The Now Economy

Chris Masse sent me a pointer to Marco Ottaviani’s draft announcement for a Mini-Conference on Information and Prediction Markets to be held December 19 in London. That’s so little notice, and so close to Christmas that I’m not seriously contemplating attending, but the list of speakers is another good one. If London isn’t a long trip for you, think about this one.

• Paul Tetlock: Designing Information Markets for Decision Making
• Robin Hanson: Comparing Ways to Encourage Information Market Participation
• Leighton Vaughan-Williams: Efficiency in Exchange Betting Markets
• Olivier Gergaud: Strategic Forecasting in Rank-Order Tournaments
• Frederic Koessler: Individual Behavior and Beliefs in Experimental Parimutuel Betting Markets
• Justin Wolfers: Interpreting Prediction Market Prices as Probabilities
• Peter Norman Sorensen: Aggregation of Information and Beliefs in Prediction Markets
• Erik Snowberg: Partisan Impacts on the Stockmarket
• Koleman Strumpf: Manipulating Political Stock Markets
• Eric Zitzewitz: Full Distribution Event Studies

It’s nice to see the number of conferences and workshops in this area growing.

The Prediction Markets summit that will be held in San Francisco on December 2nd is shaping up to be quite an event. There will be speakers from Google, HP, NewsFutures, Trade Exchange Network, HedgeStreet, Stanford, Microsoft, and Yahoo. I’ll start things off by telling what I’ve been able to do with Zocalo so far, and then challenge the other attendees on a few points of Prediction Market design. Bernardo Huberman of HP will give the keynote. Google and Microsoft will talk about their experiences with markets inside the corporation. Representatives of NewsFutures, InTrade, HedgeStreet, and Yahoo will talk about how they are faring in the market. Eric Zitzewitz of Stanford will present a paper responding to Manski’s charge that prices in prediction markets don’t reflect probabilities.

The day will end with a panel discusssion, which I will facilitate. I’ll ask about Tom Bell’s draft legislation, about the prospects for increasing liquidity on HedgeStreet, and I’ll try to get InTrade to say what they plan for their proposed US subsidiary if they haven’t talked about that earlier in the day.

This will be the first public opportunity that I’m aware of to see presentations on Google’s markets, HedgeStreet, or InTrade. There is still space available. If you are at all interested in Prediction Markets, you should register now.

The whole event is billed as having a conversational, interactive style, so if you want to find out more about these ventures, this will be the place. Future events in the series are planned for the east coast, Europe, and Asia, but they’ll have very different speaker line-ups.

Tom Bell posted a short draft (with variations) of a bill legalizing Prediction Markets. The bill’s focus is explicitly on markets for science, technology, and public policy, so it would benefit the Simon Exchange and possibly the Washington Stock Exchange, but not other, general purpose, markets. The strongest version’s provisions are really simple: no federal, state, or local government may enact or enforce laws to regulate prediction exchanges, and standard commercial law continues to hold regarding the contracts. (The limitation to claims on science, technology, and public policy is in the definitions.) The weakest version only forbids enforcement against prediction markets of laws concerning gambling, commodities futures, securities, or insurance. I’ve simplified the legalese in order to get it to a couple of lines. Tom’s version is only a little longer in order to have all the necessary legalese.

These would be very nice rules if they were law, but the more interesting question is what it would take to get them enacted. Congress isn’t in the business of enacting legislation merely because it would make us all freer; there has to be a substantial lobby, or evidence of plenty of interest to make it happen. In order to get the support of the relevant industry (Trade Exchange Network, ProTrade), the terms would have to be opened up to include more than just science and technology. So a big question is whether enough support could be lined up with a version limited to science and technology to get a bill passed (it should be easier because the subjects are respectable, and can be pitched as “not like gambling”), or whether having additional companies backing it would help more. I wouldn’t mind letting the sports markets join the party, as long as it makes it easier for a bill to pass. If no bill is going to pass, it doesn’t make a difference anyway, and we’re left looking for legal strategies that will allow public policy markets to avoid a suit or survive one if it happens.

… there’s money to be made in adult content, so eventually handsets will become yet another commercial outlet. Rather than adopting a Web-standard content rating platform such as PICS, the wireless industry associaton (CTIA) has come out with some as-yet-unspecified new technology. So far, it appears to only be a press event about how nice it will be once it’s all working.

