Prediction markets in big businesses are coming.
I bet you $1 prediction markets in startups and $B businesses are in 70% of them within 10 years
They are a unique mechanism to ensure better decisions are made by forcing the people contributing to the choice to have skin in the game. It ensures you develop not just an opinion on the projects you are contributing to, but independently verify then and ensure accuracy.
It’s radical transparency on steroid. It’s Ray Dalio’s Bridgewater Associates on steroids.
Everyone will receive virtual chips to stake on events, which will enable the success rate of team members to be tracked against all scenarios. It encourages people to verify their own opinions before they stake their choice blindly in order to ensure groupthink does not prevail.
- Should we proceed with project X or not?
- What will be the outcome of A/B test?
- How much would you stake on its success or failure?
Skin in the game for all the team in a way which is measurable. Force people to seek truth and research it. Diversity of thought and opinion is required to uncover any holes in the collective reasoning of the team.
Decision making becomes something where you are rewarded for being right, not for agreeing with your boss. Contrarians can hang their hat on their opinion. Real devils advocates emerge because it is worth doing so.
I hate people just having opinion built on their biases without any effort for external confirmation. It’s too easy to just state an absolute opinion. What if you could be challenged on it? What if a colleague could ask you if you want to bet? What if the outcomes had real world implications. Would you carelessly brandish opinion as fact? Or would you seek truth in everything you do? That is the habit this seeks to build. This is what it would ensure.
Most businesses don’t reward you for being contrarian
What if they did? What if they could.
What if you were rewarded more, the more right you were. The more you staked on the outcome.
You have to develop convictions for the right reasons. Luck and skill would still play a massive part, but you would be committing to something based on what you knew, what you learned, and what you can control.
I can’t think of a better outcome for any company. Startup or incumbent.
It breeds healthy competition
It gamifys truth seeking
Decisions are universally made with incomplete information.
But how frequently is that the case because of a lack of incentive to find out more? Making the right choices when uncertainty is the default setting leads you to analyze data more efficiently.
Failure isn’t fatal if you learn from your mistakes. In most companies, those things aren’t recorded. Who contributed to a wrong or right decision.
- Was a wrong decision made for the right or wrong reasons?
- Was a good decision made for the right or wrong reasons?
This lets us track that. Where a wrong decision was made for the right reasons, awesome. When it was made for the wrong ones we put ourselves in a position to develop processes that avoid that scenario in the future. Where a good decision was made for the right reasons, awesome. When it was made the wrong ones we put ourselves in the position to avoid the false positives of always assuming we made the right decision because of skill and the wrong one because of bad luck.
Organizations which seek truth will thrive in a world where we are drowning in information. It’s about building processes and systems that reward people for doing the right things. Increasingly, that will be finding the information that lets us make critical decisions more efficiently.