What Are These Prediction Markets?

None of us is as smart as all of us.

—Japanese proverb

PREDICTION MARKETS IN THEIR various forms are one of the least understood ideas in business. Even though some of the examples that appear later in this book have been mentioned in the Economist, National Geographic, Time, and major business newspapers, few readers would associate prediction markets with the applications used by Rite-Solutions, or with Google, or with predicting flu epidemics.

There is a long history to the prediction-making business. In Greek mythology, the first source of predictions—the earliest oracle—was Gaia, the earth goddess. She dwelled at Delphi on the slopes of Mount Parnassus, dispensing profound wisdom and foretelling the ...

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