the article: "Our search engine works well because it aggregates information dispersed across the web, and our internal predictive markets are based on the same principle: Googlers from across the company contribute knowledge and opinions which are aggregated into a forecast by the market. Sometimes, just feeling lucky isn't enough, and these tools can help." In related news, some software was recently open sourced that enables people to set up their own prediction markets."

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See Here (3, Funny)

XFilesFMDS1013 (830724) | more than 8 years ago | (#13620891)

use of prediction markets to forecast certain events that are relevant to their business.

Nothing to see here....hmmmm...bet they didn't see that one coming.

Clever Game (Re:See Here) (1)

nickdot (916387) | more than 8 years ago | (#13621508)

"certain events that are relevant to their business" suggest that these are external non-Google events. As Google is a company which likes to mystify itself in a fog of rumors, they could use this toy as a market study rather than predictive tool.

Suppose Google in the past included events like Gmail, Google Talk/Wifi/Earth/Print ... (I'm sure the whole alphabet will follow), they would easily see for which services there is a higher demand and which at the moment could be the new hottest platform for their content based ads to multiply their income. Something which appears first as a neutral game, might be another clever way to tap the brains of somebody else. It's just loyal to its own principle: "Organize the information, but don't create it yourself."

Times are changing. No longer the selling of products (content, books, music, videos, ...) may generate the primary income, but the infrastructure around it (ads, services, support, ...). Something the RIAA doesn't realize maybe, but what Google for sure is doing. If they mean organize, they mean in fact organize in such a way that consulting generates money. It's a hidden market with still a lot of land to be conquered. It's time that other companies catch this up, otherwise Google will be granted a monopoly and we all know what that mean$.

First post (-1, Offtopic)

Anonymous Coward | more than 8 years ago | (#13620901)

Fp yeah

Sounds Like Owise.com (2, Informative)

Crusader7 (916280) | more than 8 years ago | (#13620903)

I just recently started participating in it. Doesn't seem too complicated, though I'm still a bit unclear as to the relevancy of the predicitions it generates. It seems to me that for this sort of thing to work right, you'd need a much larger sampling (which maybe Google is hoping to get), but then, maybe I just don't know what I'm talking about?

Re:Sounds Like Owise.com (0, Insightful)

Anonymous Coward | more than 8 years ago | (#13621002)

You just don't know what you're talking about. Why would you think you need a much larger sample if you're not trained in statistics? You must just be completely guessing! Look, the predictions it generates are supposed to be an estimate of what the general population feels the probablility of the event is, not the actual probabililty of the event. Since many times humans have a hard time with probabilities (grossly overestimating rare events, terrorism, etc.), the results have to be interpreted correctly! Futures markets are really interesting though from a financial/statistical point of view.

Re:Sounds Like Owise.com (5, Interesting)

drangundsturm (909630) | more than 8 years ago | (#13621475)

Owise.com is actually a lot different in underlying mechanism, making predictions by blending opinions like a nerual network does.

Our philosophy is: why bother with all the trappings of the "market". It just confuses people, and leads to all kinds of gamesmanship that has nothing to do with what you're trying to predict. We simply ask people what they think the outcome will be, and we use a mathmatically correct way of ranking their accuracy (called a "proper scoring rule" for those of you who like math).

People who are right get higher weights in our system, can win prizes like Amazon gift certificates, and gain "titles" such as "Senior Political Analyst, Level 3". Bloggers can use our data graphs free, just don't nuke our watermarks. The system has already been more accurate than experts at some predictions, although we are just starting out and need a lot more people.

Re:Sounds Like Owise.com (1)

Otter (3800) | more than 8 years ago | (#13621944)

People who are right get higher weights in our system...

Out of curiosity -- do you have empirical evidence that weighting people's guesses on their track record gives better accuracy than equal weighting does? It's not obvious to me that that would be so.

Yay Delphi. (3, Informative)

Anonymous Coward | more than 8 years ago | (#13620907)

And once again John Brunner wins. Can't believe the Shockwave Rider was written in 1975... compensated abstinence zone in New Orleans anyone?

Awesome Mindpower! (3, Funny)

mfh (56) | more than 8 years ago | (#13620909)

We also found that the market prices gave decisive, informative predictions in the sense that their predictive power increased as time passed and uncertainty was resolved.

This is why I like Google. The use of intelligence to develop accurate results in a predicative system, and keep it all flowing -- it shows not only wisdom -- it shows an early level of omnipotence, which has to be the key ingredient to success today! If God is supposed to be omnipotent, why not try it? (haha I'm not a religious nut, FYI... just like to use the data available)

Consider the alternative solution to success [slashdot.org] and you really must put your investment dollars where you have the most faith. Google stock can only go up, thus breaking the law of Gravity. Only a supra-genius (Wyle E. Coyote) knows how to bend the laws that govern market economy to their favour. Are you really going to bet against that kind of mindpower?

Being geeks, we naturally used information theory to measure the entropy of our probability distributions:

This is a demonstration of wisdom. Knowing the rate of market decay is a HUGE BENEFIT for all Google stockholders. Google keeps proving that time and time again: being a geek puts you in the best position for the continuation of the species, even if you're not getting laid *today*, you will get laid PLENTY when you get lots of money, and therefore sire many children and overwhelm the market with clones of yourself. Then improve the genome of your clones in modular functionality, so that parts become interchangeable. You can now patent genes, so you don't have to patent actual clones to profit.

Seriously, at this rate, I see this coming as the next logical step for Google. Bioharvesting of nerds for fun and profit. Especially nerdy gamer chix!

Re:Awesome Mindpower! (1, Funny)

Anonymous Coward | more than 8 years ago | (#13620956)

except I've seen many a genious father create very very stupid children.

Re:Awesome Mindpower! (0)

Anonymous Coward | more than 8 years ago | (#13621158)

except I've seen many a genious father create very very stupid children.

You sound bitter towards your father.

