The Rise of the Numerati

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That science developed over the centuries, and we now have experts who are comfortable working with ridiculously large numbers, the billions and trillions that the rest of us find either unimaginable or irrelevant. They are heirs to the science that turns our everyday realities into symbols. As the data we produce continue to explode and as computers grow relentlessly stronger, these maestros gain in power. Two of them made a big splash in the late 1990s by founding Google (GOOG). For the age we're entering, Google is the marquee company. It's built almost entirely upon math, and its very purpose is to help us hunt down data. Google's breakthrough, which transformed a simple search engine into a media giant, was the discovery that our queries—the words we type when we hunt for Web pages—are of immense value to advertisers. The company figured out how to turn our data into money. And lots of others are looking to do the same thing. Data whizzes are pouring into biology, medicine, advertising, sports, politics. They are adding us up. We are being quantified.

When this process began, a half-century ago, the first computers were primitive boxes the size of a garbage truck. They kept their distance from us, purring away in air-conditioned rooms. At this early stage, the complexity of the human animal was too much for them. They couldn't even beat us at chess. But in certain numerical domains, they showed promise. An early test involved consumer credit.

In 1956, two Stanford graduates, a mathematician named Bill Fair and his engineer friend Earl Isaac, came up with the idea of replacing loan officers with a computer. This hulking machine knew practically nothing, not even what the applicants did for a living. It certainly hadn't learned if they'd gotten a raise or filed for divorce. Legions of human loan officers, by contrast, were swimming in data. They often knew the families of the loan applicants. They were acquainted with how much the applicant had struggled in high school and how his engagement had fallen through, probably because of a drinking problem (if he was anything like his uncle). The loan officers had enough details to write sociological monographs, if they were so inclined, about the families in their towns. But they lacked a scientific system to analyze it all. Bankers depended, for the most part, on their gut.

Scores to Quantify Risk

By contrast, the computerized approach zeroed in on only a small set of numbers, most of them concerning bank balances, debts, and payment history. Bare bones. Fair and Isaac built a company to analyze the patterns of those numbers. They developed a way to determine the odds that each customer would default on a loan. Everyone got a number. These risk scores proved to be much better predictors than the gut-trusting humans. Most borrowers with high credit scores made good on their loans. And more people qualified for them. The machine, after all, didn't discriminate on the basis of anything but numbers. It was equal-opportunity banking. Like a lot of analytical systems, it was fairer. Its narrow scope, paradoxically, returned broad-minded results. What's more, a lot of people turned out to be better bets than the loan officers suspected. The market for credit expanded.

Still, the computer knew its place. It thrived in the world of numbers, and it stayed there. Those of us who specialized in words and music and images barely noticed it. Yet over the following decades, the computer grew in power, gobbling up ever more ones and zeros per millisecond. It got cheaper and smaller, and it linked up with others around the world. It produced jaw-dropping efficiencies. And from the viewpoint of the humanities crowd (including this history major), it swallowed entire technologies. It supplanted typewriters and moved on, like an imperial force, to rout record players and film cameras. It took over the mighty telephone. Finally, in the 1990s, even those of us who had long viewed computers as aliens from the basement world of geekdom started to make room for them in our homes and offices. We learned that we could use these machines to share our words and movies and photos with the entire world.

In fact, we had little choice. The old ways were laughably slow. But there was one condition: We had to render everything we sent, the very stuff of our lives, into ones and zeros. That's how we came to deliver our riches, the key to communications on earth, to the masters of the symbolic language. Now these mathematicians and computer scientists are in a position to rule the information of our lives. I call them the Numerati.

Adapted from The Numerati by Stephen Baker, copyright ©2008. Reprinted by permission of Houghton Mifflin Harcourt Publishing Co. All rights reserved.

For further info, visit TheNumerati.net

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Baker is a senior writer for BusinessWeek in New York.