Stock market metaphor with ideas
June 30th, 2009I’ve been writing about ideas and innovation for about a year now. More and more evidence has, in my opinion, built up to show that the stock market metaphor is not appropriate for finding the best ideas from a prospective pool.
From Emile of NewsFutures, here are three links and a quote from each:
The imagination market, Information Systems Frontiers (July 2007)
Participants were able to trade shares of technology ideas over the course of 3 weeks, resulting in the market identifying the “best” idea as the highest priced security. Our findings suggest that information markets for idea generation result in more ideas and more participants than traditional idea generation techniques; however, using markets to rank ideas may be no better than other methods of idea ranking.
Examining Trader Behavior in Idea Markets: An Implementation of GE’s Imagination Markets , Journal of Prediction Markets (April 2009)
In this experiment, we examine the behavior of traders that have submitted the ideas on the market and their influence on the market’s outcome. An idea’s submitter is clearly motivated to have his idea valued highly by the market, both by the funding given to the top idea as well as smaller prizes given to the top three ideas. In general, founders tended to buy their suggested ideas at prices above the volume-weighted-average-price (VWAP) in significant volumes. We discuss the implications and mitigation strategies. A survey of market participants yielded mixed results regarding the market’s effectiveness at ranking ideas but very positive results regarding the quality of ideas proposed.
GE Global Research blog (link here)
From the comments,
“GE Healthcare IT attempted an imagination market a few months ago to bring forth some new ideas for the company’s future. It left me with very strong mixed impressions: on one hand, it’s wonderful that we’re leveraging the power of technology for mass collaboration and idea sharing. On the other hand, I felt that the tool obfuscates the very opinions it seeks to gather by due to the inherent complexities of market behavior.My primary objection is the use of the stock market paradigm to evaluate these ideas. Simply, I find it too abstract to be useful in gathering feedback about the quality of an idea. Stock investment is done by trying to predict *the change in collectively perceived value of something over time*. However, when dealing with ideas, neither the collectively perceived value, nor the change in this value over time are valuable metrics; you want people evaluating ideas based on *their opinions*, not based on their attempts to predict changes in the investment decisions of others over the course of a few weeks. These are static ideas isolated from one another, not evolving companies that interact. I think a stock market is an unnecessarily abstract, and distracting way to retrieve simple information: what do people think of these ideas?”
I’d be interested in hearing from people that disagree with this…