Private Prediction Markets for Companies

I’ve been a fan of prediction markets since I saw Idea Futures (now Foresight Exchange) on the Web in something like 1995. Although Idea Futures and other early Web prediction markets were public, the use of private prediction markets within companies has been gaining momentum.

To understand what a prediction market is and why it can be valuable to a company, look at this:

When Todd Proebsting, director of Microsoft’s Center for Software Excellence, tested a prediction market internally, managers quickly gave it their blessing.

The goal: to have 25 members of a development team predict when a Microsoft product would ship (this was an internal product, not one sold externally). The prediction market was set up in August 2004, and the product that “had been in the works for a long time” was scheduled to ship in November 2004. Each “trader” received $50 in their account to start with, and was told that the more accurate their prediction, the more money they would make. The market opened with an initial price of on-time delivery set to 16 2/3 cents.

“The price of ‘before November’ dropped to zero right away,” Proebsting said. “The price of ‘on time’ in about two to three minutes dropped to 2.3 cents on the dollar.” Translated, that’s more than 30-to-1 odds against on-time delivery.

Then the woman who was responsible for scheduling started trying to convince her colleagues who were buying and selling future delivery dates. “She was able to talk (on-time delivery) up to around 3 cents,” Proebsting said. “People really enjoyed moving the price...They loved this.”

“The next day the director comes into my office and said, ‘What have you done?‘” Proebsting said. But further investigation showed that the product actually was behind schedule, even though nobody was telling management, and it eventually shipped in February.

Enough said.

(The excerpt is from Declan McCullagh’s News.com coverage of a recent “micro-conference” on the subject, hosted by Yahoo.)

Tragedy and the Kindness of Strangers

If you are in the United States, you may have heard about James Kim earlier this week. On a family roadtrip, he took a wrong turn onto an isolated mountain road in Oregon.

It was an ordinary mistake. It became tragic when the family’s car got stuck amid heavy snow. His wife, Kati, and their two children were rescued nine days later near the car, which they had used for shelter.

However, on day seven, with supplies and hope dwindling, James had set out on foot for help. Before succumbing to the elements, he covered more than ten miles of snow-covered mountain wilderness, with little food or protection, searching for the searchers.

NPR’s Scott Simon eloquently captured what a lot of people felt:

So much of modern popular culture depicts parents who are goofy, foolish, clueless and slightly pathetic. [Yet] almost every parent is certain they would risk their life for those they love; James Kim actually made that sacrifice.

In the days before Kati and the children were rescued, the search for the Kims generated a groundswell of media attention, first local then national. It was a primal human drama, magnified by the involvement of the children, four-year-old Penelope and seven-month-old Sabine.

They all could have died. Among the reasons Kati, Penelope, and Sabine were rescued was a primal response from far-flung strangers, people with no reason to be involved other than an instinct to help: the phone company engineer who on his own time combed through cell-phone network data to narrow-down the area for rescuers to search; the amateur helicopter pilot, unrelated to the official search effort, who spotted Kati from the air, who “went up because he had a hunch, and because a newspaper picture of the girls reminded him of his own grandkids.” (San Francisco Chronicle)

As for the official search effort, the San Jose Mercury News tell us that 95% of search teams are volunteers, people ready to take a middle-of-the-night call to wherever, for whomever. They did so for days on end.

And finally, for those people far from the scene, whose only connection to the story was the story, there were kind words—of support, prayer, and later, condolence. James’ employer, CNET, received thousands of such emails and postings.

In the aftermath, various anonymous people left flowers at the front of CNET. A baker from South San Francisco dropped off a bunch of pastries that he made, because that’s what he could do.

So while one man fought for his family’s survival, thousands of people reached out to help. Many were friends, colleagues, and relatives of the Kims. Many more were strangers.

Bassmaster and the American Dream

It started with an aside, a few sentences in a New York Times Book Review piece. The subject was bass, as in fish. The reviewer was listing colorful characters in the world of competitive bass fishing, including:

...Takahiro Omori, winner of the 2004 Bassmaster Classic, who came to America from Japan in 1992. (There seems to be a Japanese craze for American bass fishing.) Omori arrives here virtually penniless and without any English, and lives out of a 1965 Chevy Suburban for three years while trying to break into the pro angling circuit. When he finally has some pro success, he buys a house in Lake Fork, Tex., where he installs a swimming pool, not for swimming but for testing lures.

As American Dream stories go, this one had me hook, line, and sinker.

The inevitable Google search revealed Omori’s Angler Profile in ESPN’s Angler/Tournament Database. His logo-clad outfit testified to competitive bass fishing’s oft-quoted goal of becoming “the next NASCAR.” Copious statistics detailed Omori’s performance in the real world, as well as in Bass Fantasy Fishing. How far he had come.

A 2004 feature article in The Dallas Observer recounted Omori’s journey, from nine-year-old pond fisher to 18-year-old Japanese pro to competitive bass fisherman in America. From his start in the United States at age 21, it took twelve years—of initial failure, then slow but methodical progress, and finally Bassmaster Classic victory.

On the Omori work ethic:

He’d finish one tournament, and even if the next was three weeks out, he’d drive there and pre-fish until it started. At night, Omori would find other pre-fishers and ask them to dinner, whereupon he’d talk fishing. Or, if there weren’t other pre-fishers to dine with—because, really, who wants to pre-fish for three weeks?—Omori would head to his van and read a bass magazine. His trailer on Lake Fork became a library of Field & Streams and Bassmaster videos, stacked to the ceiling. Boxes of fishing tackle were everywhere. Eventually, Omori had to clear walking paths so he could get from his bed to the trailer’s door without stepping on a Rick Clunn tape or a stray crank bait.

Most bass guys had families or at least dated, but how did you date when you put 40,000 miles a year on your beat-up van and were home only to pack up for the next trip? Most guys tinkered with their lures to make them fly better or land softer, but how many stayed up half the night making lure modifications for scenarios, for the moment when you’re fishing in Kentucky, near a bank’s edge, in the early morning, and it’s sunny out, and the water’s 5 feet deep? How many did that? How many had more than 110 tackle boxes with lures inside that carried a labeling, a reminder, of said fishing scenarios?

Omori’s singular pursuit of a U.S. bass-fishing career left him estranged from his father, who only saw dishonor in the enterprise. But by 2001, when Omori started to win enough money to buy a house (which, of course, was on a famous bass-fishing lake), father’s attitude was thawing, to the point that father and family came to the United States to see Omori compete.

But two weeks later, father was dead, sending Omori into 16 months of grief and contemplation. He came out the other side a renewed man on a mission, regaining form in 2003 and aiming for the ultimate goal: a win in the Bassmaster Classic, “the Super Bowl of bass fishing.”

In preparation for the 2004 season, Omori installed the swimming pool mentioned in The New York Times Book Review quote. The Dallas Observer piece adds the following color:

Before it was filled, Omori painted a 1-inch-wide line down the center of the pool. As he prepared for the bass season, he’d grab a fishing rod and one tackle box from the walk-in closet filled with tackle boxes (but not clothes), sit in a chair a full cast from the pool, smell the chlorine and try landing his different lures onto the 1-inch strip, making adjustments if the lure didn’t land right, making adjustments if it hit the strip but then drifted away with a current. He’d do that for hours.

Omori went on to win the 2004 Bassmaster Classic. For a dramatic retelling, see the Dallas Observer article, near the end.

It was August 1, 2004, twelve years after Omori arrived in the United States with hardly any money or English vocabulary. Omori called it the greatest day of his life.

It’s the greatest story—fish or otherwise—that I’ve heard in a long time.