Predicting success

I received an email the other day from an expert in prediction markets. I've read about these - they are a forecasting tool that aggregates the opinions of large numbers of people to predict everything from the winner of the National Spelling Bee to box office hits to Oscar winners to election outcomes. This week's New Yorker (I skipped over my 3 month pile and jumped to current events) features a "Financial Page" column on prediction markets. The columnist, James Surowieki, can be credited with popularizing the term "wisdom of crowds." He writes about a deal between Simon & Schuster and MediaPredict to see if the book publisher could improve its (industry-standard) poor record for identifying potentially successful book proposals.

Deep into the column Surowieki notes that these markets aren't perfect, but they are better than other forecasting tools. He then makes this key distinction:

"The catch is that to get good answers from consumers you need to ask the right kinds of questions; asking the market to predict how many copies a book will sell, which requires predicting how a wide readership will behave, is better than asking the market to predict which manuscript will get a book deal, which requires predicting the decisions of a small number of editors. (The Simon & Schuster experiment with MediaPredict, unfortunately, focuses more on the latter.) And you need a critical mass of people to participate."
Keeping this in mind, what role might such forecasting tools play in philanthropy? To some extent, the Long Now Foundation uses its Long Bets site for this purpose - its a public forum where anyone can place a bet on future social issues, with philanthropic money at stake. You can make a prediction, note your argument, others can vote for/against it, and anyone can place a bet against your prediction.

Could communities be asked to predict what kind of grant making strategies would achieve certain goals? What about predicting the likelihood of certain public policy futures, and using those to inform philanthropic decision making? Or simply look for future social trends that would influence philanthropy, such as one Long Bets prediction that, "By 2100 racism will no longer be significant phenomenon in most countries of the world."

Given the money (and social issues) at stake, forecast tools that work would be of great benefit to philanthropy. Who knows, maybe one day philanthropically-subsidized social issue prediction markets will be as familiar to us as stock indices and the weather report? Of course, such forecasts may have to be printed in philanthropically-subsidized community newspapers. Independent, credible information - critical in value, and seemingly scarcer every day. It could very well be the philanthropic currency of the future.


2 comments:

Gwen Walden said...

Hi Lucy. We're actually working on a non-profit and philanthropy forecasting project in Southern California. A network of non-profits and foundations have come together to contract with local research universities to create what we think is the first-ever forecast. Our goal is to use the data as a way of coalescing around a common advocacy agenda, so we can increase public policy awareness of our needs and issues. We'll keep you posted on our efforts!

Robin Hanson said...

Such things are quite possible, if the infrastructure is created to support them.