Re:Awesome Mindpower! (1, Insightful)

Otter (3800) | more than 8 years ago | (#13621052)

Seriously, at this rate, I see this coming as the next logical step for Google. Bioharvesting of nerds for fun and profit. Especially nerdy gamer chix!

I like how you put this in bold and still managed to catch an Informative...

Re:Awesome Mindpower! (3, Interesting)

dsginter (104154) | more than 8 years ago | (#13621113)

The use of intelligence to develop accurate results in a predicative system

You don't even need intelligence, in many cases. Just the "wisdom of the crowd". Read this [cnn.com] for more info. A quote:

In an early example, Surowiecki refers to a study conducted by the British scientist Francis Galton. Galton was a believer in the power of the elite, noting "the stupidity and wrong-headedness of many men and women being so great as to be scarcely credible." But at a fair, he noticed a wagering competition in which people bet on the weight of an ox. Eight hundred people participated; some were butchers and farmers, others just idle guessers.

When Galton averaged the estimates, he expected the result to be way off. Instead, the crowd had come within one pound of the ox's weight.


Re:Awesome Mindpower! (1, Interesting)

smooth wombat (796938) | more than 8 years ago | (#13621187)

noting "the stupidity and wrong-headedness of many men and women being so great as to be scarcely credible."

Yeah, we know. Just look at the vast majority of people that you have to interact with on a daily basis.

No, I'm not trolling. I'm being serious. Take a good look at those around you and you'll see the truth behind Galtons comments.

The difference between why a crowd can give you better results than asking a single person is because each of us has our biases and preconceptions. However, put us in a situation where others can give input and the groupthink mentality starts to take over.

Re:Awesome Mindpower! (1)

Jerf (17166) | more than 8 years ago | (#13621964)

However, put us in a situation where others can give input and the groupthink mentality starts to take over.

You should be more precise. "Groupthink" is usually considered a perjoritive, but it doesn't quite look like you're using in that sense.

If members of the group can provide feedback to each other directly, then groupthink can take over and I'd expect a group to start acting more like an individual. This is the perjorative sense.

However, if the members of the group don't feed back to each other (or do so "sufficiently indirectly" for some suitable definition), you can get the effect mentioned in the GP, and this is amazingly powerful.

("Sufficiently indirectly" is an important point. A single political group can exhibit very powerful perjorative-groupthink, but the political system as a whole does vastly better than any individual or small group could possibly do, via this statistical-groupthink. Sure, it ain't perfect, but you shouldn't be measuring against "perfection", a very subjective measure on a national scale anyhow, but against those economies that have existed that tried to be run by a single person or small group. You'll note most of them have been Darwin-ed away...)

Re:Awesome Mindpower! (2, Funny)

ArsonSmith (13997) | more than 8 years ago | (#13621946)

Google decided to pose the question to it's search engine. "Is there a GOD". After feeding in all internet information available they typed it in and waited. After a lot of hard disk searching and the checking of all drives the computer went into an eerie silence for a few hours and then started typing.

        "Not enough resources to compute answer."

This time they were going to get an answer to an age old problem and nothing would stop them. After months of negotiations with governments around the world they were able to link 12,000 linux computer all over the world together to produce the ultimate computer search lcuster. Nothing would stop them now. Just to make sure they re-crawled the web to to find all information even remotely connected to God.

        It's answer was "Insufficient data."

Not to be outdone the scientists in their infinite wisdom started gathering books on everything from the Worlds libraries, archives, and archaelogy institutions. So much information was assembled that copywrite holders sued. Book publishers complained. Not detured by the lawsuits, again the question was ready to be posed.

The information entered and all computers linked a scientist typed in the question "Is there a God?". The computer cluster whirred into action checking all it's RAM and then linking with all the other computers. After .0012 seconds of activity going from one computer to another the computer started typing the answer and everybody waited eagerly as it typed to the screen.

        "There is now."

hum hum.. (1)

bezgin (785861) | more than 8 years ago | (#13620911)

This seems to be the way for Google to kill Microsoft. :)

Fiction becoming reality (-1, Offtopic)

TripMaster Monkey (862126) | more than 8 years ago | (#13620914)


The science of psychohistory is advanced once more.

Re:Fiction becoming reality (1)

jejones (115979) | more than 8 years ago | (#13621001)

With all due respect to the Good Doctor and Tripmaster Monkey, psychohistory isn't involved. Read Marc Stiegler's Earthweb [skyhunter.com] . (Note: the web page is out of date; for example, the contest is over.) It's set in a world where idea futures markets are commonplace (and periodically save the world).

(If you happen to have read his David's Sling (and if you haven't, you should), you'll recognize the world of Worldweb as the society that Nathan Pilstrom envisions at the end of that book, where the Zetetic Institute's ideas and methods have become commonplace. Reggie Oxenford is what Bill Hardie was trying to become.)

Re:Fiction becoming reality (1)

mattpalmer1086 (707360) | more than 8 years ago | (#13621403)

Yup - as soon as I saw this piece, I immediately thought of EarthWeb. Cheesy story, but great forward thinking - I love it.

Re:Fiction becoming reality (3, Funny)

R.D.Olivaw (826349) | more than 8 years ago | (#13621014)

The science of psychohistory is advanced once more.

I'm doing my best to ensure it does.

Gmail is the ultimate prediction market (5, Interesting)

nokilli (759129) | more than 8 years ago | (#13620918)

Want a tip on when a stock is going to move? Monitor the number of times your users send email to one another containing the stock's symbol in the message. When the number goes up, activity is sure to follow.

But they wouldn't do that, right? Because...

Because...

Exactly.
--
You didn't know. [tinyurl.com]

Re:Gmail is the ultimate prediction market (1)

lifterx (916661) | more than 8 years ago | (#13620954)

If they're tracking anonymous data, then I'm fine with that. They're providing the service for free, so it's not unreasonable for them to try and benefit out of it, and as far as ways to get something back from the subscribers, it's not a bad one.

I'd love to see what kind of stuff they come up with.

Anyone know of any legal issues concerning google doing something like this?

