Saturday, July 19, 2008

Randomness and Predictive vs Social Forces

In traditional media marketing, there's a sense that one can predict consumer preference (and those who do the best job of this make the most money). Unfortunately for many who have made careers out of this line of thinking, their processes have relied largely upon situational factors that have allowed their success--with few media outlets (eg- TV, radio stations), those who could spend enough money to get placement for their acts would see great returns.
But times have changed. As Leonard Mlodinow says in The Drunkard's Walk: How Randomness Rules Our Lives :

That is the deterministic view of the marketplace, a view in which it is mainly the intrinsic qualities of the person or the product that governs success. But there is another way to look at it, a nondeterministic view. In this view there are many high-quality but unknown books, singers, actors, and what makes one or another come to stand out is largely a conspiracy of random and minor factors--that is, luck. In this view the traditional executives are just spinning their wheels.

Mlodinow goes on to tell of a study in which 14,341 participants are asked to listen to, rate, and if they desired, download 48 songs by bands they had never heard of. Some got to see how popular the songs were, in terms of their peers downloading them. These folks were further divided into 8 groups, and could only see the data from the folks in their own group. Then there was a group that got to see no data whatsoever--this group was considered to be determining the "intrinsic quality" of the music, without any outside influence.

If the deterministic view of the world were true, the same songs ought to have dominated in each of the eight worlds, and the popularity rankings in those worlds ought to have agreed with the intrinsic quality as determined by the isolated individuals. But the researchers found the exact opposite: the popularity of individual songs varied widely among the different worlds, and different songs of similar intrinsic quality also varied widely in their popularity.

One song ranked 26 of 48 in "intrinsic quality," but was #1 in one world and #40 in another. As one song or another, by chance, got ahead early in downloads, it's apparent popularity fueled others to find it appealing.

The influence of others will always be important to us--we inherently trust the recommendations of other humans more than anything else. Traditionally, the only music recommendations we had access to came from the DJs and VJs who played what the major labels asked them to. There were a few "tastemakers." Now we have all the music options we could ever ask for, plus the option of getting recommendations from anyone and everyone--it's a reactive market now where hits aren't made by radio, but by our peers.

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