Individuals who use Idea Market contribute with ideas that are then channeled through a predictive market system driven by the collective intelligence of individuals. Participants are motivated to create innovative solutions for their companies and are driven by recognition and material incentives. By interacting with each other and selecting the ideas that are viable and have the most impact, innovation initiatives are driven forward.
The cornerstone of success in this process is the hierarchical validation stage which immediately follows crowd assessment. Managers with decision making power are able to select the best ideas and fast track them to implementation. This process – which may otherwise be extremely complex – is simplified by the efficient filter of collective intelligence.
While similar, there are critical differences between predictive and financial markets. Keynes (1936) metaphorically referred to financial markets as a “beauty contest” where investors trade on the basis of what one thinks others think. In financial markets there is no a posteriori validation of the quality of an asset, therefore some investors go with the flow and try to react rapidly to changes in expectations (short-term market timers are included in this group). Conversely buy-and-hold investors can be an example of people waiting for an implicit “second-stage validation” with good rates of return and dividends. This is where predictive markets and financial markets meet.
With Idea Market, the goal is for a participant to invest in the best ideas (according to his own personal belief) and hold his investment (unless he thinks that at a certain time the idea is overvalued and a correction is needed) until the implementation decision.
It should be ensured that incentives for the subsequent implementation of ideas have more weight than in-market incentives. Keeping to this rule will ensure that participants meet the primary objective of Idea Market: to create value. As per the above discussion we see this is a stark difference from the standard beauty contest of picking the most popular ideas.