Re:Gmail is the ultimate prediction market (2, Insightful)

plover (150551) | more than 8 years ago | (#13621324)

If they're tracking anonymous data,

Rather than USENET, I believe the O.P. was referring to gmail. Web based or not, people (perhaps wrongly) have an expectation of privacy in their personal communications. For Google to be snarfing this out of gmailed data would be extremely evil (violating one of their core principles.)

While the suggestion that Google is monitoring gmail for stock activity is really funny, in real life it wouldn't happen for several reasons. First, they'd be violating their user's privacy. Next, they might be seen as taking advantage of insider information. While companies may have a policy in place about not discussing stock information over email, and most people won't violate their employers rules, human behavior does suggest they'll still talk ABOUT their company.

Finally, if it was revealed that Google ever tried this, you can bet the scammers would immediately start exchanging gmails about some company as part of a pump'n'dump scheme!

BTW, traffic analysis is amazing stuff -- it's been suggested that the pizza delivery businesses in Washington D.C. know when something is up before the rest of us because they deliver more midnight pizzas than usual to the Pentagon.

Re:Gmail is the ultimate prediction market (3, Insightful)

bigtrike (904535) | more than 8 years ago | (#13621145)

That's only useful if those emails pick up before anyone else's stock predictions. In order to make money in the stock market, you not only have to predict the future, but you have to do it better than your competitors. If your forecast comes after everyone else's, then the price will have inflated or deflated by the time you can buy or sell, meaning you cannot profit.

Re:Gmail is the ultimate prediction market (0)

Anonymous Coward | more than 8 years ago | (#13621755)

In order to make money in the stock market, you not only have to predict the future

No you don't. You invest in a broad based mutual fund and let the growth of the economy make you money. Please read "A Random Walk Down Wall Street". Your final sentence also leads me to believe you have a very fuzzy understanding of markets, stochastic calculus, and the evidence for and against the effecient market hypothesis. Please leave Real Finance to the Big Guys.

Re:Gmail is the ultimate prediction market (1)

Jugalator (259273) | more than 8 years ago | (#13621167)

Eh, who cares if they do?

What matters is if they start connecting info to private profiles.

Re:Gmail is the ultimate prediction market (1)

pasword *** (824184) | more than 8 years ago | (#13621585)

They don't need to monitor the mail accounts, they only need to monitor the add clicks...

ads in gmail have their own marquers (../pageclick?client=ca-gmail).

Re:Gmail is the ultimate prediction market (1)

Tom (822) | more than 8 years ago | (#13621614)

Because knowing that there'll be activity tells you nothing you can turn into cash. "Up or down?" is the question you want answered not "is it moving or not?".

Re:Gmail is the ultimate prediction market (1)

marmotte (857974) | more than 8 years ago | (#13621667)

Honestly, I think your tip is as good as guessing the right stock symbol from an alphabet noodle soup...

Re:Gmail is the ultimate prediction market (1)

marmotte (857974) | more than 8 years ago | (#13621758)

that's ridiculous with gmail i think: mails that would matter are insiders ones: people that actually make the trend. even if few of them would be on gmail instead of using their corpoporate mails, they would be lost inside hundreds of small stock investors that just follow what every can see on the charts...

Result of this (1, Insightful)

Anonymous Coward | more than 8 years ago | (#13620923)

1. Predict Market
2. Act on Prediction
3. Cause Market Impact
4. Need New Prediction!

World is quickening

Re:Result of this (3, Funny)

bezgin (785861) | more than 8 years ago | (#13620953)

1. Predict Market
2. Act on Prediction
3. Cause Market Impact
4. Need New Prediction!

5. ????
6. Profit

putting their users to work (3, Insightful)

garat (899448) | more than 8 years ago | (#13620927)

Hmm... prediction markets... Ahh: http://en.wikipedia.org/wiki/Prediction_market [wikipedia.org]
Wonderful, Google realizes that many people think they're absolutely wonderful and finds a way to put those people to work for them. As for the possible MSN/AOL deal about to occur and "kill" Google, with ideas like this and a willing user base Google isn't threatened at all.

Re:putting their users to work (1)

garcia (6573) | more than 8 years ago | (#13621130)

Wonderful, Google realizes that many people think they're absolutely wonderful and finds a way to put those people to work for them.

Users believe that Google is absolutely wonderful because Google appears to be working for the users! Now, who is receiving the best benefit? Obviously Google but does that matter to the users?

That's not something we can answer but it appears that the users are happy. That may change depending on what Google does.

Soon available in Beta (3, Funny)

WormholeFiend (674934) | more than 8 years ago | (#13620949)

GoogleAstrology

Re:Soon available in Beta (1)

qray (805206) | more than 8 years ago | (#13621247)

More like eightball.google.com
--
lobock pockdor squam da

Forecasting (1)

jurt1235 (834677) | more than 8 years ago | (#13620955)

The markets were designed to forecast product launch dates, new office openings, and many other things of strategic importance to Google. So far, more than a thousand Googlers have bid on 146 events in 43 different subject areas.

So the prediction for a new office opening gets more accurate when you discover that there are less workspaces than people in the office. A production launch date more accurate when the people working on the project are occupying those workspaces all the time and really start to smell bad?

Is this not like a thousand monkeys trying to type Hamlet, but now with just a bit of brain and input from the surrounding?

For the lazy (2, Informative)

larry2k (592744) | more than 8 years ago | (#13620978)

In related news, some software was recently open sourced that enables people to set up their own prediction markets.

Project Idea Futures
A web-based prediction market (Idea Futures) system. In prediction markets, the commodities traded are claims about future events; the market price gives a consensus probability about the event's likelihood of coming true.

http://ideafutures.sourceforge.net/ [sourceforge.net]

Sheep (4, Insightful)

scottennis (225462) | more than 8 years ago | (#13620979)

"Group wisdom" is a misnomer for "herd mentality."

I predict that when you herd sheep from field A to field B, they will eat whatever is in field B rather than return to field A.

