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