How to bet on the 787's arrival

A company that tries to harness "the wisdom of crowds" to forecast future events has launched a Web site where you can bet real money — $15 minimum — on whether Boeing's 787 Dreamliner will actually be delivered to its first customer on time.

It may sound tasteless if you work at Boeing. It may smack of illegal Internet gambling or a scam. But site founder and cognitive psychologist Emile Servan-Schreiber, who says all the money wagered goes to charity, calls it a demonstration of how a "prediction market" can meld the collective judgments of many people.

And he's hoping people working on the 787 project jump in, increasing the reliability of its prediction about the May 2008 delivery date.

The site, www.bet2give.com, is an intriguing marketing sideshow to Servan-Schreiber's serious business, called NewsFutures.

He earned a doctorate at Carnegie-Mellon University in Pittsburgh studying "how intelligence emerges from the brain via the interaction of many stupid neurons."

"Using the Internet to connect and network many different brains" and get superior insight is "a natural next step," says the cerebral French American.

The company has clients such as steelmaker ArcelorMittal, drug giant Eli Lilly and InterContinental Hotels. The Texas Department of Transportation has used NewsFutures to gauge the likely success of toll roads in that state, Servan-Schreiber says.

Other established prediction markets include the Iowa Electronic Markets, run by University of Iowa College of Business professors, which predicts election results often better than traditional polls; and the Hollywood Stock Exchange, which predicts movie box-office returns.

These operate essentially like the financial markets, where Boeing's stock is priced according to the judgment of thousands of traders.

At the bet2give site, you "bet" by deciding at what price to buy or sell shares that will pay $1 if Boeing delivers the 787 on time — and will be worthless if Boeing misses the deadline.

The trading determines a "share price" that signals a collective judgment: If the current price is 65 cents, that means the market collectively estimates there's a 65 percent chance that the 787 will be delivered next May.

You win by parlaying your stake into a larger one, perhaps buying from that pessimist who's selling Boeing 787 shares at 20 cents on a day when the outlook seems poor, and selling to the optimist who'll pay 85 cents when on-time delivery looks more certain. You'll need a credit card or PayPal account.

It's not gambling, Servan-Schreiber says, because there's no hope of profit. If you win, you choose a charity that gets your winnings.

The site takes bets on a whole series of future events besides delivery of the 787 — the upcoming U.S. presidential elections, the next Seahawks game, the chance that Osama bin Laden will be caught before President Bush leaves office.

If enough Boeing insiders participate, says Servan-Schreiber, Boeing should pay attention to the outcome. That might help it avoid the disaster that befell Airbus when its A380 superjumbo program ran into serious unforeseen delays.

"The whole point of the wisdom of crowds and the prediction market is to gather knowledge inside companies that is not bubbling up on time to the leadership," Servan-Schreiber says.

— Dominic Gates

Another local bank will test IPO waters

Given the housing markets' squishy prospects, this might not seem the best time for small banks that specialize in home loans to go public. But several local banks have been testing the initial public offering waters anyway.

The latest to plan an IPO is Seattle-based Sound Community Bank, which has five branches in the Puget Sound area. Sound Community, which started out 54 years ago as the Associated Grocers Employees Federal Credit Union, is now a mutual-savings bank, fully owned by its depositors.

Through a complicated reorganization plan made public in a recent Securities and Exchange Commission filing, it hopes to sell 44 percent of itself to outside investors, for between $10 million and $17 million.

What do depositor-owners get out of the IPO? Besides first crack at buying stock, they'll have the knowledge that an IPO gives Sound Community "the financial strength to grow our bank and better enable us to serve our customers in our market area."

The top brass stand to get more tangible benefits. Thirteen directors and officers would be allowed to buy 151,000 shares, 4.5 to 6.1 percent of the shares outstanding after the offering. They also stand to gain stock options and restricted stock from an "equity incentive plan" the company plans to adopt. All bank workers also would participate in an employee stock ownership plan that would borrow money from the company to acquire 3.9 percent of its shares.

In the contemplated IPO, the outside investors would own 44 percent of a new holding company, Sound Financial, whose shares would be publicly traded. The rest, except for 1 percent given to a new charitable foundation, would be held by an entity whose owners are the bank's current and future depositors.

The upshot: Sound Community Bank's depositors would still control the company, but the bank would get several million dollars for expansion through new branches and "the acquisition of other financial institutions."

First Savings Bank of Renton is preparing to "demutualize" into First Financial Northwest, which filed to sell between $136 million and $211.6 million of stock. Shares are scheduled to start Nasdaq trading sometime in the next couple of weeks.

But the path from privately held to publicly traded isn't always smooth. DuPont-based Venture Financial Group, parent of Venture Bank, had hoped to complete a $39 million IPO by now. Last week, however, Venture said it was postponing the offering indefinitely, citing adverse market conditions. —

Rami Grunbaum: rgrunbaum@seattletimes.com or 206-464-8541