I have recently read two books: Freakonomics by Steven Levitt and The Long Tail by Chris Anderson.
They are both very relevant to my research interests and are unbelievably successful in the book stores. I found two English versions of Freakonomics and a translated Chinese version of the Long Tail in our university book store. So I went to the Central to buy an English version of the Long Tail in the IFC mall, I like the name of the book store, it’s called something like DYNAMICS or DYNAMO.
In the Long Tail book, Anderson gives many many examples to support one simple observation: niche market goods (obscure products) collectively can be as important as the mass market goods. This is not surprising as information technology enables the firms to almost costlessly add inventory. Many examples given in the book are induced by supply-side cost savings. Consumer search also contributed to the story, as it is easier to compare products and easier to find new niche-market products. (I got a set of SpaceWarp a few month ago, it is a toy that involves building up small roller-coasters on the table and let a metal ball to go around the tracks. The problem was that the toy was produced in the 80′s, and I do not have the manual. So I searched in Google, and found a complete manual and quite a number of websites discussing various innovative ways to play it.) Many blogs are following this book and keep repeating what was said in the book. With an innovative spirit, I’d like to pull the attention to possible inhibitors of the long tail. For example, although it is easier to search for obscure products, and by definition, there are a lot of them. “A wealth of information creates a poverty of attention” (H. Simon) So research needs to be done to study how to better match the consumer needs with the supply. I think the reason that no one studies it is that the topic is inter-disciplinary. Computer scientists may spend too much time on algorithms to improve the speed of matching, economists may spend more time to examine the social welfare gains from the matching, people in marketing care more about how firms should compete with other by introducing product differentiation, operations management people may be obsessed with how traditional supply-chain framework is affected. This observation promotes the idea of “business value of information”, that may not fit well to the traditional MIS paradigm. Fortunately, some researchers in the B-School is realizing this problem and in this year’s WISE (Workshop on Information Systems and Economics http://digital.mit.edu/wise2006) there is one session dedicated to the Long Tail. (I have a paper on Wikipedia with Feng Zhu of Harvard B School, it is an exciting one, too.)
Comparing the two books, I generally like Freakonomics more, each chapter introduces a new topic and they are nicely fit into an overarching framework about the value of “Information”. Many interesting topics are covered, for example, how to detect cheating in sumo wrestling, how to detect teacher cheating in high schools, why African American kids are given distinctive black names, how Chicago drug dealers are similar to the clerks walking on wall street, etc. I especially like the chapter about how an India-born U Chicago-trained sociologist making friends with drug dealers and how economics can help to decipher the drug dealer’s account book. Maybe it’s time for me to go in disguise to join Taliban or Al Qaeda to study how they make use of information to organize their activities. My hunch tells me that they may be much more effective than even some big firms in their efficiency.
Finally, an interesting cartoon
I’d like to thank tkkoh’s pointer to the Rubinstein review of Freakonomics. I read it and I don’t like his review:
1. Rubinstein is very sarcastic about the words such as “brilliant”, “clever” used in the book to describe Levitt and his methods. I think Rubinstein is an accomplished academic, but that does not mean other people are any less brilliant.
2. Rubinstein obviously has some issues with Levitt’s math background. Personally, I have been wondering how Levitt survived MIT with his math. I still remember the feeling going out of the stats (Sara Ellison) and IO (Glenn Ellison) exams. But from my reading of Levitt’s papers, he has really clever (sorry to use it again) ways of using stats to make his points. I just wish there were more papers like this: use straightforward statistic tools to explain complex social phenomena. If there is anything the economists should do (rather than repeating/re-discovering what Mathematicians have done decades or even centuries ago), it should be explaining things, or, although criticized by Rubinstein, justifying a viewpoint.
3. Rubinstein’s point about “re-finding” 2 million babies is not valid. In any decent hospital in the US, the SSN is automatically processed when a child is born.
4. Rubinstein was so eager to find problems in a chapter title, that he contradicts himself. In section 4, he first disagrees with Levitt (totally ignoring the other author, Dubner), who claims that “Who cheats, well, just about anyone, if the stakes are right.” Then supports the exact claim by giving his own example: “In the few cases in which I (Rubinstein) conducted experimental research, I myself felt the pressure not to search further at a stage in which the experimental results went in my favor and to check findings seven times when they appeared not to support the assumptions I was sure were correct.” Levitt’s argument is not that economists are any smarter than anyone else, his very point is that economists are not less likely to cheat than your grocer!
I believe this book will turn many kids into economists for the time being, or at least let them know the power of critical thinking. While I’m not sure if the society needs more economists, the second point certainly makes this book invaluable.
One last word about the Rubinstein review, reading this review reminds me reading referee’s report with which everyone in my profession is familiar. I don’t understand why they derive such utility from pancaking those minor points and just ignore the great value underlying the innovative and creative works.