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How Amazon’s Algorithm Gets You to Spend Money
Companies like Amazon take advantage of the fact that they know a whole lot more about buying patterns than you do. As author and entrepreneur Jerry Kaplan explains, this sort of information asymmetry is the real crux of their business plan.
Jerry Kaplan is widely known in the computer industry as a serial entrepreneur, inventor, scientist, and author. He is currently a Fellow at The Stanford Center for Legal Informatics. He also teaches Philosophy, Ethics, and Impact of Artificial Intelligence in the Computer Science Department, Stanford University.
Kaplan co-founded several ventures including Winster.com (social games); Onsale.com (online auctions); GO Corporation (tablet computers); and Teknowledge (expert systems). He wrote a best-selling non-fiction novel entitled “Startup: A Silicon Valley Adventure”, selected by Business Week as one of the top ten business books of the year, and optioned to Sony Pictures, with translations available in Japanese, Chinese, and Portuguese. His latest book is titled Humans Need Not Apply.
Kaplan co-invented numerous products including the Synergy (first all-digital keyboard instrument, used for the soundtrack of the movie TRON); Lotus Agenda (first personal Information manager); PenPoint (tablet operating system used in the first smartphone, AT&T's EO 440); the GO computer (first tablet computer) and Straight Talk (Symantec Corporation's first natural language query system). He is also co-inventor of the online auction (patents now owned by eBay) and is named on 12 U.S. patents.
He has published papers in refereed journals including Artificial Intelligence, Communications of the ACM, Computer Music Journal, The American Journal of Computational Linguistics, and ACM Transactions on Database Systems.
Kaplan was awarded the 1998 Ernst & Young Entrepreneur of the Year, Northern California; served on the Governor’s Electronic Commerce Advisory Council Member under Pete Wilson, Governor of California (1999); and received an Honorary Doctorate of Business Administration from California International Business University, San Diego, California (2004).
He has been profiled in The New York Times, The Wall Street Journal, Forbes, Business Week, Red Herring, and Upside, and is a frequent public speaker.
Jerry Kaplan: If you’ve ever been online and if you haven’t, I don’t know what you’re doing watching this video. You know that many websites are tracking and studying your behavior and in a way they help you by presenting products and information that they think that — they believe — based upon your browsing history and other characteristics are going to be of great interest to you. But there’s also a darker side to that activity. While that may add great convenience to you, the truth is that that also permits them to look at questions like what do they estimate you’re willing to pay for that product? Now a lot of people think mistakenly that you’re supposed to charge the same price for a product to everybody. That’s not the case. You can’t discriminate based on certain criteria — race, religion, sexual preference. But it’s perfectly fine for me to charge this guy more than that guy because I think he’ll pay more and just look at airplane tickets as a perfect example of that sort of thing. Now here’s the problem. We’re taking those kinds of decisions in these websites. Amazon itself is a fantastic example of this and we’re incorporating very sophisticated machine learning algorithms that are designed to manage the overall behavior of the group of people who are visiting that website.
In order to optimize profitability for the companies that are running those websites. And they will cut you the least slice of pie, the smallest slice of pie that they can to get you to send you to do what they want you to do in order to maximize the profits of the corporation. Now you may have been on Amazon and you may put things in — I use what’s called a save for later or something in your cart. And you come back the next day and good news, you know, this book is three cents less or that’s two cents more or this is a dollar more. But there aren’t people doing that. This is a machine learning algorithm. And what it’s doing is analyzing time of day and the characteristics of what you bought in the past and how you’ve responded to different kinds of incentives. And where you came from and what kind of browser you’re using as a major factor. Anything it can in order to adjust the price to just the point where you’re going to buy at the highest possible price. You as an individual have freedom of choice. It’s a free country. You can buy it. You can not buy it. That’s great. But we as a group as a set of customers purchasing from Amazon or some other site we adhere to certain statistical properties. So as a group, we don’t have that freedom because it can be managed by the entity on the other side. Whenever there’s an information asymmetry like that, they know what you’re likely to buy by what your characteristics are and they can optimize the yield on site based upon that. They’re at an advantage over you. Amazon is a wonderful company, but it is basically one giant machine learning algorithm. It is designed to do what’s called arbitrage. It knows what it can buy things for. It knows what it can sell things for. And it can adjust the profitability in that zone in order to maximize sales, in order to maximize profits.
And it can do so in a way that is far more efficient than has ever been possible in retailing before. So when I think of Amazon, the fact that they’re selling goods is incidental. I think of it like a stock-trading program. Buy low; sell high. Buy here; sell there. There’s a spread. These really are arbitrage systems and you are the mechanism by which these companies maximize their profits.
Companies like Amazon take advantage of the fact they know a whole lot more about buying patterns than you do. As author and entrepreneur Jerry Kaplan explains, information asymmetry is the real crux of Amazon's business plan. That Amazon sells goods is incidental. The real money is generated by machine learning algorithms that can deftly achieve arbitrage: the ability to set prices in a way that maximizes profits. So the next time you spot a price shift for a product you've been keeping an eye on, know that a hyper-intelligent computer system has for just as long kept its eye on you, and it's smarter than you think.
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Gender and sexual minority populations are experiencing rising anxiety and depression rates during the pandemic.
- Anxiety and depression rates are spiking in the LGBTQ+ community, and especially in individuals who hadn't struggled with those issues in the past.
- Overall, depression increased by an average PHQ-9 score of 1.21 and anxiety increased by an average GAD-7 score of 3.11.