Re:Sheep (1)

interiot (50685) | more than 8 years ago | (#13621146)

That's why you usually have a small group of leaders at the top of companies, so that coherent consistent decisions get made. However, sometimes the people under them all firmly agree that they're making a bad decision, or missing a business opportunity, etc. Usually all the employees just start gossipping and complaining at the water cooler. An internal prediction market will harness this internal dissent, and allow the rare ocassions where mob/democratic rule is better than oligarchy, to influence the leaders, if the leaders choose to allow it.

Re:Sheep (1)

scottennis (225462) | more than 8 years ago | (#13621243)

In other words, if enough sheep get stomach aches from eating the fodder in field B and start bleating loudly, the "leaders" may decide it's a good idea to move tham all back to field A (or maybe even to field C).

Re:Sheep (1)

interiot (50685) | more than 8 years ago | (#13621422)

So you're saying that the sheep should never bleat?

Guess what "freedom of the press" is for? To increase the loudness of sheep bleating. So that, let's just say, maybe there's a hypothetical situation where a large hurricane hits land, and the leaders are perhaps a little too slow in their emergency management jobs. The sheep should bleat. And then when the next disaster comes, look at that, the leaders act more quickly.

The sheep aren't remotely smart enough as a mob to predict the path of the hurricane. They aren't smart enough to design the best evacuation plans. But they sure can see that the leaders screw up every once in a while. And that process is a good thing.

Prediction markets just bring parts of this "freedom of the press" process (which requires a larger population, and more openness, and more explicitely combatitive groups) into an internal company.

Re:Sheep (2, Funny)

mysticgoat (582871) | more than 8 years ago | (#13621960)

This can be summed up by the plaque I once saw on the wall of a manager who had a reputation for making good decisions:

I must hurry and catch up with the others, for I am their leader!

Re:Sheep (4, Informative)

SilentReallySilentUs (908879) | more than 8 years ago | (#13621260)

You should read "Wisdom of Crowds" by James Soriecki. It is a very nice text on how, where, and why "collective wisdom" of a few average individuals is better than the wisdom of a few experts.

Re:Sheep (3, Informative)

SparafucileMan (544171) | more than 8 years ago | (#13621461)

Well you should read "The Madness of Crowds". amazon [amazon.com]

the crowds don't know shit when it comes to financial markets.

Re:Sheep (1)

SilentReallySilentUs (908879) | more than 8 years ago | (#13621506)

Interestingly Soriecki has quoted Mackay several times and refuted some of his conclusions. I will surely get hold of this book and read arguments from the opposite side.

Re:Sheep (1)

SparafucileMan (544171) | more than 8 years ago | (#13621555)

and i'll read mackay. but i doubt it applies to financial markets. i imagine that the crowd is the best bet when your distribution is normal, but financial markets are not normal, and believing otherwise will just leave you broke and pissed off.

Re:Sheep (1)

the_helper_monkey (553335) | more than 8 years ago | (#13621419)

You could say the same thing about the way the financial markets work.

Re:Sheep (1)

Eslyjah (245320) | more than 8 years ago | (#13621729)

It may be true that most people are followers and not leaders, but in most prediction markets (not Google's yet, as I understand it), people have to back up their predictions with cash. Those that are informed in their predictions win money and come back. Those that make ignorant predictions lose money and go away. This is what makes prediction markets work. It's a way to consistently sift the wisdom from the "herd mentality," without resorting to populism or democracy.

Prediction markets are a great invention. I think you should look into them a little more before you dismiss them as groupthink, because they are exactly the opposite.

Re:Sheep (1)

X (1235) | more than 8 years ago | (#13621891)

Actually, you got the idea behind group wisdom totally wrong. In fact group wisdom tends to be poorer when the group is influenced by "leaders" or "experts".

Groups/information markets aren't always "wise". The circumstances where they perform best is when there are no experts because the relevant information is spread diffusely amongst the members of the group.

Prediction is easy (0)

Anonymous Coward | more than 8 years ago | (#13620980)

Making money in the stock market is easy.
Buy some stock, and when it goes up sell it.
If it doesn't go up don't buy it.

                              - Will Rogers

Re:Prediction is easy (1)

SparafucileMan (544171) | more than 8 years ago | (#13621536)

"the market can stay irrational longer than you can stay solvent." -keynes

Like predicting Web habits is difficult... (-1, Redundant)

ProZachar (410739) | more than 8 years ago | (#13620989)

People want porn. Is that so hard to predict?

I predict... (1, Funny)

Jumbo Jimbo (828571) | more than 8 years ago | (#13620999)

that this story will be duped by the end of the week

Re:I predict... (0, Offtopic)

CreatureComfort (741652) | more than 8 years ago | (#13621161)


Some mod has a sense of humor. Redundant mod on a post about dupes...hehe.

Ignore me, I'm just trolling for an off-topic mod.

The honest weatherman (2, Interesting)

Anonymous Coward | more than 8 years ago | (#13621008)

Reminds me of E.T. Jaynes's "Honest Weatherman" example in his book, Probability Theory: The Logic of Science (section 13.5). By making a weatherman's salary proportional to a certain function (logarithm of the probability he predicts, or entropy, or something, I forget), the weatherman has an incentive to make the best possible predictions: his salary will be directly proportional to the quality of his predictions, being maximized when his rain forecast probabilities match the actual probabilities of rain. You could set up a "free market betting system" this way, rewarding the quality of people's guesses regarding the likelihood of various outcomes.

Re:The honest weatherman (Offtopic) (1)

ThosLives (686517) | more than 8 years ago | (#13621440)

[being marginally off-topic ramblings]

when his rain forecast probabilities match the actual probabilities of rain.

