Clarity From Crowds™

Jon Carender, VP of Sales at CrowdClarity, will be presenting at The National Summit, held in the Marriott Renaissance Center, Detroit, MI from June 15-17, 2009.

“The Mission of The National Summit is to convene a cross-sector gathering of business, government, labor and academic leaders to develop and promote actions to improve America’s competitiveness in a global economy.”

Registration for the event is still open and 1-Day and 3-Day passes are available for both DEC and non-DEC members. Click here for more details.

Speakers include William Clay Ford – Jr. Executive Chairman of Ford Motor Co., Andrew N. Liveris – Chairman & CEO of Dow Chemical Co., Richard H. Anderson – CEO of Delta Air Lines, Steven A. Ballmer – CEO of Microsoft, and many more.

Event, News Coverage Detroit Chamber of Commerce, The National Summit

Our most recent team member and programmer, Andy Kish, was recently featured on Concentrate Media. Andy is a student at the University of Michigan’s College of Engineering and is concentrating in both Electrical Engineering and Computer Science.

Concentrate Media’s goal is to tell “a narrative of creative people and businesses, new development, cool places to live, and the best places to work and play.”

One of their features, Jobs Landed, presents dynamic hiring information that showcases both the companies that have recently hired new employees, and that same talent that they have found.

Andy’s Jobs Landed page can be found here, representing CrowdClarity.

News Coverage Concentrate Media, Hired, Jobs Landed, Programmer

We have recently changed our company name from Frontier Markets to CrowdClarity. Both our product and our company name are now the same. (Our previous corporate website, www.frontiermarketsllc.com, will now redirect you to our new site: www.crowdclarity.com)

We believe that the name CrowdClarity best relates to our software’s prime goal: to gather the best possible data from a diverse user base within a company, and to then use that data in a way that greatly benefits that company by providing accurate and market responsive information.

For those who wish to log into our system who were accustomed to visiting www.crowdclarity.com, please simply click the “Customer Log-in” link at the top right, or visit the new log-in page directly at: users.crowdclarity.com. Thank you!

Branding Name Change

Nathan Bomey, writing for the Ann Arbor Business Review recently interviewed the team members of CrowdClarity and published an article covering our history, growth, and goals.

Ann Arbor startup CrowdClarity leverages employee predictions into data

News Coverage Ann Arbor Business Review

CrowdClarity beats Nate Silver… AGAIN!

After beating Nate Silver in predicting the 2008 election results, CrowdClarity is back for more. Yet again, our unpaid, untrained volunteers were able to predict the Oscars results with more accuracy than any expert out there.

(Chart of data from “Most Oscars Won” Market – Click to Expand)

The most interesting thing about this is that with only 13 active participants, we were able to predict 13 out of 14 Oscar winners. The reason that this works is that the participants weight their picks based on how much they believe in them by choosing the amount of points they want to place on their pick. This measure of confidence gives the market a precision that beats a poll 3 times out of 4 – even with small numbers of people.

Additionally, the realtime ability to ‘cash out’ the points that a user placed on their initial prediction, in order to spend those points on a different prediction, allows our users to quickly respond to changes regarding the market – in this case, the Oscars. By enabling this activity, our software does more than simply poll a user group at one instance of time – it adapts to its environment from market open to market close.

This same dynamic can be used to accurately predict otherwise difficult-to-predict things for companies – such as sales or project delivery dates. This is what CrowdClarity is all about!

CrowdClarity Results Oscars, Public Prediction Markets

Four members of our team applied for, and won, the $10,000.00 Dare to Dream Integration Grant. Jonathan Carender, Dylan Imre, Andrew Kish, and Eric Rose were recognized at the event and were one of only two groups to receive the award.

The Dare to Dream grant program is coordinated and hosted by the Samuel Zell & Robert H. Lurie Institute for Entrepreneurial Studies at the University of Michigan Ross School of Business. Support for the grant program was provided by Eugene Applebaum – President of Arbor Investments Group.

For additional information about the program, please visit: Dare to Dream Overview

News Coverage Award, D2D, Dare to Dream, Integration Grant, Ross Business School, Zell Lurie

Frontier Market’s members Jonathan Carender and Dylan Imre entered their 3-minute business pitch in the University of Michigan’s MPowered Entrepreaurship’s 1,000 Pitches Initiative.

The goal of 1,000 submitted pitches for the event was actually surpassed, and Frontier Markets placed in the Top 10 submissions for the High-Tech category.

The University Record wrote an article featuring the contest as well as members of our team which you can read here.

News Coverage 1000 Pitches, Business Pitches, MPowered, University Record

As sad as the outcome was for a dyed in the wool Michigan fan, there was a silver lining. The prediction market that we had set up at one of our CrowdClarity beta customers very accurately predicted the actual outcome of the game.

The market we set up was “What will the outcome and points difference be for the OSU-Michigan game?”

The actual outcome was 42-7 for OSU – a points spread of 35. This corresponded with the “OSU by more than 26 points” outcome of our market – which was the outcome favored by the market participants.

