prediction

Prediction, not narration, is the real test of our understanding of the world.

Entrepreneurs are entrepreneurial, as differentiated from managerial or strategic, because they think effectually; they believe in a yet-to-be-made future that be substantially shaped by human action; and they realize that to the extent this human action can control the future, they need not expend energies trying to predict it. In fact, to the extent that the future is shaped by human action, it is not much use trying to predict it - it is much more useful to understand and work with the people who are engaged in the decisions and actions that bring it into existence.

“This ‘telephone’ has far too many shortcomings to be seriously considered as a means of communications.”

The idea behind prediction markets is simple: People who claim to have any foresight or expertise into a social or political issue bet on specific empirical predictions concerning what will happen in the future. James Surowiecki's The Wisdom of Crowds has popularized research showing that under certain conditions "crowds" outperform experts. Well-designed prediction markets fulfill those conditions: The Iowa prediction markets outperform exit polls in predicting elections; and Florida orange futures markets outperform weather forecasters in predicting Florida weather. When we give large numbers of people an opportunity to discover the truth about the world, in a situation in which there are financial pay-offs for accuracy, on balance they outperform experts. More recently, Philip Tetlock conducted a large-scale analysis of expert political judgment and discovered that the better known an "expert," the worse his judgment as measured against predictive accuracy.[4]