See the Washington Post or the New York Times for largely similar content-free announcement stories. From the NYT piece:

The nation’s major cellular phone carriers said yesterday that they had adopted a content rating system for video, music, pictures and games that they sell to cellphone users - a development that could pave the way for them to begin selling pornography and sex-oriented content on mobile devices. The carriers said the ratings, meant to mimic content classifications for movies and video games, are voluntary. Initially, the carriers would classify content in two categories: general interest and restricted content deemed appropriate only for people over the age of 18. The carriers said they had agreed not to begin making restricted content available until they had developed filters and other technological tools that would enable parents to prevent children from getting access to inappropriate material. The carriers, including Cingular Wireless and Verizon Wireless, the largest and second-largest mobile companies, said they were developing filtering technology and that it should be available soon.

The dramatic saga of Commerce One’s fundamental Web Services patents has apparently concluded with a happy-enough ending. Based on pioneering work by Robert Glushko and Marty Tenenbaum, among many others, this patent portfolio began with work spun out of CommerceNet (the nonprofit consortium) as Veo Systems, Inc.

Last year, there was a court-ordered auction of the bankrupt company’s patents to a then-unidentified high bidder who some feared would begin to use the patents to shake down the nascent Web Services industry. In time, it appeared that Novell acquired those rights, and this week, a new consortium “of five technology and consumer electronics companies - I.B.M., Novell, Philips, Red Hat and Sony - who share an interest in promoting the spread and adoption of the free Linux operating system” named Open Invention Network made them available under royalty-free licenses.

Company to Start Offering Free Use of Patents It Holds
November 10, 2005
By STEVE LOHR

A new patent-holding company, the Open Invention Network, is expected to begin operations today with the unusual business plan of buying certain patents and licensing them without charge.

The company has the financial backing of five technology and consumer electronics companies - I.B.M., Novell, Philips, Red Hat and Sony - who share an interest in promoting the spread and adoption of the free Linux operating system.

The chief executive of the Open Invention Network, Gerald Rosenthal, is a lawyer and a former director of I.B.M.’s intellectual property licensing program.

At I.B.M., Mr. Rosenthal led the lucrative technology-licensing program, which has routinely earned $1 billion or more in recent years. He will be pursuing a different strategy at the new company.

“By itself, this is not a money-making enterprise,” he said. “Our goal is to enable the Linux ecosystem to grow.”

As users or distributors of the free operating system, the five corporate supporters of the Open Invention Network all have a vested interest in fending off threats to Linux.

Legal challenges to Linux users have already surfaced, but none have slowed the adoption of Linux, which is used everywhere from corporate data centers to consumer devices like digital music players. Yet the legal risk, analysts say, is an uncertainty in the outlook for Linux.

In March 2003, I.B.M. was sued by the SCO Group, a Utah company, which said that I.B.M. had illegally contributed code to Linux from the Unix operating system. SCO had obtained the licensing rights to the Unix software and contends that Linux, a variant of Unix, violates its rights. SCO is seeking $1 billion in damages. I.B.M. denies the charges in the case, which is pending.

Another worry for Linux users is the rise of specialized intellectual property firms that acquire software patents, and then make money by licensing the patents as widely as possible.

That concern arose when the patents of a bankrupt dot-com company, Commerce One, were auctioned in December for $15.6 million.

Computing specialists worried that the patents dealt with technology that was broadly used in Internet commerce, and, if aggressively enforced, could result in many companies having to pay license fees. The winning bidder, however, was later identified as a lawyer representing JGR, a subsidiary of Novell.

Novell, a Linux distributor, is placing those patents in the new portfolio of the Open Invention Network, based in Pound Ridge, N.Y.

Patents owned by the Open Invention Network will be available free to any company, organization or individual that agrees not to assert its patents against others who have signed a license with the new patent-holding company. The Open Invention Network will continue to identify and acquire patents related to Linux.

Mr. Rosenthal sees the new company as a guardian of innovation in an environment for technology development.

“If you look at the Internet and Linux,” he said, “a lot of it has been the result of collaborative work without anyone really owning the intellectual property.”