Even more astounding was the fact that all of these participants live and work in Ann Arbor, Michigan and most of them are also dyed in the wool Michigan fans.

The astute amongst you will notice that there was a little bit of “hope” reflected in the market (as well as the well known fact that upsets can happen in rivalry games) by the slight over-weighting of the outcomes where Michigan wins by a small margin of 1 touchdown or less.

CrowdClarity Results, Prediction Market Results Clarity from Crowds, CrowdClarity, Football, Michigan, Ohio State, Prediction Markets, Sports

We’ve heard over and over that prediction markets can outperform experts, polls, and group consensus. But there are several different kinds, which one works the best?

To evaluate this question, I have decided on a framework which aligns the incentives of the traders to reach the efficient market equilibrium (a.k.a. Perfect Bayesian Equilibrium, PBE). What that means is that I want each trader to want to reveal all the information he/she has available by adjusting the market price when they find new information. We achieve this by eliminating the potential incentives to either bluff or withhold information.

In order for the market to be efficient, it must fully and immediately reflect all the available information into the new market prices. When traders are strategically withholding information, in order to realize bigger gains in the future, then the markets are not reaching equilibrium.

Conditionally independent signals are essential to allowing any market to reach the Perfect Bayesian Equilibrium. However, conditionally dependent signals open the door to allow for traders to strategic mislead other traders by bluffing or withholding private information.

Previously on this blog, I’ve preached that decentralization and trader independence are key. One main reason may be seen here – conditionally independent signals are a result of a decentralized market.

As far as I know, the only mechanism for achieving the Perfect Bayesian Equilibrium in a theory-based prediction market is a proper scoring rule. Currently, the most effective market scoring rule is Hanson’s Logarithmic Market Scoring Rule (LMSR).

The two other most popular mechanisms for prediction markets are CDA (continuous dual auction), in which the traders place calls and interact with each other like a real stock market, and DPM (dynamic pari-mutuel), in which the simple pari-mutuel market is supplemented by a mechanism to incentivize early trading.

LMSR is superior to CDA and DPM for several reasons.

First, traders receiving conditionally independent signals will miss out on potential gains by either delaying trading (withholding) or bluffing. More specifically, truthful betting is a PBE for all traders in LMSR. Meaning, each trader is realizing his/her maximum payoff, given the current state of the world.

Second, traders in CDA are not incentivized to fully reveal their private information. Any offer made by one trader is a signal to all the other traders in the market. This offer may discourage a potential trade. For example, a trader with private information will not fully reveal his/her information right away. Instead, he/she will leak information to the market little by little to obtain a greater profit over time.

Third, in DPM, traders have incentives to partially withhold information from the market until just before the end of the market. Thus, the market will only reach equilibrium right before the market closes.

And lastly, in CDA and DPM, the market is a zero-sum game, thus risk-neutral participants will have to incentive to participate. LMSR, on the other hand, which is a proper scoring rule, is a positive-sum game, will incentivize even risk-neutral participants.

References:

“Bluffing and Strategic Reticence in Prediction Markets”

- Yiling Chen, Daniel M. Reeves, David M. Pennock,

Robin D. Hanson, Lance Fortnow, and Rica Gonen

Prediction Market Results, Related Studies Bluffing, CDA, DPM, LMSR, Strategic Reticence

Perhaps the most important aspect of cognitive diversity is individual independence. Our culture has a tendency to conform to homogeneity, which lowers the ability of individuals to seek out unique information.

The rise of the internet was the saving grace of diversity. Individuals now have the ability to access information located all across the world with the click of a button. Utilizing the internet, groups of people may implement successful collective intelligence strategies, regardless of the size of the group and physical distance between the members.

A couple months ago there was a post by Albert Wegner on the blog for his VC firm, Union Square Ventures. (USV is an early-stage IT venture capital fund located in New York City) His post was titled “Power to the People” and I’ve included an excerpt below:

To us, this appears to be one of the great constants of the web. It is taking power away from existing large institutions and pushing it out to smaller entities and often all the way to individuals.*

When I read his post, it immediately resonated with what we are doing at Frontier Markets – using the web to give power to the people. Specifically, we are empowering our customers by helping them empower their employees.

By making use of this simple concept, firms have been able to add tremendous value to their organizations. For example, one firm used to post annual budgets to their employees and then asked for feedback. The response they got was always the same, “Looks good, boss!” However, at the end of the year when they missed budget by 12%, grumbling could be heard from every employee at the company. Clearly, they did not agree with the original projection, but for them, there’s no incentive for them to stick their neck out and offer a conflicting opinion. Employees are not rewarded for disagreeing with their superiors.

Their problem: By posting the management-developed budget, employees are disincentivized to give their truthful opinion.

The solution: Diversity through independence! Don’t influence your employees by posting management predictions too early. Instead, seek unbiased input from your employees through a means which makes the input anonymous. You’ll be amazed how diverse your employees’ opinions really are, and how accurate your new budgets will be.

*Power to the People

September 22, 2008, Albert Wenger, Union Square Ventures

Related Studies Albert Wegner, Diversity, Independence, Power to the Employees, Union Square Ventures