Does anyone know what meteorologists mean when they say "x% chance of weather event"? Does this just mean "given current circumstances, we have seen x% chance of said event occurring in the past" or is it some other silliness? For instance, I love the NHTSA star-rating system which says "this vehicle has an x% chance of a rollover in an accident" which is meaningless without ancillary information about accidents (for instance, in any particular accident the vehicle will either roll or not roll). In any weather event, the event will either happen or not happen. In the vehicle instances, I'd be more pleased with "these conditions will make this vehicle roll over, and those conditions occur x% of the time in all the accidents we've measured"; For instance, "If your vehicle is subject to lateral accelerations of 1.7g, it will roll" and "out of all the accidents we see, 1.7g is experienced x% of the time"; the difference between accident statistics and weather statistics, though, is that accident statistics are descriptive while weather statistics are predictive.

I don't know how to determine if social polls are descriptive or predictive; it probably depends on the subject matter in question (weight of an ox is predictive, chance of social event Q is descriptive).

[end off-topic ramblings...]

Isn't this exactly what the Pentagon tried to do.. (4, Insightful)

no_nicks_available (463299) | more than 8 years ago | (#13621022)

with terrorism? It's too bad people got all pissy since this method of prediction works fairly well.

Re:Isn't this exactly what the Pentagon tried to d (2, Insightful)

geoffrobinson (109879) | more than 8 years ago | (#13621173)

The Pentagon was ahead of its time I think.

Re:Isn't this exactly what the Pentagon tried to d (1)

hcdejong (561314) | more than 8 years ago | (#13621319)

Not just the Pentagon. Strategypage [strategypage.com] runs a prediction market with this type (terrorism, and national security/defence-related in general) of events.

Re:Isn't this exactly what the Pentagon tried to d (1)

Quiet_Desperation (858215) | more than 8 years ago | (#13621515)

Yes, this is similar if they are using common futures market methods. That event illustrated more than most what a collection of barely-single-celled organisms humanity is. People here on Slashdot we're foaming at the mouth thinking there was going to be actual money wagered of terrorist events, even though that should fail to get past even rudimentary BS detectors. Even mainstream news media was incorrectly reporting that. I remember it made me want to start lobbing Ebola bombs or start stabbing people at random, despite the fact I was already a complete misanthrope and thought I could not be disappointed by people anymore.

Re:Isn't this exactly what the Pentagon tried to d (0)

Anonymous Coward | more than 8 years ago | (#13621818)

I don't think "Bomb the brown people, because the people who bombed us were also brown" is quite the sort of prediction method that the article describes.

I know, I know. -1 Flamebait.

If you need me, I'll be in my corner.

No Rocket science here folks (4, Interesting)

OlivierB (709839) | more than 8 years ago | (#13621029)

Predicting involves extrapolating from a current ** sample** of data to predict the future based on one own interpretation /recognition of patterns.

The better your size and quality of your sample combined with a finely tuned pattern recognition the better your forecast (I won't go into exceptional events which by definition are exceptional).

So what do we have here? A larger sample of better quality for starters.

Also do not underestimate the power of the masses. If your sample=population size this is no longer forecasting (i.e. extrapolation) but the writing on the wall! (as long as people do as they say they are going to do).

So if your sample size increases dramatically, with better quality (smart employees) things will tend to happen as per the survey!

I know I am oversimplifying but but these are the basics of neural networks (or in this case a neural network of neural networks). Look it up.

Of course, predicting is not extrapolating if it is purely a random guess.

Have fun!

Re:No Rocket science here folks (1)

Red Flayer (890720) | more than 8 years ago | (#13621172)

"Also do not underestimate the power of the masses. If your sample=population size this is no longer forecasting (i.e. extrapolation) but the writing on the wall! (as long as people do as they say they are going to do). "

If sample size = population size, all you have is certainty about what people believe (assuming they answer honestly). What people believe != what is going to happen. The idea here is that as time approaches the time of the event, people can guess more accurately about the event.

Re:No Rocket science here folks (1)

SparafucileMan (544171) | more than 8 years ago | (#13621193)

Neural networks don't tell you crap for the same reasons that that other fad, genetic algorithms, don't either. There are well-defined mathematical reasons that "the crowd" can't predict the future or any of that nonsense--the problem is mathematically unsolvable. (read "The No Free Lunch Theorem"... its a refrasing of the Halting Problem)

DO NOT FORGET: The larger size of your data leading to better predictions ONLY HAPPENS WHEN YOUR DISTRIBUTION IS NORMAL.

It's well documented that markets are "fat-tailed", that is, not even close to normal distribution.

Long Term Capital made this same mistake. Hired a bunch of PhDs, bought a shitton of Sparcs, and assumed the distribution was normal. They made a ton of money for 3 years then in about 1 or 2 months lost every last cent. Billions of dollars.

The crowds are not to be trusted. Remmeber the bubble before the Depression? the '87 crash? the '00-'01 crash? the silver market crash of 81? the mania of 1900? 1869? 1879? 1889?

I predict... using my wisdom (2, Informative)

Gopal.V (532678) | more than 8 years ago | (#13621040)

I predict that google stock will rise ...

I've started playing Yahoo! Buzz games for a few months now (I dropped a virtual packet on FireFox). It's called Yahoo! Buzz game [yahoo.com] . These folks seem to gather their data from Yahoo ! search queries and from the logs on who clicked what. Which is why it seems to really follow the non-geek popularity levels too well - Google is what the geeks use (which is why I almost always seem to lose there).

This is just Google calling Market surveys by another name. I'm sure I can dig up a couple of WalMart papers about the same thing in the real world. Sort of vote with your money approach vs tell us approach (demand vs desire).

Who recall The Shockwave rider novel? (1, Interesting)

Anonymous Coward | more than 8 years ago | (#13621044)

On the Brunner novel "The Shockwave rider" is described the "Delphi pool" and that was the first thing that came to my mind after reading TFA...

http://www.technovelgy.com/ct/content.asp?Bnum=661 [technovelgy.com]

Non-ideal behavior: bubbles & manipulators (3, Insightful)

G4from128k (686170) | more than 8 years ago | (#13621056)

This is really cool, but I hope they control for two of the less-than-ideal behaviors of markets.

