AIQ: How People and Machines Are Smarter Together by Nick Polson and James Scott. Imagine being able to write a novel knowing in advance that it would become the biggest bestseller. Or imagine a record company no longer needing to audition hundreds of bands because it had developed a method to design a group as successful as Pink Floyd or the Rolling Stones. Sounds impossible, doesn’t it?
Yet, that is essentially what Netflix did with the TV show House of Cards. Instead of spending millions on pilot episodes to test audience reactions, Netflix analyzed its vast user database to uncover viewers’ preferences. Then, using machine learning, an application of artificial intelligence, they created a show designed to match what people already loved. In short, conditional probability and techniques for modeling missing data turned Netflix from a content distributor into a powerhouse production company, and they did it at remarkable speed.
Here’s a fascinating detail I came across in this book: Isaac Newton, brilliant as he was, made a surprisingly simple statistical mistake during his time at the Bank of England. That error led to money flowing out of the country and triggered a serious financial crisis. A reminder, perhaps, that even geniuses should stick to their fields. Never trust a physicist with economics!
