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Bet on It! By Steven Cherry

In August 2004, Todd Proebsting, a researcher in Microsoft’s platform and services division, was approached by a manager in the company’s testing organization who had spent months helping to create a piece of software to be used by other Microsoft programmers. Although it was an internal product, the software still had a rigid development schedule and an official launch date: November 2004, just a few months away.

The manager had heard a talk by Proebsting about something called a prediction market, a sort of stock market for ideas, in which Microsoft employees would in effect place bets on predictions, instead of on racehorses or football teams. A lot was riding on the timely completion of the testing software. “You said that a market could be used to predict schedules,” the manager said. “I want to know when my team will finish writing the software.”

Proebsting created a market with six possible bets: that the product would ship before November, in November, in December, in January, in February, or later than February. His pool of bettors included members of the development team itself, other developers, and program managers from related teams, as well as internal “customers”—the programmers within Microsoft who would use the software. He showed them all how to use the market, gave them each US $50 with which to wager, and then sat back and watched prices fluctuate.

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