Hey—we've moved. Visit
The Keyword
for all the latest news and stories from Google
Official Blog
Insights from Googlers into our products, technology, and the Google culture
The flow of information at the Googleplex
January 8, 2008
Posted by Bo Cowgill, Economics Group
Earlier
on this blog, we shared some exciting early results from our firm's implementation of
prediction markets
. At
last Friday's meeting
of the
American Economic Association
, we shared the results of a deeper study, "
Using Prediction Markets to Track Information Flows: Evidence From Google
," that uses prediction markets to show how organizations process information and respond to external events. Here are some interesting findings:
Traders in the same location tend to make the same trades at the same time.
The trades of cubemates within a small radius is the best predictor we found. By using a record of historical office changes, we could observe that the correlation begins shortly after people are seated nearby. It makes sense, because the physical proximity enables easy communication. As Eric Schmidt (our CEO) and Hal Varian (now our Chief Economist)
advised in 2005
: "The best way to make communication easy is to put team members within a few feet of each other. No telephone tag, no e-mail delay, no waiting for a reply." As you can see below, our finding about the importance of proximity holds, even once we account for many other factors.
Although we did find strong correlations among professional and social contacts, these were substantially weaker than the correlations for micro-geography
. We also measured the influence that people on similar projects, in similar places in the organization and with similar demographic characteristics exert on each other. This helped establish that geographic proximity -- and not some other type of similarity -- was responsible for the correlations we saw.
Despite the markets'
strong forecasting abilities
, there is a slight optimistic bias driven mainly by new employees
. On average, outcomes that were good for Google were overpriced by 20%. This bias was strongest on days after appreciations in
Google stock
and, ironically, for outcomes under our own control! We also find biases against extreme outcomes and
short selling
. Given a range of five outcomes, the middle ones were typically overpriced and unprofitable by comparison with the outliers.
Although the proof is in the paper, nothing quite helps like a graphic. Below you can see a snapshot of trading in one of our offices. The areas where employees are making profitable decisions is green, and the areas where employees are making unprofitable decisions is red. There are about 16 profitable traders in that big green blotch in the middle!
Labels
accessibility
41
acquisition
26
ads
131
Africa
19
Android
58
apps
419
April 1
4
Asia
39
books + book search
48
commerce
12
computing history
7
crisis response
33
culture
12
developers
120
diversity
35
doodles
68
education and research
144
entrepreneurs at Google
14
Europe
46
faster web
16
free expression
61
google.org
73
googleplus
50
googlers and culture
202
green
102
Latin America
18
maps and earth
194
mobile
124
online safety
19
open source
19
photos
39
policy and issues
139
politics
71
privacy
66
recruiting and hiring
32
scholarships
31
search
505
search quality
24
search trends
118
security
36
small business
31
user experience and usability
41
youtube and video
140
Archive
2016
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2015
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2014
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2013
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2012
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2011
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2010
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2009
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2008
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2007
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2006
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2005
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2004
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Feed
Google
on
Follow @google
Follow
Give us feedback in our
Product Forums
.
Follow
