In an interview, Tim O’Reilly points out the big deal of Web 2.0 - it’s about the information:

That goes back to a major theme of web 2.0 that people haven’t yet tweaked to. It’s really about data and who owns and controls, or gives the best access to, a class of data. Amazon is now the definitive source for data about whole sets of products — fungible consumer products. EBay is the authoritative source for the secondary market of those products. Google is the authority for information about facts, but they’re relatively undifferentiated.

Information is the oil/gold/guns of the twentieth century.

Categories: Business and Economics, Distribution, Information Economics, Information Markets, Social Software, Technology
No Comments »

Slate has announced a guide to political futures markets for the 2008 US Presidential Election. Political futures generally predict outcomes better than polls for a number of reason. Slate is going to track the big prediction markets along the big races and report along.

For a snapshot, the Iowa Electronic Market, the Big Daddy of prediction markets, shows Clinton and Obama neck and neck for the Dems, and the Field Candidate (anyone but McCain, Romney, and Guiliani) taking the republicans. Guiliani leads among those candidates with their own futures. The dems are also predicted to win by a slim margin.

Also, I haven’t investigated the differences between contracts in the markets, but the wide price differences between the Iowa Electronic Market and Intrade seem like an arbitrage opportunity for those who can trade in both.

Categories: America, Information Markets, Politics, Polling, Social Software, Technology
No Comments »

Joanna Jacobs passes along Barry Schwartz’s recommendation that elite universities use a lottery for admissions (I couldn’t find the whole article):

There is probably a right answer to the questions “Whom should we admit?” or “Which college should I select?” But we won’t know until after the fact. Chance factors (roommate assignment, romantic successes or failures, or which English professor evaluates your first papers) might have a bigger effect on success and satisfaction than the tiny differences among applicants (or schools) within the range of acceptability. So once a set of “good enough” students or “good enough” schools has been identified, it probably doesn’t matter much which one you choose; or if it does matter, there is no way to know in advance what the right choice is.

College admissions is a crap shoot, and anyone who tells you otherwise is lying. Let colleges admit the all-stars, reject the losers, and show the people in the middle just how much randomness is involved. As long as students are using the Common Application to apply to multiple schools, though, the application becomes even more like a lotto ticket. Is this applicant applying to Cornell to hedge in case they don’t get into Columbia, or do they really want to go there?

The solution? Use a bidding market. Give each student who fills out the common application 1000 points and allow them to allocate them among schools they apply to. Weight students in the lottery based on the number of points they bid, so that students who bid more get more of a chance. People will still get into college - being in the “middle” group of Harvard applicants still makes you in the top group of many other great schools.

Bidding systems solve another problem as well. A friend of mine used to work in an admissions office, and she said they would look at other schools a candidate applied to and reject those who seemed highly qualified and applied to top tier schools because the office thought they weren’t likely to accept the admissions offer in the first place. Restricting the number of bidding points lets universities measure not only a student’s binary desire to attend signaled by applying (yes/no), but also the strength of their desire to attend the school (number of points bid).

Most people overestimate the role of going to a good college on life outcomes. They also overestimate how good admissions offices are at picking which people get in and which don’t. Exposing just how random it is, as Schwartz notes, will expose just how much “luck” is involved. Does that mean that a Harvard student and a Community College student are on the same intellectual level? Doubtful, but it will show the Princeton student that they could just as easily be at Duke, if only the lottery had been different.

Categories: Education, Incentive Centered Design, Information Economics, Information Markets, Matching Mechanisms, The Academy
No Comments »

I underestimated how much having a “real job” would cut into my blogging time, and thus, posts have been slow. More than that, though, I underestimated how addicted I would get to Yahoo Answers. It’s more than just the desire to earn more points. It lets me fulfill my secret desire to be an advice columnist, and I think my 10% best answer ratio indicates I’d be pretty good at it. Most of my best answers are in the realm of dating/relationship issues and financial advice, but my friends could have told you that.

What’s my incentive to contribute? Is it the otherwise meaningless points? The thrill of answering questions? The social reward of participating and helping people? Or is it just a way for me to channel my inner Dear Abby? Lets just say that if you like my answers, and you want to give me a column at a major newspaper or alternative weekly, you know how to find me.

Categories: Dating, Incentive Centered Design, Information Markets, Social Software, Technology
No Comments »

Prizes stimulate innovation better than grants:

BACK in the 1700s, prizes were a fairly common way to reward innovation. Most famously, the British Parliament offered the £20,000 longitude prize to anyone who figured out how to pinpoint location on the open sea. Dava Sobel’s best-selling 1995 book “Longitude” told the story of the competition that ensued, and Mr. Hastings mentioned the longitude prize as a model at that meeting back in March.

Eventually, though, prizes began to be replaced by grants that awarded money upfront. Some of this was for good reason. As science became more advanced, scientists often needed to buy expensive equipment and hire a staff before having any chance of making a discovery.

The internet is changing the economics of innovation and discovery.  Science is no longer expensive like it once was, it is within the realm of dedicated and educated hobbyists.  Robin Hanson, who the article discusses, is everywhere you find interesting information economics problems.

