Bruce Bueno de Mesquita’s new book, The Predictioneer’s Game, is well worth a read.

First, it’s simply interesting. The author has been building game theory based prediction markets for the US government and private industry clients for years, and his learnings in this field (especially, multi-player nation state relations modeling) are fascinating.

Interestingly, the author writes about something closely related to Admiral John Poindexter’s somewhat controversial Policy Analysis Market (PAM).

From a market research point of view, The Predictioneer’s Game is one look into the future. It’s no secret that Delphi Panels (first invented by RAND after WWII), are the historical beginning point for many futurist efforts. But, the simultaneous advent of hosted online communities and prediction markets means that at some point (probably very soon) market research will combine the two in a way that creates a step change in the field. And, this combination is ultimately going to look like much of what the author of The Predictioneer’s Game has been doing for the US government for many, many years.

How will it work? First, market researchers will create an online community that has the features (either in background, skills or purchase interest) that they desire. Then, this group will be given a series of questions. Each question will ask what the likely range of consumer/business/voter responses might be. Then, a prediction market or exchange will be created for this range of outcomes. Trading will commence. If the literature is correct, the outcome of this trading will likely mirror (or approximate) the outcome in the real world. Most interesting to me is that this process is now being tinkered with to design new products and product features.

In the world of public affairs, a common research approach is to poll a random sample of policy elites and use this data to understand how future scenarios might sort out. StrategyOne used this approach with its Beltway Barometer to better understand what might happen with the initial bailout bills in the fall of 2008. In fact, we found support for the first bailout slipping quickly and this is exactly what happened. But, a more powerful complement to this survey based approach will be the creation of exchange driven communities of policy elites or influencers. This may just be the next “killer app” in the public affairs space.

RPM