With all the predictions and anti-predictions of an Apple iPhone, I have to wonder how much people actually lose if they're wrong.

The big idea this time is that, unlike two years ago when people predicted this, Apple will release essentially either a cross between an iPod and a cellular telephone, or a very stylish Apple-branded cell phone without much in the way of MP3 player—though most high-end phones come with them anyway. Based on what little I know, though about the telco market, I think it's very unlikely because Apple would have to make a deal with a major carrier, that is, they could sell them out of the box but won't get distribution like the RAZR got. (John Gruber discusses this at more length in a podcast with Dan Benjamin.) The cell phone market is either a very saturated one or a market with a few gatekeepers, so it's more likely that they'll come out with something like the Nano—a device that not so much revolutionizes an industry but gives it style. That's vague, and therefore easy both for me to claim victory and for others to say I'm wrong. Which is to say I don't really know what they're going to announce. And I've put exactly zero dollars on the line.

Here's what I understand about prediction markets: buyers and sellers engage in contracts to 'price' the likelihood of an event, in this case, the likelihood that Apple will release a certain product or type of product. These people have either private or public information or both (that is, those with private information also have access to public information, but it's not necessarily true that those with public information have access to the private information). If someone does analysis of the available information to them, and don't release it (Sacha, for example, sometimes holds some of his cards close to his hand), then I consider that information private as well. Most bloggers who publish their predictions generally explain why they think a certain way, so their analyses become public information too.

Because people bet real money on predicting something, and money is a direct, numeric and very clear indication of value, that signals how confident a person is in their prediction. And if they're wrong, they lose something tangible, not just a temporary hit on their reputation. A prediction market aggregates these bets, giving us an indication of what people from all walks of life think will happen.

I've never participated in a prediction market involving real money, so my understanding comes only from reading books like The Wisdom of Crowds and asking questions of people like Sacha, who very accurately predicted the 2006 Liberal Party Leadership race after taking public information—what he knew about the party and the leadership candidates as well as the convention's election process—and analyzed it. There's a lot of "public information" about what Apple might release, in the form of what they pre-announced and what seems obvious (e.g. "iTV", additions to iLife), but almost all of it are guesses, some educated, others not.

So where are the prediction markets for Apple products? If any company profits from an inefficient market in predictions (in the form of hype and free marketing), it's Apple. Is anybody out there putting their hard-earned dollars on the line with guesses about what Apple will announce?