1. Tee Time with Admiral Poindexter? (Markets at Microsoft) Todd Proebsting Microsoft

2. Three Four Types of Researchers Once upon a time I thought there were 3 types of people involved in research: –Priests –Prostitutes –Pragmatists Now, I believe there is a fourth: –Promoters (Proselytizers?)

3. Markets Inside Microsoft 6/03: E-Commerce conference introduction 7/03: PAM debacle “Tee time with Admiral Poindexter, Sir?” 9/03: Start market software creation 2/04: Beta Test #1(Wisconsin Democratic Primary) ~50 traders, prize lottery 3/04: Beta Test #2 (DARPA Grand Challenge) ~300 traders, prize lottery 8/04: Two real markets (schedule and bug count for small, internal project) ~25 traders, $50 each 9/04: Two real markets (schedule for small project) ~25 traders, $30 each 2/05: A half-dozen people “really close” to sponsoring markets

4. Pitch 10+ Formal presentations, countless informal pitches Better predictions from proper incentives –Incentive to reveal true beliefs –Incentive to reveal confidence –Incentive to gather information Bash competing prediction methods Reality check on prevailing predictions “What does the market know that I don’t know, or what do I know that the market doesn’t know?”

5. Negative Reactions to Idea Insider trading Real money bothers some Real money is needed Boom/bust cycles (irrationality) Gambling Markets don’t work Distraction from real work Redundant mechanism Unstable market (predictions affect decisions) –E.g., predicting failure promotes corrections Self-fulfilling market (predictions affect outcome) –E.g., predicting success increases budget Conflicting incentives –E.g., make money off of project failure Positive incentives –E.g., predicting success increases budget, which increases sales, which increase personal gains (bonuses, promotions, …) Needing markets is a sign of a dysfunctional organization Disclosing that the emperor has no clothes damages morale

6. Positive Reactions to Idea Market believers –“It was a blast for me as well, finally finding someone as (well, really more) passionate as I about these things. I’ve begun pinging people about whether they want to sponsor one.” Mischief makers –“You should run a market on XXX---I’ll short ON TIME.”

7. First “Real” Market August 2004: Predict internal product ship date –Official, accepted schedule: mid-November 2004 –25 traders @ $50, made up of testers, developers, etc. Securities: Pre-NOV, NOV, DEC, JAN, FEB, Post-FEB Within a few minutes of opening, NOV dropped to $0.012… Currently expected to ship in February… Software functioned well Only 60% of traders traded Automated market maker –Great liquidity –Complicated to explain –Satisfying experience to move market

8. What Next? Never-ending internal promotion –Repeat customers –Revenue markets –Review-ratings markets Software improvements –Democratize/simplify market creation –Conditional markets –Book orders –Web services (simplify remote trading/analysis)