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If the Opening Ceremonies for the summer 2008 Olympic Games were any indication, the People’s Republic of China is intent on changing their global image. Under the rule of one of the last Communist governments, China has been under intense scrutiny for a myriad of social concerns – including their use of sweatshop labor, extreme poverty, and their violent handling of political uprisings. The Olympic Games – and the accompanying boost in tourism – could be seen as a new beginning for the nation, opening borders that were once closed to Western travelers. But it is not only this new openness that will be a boon to travelers, but their ongoing development of what is touted to be the fastest, most technologically advanced high-speed rail system in the world. The future is coming to China – and it’s arriving by rail.

Despite a growing technology industry, China is not immune to the worldwide economic recession. Prior to the Olympics, billions of Yen were spent in developing infrastructure, but the promise of boom times has yet to materialize, leaving thousands of property owners – and the banks holding the papers – scrambling to find occupants. With unemployment on the rise, and the financial system at risk, China has embarked on one of the most ambitious transportation projects ever seen – the countrywide development of high-speed rail. The government is so optimistic that they’ve routed a majority of their $585 billion stimulus package to the project, with plans to build 35 high-speed routes by 2012.



China Bullet Train – Shanghai

To the citizens of many Western countries, China’s focus on rail travel may seem antiquated. However, high-speed rail is anything but. Developed in Germany, the Maglev system uses magnetic levitation to propel the rail cars along the tracks – at speeds previously thought impossible for large-scale transportation. In addition to speed (dependent on conditions, capable of 300+ mph), maglev trains offer a smoother, and more quiet ride than conventional wheeled trains. However, this new system does require significant changes to existing infrastructure, in addition to addressing the potential safety issues. Inaugurated in 2002, the Shanghai Maglev train provides daily service between downtown Shangai and the Pudong International Airport, with the construction of further expansions planned to start in 2010. Built in partnership between the Chinese government and German company Transrapid, the Shanghai Maglev is the ‘first operational high-speed conventional maglev railway in the world’ and reaches an average speed of 311 mph on the limited track length.

The future project will combine foreign technology with Chinese manufacturing, with the aim to create thousands of jobs to boost regional economies. When finished, China will have over 16,000 miles of high-speed railways, linking the major cities of each province and expanding to the Western border. Already the principal means of transport for citizens – with over 1.456 billion trips taken in 2008 – the new lines will provide further service for both passengers and freight, easily connecting even the most isolated regions.

It is an ambitious project to be sure, but also a tremendous leap forward for an industry that has suffered in the aviation age. And for the Chinese – keepers of one of our civilization’s oldest and most mysterious cultures – it is the dawn of a new era.

It’s not wholly gambling – not in the Vegas sense. But it’s not purely an academic pursuit either – despite it’s uses as a real-world teaching tool. The science of prediction markets is a curious phenomenon – controversial, moderately confusing, and at times, uncommonly accurate. Speculative in nature, prediction markets use the wisdom of the crowd to foretell the outcomes of certain events – whether the election of a political party or the weekend box office results for the latest Bruce Willis action flick. A little bit economics, tea-leaf readings, and data collection. Think of it as gambling for the academically minded.



What is a Prediction Market?

Although public interest has grown considerably in the past two decades, in lockstep with the worldwide adoption of the internet, prediction markets are not a new concept. Prior to the 1940′s, betting money on the outcomes of Presidential elections was common, with Wall Street representation and fluctuations reported in daily newspapers. But what makes this different than say, laying down $1000 on a New England Patriots 2010 Superbowl win is not just the money. Prediction markets are used mainly to gauge public opinion – and to use the data collected to develop stronger theories about our cultural and political leanings. In fact, the amounts of money involved are too small to even merit consideration from the Commodity Futures Trading Commission (CFTC), the industry’s governmental watchdog.

