“If the current betting trends are to be believed, it now seems certain that a recall is in the cards”

-Paddy Power, Irelands Biggest Bookmaker
July 14, 2010 press release

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Speaking of dumb bets: Its time to revisit a recent prediction market “winner,” and review the strengths and weaknesses of these markets:

Recall this Bloomberg article:

Apple IPhone 4 Recall Odds Increasing, Irish Bookmaker Says ^[1]

Apple Inc. is increasingly likely to recall its iPhone 4 after complaints about poor reception and a critical review from Consumer Reports, according to a betting company that tracks odds for such events.

Paddy Power Plc ^[2], Ireland’s biggest bookmaker, said the chances that Apple will ultimately recall the phone have increased following what it described a “betting frenzy” after the Consumer Reports review. The consumer organization said on July 12 it wouldn’t recommend the phone because of its tendency to lose signal strength when held in a certain way.

Only, not so much.

We have a long history of criticizing ^[3] so-called prediction markets. There is no “wisdom of the crowd” unless the prediction markets has a similar demographic profile to whatever group is being forecast (or polled). When their community of voters are similar to an electorate, they act as a deeper polling mechanism. When they try to forecast the decision making processes of dissimilar bodies — Juries, Boards of Directors, or in this instance, corporate management — they stink the joint up.

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Source:
Apple IPhone 4 Recall Odds Increasing, Irish Bookmaker Says ^[1]
Arik Hesseldahl
Bloomberg, July 14 2010
http://noir.bloomberg.com/apps/news?pid=20601087&sid=a0GOFk3C_q3k&