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