The power of prediction markets is in the ‘pure’ intent of the speculator. Preceding an election, political pollsters collect data on the hoped-for outcome from tens of thousands of citizens. The data represents not what the public believes will happen, but what they want to happen. In using the predictive market model, speculators – by necessity of participation – take into account cold, hard facts, not feelings. (The genius of this model lies here, as to be a ‘winner’ in this arena takes at least a modicum of research, and to step away from one’s own bias.) Or, to put it another way, it’s not about whether the speculator believes in the artistic merit of Bruce Willis’ oeuvre, but whether or not they believe millions of other fans do.

Developed by the University of Iowa Tippie College of Business, the Iowa Electronics Market (IEM) is a not-for-profit organization, and the most often cited prediction market. Run solely for educational/research purposes, investor account holdings cap out at $500. The University uses the IEM to ‘prepare students to be intelligent market participants’, in addition to gaining data on market trends and behavior. Covering political, cultural, and business futures (some of which are only open to students), IEM has a proven track record for accuracy in forecasting election results.

The Hollywood Stock ExchangeS (HSX) uses a slightly different business model, allowing traders (using simulated funds) to buy shares in the Hollywood elite – including actors, directors, and the potential box office returns for upcoming films. Industry insiders have used the HSX as a highly accurate indicator for opening weekend numbers, and to determine which stars are on the ascendancy (and vice versa) in regards to casting future projects. HSX has also shown a remarkable ability to foretell major-category Oscar winners, with 32 of the 39 awards being correctly predicted in 2007.

No one can say for sure what the future will bring. But that hasn’t stopped multinational corporations – including Google, Best Buy, Motorola, and Hewlett-Packard – from adopting a prediction market model to ascertain looming changes in their respective industries. Whether the subject is the potential global sales of video game titles, or the next Microsoft venture, this economic wunderkind is making big waves in big business.

It’s not wholly gambling – not in the Vegas sense. But it’s not purely an academic pursuit either – despite it’s uses as a real-world teaching tool. The science of prediction markets is a curious phenomenon – controversial, moderately confusing, and at times, uncommonly accurate. Speculative in nature, prediction markets use the wisdom of the crowd to foretell the outcomes of certain events – whether the election of a political party or the weekend box office results for the latest Bruce Willis action flick. A little bit economics, tea-leaf readings, and data collection. Think of it as gambling for the academically minded.



What is a Prediction Market?

Although public interest has grown considerably in the past two decades, in lockstep with the worldwide adoption of the internet, prediction markets are not a new concept. Prior to the 1940′s, betting money on the outcomes of Presidential elections was common, with Wall Street representation and fluctuations reported in daily newspapers. But what makes this different than say, laying down $1000 on a New England Patriots 2010 Superbowl win is not just the money. Prediction markets are used mainly to gauge public opinion – and to use the data collected to develop stronger theories about our cultural and political leanings. In fact, the amounts of money involved are too small to even merit consideration from the Commodity Futures Trading Commission (CFTC), the industry’s governmental watchdog.

The power of prediction markets is in the ‘pure’ intent of the speculator. Preceding an election, political pollsters collect data on the hoped-for outcome from tens of thousands of citizens. The data represents not what the public believes will happen, but what they want to happen. In using the predictive market model, speculators – by necessity of participation – take into account cold, hard facts, not feelings. (The genius of this model lies here, as to be a ‘winner’ in this arena takes at least a modicum of research, and to step away from one’s own bias.) Or, to put it another way, it’s not about whether the speculator believes in the artistic merit of Bruce Willis’ oeuvre, but whether or not they believe millions of other fans do.

Developed by the University of Iowa Tippie College of Business, the Iowa Electronics Market (IEM) is a not-for-profit organization, and the most often cited prediction market. Run solely for educational/research purposes, investor account holdings cap out at $500. The University uses the IEM to ‘prepare students to be intelligent market participants’, in addition to gaining data on market trends and behavior. Covering political, cultural, and business futures (some of which are only open to students), IEM has a proven track record for accuracy in forecasting election results.