1) There are two ways to "be right" in a market. First, I can make the right choice as to the actual ending outcome. This a buy-and-hold strategy. Or, second, I can make the right choice as to the direction of price movements in the market. This is the speculator's buy-and-sell strategy. The first strategy means the the market converges on the "true" expected value. The second strategy leads to bubbles and crashes that don't provide as much useful data on the actually variable being modeled by the market. Google wants to encourage the first type of trading, but not totally suppress the second type of trading because speculators provide liquidity in markets.

2) Manipulators can "cause" events to occur in the way that maximizes their return, but suboptimizes Googles performance. If I bet that a given project will be done in October and it looks like its getting done early, what stops me from causing a small delay? Of if the project is being delayed too much, what stops me from descoping the project or doing a fast, low-quality job to complete the project within my chosen time frame. In either case, I can manipulate the outcome to win in the market, but hurt Google.

Note that I don't include insider trading in the list problems. Google doesn't really care if the market is fair, only that it provides accurate predictions. In fact, Google might encourage insider trading as a way to encourage communication inside the company. The more people that share their "inside" information on upcoming strategic, the better.

The relevant book for this is (1)

BlightThePower (663950) | more than 8 years ago | (#13621062)

The Wisdom of Crowds by James Surowieki. [randomhouse.com]

I'd recommend it, unlike a lot of popular science books it does actually cover the material reasonably accurately and its quite engagingly written as well.

Re:The relevant book for this is (1)

SparafucileMan (544171) | more than 8 years ago | (#13621144)

Please apply this knowledge to making money on the stock market. I guarantee you will be broke rather quickly. Most of the foundation of finance is on taking advantage of the mania of crowds, which barely know what they're investing in nevermind the value of it. This is why brokers make all their money on getting you to trade, not on getting you to trade successfully.

Re:The relevant book for this is (1)

lowrydr310 (830514) | more than 8 years ago | (#13621754)

I share those same thoughts, and I think that's why the real estate market has gone up ridiculously. Interest rates drop and banks relax their lending qualifications, then smart investors take advantage of it. Next thing you know, all you hear about are people making money in real estate. People who normally can't afford a house and normally wouldn't qualify for a loan are getting interest-only loans on homes they can barely afford. Before you know it everyone is in a frenzy and the prices are sky high.

I can't find the link, but I read a survey on CNN Money or MSNBC that asked people about their loans. Only about 25% of the people surveyed actually knew and understood all the details about their home loan. The remaining 75% were unsure, with many people not knowing how interest-only or reverse amortization loans work. I'd guess that a lot of people are only concerned with their monthly payment, even if they don't realize they're not paying any principal at the moment.

Despite these prices, many people including realtors continue to say that the real estate market is not going to go down anytime soon. They say this publicly, but I'd like to know what they really think. Where are they willing to put their money? I know if I earned a 6% commission on every sale, I'd be trying to dismiss any concerns about a market collapse and try to sell as many overpriced homes as I could. Selling one $250,000 house gets you a cool $15,000 (gross) which is probably equivalent or even more than what many engineers make in three months.

I graduated from college in 2002 and missed my opportunity to buy a reasonably priced home at the start of this explosion. Despite not having enough saved for a downpayment, I still felt that prices in the area I lived (Los Angeles) were too high. Since then they've gone up by over 30%. I now live in New Jersey where prices are just as bad and sometimes worse considering that the homes here are generally older and need more repairs. My wife and I earn a decent income that is higher than the average salary for the town we live in, and we cannot afford a house! There are some affordable houses nearby, but they're old homes that need repair and they're in neighborhoods that we wouldn't be comfortable living in. I have an acquaintence in Southern California who is a doctor earning a nice six figure salary and he's having difficult finding an affordable home.

I wonder where people get their money to afford a house in today's real estate market (at least in NY/NJ and CA). Does everyone just have a lot more money than I do, or are a lot of people getting themselves into a financial mess where they'll be spending 75% of their income to pay for their house when their interest-only period is over? For now I'm happy renting, especially when you consider that what I pay in rent is less than what most homeowners near me pay in property taxes!

Re:The relevant book for this is (1)

SparafucileMan (544171) | more than 8 years ago | (#13621980)

i completely agree.

you'll notice that the market has tanked this week following the fed rate raise.

what's happening, i think, is that the Fed propped up the housing market to offset the bubble crash. now they are in the position of having to raise rates quite a bit more still, while the economy is still not much better than after the crash. housing prices will fall eventually and then we'll start to really see some interesting things. the U.K. had a housing bubble and it's already started to prick. peeople in the US were hoping they'd get a bit of free money from the fed this month, but the fed is in serious serious trouble and they know it.

the government is going to spend $200 billion on Katrina? where they hell are they going to get that? foreigners are buying less bonds, so the Fed will have to substitute. result: inflation.

as far as when the crash will be? hard to say. remember the stock bubble? in '97 and '98 alot of pros lost money shorting the market. they couldn't imagine that it would take a couple more years of mania before people regained their senses. but eventually, what goes up must come down.

and you're right, you can tell the speculative binge is back with all the crazy mortages. people must be insane to be doing interest-only mortages! even ARMs are a stupid, terrible idea. and they don't even know it! it's quite amazing, especially considering the amount of money involved. people are running around, buying houses that they can't afford. once rates go up, they are s-c-r-e-w-e-d.

for some reason, people think they can make money investing without effort, without years of study and hard work. how silly.

there is a funny method of making money: short whatever comes out on the cover of Time or Business Week. the idea is that by the time one is receiving investment tips from ones barber or cab driver or tabloid (which is what Time really is), its time to get out of the market in a hurry. i think Time had its first housing market cover in like June of this summer. you'll also notice that it's a commonly accepted fact that inflation will remain at this ridiculously low level forever. bah humbug.

good luck renting. if the market collapses, you'll be saving money by renting, nevermind saving on the huge opportunity cost of owning a home. at some point, people will regain their senses, and you'll be richer than ever. just tell your wife how wise you're being buy not being a financial fool ;)

P.S. you might like "Reminesces (sp) of a Stock Operator". it's superb.

