Prediction markets
I am an academic not an entrepreneur, but if there’s one area that I think is ripe for a successful venture it’s creating the go to prediction market. By the early 2000s we had established that prediction markets were an effective tool for corporate management and we also learnt how useful they could be for a broad range of policy issues. It’s a scandal that governments – and the US in particular – have been so opposed to their use. (The reason is that they’re treated either as gambling firms or futures traders which are two of the most targeted and heavily regulated industries). According to Scott Alexander:
“There ought to be a billion dollar prediction market, maybe a ten billion dollar one. Smart VCs clearly believe something like this, or Kalshi wouldn’t have gotten $30 million+ in investment. Sometimes people who incorrectly believe I know things about prediction markets ask me if I know the missing secret sauce. I don’t think there’s any secret. A prediction market will strike it big when it gets three things right at the same time:
Scott Alexander
- Real money
- Easy to use
- Easy to create your own subsidized markets
It’s a dream of mine that I may have students who manage to put those things together, solve the regulatory issues, and launch a killer app. So far the closest is probably Polymarket but also see Prediki.
Here is a website that aggregates prediction market data:
Sustainability
The Climate Risk and Uncertainty Collective Intelligence Aggregation Laboratory (CRUCIAL) uses prediction markets to learn more about future climate related challenges. See:
- Roulston, M., Kaplan, T., Day, B. et al. Prediction-market innovations can improve climate-risk forecasts. Nat. Clim. Chang. 12, 879–880 (2022)