Problems and their scale

March 11th, 2010  |  Published in Commentary  |  1 Comment

When deciding what issues to focus on, a lot of measures can be taken.
As the internet leaves us with exploding amounts of information about everything, we should look for the factors that don’t follow exponential growth such as Moore’s law.
The most obvious one: how many people are involved?
Even if suddenly everybody and their dad is posting on blogs, twitter and the like, the total amount of people or groups involved in any contemporary activity remains fairly predictable in more regular cases (not talking about FarmVille or Facebook here).
Take 1: Say you want to fix the education system?
Even though teacher-to-student ratios might change a bit, there won’t be sudden explosions or everybody replaced by a robot tomorrow.
Or higher education: there are only 18 000 university-like institutions in the world. From that we can jump to the amount of students, professors, staff, alumni-output-per year. Yes, in the current economic times, more people are going to college then ever, but still the numbers should be quite easy to grasp.
So if you want to solve any issues in the sphere, go by the constants and variables.
Take 2: You want to invest your money in the stock market?
Well, turns out there are only about 45.000 companies being traded on only 56 public stock exchanges worldwide.  Wolfram tells me that there are 38 “money centre banks”, and on Wikipedia we find a couple more. Both numbers are misleading, but a nice start for individual looks. But then we notice that in the U.S. alone there are more than 9000 banks, Germany has at least 2000 and so on. But hey, there are only about 200 countries in the world so it can’t be that hard.
But as usual, Pareto’s 80-20 Rule applies, and only the fewest of them actively trade and are highly connected at the same time.
So to go further, do as any good journalist and follow the money. And the people that handle it.
A good example for this practice: how Enron’s fraud was uncovered, nicely narrated by Malcolm Gladwell in Open Secrets.
1. try to estimate and count the  number of groups and people involved in the field you are looking at.
2. if you want to profit from it, see who is spending the money, and how much of it there is.
3. remember that all people and groups are extremely well connected, so decisions should be fairly easy to predict
4. don’t get too drawn into the observations of outsiders (analysts, journalists, bloggers) as they mostly describe the obvious, but hide the not so obvious (that guy is our client, we are theirs, i own their stock, etc.)
Most of the time, thanks to the internet, your problem is probably a mystery and not so much a puzzle.
Kiss off: But how do exponential shifts happen in groups of people then?
But still, why are things like Twitter, Facebook, Mafia Wars, Fishville, Farmville and Multi-Level-Marketing scams working?
Simple answer: Metcalf’s Law:
the value of a network grows with every new participant that’s added (exponentially)
A bit more nuanced: Beckstrom’s Law:
The value of a network equals the net value of each user’s transactions conducted through that network, valued from the perspective of each user, and summed for all.
Translation: Facebook is that cool, because everybody is there, talking to you and marking your face on those party pictures. And then, everybody is commenting on it. And you reply, they like, you poke, they send out cows for adoption and so on.
So, what problem are you trying to measure up?
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