P.P.S. i graduated in 2001, started a job at beginning of 2002. good salary, and I missed the housing buy opportunity too. i was annoyed (i also missed the stock bubble) but no biggie. renters have gotten the shaft for 13 years--our time is quite due.

actually, the relevant book for this is (1)

circusboy (580130) | more than 8 years ago | (#13621939)

the madness [amazon.com] of crowds...

I'll buy it if... (3, Funny)

AnonymousYellowBelly (913452) | more than 8 years ago | (#13621073)

... they do correctly predict:
- launch date of MS Vista;
- launch date of Ballmer's furniture;
- which 'feature/bug' will be dropped from the Vista release.

Re:I'll buy it if... (1)

AndreiK (908718) | more than 8 years ago | (#13621949)

-2010 -You don't need to predict a past event :P -All of them.

Where's the beef? (1)

Red Flayer (890720) | more than 8 years ago | (#13621076)

(1) Create a predictive survey with quantitative questions
(2) Graph the responses, and calculate entropy using information theory (or, just calculate variance)
(3) Measure the change in variance/entropy over time
(4) Conclude that as a product gets closer to release date, people have more consistent ideas of the price.

The difference between this and traditional quantitative market prediction surveys? Google gets its sample from "Teh Internets".

Nothing to see here, please move along.

Re:Where's the beef? (1)

PhoenixPath (895891) | more than 8 years ago | (#13621310)

Couldn't reist:

(5) PROFIT!!!@!!#1111oneoneone1

Sorry.

Re:Where's the beef? (1)

Red Flayer (890720) | more than 8 years ago | (#13621439)

I started out to write the cliche, but then realized that what Google did has been done a million times before.

I was still only barely able to resist...

Weird! (1)

ngyahloon (655557) | more than 8 years ago | (#13621100)

Does anyone find it weird that Googlers read "MSN Search Weblog":P

Google! (3, Funny)

Mr. Underbridge (666784) | more than 8 years ago | (#13621102)

Hey, I wonder what Google's doing today, I haven't heard anything about them lately.

Re:Google! (1)

Luscious868 (679143) | more than 8 years ago | (#13621268)

Hey, I wonder what Google's doing today, I haven't heard anything about them lately.

Exactly, Slashdot has been sucking on Google's proverbial teet for far to long now. It's getting tiresome.

Re:Google! (1)

Nathan Lanier (895776) | more than 8 years ago | (#13621602)

I don't see any reason why they shouldn't be.

It will be a mistake if MS bought AOL now. (0, Offtopic)

managedcode (863136) | more than 8 years ago | (#13621222)

MS has totally different work culture. Trust me moving MSN into Products and Platforms means, they are now under direct supervision of Bill. MS has aggressive work culture while AOL is packed with laid-back typical corporate Americans. Bill will first fire ballmer if he bought AOL or they will buy AOL minus it's lousy employees.

So.... (1)

RyoSaeba (627522) | more than 8 years ago | (#13621227)

will it finally be able to tell us when Duke Nukem Forever will be release?

Central limit theorem in action (4, Interesting)

call -151 (230520) | more than 8 years ago | (#13621297)

The classic example of "crowd wisdom" is the jellybeans-in-the-jar experiment, often used in introductory MBA classes to convince people that open markets value securities (basically) fairly. The experiment goes like this: the professor brings a jar of jellybeans and asks everyone to guess how many there are in the jar. The individual estimates may vary quite a lot, but the average of the estimates in the class is usually close, in fact often closer than the closest estimate of any of the students depending upon the size of the class. That is in a situation where the students have very little information about the jar and perhaps no experience with such estimates. If there were greater experience and/or they were allowed more information then presumably the individual and average estimates would be even closer. Basically, this can be described as the "Central Limit Theorem" in action- that the standard deviation of averages is smaller than the standard deviation of the individuals by a factor of the square root of the sample size, as illustrated in this applet [web.uvic.ca] or in this Mathworld description [wolfram.com] . The CLT actually says more- that as the sample size increases, the distibution of averages approaches that of the normal ("bell curve") distribution, so the distribution of avergaes is roughly normal, and then techniques designed to analyze the normal distribution can be applied with greater certainty.

Re:Central limit theorem in action (1)

SparafucileMan (544171) | more than 8 years ago | (#13621509)

your sample has to be normal in the first place for this to work. financial markets are not normal, they are "fat-tailed": extreme events happen with regularity. this is why traders don't bother with MBA classes. they're too busy fleecing the ignorant.

Re:Central limit theorem in action (0)

Anonymous Coward | more than 8 years ago | (#13621868)

Sample does not have to be normal to begin with. Asymptotically, xbar is normally distributed with stddev sigma/sqrt(n). That's stats 101 stuff. You're spouting off lots of incorrect info on stats, where's your degree from ?

Re:Central limit theorem in action (1)

call -151 (230520) | more than 8 years ago | (#13621947)

Actually, no- the CLT says that samples drawn from any distribution, no matter how non-normal it is, will have their averages behave closer and closer to a normal distribution as the sample size increases. It may be that the sample size needs to be large to have something that is a good approximation of the normal, but no matter how "thick-tailed" or "U shaped" a distribtion is, its sample averages will converge to the normal distribution as the sample size increases.


In actual practice, it may be that the sample size needs to be quite large for the averages to look "normal", but there is no getting around the CLT. The assumptions that are made to use standard statistical methods are exactly that- assumptions. If the assumptions are flawed (the distribution of an actual parameter is normal, rather than the averages, for example) then the conclusions are of course dubious. Famous examples of assumptions coming back to bite analysts in a big way are generally of two types- assuming something is normal that is not, as you point out, and also assuming that events are independant that are not. The failure of the independance assumption is thought to underlie the spectactular LCTM [erisk.com] collapse, the Asian currency collapse in 97 and other domino-type collapses.

This can't work (3, Interesting)

SparafucileMan (544171) | more than 8 years ago | (#13621309)

This only works when the distribution is NORMAL.