- The researchers recommended that health care providers check in with LGBTQ+ patients about stress and screen for mood and anxiety disorders—even among those with no prior history of anxiety or depression.
Study findings<p>For the study, <a href="https://link.springer.com/article/10.1007/s11606-020-05970-4" target="_blank">published in the Journal of General Internal Medicine</a><em>, </em>Flentje and her team evaluated survey responses from nearly 2,300 individuals who identified as being in the lesbian, gay, bisexual, transgender, and queer (LGBTQ+) community. Most of the participants were white, while nearly 19 percent identified as a racial or ethnic minority. Multiple genders were represented with cisgender women (27.2 percent) and men (24.6 percent) making up a majority of the participants. Sixty-three percent had been assigned female at birth. For the most part, participants identified their sexual orientations as queer (40.3 percent), gay (36.5 percent), and bisexual (30.3 percent).</p><p>The JGIM study participants were recruited from the 18,000-participant <a href="https://pridestudy.org/" target="_blank">PRIDE Study</a> (Population Research in Identity and Disparities for Equality), which is the first large-scale, long-term national study focusing on American adults who identify as LGBTQ+. It conducts annual questionnaires to understand factors related to health and disease in this population. </p><p>Participants filled out an annual questionnaire (starting in June 2019) and a COVID-19 impact survey this past spring. Flentje noted that on an individual level, some people may not have experienced a big change in anxiety or depression levels, but for others there was. Overall, depression increased by a <a href="https://patient.info/doctor/patient-health-questionnaire-phq-9" target="_blank">PHQ-9 score</a> of 1.21, putting it at 8.31 on average. Anxiety went up by a <a href="https://www.mdcalc.com/gad-7-general-anxiety-disorder-7" target="_blank">GAD-7</a> score of 3.11 to an average of 8.89. Interestingly, the average PHQ-9 scores for those who screened positive for depression at the first 2019 survey decreased by 1.08. Those who screened negative for depression saw their PHQ-9 scores increase by 2.17 on average. As for anxiety, researchers detected no GAD-7 change among the study participants who screened positive for anxiety in the first survey, but did see an overall increase of 3.93 among those who had initially been evaluated as negative for the disorder. </p>
Risks among gender and sexual minorities<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="fc3fd1ae68b77bbbf58a6995638d6d65"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/EnUqDjCqg0A?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>The LGBTQ+ community is a vulnerable population to mental health concerns because of their fear of stigmatization and previous discriminatory experiences.</p> <p>Previous research by the Human Rights Campaign has found "that LGBTQ Americans are more likely than the <a href="https://medicalxpress.com/tags/general+population/" target="_blank">general population</a> to live in poverty and lack access to adequate medical care, paid <a href="https://medicalxpress.com/tags/medical+leave/" target="_blank">medical leave</a>, and basic necessities during the pandemic," said researcher Tari Hanneman, director of the health and aging program at the campaign.</p> <p>"Therefore, it is not surprising to see this increase in anxiety and depression among this population," Hanneman said in the release. "This study highlights the need for <a href="https://medicalxpress.com/tags/health+care+professionals/" target="_blank">health care professionals</a> to support, affirm and provide <a href="https://medicalxpress.com/tags/critical+care/" target="_blank">critical care</a> for the LGBTQ community to manage and maintain their mental health, as well as their physical health, during this pandemic."</p>
What should health care providers do?<p>The authors of the study recommend that health care providers check in with LGBTQ+ patients about stress and screen for mood and anxiety disorders in members of that community—even among those with no prior history of anxiety or depression.</p><p>As cases of COVID-19 continue to mount, the sustained social distancing, potential isolation, economic precariousness, and personal illness, grief, and loss are bound to have increased and varied impacts on mental health. Effective treatments may include individual therapy and medications as well as more large-scale coronavirus support programs like peer-led groups and mindfulness practices. </p><p>"It will be important to find out what happens over time and to identify who is most at risk, so we can be sure to roll out public health interventions to support the mental health of our communities in the best and most effective ways," said Flentje.</p>
What we know about black holes is both fascinating and scary.
- When it comes to black holes, science simultaneously knows so much and so little, which is why they are so fascinating. Focusing on what we do know, this group of astronomers, educators, and physicists share some of the most incredible facts about the powerful and mysterious objects.
- A black hole is so massive that light (and anything else it swallows) can't escape, says Bill Nye. You can't see a black hole, theoretical physicists Michio Kaku and Christophe Galfard explain, because it is too dark. What you can see, however, is the distortion of light around it caused by its extreme gravity.
- Explaining one unsettling concept from astrophysics called spaghettification, astronomer Michelle Thaller says that "If you got close to a black hole there would be tides over your body that small that would rip you apart into basically a strand of spaghetti that would fall down the black hole."
The team caught a glimpse of a process that takes 18,000,000,000,000,000,000,000 years.
- In Italy, a team of scientists is using a highly sophisticated detector to hunt for dark matter.
- The team observed an ultra-rare particle interaction that reveals the half-life of a xenon-124 atom to be 18 sextillion years.
- The half-life of a process is how long it takes for half of the radioactive nuclei present in a sample to decay.
A new study looks at what would happen to human language on a long journey to other star systems.
- A new study proposes that language could change dramatically on long space voyages.
- Spacefaring people might lose the ability to understand the people of Earth.
- This scenario is of particular concern for potential "generation ships".