In the new world of online everything, where digital platforms collect information about our choices and preferences every second of every day, customers see both benefits and risks. Experts at the Aspen Ideas Festival differed in their views on the pros and cons of today’s data- and consumer-driven marketplace, in a conversation with The Atlantic’s senior editor Derek Thompson.
On what informs our choices
On the one hand, sites like Amazon.com are collecting so much information about our choices and desires that they can use that information to power suggestions that lead us to other things we might want.
“I do think that empowers the consumer to have the ability to choose what they want to buy, to buy it more quickly and also perhaps get more value later from that supplier later on through predictive analytics,” said Mark Schlageter, Managing Director of the Americas for Thomson Reuters.
On the other hand, an increasingly heavy-handed reliance on algorithms could shortchange the value humans can provide each other.
“There’s a danger to engines that address the needs that we’ve already expressed,” said David Weinberger, a senior researcher at Harvard’s Berkman Center for Internet and Society. He says algorithm-powered recommendations might not turn up the best possible options for consumers.
Andrew McAfee, principal research scientist at MIT and co-founder of its Initiative on the Digital Economy, believes the best-case scenario is a mixture of both — that is, a properly configured combination of algorithm-powered information and human insight. If that’s not possible, he thinks an algorithm alone, even an improperly configured combination, is preferable over a human alone.
The key, according to Weinberger, is “gauging what your community finds both interesting and challenging as a way of providing recommendations.” That community can be composed of both real people and community-based markets.
On what gets created and why
These new marketplaces are also inherently changing what goods and services are being created in the first place.
Marketplaces are now conversations, according to Weinberger, and he says all of those conversations — powered by sharing, commenting and ratings — inform what products make it in front of consumers.
“This a fundamentally different way of thinking about how the future works,” said Weinberger, “whether it is something planned and anticipated by a few people who have the means to make it or … an open platform where we can all participate and make the things that matter to us and then share those things.”
McAfee noted that innovations such as Twitter, Wikipedia and Stitch Fix reflect concepts that might not have seemed obviously promising. “The great thing about this digital playground is that it opens up more opportunities to be shocked and surprised by the innovation we are seeing,” McAfee said.
Here again, he noted the need for a combination of insight and ingenuity.
“It seems like the worst way to give customers great new products is to ask them what they want,” McAfee said. “A much better way is to combine that spark, that creativity, that design genius, that idea of what people actually might value, with data and experimentation.”
On the underlying trends at work
The panel experts acknowledged that bigger economic dynamics are also in play, affecting how much money consumers have to spend in this new world.
“We really are seeing a polarization in the economy, a hollowing out of the middle class,” McAfee said. “It’s becoming tougher to be a classic middle-class American citizen consumer.” It’s a challenge he said won’t be solved by technology, but rather by basic economic efforts to restore economic growth.
Thompson noted the combination of abundance and technology has made many things such as digital music and books cheaper, ultimately benefiting consumers who may have less money to spend.
But Weinberger noted there is a downside to that too.
“The price of certain things has actually gone up,” said Weinberger, citing games and cable, and suggesting quality can also suffer. “We are seeing the rise of more casual games, e-books written by amateurs, and the rise of people knowing how to get that stuff for free.”
The hyper-mobile young consumer also has the power to change the landscape.
Schlageter noted that Americans between 10 and 20 now use their handhelds for every aspect of their lives. He expects that behavior to translate to e-retail over the next five to 10 years as those consumers get more purchasing power.
The experts agreed that the web has had — and will continue to have — a transformative influence on the dynamics of markets.
“All of us as consumers should be incredibly happy about all these trends,” said McAfee. “And because of this world of big data … we are learning some really interesting things about ourselves as consumers in every sense of the word.”
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