Its "well documented" that financial markets are not normal. They are "fat-tailed"--extreme events happen with regularity. This attempt has been tried thousands of times by people with far more at stake than google. They also had more money, more PhDs, etc. And they failed. They always fail at some time or another. There is no algorithm for the financial markets.

Those who doubt had best read the story of Long Term Capital Management. wikipedia link [wikipedia.org]

What Google is doing is interesting, but it's no magic bullet. And I'm not even sure I'd use this system to place money on the markets. Fads come, fads go. Neural Networks. Genetic Algorithms. Fibonacci numbers. Eliiot Waves. what-have you. They're all nonsense. The big ol boys still make their money the old fashioned way: graft, theft, and deceipt.

Anyone honestly think Google knows something that the trillion dollar financial industry doesn't? They have far more at stake that Google. They have their fair share of MIT PhDs, economic nobel prize winners, sparc computers, access to nearly every price in the world at any time. And they still make the majority of their cash through commission.

Call me a cynic, but the math says this can't work. And I'll trust the math before I trust a company that doesn't even pay dividends any day.

Re:This can't work (3, Insightful)

dajak (662256) | more than 8 years ago | (#13621690)

What Google is doing is interesting, but it's no magic bullet. And I'm not even sure I'd use this system to place money on the markets.

I certainly will, if many people use the system. It is extremely useful to know what the majority believes. It is one thing to predict accurately what will happen, and another thing to gauge to what extent this knowledge is already factored into market prices. the point of reading the headlines of financial publications has always been to know where the herds are going, as far as I am concerned.

Google on the Rise (1)

McLetter (915953) | more than 8 years ago | (#13621435)

This is incredible, Google has grown from a small search engine to a huge technology group. This new software seems like a great idea. I predict that Google is going to soon be one of the leading technology companies out there, if it isn't already

in a previous life (1)

devonbowen (231626) | more than 8 years ago | (#13621537)

I used to work for a company that did market forecasting using stuff like fractal theory, etc. I remember that one of our CERN physicists (we didn't have an economists on staff) did a correlation analysis of implied volatility versus actual volatility. Implied volatility is calculated from option prices and, according to the Black-Scholes model, indicates what the market as a whole thinks the future volatility of the underlying will be. He found there was absolutely no correlation between what the market expected the volatility to be and what it actually turned out to be (using all the tools in our toolbox). Though there was correlation between the price curves themselves and the future volatility. So while the seeds of predictability were in the data, people didn't seem to have much ability to make use of it.

Devon

zLabs' project zocalo (3, Informative)

Salamanders (323277) | more than 8 years ago | (#13621587)

http://zocalo.sourceforge.net/ [sourceforge.net]

Great realtime prediction market, written in python, uses ajax for updates, very slick. (Disclaimer: I was an intern with zLabs over the summer and chatted with the developers often, very smart people)

Yahoo has one going you can actually play with (4, Insightful)

X (1235) | more than 8 years ago | (#13621663)

Yahoo has launched one of these [yahoo.com] to the public back at in March of 2005 at the O'Reilly Etech conference. They actually had a contest where the top performer got a Mac-mini.

This ought to raise the hairs on your neck (5, Interesting)

TampaDeveloper (834876) | more than 8 years ago | (#13621697)

I see all these dismissals, as if this is a joke. But might I suggest that the researchers at Google aren't trying to get an acceptable sample-size, as many people here are naively suggesting. It seems much more likely that Google is researching the thought-process of prediction itself. It also seems likely that a number of fairly intelligent industry-insiders also believes they're close to figured out how to create a prediction engine that is accurate (ahref=http://slashdot.org/article.pl?sid=05/09/22 /1229238&tid=109&tid=120&tid=217rel=url2html-6813 [slashdot.org] h ttp://slashdot.org/article.pl?sid=05/09/22/1229238 &tid=109&tid=120&tid=217>)...

Think about it; If they have enough information (IE the web), they can hone it by feeding it past events to "predict" other past events and then comparing their prediction to what actually occurred. If it's able to predict events that have occurred given what came before those events, then there's a good chance that it will work with current data to predict future events.

Feel free to label me a wacko... Perhaps I've seen "Terminator" too many times. But I've also worked with a number of freakishly intelligent people; the kind that Google has been hiring right-and-left without any apparent reason. I've always said that technology could someday facilitate society's return to bondage... It may seem far fetched, until one considers the sheer breadth of people that hate "western" culture. Given the past as a predictor, I would be inclined to believe that few Middle Eastern leaders would hesitate to use technology to exterminate as much of western culture as they could... Folks, its not unrealistic to recognize the likelihood that technological-advancements will make sudden and drastic changes to our way of life... This ought to give us pause. What balances are essential to our culture? What imbalances will end it? Someday, somewhere, somebody is going to come up with a way to utilize technology to facilitate his/her agenda. Maybe we don't have to worry about Google, since the magnitude of the consequence is, at least in part, proportionate to the magnitude agenda of the individual(s). But things such as this should be cataloged in our brains as evidence that this mode of societal-failure is plausible.

Ok, flame away. But I hope I never have to say I told you so.

Oh, so now this is good? (1, Insightful)

Eadwacer (722852) | more than 8 years ago | (#13621702)

Didn't John Poindexter propose something similar as a way of predicting terrorist attacks? Didn't the community beat up on him until DARPA was glad to drop the idea? What's different now?

risk and reward required (1)

geoffDeGeoffGeoff (916791) | more than 8 years ago | (#13621838)

Some potential gain or loss based on predictions is required for any kind of accurate forecast in a prediction market. Betting markets were recently shown to be more accurate than opinion polls in predicting election results. Accuracy here will only follow from the "put your money where your mouth is protocol" this will eliminate predictions based on politics, humour, indifference, ignorance etc.

Actually, there are three open source markets (1)

Spatula Sam (770957) | more than 8 years ago | (#13621927)

Interest in prediction markets usually increases in years after major elections (elections are the killer app for prediction markets). There is a good directory of prediction market software (free and otherwise) here. [chrisfmasse.com]
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