Prediction Markets at Google

Is it a good idea to encourage ALL employees to trade in these markets? Should insiders and/or highly uninformed people be allowed to trade? Do they help or hurt the market?

In the case, Dolores Haze, a manager on a search quality team, gave the opinion that the Google Prediction Market (GPM) was not a lot of help to her or her team. She felt it was her job to know the status of all projects. When a project in her division was posted on GPM, she knew what the outcome would be because she was so close to the project. When the market agreed with her, she wasn’t surprised and felt GPM did not offer her any new advantage. Instead, it simply affirmed her intuition. While she agreed that the GPM created excitement about projects Google-wide, she did not believe the GPM should be considered a resource when it came to making company decisions.

While I believe the GPM is great in terms of motivating people to learn what’s going on company-wide, I found it interesting that some people used the GPM to make trades hoping they would intentionally mislead the market. They had the advantage because they were so close to the project and felt strongly about the overall outcome. Still, it appears that GPM is yet another example of the “long tail” effect in that 80% of the trades are made by 20% of the people. Most people trade only once or twice each quarter. Therefore, the frequent traders are really only competing with themselves. I believe Google should continue to encourage all employees to trade in the market in order to get more accurate market prediction results.