From Asterisk Magazine, Issue 08, January 2025:
Over the past two decades, Google has hosted two different internal platforms for predictions. Why did the first one fail — and will the other endure?
It’s July 2005. Google is the darling of Silicon Valley. It has just unveiled Google Maps; Gmail is still in beta. Next year it will acquire YouTube and launch Google Translate.
The week’s new hires file past a full-size dinosaur skeleton in the courtyard on the way to their first TGIF — the company’s weekly all-hands. They wear beanies with red, yellow, green, and blue colors — like the yet-to-be-designed Chrome logo — with a propeller on top. They are here to see Google’s founders, Larry Page and Sergey Brin, both wearing shorts and plain colored t-shirts, banter about new tech.
In the first line of their Founders’ IPO letter, Page and Brin wrote “Google is not a conventional company.” They sought to provide “unbiased, accurate and free access to information.” On this Friday, Patri Friedman, the grandson of Milton Friedman, and Bo Cowgill, now an economics professor at Columbia University, are here to talk about Google’s next bet to do this: an internal prediction market called Prophit.
On stage next to Larry Page, Friedman and Cowgill announce winners from Prophit’s first quarter and show statistical results on its forecasting accuracy. Prophit was popular inside Google. Over the next three years, about 20% of all Google employees would place bets.
Two months after this presentation, The New York Times covered Prophit. They wrote about it again in 2008, and it became a Harvard Business Review case-study. Despite the momentum, in March 2010, Prophit hit a major roadblock in its public launch as an external product. It attempted a pivot, and ultimately shut down in 2011.In April 2020, almost exactly 15 years after Prophit launched, and one month after employees worldwide were sent home due to COVID-19, I launched Google’s second internal prediction market, called Gleangen. 1 By late 2022, about 8% of Google employees had placed a bet on Gleangen. The company had grown so large that 8% represented 15,000 people — ten times the number of employees that placed bets on Prophit. Gleangen sustained over 1,000 monthly traders, more than the popular forecasting platforms Metaculus (where I later served as CTO) and Manifold at the time. 2
Outside of Google, prediction markets have once again been thrust into the spotlight. Weeks before it became a mainstream view, users on sites like PredictIt and Metaculus predicted not only that President Biden would drop his reelection campaign but that doing so would increase the Democrats’ chance of winning. Over the next few months, swings in election prediction markets regularly made national news, and despite some distortions caused by aggressive whales, the markets ultimately performed well. Theoretically, prediction markets are equally powerful when used by companies to anticipate events, such as predicting their competitors’ next moves.
But as Cowgill has shown, corporate prediction markets have a mixed track record, as evidenced by attempts at Google and many other companies. Why is this? What does it take to make them work? The inside story of Prophit and Gleangen, the two largest corporate prediction markets ever run, offers some lessons.
A new type of information economy....
....MUCH MORE
