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And thanks for listening. Welcome to the H-BRAIDIA

Welcome to the H- Idea Cast from Harvard Business Review. I'm Sarah Green.

I'm talking today with Economist Don Thompson, the author of the new book Or's How Prediction Markets Turn Employees

into Visionaries. Don thanks so much for joining us today.

Pleasure. So the book is about Prediction Markets. Can we just start out by talking about what a

prediction market is? Well think of a stock exchange and think what a stock

exchange does other than than transfer ownership, it

stock exchange incorporates buying and selling opinions from

thousands of people, hundreds of mutual fund managers every day.

And it predicts the value of a company at a point in time, and we accept

that as the best estimate of what a share is worth and what the company is worth. Now a

prediction market is a stock exchange that deals with

events or ideas. It deals with happenings rather than securities. And it asks you to

invest in whether something will happen or what an outcome will be.

And the price of the outcome, in other words, the stock price, gives you a probability of that event happening. So it doesn't tell you what

people think will happen but it tells you the strength of their views. 60% believe it, 90% believe it. And it tells you how that is changing over time so you can measure the probability of something happening like a presidential election like Obama winning again in November and

thus is very useful it gets people to put their money where their beliefs are rather than repeating back what

they would like to happen or what their boss would like to happen.

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