James Surowiecki on prediction markets.

Prediction markets function like futures markets, except that, instead of betting on the future performance of a company or a commodity, people can bet (often with play money) on things like election outcomes, current events, and product sales.

The collective intelligence of consumers isn’t perfect—it’s just better than other forecasting tools. The catch is that to get good answers from consumers you need to ask the right kinds of questions. And you need a critical mass of people to participate.

Nobody knows anything. But everybody, it turns out, may know something.