The blog, Midas Oracle, looks at prediction markets in the news and issues surrounding their value and usage and contains many current articles about different markets and their social utility.  The author examines the utility of prediction markets, and determines that it is in fact their ability to synthesize facts, expectations and beliefs gathered by a diverse audience of users much faster than traditional media outlets can that makes them a valuable means of forecasting events.  It is arguably this efficiency that should be focused on by developers and those looking to harness the collective intelligence of prediction markets in order to develop new ways of making prediction markets more effective.

    Putting Suroweicki's qualifications of a diverse, decentralized and independant crowd in the context of their ability to amass this information most efficienctly is a useful method of understanding their significance.  It seems to make sense why these characteristics would be useful for prediction markets.  Another interesting aspect of this blog is that it does not hold the crowds on a pedestal for their supreme intelligence, but rather values their speed and popularity as their defining characteristic.  This follows more in the line of conventional wisdom, and is an important concept when examining the role of these markets in the foreseeable future.

    This article examines the Hollywood Stock Exchange and gives basic information about its usage and what happens with the collected data.  In the case of HSX, the value lies not in the prediction of the future, but rather the accumulation of the preferences (tied to the demograpic information) of the average users.  That data is then sold to production companies who can adjust their upcoming films, and determine more intelligent money allocation based on their consumers.  This model works two ways, predicting the value of actors, producers and movies and also informing the film industry about what the average consumer desires. 

    While the Hollywood Stock Exchange does not release their demographic information on their website, they operate an entire research end that enables studios to selectively purchase certain types of data collected.  In this case it is important for the average person to join in on the trading, not only to get data on the target audience but also to give reason to attract experts, who see opportunity to do well.  These experts' opinions are important and might not be harnessed in other more traditional methods.

James Surowiecki outlines through cultural examples the basic idea of collective intelligence and that time after time it is shown that the group estimate to a given problem is more accurate than most of all of the individual guesses. He then lays out a key set of characteristics for what makes a wise crowd. They are: diversity of opinion, meaning that users come from many different intellectual backgrounds; independence, that they do not rely heavily on the opinions of others; decentralized, meaning people can draw upon local knowledge, and a means for aggregating their opinions. He states that while the average is often mediocre in most cases, in decision making it is most often the best. Though he also states that collective intelligence is not always perfect, citing certain examples where experts certainly know better than the crowd.

Surowiecki lays out the particular parameters I will esxamine as a starting point in my research project in looking at the particular incentives of marketing techniques used to maintain a flourishing prediction market. The implications for data gathered from prediction markets will examine the future role of experts, building off of Surowiecki's comments. In addition this work will mark the branching off point from where I examine other definitions of "wise crowds" and how important his characteristics actually are.