Peer Pressure in Unpredictable Cultural Markets

The main nugget from the New York Times article on ‘cumulative advantage’:

Introducing social influence into human decision making, in other words, didn’t just make the hits bigger; it also made them more unpredictable.

The researchers were analyzing data from a music download site and some downloaders would see the popularity of certain songs, some wouldn’t.

Because the long-run success of a song depends so sensitively on the decisions of a few early-arriving individuals, whose choices are subsequently amplified and eventually locked in by the cumulative-advantage process, and because the particular individuals who play this important role are chosen randomly and may make different decisions from one moment to the next, the resulting unpredictably is inherent to the nature of the market. It cannot be eliminated either by accumulating more information — about people or songs — or by developing fancier prediction algorithms, any more than you can repeatedly roll sixes no matter how carefully you try to throw the die.

But even a modest amount of randomness can play havoc with our intuitions. Because it is always possible, after the fact, to come up with a story about why things worked out the way they did — that the first “Harry Potterâ€? really was a brilliant book, even if the eight publishers who rejected it didn’t know that at the time — our belief in determinism is rarely shaken, no matter how often we are surprised.

I’m repeating that:

It is always possible, after the fact, to come up with a story about why things worked out the way they did

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About Andy Wibbels

Andy is an award-winning blogger and author of the book Blogwild! A Guide for Small Business Blogging. His work has been featured in The Wall Street Journal, USA Today, Entrepreneur, Wired, Business Week, Forbes, and other national and international media. He was worked at several San Francisco startups including Get Satisfaction, SAY Media, InMobi, Keas, and Mindjet. Currently, Andy is Director of Marketing at Lucidworks. Tw · Fb · G+ · Li

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