Categories: Business and Economics, Incentive Centered Design, Information Asymmetries, Information Economics, Information Markets, Matching Mechanisms, Science, Social Software, Strategy, Technology, Users as Partners
No Comments »

In Slate:

But the more I thought about Cramer, the more I realized that pointing out that he gives terrible investment advice would be like pointing out that the sun rises. Worse, I would be dismissed as a wet blanket who didn’t get that the point of Mad Money was just to have a bit of ironic fun. I mean, of course Jim Cramer gives terrible investment advice—we all know that, right?—and we only watch the show because, well, because he does possess a certain bizarre type of market and entertainment genius—if there’s a pundit out there with more opinions about more stocks, I’ve never seen him—and he’s irreverent, madcap, and, yes, even brilliant, in an idiot-savant, freak-show sort of way. (Moreover, Cramer is mesmerizing reality TV. Admit it: You watch because you wonder if this is the night he finally has a heart attack, kills someone, or explodes in a tirade of expletive-laced slander.)

That is precisely why I watch Mad Money, and I love watching the show (though I can never stomach a full episode at a time). I think CNBC personalities are awesome, and although Jim Cramer is great in small doses, he’s nothing compared to personal finance guru Suze Orman, who will help you fix up your crappy finances and crappy relationships at the same time.

Categories: Business and Economics, Entertainment Media, Information Asymmetries, Information Markets, Television
No Comments »

According to Slate, an attempt to get a nobody elected to the NHL All Star Game has exposed gross incompetence on the part of the site administrators and league officials:

How did the Rory Vote-O-Matic work? According to Touesnard, online security at NHL.com was pathetic. The league tried to counter automated scripts by making voters decipher words embedded in distorted images—a system known as CAPTCHA. But the NHL used only 51 different picture files and each one had a predictable name, like “1.gif.” All the Rory hackers had to do was create a table that linked up each file name with the appropriate pass phrase. Touesnard coded up the Vote-O-Matic in just a few hours.

Incentive centered design problem for online voting, anyone?

My favorite tidbit:

Some have even gone so far as to suggest the whole thing was orchestrated by the league’s viral marketers, who have been pushing a fan-centered brand under the slogan “My NHL.” But it’s hard to imagine how anything positive could come from such a parade of scandalous incompetence.

Having viral marketers is stupid enough on its own.  Then giving them positive credit for something they didn’t start and subsequently blatantly mismanaged?

Categories: Business and Economics, Community, Governance, Incentive Centered Design, Information Economics, Information Markets, Marketing, Social Software, Users as Partners
No Comments »

Kevin Bacon has leveraged his high network centrality into a charitable initiative, sixdegrees.org, which connects individuals to celebrities who advocate for a charity, or allows you to become a celebrity for a charity of your choice.  Somehow, it then networks people together, though I don’t really get how, and my guess is that the site cost more to put together than it’s raised so far.

Via Philantrhopy 2173.

Categories: Community, Information Markets, Matching Mechanisms, Philanthropy, Social Software, Technology, Users as Partners
No Comments »

The Freakonomics Blog is also now talking about truth markets (is it information market day or something?):

An excerpt, which they excerpt from a letter:

I think the guy who talked about having a trustworthiness rating for individuals is on the right track. Except, anything that distracts users from making immediate changes (such as logging in, or a notion that I have to build my reputation to have an equal voice) could be the death of wikipedia. My approach to improve wikipedia would be to include an “information liquidity” metric along with each page, similar to a stock’s trading volume. Pages could be grey-scale coded based on the page change history, with high-volume pages appearing darker, more solid. Of course this can be gamed, but here gaming has visible artifacts. As far as accuracy goes, I think this would solve Stephen’s objection because the informational backwaters—pages with lower liquidity—would appear visually distinct from the heavily modified. In machine learning there’s a construct called a Boltzmann Machine (aka simulated annealing machine) which describes the dynamics of systems like wikipedia, but it requires a metric like volume/liquidity/energy. An alternative approach to social networking for solving accuracy/trust problems is this one, which I’m very intrigued by, but the system isn’t big enough yet to bear out the promises.

Categories: Incentive Centered Design, Information Asymmetries, Information Economics, Information Markets, Social Software
No Comments »

Online prediction markets have made it to Slate on the same day that my class on Information Aggregation and Predictions Market started.
From Bruce Reed on Slate:

After Bush signed the bill [banning online gaming] earlier this month, the online gaming giants shut down their American operations almost overnight. Sportingbet Plc, a British company, took a $391 million loss and sold its U.S. arm for $1.

Other companies are betting the law won’t stick. Trade Exchange Network, an Irish firm that runs Tradesports.com and Intrade.com, continues to welcome American customers. But here’s the real irony: At the same time the Republican Congress is trying to throw them out of the American market, the briskest business at Tradesports and Intrade is taking bets on whether Americans will throw out the Republican Congress.

In other news, I start the semester down $500 class bucks due to bad information about the Tigers’ victory prospects.

Categories: Information Asymmetries, Information Economics, Information Markets, Politics, Social Software
No Comments »