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Tee Time with Admiral Poindexter? (Markets at Microsoft)

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

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Tee Time with Admiral Poindexter? (Markets at Microsoft)

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

  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)

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