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Original Essays | September 18, 2014 1 comment
On a hot July evening years ago, my Toyota Tercel overheated on a flat stretch of highway north of Cedar Rapids, Iowa. A steam geyser shot up from... Continue »
Ken SteiglitzDescribe your latest project.
First, Snipers, Shills, and Sharks is about why eBay is so tremendously successful as a business, essentially dominating the online auction market. If you were thinking for the first time about putting an auction up on the internet, well, the most obvious thing to do is to just keep posting the highest bids, and then, at some deadline, award the item to the highest bidder. I explain in the book why this wouldn't work well, and how eBay is exquisitely tuned to the internet in ways that are not obvious. eBay combines three elements: (1) the winner pays the second-highest bid; (2) at any point in the auction, only the second-highest bid so far is posted the highest bid is hidden; and (3) there is a hard deadline, when bidding ends. The interplay among these three features encourages early bidding and competition, crucial to eBay's success.
On another level, the book is about what is called "auction theory", which is the economist's theory of what auctions are best for sellers and buyers under many different circumstances. The idea of a second-price auction comes from the first paper ever written on auction theory: by William Vickrey in 1961. And the theory depends critically on John Nash's idea of equilibrium behavior. The mathematics (essentially freshman calculus) is carefully hidden in the appendices, and (I promise) there are no equations in the main text.
At another level and this is where the practical aspects of auctions meet theory the book is about human behavior, how the theory fails in important ways, and how real behavior plays perfectly to the advantage of eBay in making the auctions competitive and exciting some might say addictive.
Another important reason eBay works as well is it does is that it is transparent, and is therefore readily accepted as a trusted third party to users. Because of its transparency, eBay has become a gigantic fishbowl of economic behavior, and anyone can watch the millions of little fishes deal all day and night. This has greatly facilitated data collection, and field experiments, where researchers can carry out their own experiments by buying and selling themselves.
I should add that the book is not a manual or a collection of tips about how to start a business on eBay. Rather, it is about why eBay works well, how it fits into auction theory, and how people decide how to spend their own money, for things they really care about, sometimes passionately.
There are many different reasons I find myself writing. The physical act of sitting quietly and composing is pleasurable in itself. But I think the most powerful force is the need to set things down as simply as possible to separate the important from the irrelevant, the necessary from the inessential. I think this comes at a point when I think I've gotten to the bottom of something, or least when I feel I understand at least the foundations of a subject. To explain further, I'd like to talk about specific books.
It was like this in writing the book with Papadimitriou on Combinatorial Optimization (1982), in which we tried to lay out what it was that made some problems hard and some easy. Christos of course has gone much farther along this path in the twenty-five years since that book was written, and the boundary between hard and easy has developed further as a fascinating playground for computer scientists.
My DSP Primer (1996) is, similarly, an attempt to boil the subject down to its essentials. The linear theory can all be motivated by a few natural and physically appealing ideas, and this foundation serves as a necessary starting point for the really complex and interesting world of nonlinear phenomena.
Snipers, Shills, and Sharks is also, at one level, a minimal exposition of a theory auction theory. But it would be downright wrong to present it as an explanatory theory in the same way that algorithm complexity or digital signal processing is. In Snipers the fundamental theory reaches the usual sort of technical difficulties when more general, but well defined questions are asked. But the theory of auctions stands in a totally different light here, because we are, after all, dealing with what is somewhat optimistically called a social science, with questions of human behavior.
The job of writing with the mathematical theory in the background instead of center stage was the most challenging and interesting part of this most recent project, and it was the difficulty of simplification that really kept me going.
Describe your favorite childhood teacher and how that teacher influenced you.
Chess or video games?
What was your favorite book as a kid?
What new technology do you think may actually have the potential for making people's lives better?
If you could be reincarnated for one day to live the life of any scientist or writer, who would you choose and why?
Describe the best museum of science and/or industry you've ever visited and what made it great.
By the end of your life, where do you think humankind will be in terms of new science and technological advancement?