Communication and Collaboration, Yes. But Rigor... ?

“Executives say they are harnessing a new Web tool, called prediction markets, to transform the idea pipelines inside their companies. Companies like the InterContinental Hotels Group, General Electric and Hewlett-Packard are using prediction markets to try to improve forecasting, reduce risk and accelerate innovation by tapping into the collective wisdom of the work force.

“Like blogs and wikis, prediction markets can spur communication and collaboration within a company. Yet they add rigorous measurement to business forecasts, like estimating the sales of a new product or the chances that a project will be finished on time.

“Corporate prediction markets work like this: Employees, and potentially outsiders, make their wagers over the Internet using virtual currency, betting anonymously. They bet on what they think will actually happen, not what they hope will happen or what the boss wants. The payoff for the most accurate players is typically a modest prize, cash or an iPod.

“The early results are encouraging. ‘The potential is that prediction markets may be the thing that enables a big company to act more like a small, nimble company again,’ said Jeffrey Severts, a vice president who oversees prediction markets at Best Buy…

“For years, public prediction markets have been used for politics, like the Iowa Electronic Markets and Intrade, where buyers and sellers bet on which candidate will win a particular race. And there are prediction markets where people place bets on news events (Hubdub, among others), video game sales (simExchange) or movie box-office receipts (Hollywood Stock Exchange).

“These markets have often been more accurate than professional pollsters or market researchers. The idea is that the collected knowledge of many people, each with a different perspective, will almost surely be more accurate than an individual or small group or even experts…

“Today, analysts say, there are dozens of major corporations testing these markets. The companies include Google, Cisco Systems, GE Healthcare, General Mills, ArcelorMittal, the world's largest steelmaker, and Swisscom, a large telecommunications company.”

(“Betting to Improve the Odds.” Steve Lohr. The New York Times. April 9, 2008. pg. 1)

ILLUSIONS OF RIGOR now haunt credit markets. Swelling confidence led to a confidence crisis, a confidence game.

Grow very, very wary when they tell you they have it all figured out.