The Hollywood Stock ExchangeS (HSX) uses a slightly different business model, allowing traders (using simulated funds) to buy shares in the Hollywood elite – including actors, directors, and the potential box office returns for upcoming films. Industry insiders have used the HSX as a highly accurate indicator for opening weekend numbers, and to determine which stars are on the ascendancy (and vice versa) in regards to casting future projects. HSX has also shown a remarkable ability to foretell major-category Oscar winners, with 32 of the 39 awards being correctly predicted in 2007.

No one can say for sure what the future will bring. But that hasn’t stopped multinational corporations – including Google, Best Buy, Motorola, and Hewlett-Packard – from adopting a prediction market model to ascertain looming changes in their respective industries. Whether the subject is the potential global sales of video game titles, or the next Microsoft venture, this economic wunderkind is making big waves in big business.

It is poetic, if not altogether overly optimistic – there is a rebirth occurring for the company headquartered in the Renaissance Center in Detroit, Michigan. General Motors has emerged from bankruptcy – promising to be a leaner, more efficient version of its former self. In web parlance, we could call it GM 2.0.

The beleaguered 100-year old company was once at the top of the mountain – maintaining global market dominance for 77 years – a feat unsurpassed by any other automaker. However, in the past two years, challenges from foreign auto companies and poor management practices (among other factors) severely hampered the company’s ability to stay there. Couple those factors with the onset of a worldwide recession, and GM quickly saw how little room for error there actually was.

Facing the reality of an $88 billion dollar loss since since 2005, the company had little choice but to accept the bail-out deal offered by the Obama administration – and the conditions that came with it. It was a move that outraged many, believing that government intervention was not only fiscally irresponsible but indicative of a fundamental break in our free market system. For the company’s nearly 250,000 employees around the globe, it was a move that saved their jobs and kept one of the most iconic American brands alive.

So how did this happen? And, more importantly, what does it mean?

There is no single culprit in this scenario. No city-destroying Godzilla to easily point the finger at. It is rather a mix of several factors – including poor sales, overextended dealer networks, inability to adapt to innovations in the industry, mismanagement of company assets, and high fixed costs due to their union contracts. And quite simply, they just weren’t making any money. Already operating at a loss in late 2008, GM received a government loan of $13.4 billion in the final days of the Bush administration – an influx of cash that did little to stop the financial slide.

Under the bail-out plan, General Motors would declare bankruptcy – just one of several restrictions imposed under the terms of the government agreement. General Motors Corporation would be divided in two – the surviving entity as General Motors Company (an obvious choice, as it was the founding name) with the remaining factions – those facing years of bankruptcy arbitration – to be known as Motors Liquidation Company. Additionally, GM would sell off under-performing divisions – such as Saab, Hummer, and Saturn to foreign investors, in order to focus on the remaining 8 brands. 40% of their dealer network would be slashed, and resources would be reallocated to the ongoing development of more fuel-efficient cars (including the all-electric Chevy Volt due to market in 2010).

This nearly $45 billion dollar federal bail-out is by no means a free ride for the company. Now majority owned by the US Treasury, the Crown in Right of Canada, and the United Auto Workers Union, even decision making on company leadership is out of their hands, with the government reserving the right to name directors. It is a chance to restructure, most definitely, but one with a time limit. GM will be expected to repay the loan by 2015 – a move that can only be possible if they make significant shifts by cutting costs and building better products.

Considering GM was once the most popular car brand in the world, it is almost unfathomable that they could stray so far from that success. It would serve them best to closely follow the progress made by rival Ford – also facing significant financial problems, but having opted to restructure from within rather than accept emergency federal loans. After hitting a low in early February, Ford’s stock is now triple the price – a positive sign for the economy, and one that for now, could offer a sign of future promise for the battered, but still standing, General Motors.