Crises Follow Math Rules

 
 
By Peter Coffee  |  Posted 2005-01-24 Email Print this article Print
 
 
 
 
 
 
 

Online retail enjoys the mixed blessing of extremely tight coupling between the means of advertising a product and the means of buying it.

Online retail enjoys the mixed blessing of extremely tight coupling between the means of advertising a product and the means of buying it. A mechanism that calls a product to possible buyers attention, such as Amazons reader rankings, is just a few clicks away from the mechanism by which a buyer can act on that recommendation.

This can lead to sharp, sudden demand shocks, when a retailer must be prepared to make hay while the sun shines. If the goods arent on hand, the moment may pass, with potential sales lost forever.

In the next year or two, it may become possible to diagnose demand behaviors because of work that sprang from a physics professors questioning the rise and fall of sales rankings for his book on stock-market crashes.

When UCLA physics professor Didier Sornette examined Internet download shocks, book-sale shocks, social shocks, financial volatility shocks and financial crashes, he found surprisingly good fits between a well-defined family of mathematical curves and the behavior of these phenomena.

Sornettes intensely mathematical paper, "Endogenous versus Exogenous Origins of Crises" (published late last year in the journal Physical Review Letters), can be summarized as saying that a system thats disturbed by a large external event will "relax" to something like its original state much more quickly than a system that changes in response to many internal events.

This may seem esoteric, but its implications could be valuable for those who dont want to be caught short but dont want to hold a price-slashing clearance sale to dump excess inventory, either.

Check out eWEEK.coms for the latest news, views and analysis on technologys impact on retail.
 
 
 
 
Peter Coffee is Director of Platform Research at salesforce.com, where he serves as a liaison with the developer community to define the opportunity and clarify developers' technical requirements on the company's evolving Apex Platform. Peter previously spent 18 years with eWEEK (formerly PC Week), the national news magazine of enterprise technology practice, where he reviewed software development tools and methods and wrote regular columns on emerging technologies and professional community issues.Before he began writing full-time in 1989, Peter spent eleven years in technical and management positions at Exxon and The Aerospace Corporation, including management of the latter company's first desktop computing planning team and applied research in applications of artificial intelligence techniques. He holds an engineering degree from MIT and an MBA from Pepperdine University, he has held teaching appointments in computer science, business analytics and information systems management at Pepperdine, UCLA, and Chapman College.
 
 
 
 
 
 
 

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