Analyst’s Pendulum (Economics)
This article has been substituted for its replacement…
Economics has long been referred to as the “dismal science”. It isn’t exactly pop culture, unlike the “gay science” which was, oddly enough, singing and song writing. One is certainly no replacement for the other. No substitution either.
Whether singing qualifies as a science is another article entirely…
Replacement or Substitution — They are interchangeable.
Honestly, I think of economics as “guessing with line graphs”. Is that dismal? Is it catchy? Regardless, it serves as a segue to move us to a very useful economics concept.
Coke or Pepsi? A simple enough choice for some, more complex for others. It illustrates well, the concept of replacement in economics. Both the simplicity of making a different choice and the complexity that not all people view all options as fungible (which in Latin means to perform… does that make it less dismal … more gay?). I digress.
This concept is worth millions, perhaps billions to Wall Street. It is, however, rarely considered among the academically encumbered analytic communities of big business. These are the folks running test & control, experimental design, and machine learning algorithms. Replacement rarely figures into any of their analysis. Or perhaps I being too harsh…
Replacement is simple. Too simple. It deals mostly and most easily with simple choices. But even Coke & Pepsi have managed to make that more difficult. They have gone out of their way to write contracts with vendors banning substitution products (competitors). Substitution gets messy when you are required to walk to another store.
Enter the supermarket…
While vending machines, fast food restaurants, and convenience stores have succumb to contracts and incentives, the supermarket has held the line. It is an exercise in substitution.
The internet has only made it easier… and of course harder. The ladder applying to anyone attempting to analyze this phenomenon. Online shoppers, browsers, subscribers, etc are empowered. The internet is the “great substitution machine”.
Change any aspect of an online users experience and they are quite likely to replace it. It makes much of marketing analysis quite dismal indeed. Perhaps that is why they like to add songs to their advertisements…? But I digress again.
Online developers have pulled their own Cola Wars tricks. Silicon Valley introduced me to the term “friction”. User friction, product friction, buyer friction are all terms related to the number of steps and difficulty of making a selection. It is actually the opposite of the Cola response. Dismally — the Cola guys are trying to make it harder for you to choose. The UX guys, gaily, make it as easy as possible NOT to.
Friction can then segue us back to the pendulum. As it effortlessly swings from one side to the other, friction is its foe. As noted in other articles, sometimes it can swing it multiple dimensions. Regardless, the pendulum does swing. Whether keeping time with discipline or divining who knows what with reckless personified abandon — it is again a suitable analogy for another concept in science. Analysts would do well to recognize it.
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