Using future markets for social entrepreneurship?

19th Apr 2008
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Giulio Quaggiotto at PSD Blog, a World Bank Group blog, highlighted a very intriguing trend that is emerging within governments and companies: the use of prediction markets to help predict customer trends or citizens’ desires. His post brought forth some articles and studies that have recently come out.

  • A McKinsey & Co. report on prediction markets quotes James Surowiecki: “I wouldn’t be surprised to see prediction markets used in many more companies than today, not least as a tool to forecast sales. Consumer-facing companies should be particularly interested.”
  • Knowledge Management gurus Tom Davenport and Dave Snowden jumped into the fray to cool easy enthusiasm.
  • An article in the New York Times introduces the concept of futarchy. According to Robin D. Hanson, an economist at George Mason University and a fan of alternative institutions, futarchy is “a form of government enhanced by prediction markets. Voters would decide broad goals of national welfare, but betting in speculative markets would determine the policy steps to achieve those goals.”

When I read this post, I could not help but wonder if future markets could be applicable to social entrepreneurship. The first bullet point spoke to the use of such markets to predict the changing consumer preferences for companies. It would seem as though such information would be useful for understanding the evolving needs and desires of BoP customers as well. Can future markets be modified to be applicable to the BoP? Or is modification necessary, can we use them out of the box today?

Likewise, for social investors prediction markets could figure out what innovative approaches to specific problems are most likely to be effective and help guide them in their investing decisions. Anyways, just some food for thought. I need to think further about this, but I am sure you will hear more from me about this in the ‘future.’

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