Challenges of Bringing
Information Markets to the Organization
Outline
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Foresight Exchange (FX) Software Overview
General Industry Experience
Specific Challenges
Case Study: Siemens
Overcoming the Challenges
Foresight Exchange (FX) Overview
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First web-based Idea Futures market (1994)
V2.0 running continuously since 1996
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http://www.ideosphere.com
Many science/technology claims
Public access; play money
Small footprint: customer can install in-house
User interface somewhat lacking…
Foresight Exchange Overview (Cont.)
Industry Experience Overview
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Approximately dozen organization have tried
FX to forecast:
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Project completion dates
Sales figures
Natural disasters/humanitarian crises
Sports wagering (briefly!)
Most efforts seem to follow general script…
General Industry Experience (2)
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General script:
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Someone in organization gets excited by prediction
markets
…champions concept in-house
FX software installed and set up
…markets often languish
Types of Challenges Encountered
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Technical
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Conceptual
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How do I use the software?
How do these markets work?
Credibility
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Do these markets really work?
Technical Issues
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Software installation (minor)
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Integration with in-house systems
Ease of Use (less minor)
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Trading syntax confusing
Navigation Issues
Symptomatic of deeper problem…
Conceptual Issues (1)
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Trading mechanics
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“FALSE” (negative) shares confusing
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Initial market price also confusing
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Relationship between TRUE and FALSE shares
Short selling in general poorly understood
Placing orders on the book
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Reveals too much information?
Conceptual Issues (2)
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Claim wording ambiguities
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Bounded price range sometimes insufficient
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What information does market provide?
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Does $0.80 really mean 80%?
What does the spread indicate?
Credibility Issues (1)
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Are these things a good idea?
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Uneasy with market metaphor
Do these things really work?
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Better than conventional methods?
Credibility Issues (2)
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Adverse effect on employees
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Adverse effect on company
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Don’t employees have real tasks to do?
Trading competition unhealthy?
Project X team is short-selling project X claim…
Adverse effect on management
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Market distributes power
Case Study: Siemens AG
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Two advocates
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1 in-house, 1 academic (Gerhard Ortner)
Asked to use software in late 1996
Trial license agreement soon nailed down
Markets didn’t start for another 6 months
Case Study (2)
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Management initially very skeptical
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FX co-creator joined the discussion
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“I don’t get it.”
Flew to Europe, enlightened manager
Market started in May, 1997
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Predict completion of customer project
Ran for a few months, but then…
Case Study (3)
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Random Act of Customer Intervened…
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New market started
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Customer paying for project pulled out
Same idea, different project
Better outcome
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Accurately predicted 2-3 week completion delay
Case Study (Summary)
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Experiment ultimately successful
Required much oversight
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3 people needed to convince management
Considerable effort during experiment itself
Unclear if prediction markets still in use
Overcoming the Challenges (1)
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Organizational commitment critical
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Advocate(s) need management buy-in
Must see markets as more than “game”
Mitigate technical/conceptual issues
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Intuitive user interface can help
Hide trading complexities
Overcoming the Challenges (2)
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Address fundamental concerns
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Do these markets really add value?
Are perceived disadvantages real?
Some of these are open questions
Conclusions
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Concept is compelling
Not in the mainstream (yet)
Face implementation, conceptual challenges
Can be successfully applied