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By Seth J. Itzkan and John Michitson

[Download  PDF of this article as it appears in the December 2008 issue of the Valley Patriot].

What will be the fastest growing industry cluster in the Merrimack Valley through 2009?  Will it be biotech? Clean tech? Consumer electronics? If you knew, how would that influence what you do, and if you had a hunch, how much would you be willing to bet on it?

These aren't hypothetical questions.  With predictive market technology we can help drill toward the most likely answers, and you, the armchair seer, can benefit.

In order to help drive economic development in the Merrimack Valley, we are utilizing predictive market technology to inform investors and stakeholders of the most likely prospects for industry growth through 2009.  You, the reader, are invited to participate.  The predictive market experiment will run through January 18th.  All results and germane information gathered will be summarized and provided to regional policy makers and printed in subsequent issues of the Innovation Valley column.  The winners of the predictive market exercise (those with the most "stock" value) will be profiled.  To begin now, go to the link provided at the article's end.

What are Predictive Markets?

Predictive market technology is an innovation that is sweeping Fortune 500 companies.  Using the "wisdom of the masses" a virtual marketplace helps determine the most likely ideas to succeed in the real world.  These ideas are typically for new products, and they are purchased and sold like stock.  Sophisticated graphing and valuation technology shows the daily performance and value, just as if it were a portfolio on a trading site.  Unlike trading sites, however, where participants keep their cards close to their chest, in predictive market environments, participants are encouraged to share opinions and insights.  The objective is to help distill the collective intelligence as well as hone in on the most likely outcomes.

According to a recent New York Times article on predictive markets ("Betting to improve the odds", April 9, 2008), "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. The concept has been championed by academic economists and was popularized by James Surowiecki’s 2004 book 'The Wisdom of Crowds.'"

Merrimack Valley sets a Precedent

The Merrimack Valley will be setting a precedent by using predictive markets as a tool for regional economic planning.  This further makes the case for the Merrimack Valley as a hotbed of innovation.  We will not rely solely on government agencies or industry analysts to determine which action plans are most likely to succeed, but will instead bring the ideas directly to the public and let the power and wisdom of a predictive market decide.  As the New York Times article testifies, community intelligence is likely to be far more sage than we imagine.  It’s time to retire blue ribbon panels.  The regional planning process is going Web 2.0.

Our Merrimack Valley experiment is asking the following question: What will be the fastest growing industry cluster in the Merrimack Valley through 2009?  The ten possible answers are selected from a Boston Globe article by Scott Kirsner, “Even in difficult times, entrepreneurs will emerge”, October 5, 2008.  Those choices are as follows: (1) Biotech and pharmaceuticals, (2) Clean tech, (3) Robotics, (4) Cloud computing and virtualization, (5) Devices and diagnostics, (6) Video games, (7) Mobil communications, (8) E-Healthcare, (9) Web 2.0 / Digital media, (10) Consumer electronics.

Participation is Easy

Participation is easy.  All you have to do is create an account and start the wager.  A wager is simply an answer to a question - Do you think the likely success of this idea (plan, product, industry) will go up or down?  The really fun part, however, is that by answering that question concerning the idea, you are actually buying or selling shares in it, and the value of your own portfolio will reflect its performance.  Each participant starts with $5000 and the price of the share is determined by its likelihood.  Zero dollars, means it has zero chance of success.  One hundred dollars means it’s a done deal.  Of course there is no real value to these shares.  Your job as a "trader" is to help the best ideas percolate to the top by wagering on your honest opinion.  You can even, as might be expected, have a vested interest in the outcome.  In a corporate setting, the "winner", or employee with the highest portfolio value, might receive an award.  In our exercise, you will gain recognition as the bright bulb in the house, and, most importantly, will have helped influence regional outcomes.

The real value of this exercise, however, will not, we anticipate, be in celebrating who wins, nor even necessarily in the accuracy of the forecasts.  It will be the knowledge that grows as participants provides rational for their choices.  With each trade, you will be prompted, optionally, to say a few words about why you made it.  You can also discuss it in a blog.  The sharing of key information is essential to the success of this pilot. The learning is viral, as marketplace activity can be fed to sites throughout the Internet.  In a regional effort like this, municipal planning offices and development agencies could enhance the activity by carrying feeds.  This has the potential to be a catalyst for broad based collaboration.

See you Online

To begin now, go here: http://innovationbrokering.inklingmarkets.com/