The Long Tail is about how information technologies are transforming many markets, and about the true shape and character of market these technologies reveal.

Information technologies are transforming many markets, notably media and consumer goods.  The technologies are:

• efficient inventory storage and retrieval, providing vast, near infinite inventory
• search and filtering technologies to navigate these huge inventories
• increased availability of production tools for the population

Such markets include:

• books ( Amazon )
• music ( iTunes, Rhapsody )
• movies ( Netflix, YouTube )
• consumer goods ( Amazon, eBay )

For example, let’s take books and Amazon:

• Amazon has huge centralized warehouses where it stores all the goods it sells.  It must be able to receive and ship orders quickly.  Also, through it’s Marketplace program, resellers use their storefront, but have their own warehouses and shipment systems.  Thus, Amazon doesn’t even store these items.  Thus, Amazon can store millions of items.  The largest brick&mortar super-bookstore can only have about 175,000 books.  With 6.1 million books available in the world, and 100,000 being published per year in recent history, traditional stores cannot cater to everyone’s desires.  Amazon can offer nearly 350 times the variety.
• Amazon tracks user’s ratings, stores useful customer reviews, tracks what other customers have bought, based on usage history, and utilize this information to help you search and filter the vast catalogue to your current interest.  Traditional stores can only choose one presentation of their goods, and every person must search within that specific constraint.  You will find things through the Amazon website that you’d never know about in a normal store.
• While not specific to Amazon’s operations, book publications have sky-rocketed, as tools for production, such as desktop publishing software and reduced costs of printing, such as print-on-demand services, mean that more of the populous can produce books.  This increases the number of books to catalogue, search and recommend.

The shape of markets, when sorting items based on popularity, follow a “power-law” long-tail distribution.  In short, this means that, while the popularity of any one item out on the tail is small, there is just so-much in the tail that, if made available to customers, it would comprise a significant part of one’s business.  For example, 90% of the products on Rhapsody or Netflix is not available in any stores, but this 90% make up roughly 25% of their profits.

Another interesting feature of long-tailed markets is that, as one moves into the tail, one is more satisfied with the goods, compared to the the goods at the head of the tail.  A few factors here are:

• everything in the head has broad appear to the whole audience.  Therefore, it is a bit mediocre compared to each individual’s tastes.
• everything in the tail has very specific niche audiences.  A gem item for one individual will be utter rubbish to 10,000 others.

To capitalize on the tail, one must connect each user with the content they value.

There any many more points in the book than I can outline here.  Many transformative businesses and websites are discussed, such as Google, Wikipedia, etc.

For anyone who’s exerienced these technologies and recognizes something fundamentally different’s going on, this is a great read.  For anyone who’s heard about the buzz, but doesn’t feel they understand it, this should be a great exposee.  And for anyone who works in any IT industry, you should really read how our world is transforming many aspects of human business and activity.

4 of 4 possible stars, without hesitation.

The book at three sections, which are basically: old and broken way, new and shiny way, and finally a summary of points to take away from the book.

I’ve not economics or financial training, so the first chapter was quite educational, pretty much capturing the development of modern practiced financial theory. Along the way, he shows many of the assumptions and estimations that went into each step, and also alludes to studies that show these assumptions are not true.

The second section was also educational, in respect to fractal analysis that’ve been done to financial data. Along with many nifty details about fractals and probability distributions the basic results is to show that:

• price variations at any time-scale are Power Law distributed, not Gaussian distributed as theory assumes.
• price variations at any time-scale are time-dependant or Fractional Brownian Motion, not independent or traditional Brownian Motion as theory assumes.

It goes on to demonstrate a multi-fractional construction that seems to account for these factors. as well as “fractional time” to create a time series that manifests all known anomalous characteristics of market behaviour by traditional analysis.

The book has a rich history, and fascinating contradictions to what I was taught. However, it… wasn’t very moving at the end. It didn’t have a silver bullet. I know this is science, and science’s best discoveries are the new anomalies. Yet, I couldn’t help being disappointed. In a literary sense, this book had a “pathetic” ending.

Despite all the educational aspects, ground-breaking work discussed, I didn’t get as much from it as I had hoped. 2 of 4 possible stars.

The book is broken down into 8 Chapters: several are by popularizers of Fractals, several are republished papers by active researchers, and one covers the making of the educational video. This video and book was endorsed / promoted by the recently deceased Sir Arthur C. Clarke.

I found several chapters of note:

• Chapter 1: “The Nature of Fractal Geometry” is the intro written by Ian Stewart, a mathematician, professor, and prolific popularizer of science. Well written prose that targets laymen with an amateur interest in science and math.
• Chapter 3: “A Geometry Able to Include Mountains and Clouds” written by Benoît Mandelbrot, the central figure in the development of fractal geometry. His article derived from a lecture to a Nobel Conference in 1990, and covers many of the aspect of fractal geometry in more detail:
  • Clouds, mountains and coasts; self-similar natural systems, fractal dimensionality and roughness.
  • Seemingly infinite complexity arising from fundamentally simple transformations.
  • Most striking was the “diffusion limited aggregations (DLAs)”, which show the fractal nature of natural systems growing & evolving over time.
• Overall, I found this article compelling because of the holistic synthesis, and the obviously deep and finessed presentation Mandelbroit gives.
• Chapter 6: “Self-organization, Self-regulation, and Self-similarity on the Fractal Web” is written by Gary Willaim Flake and David M. Pennock, then at Yahoo! Research Labs. This paper addresses many related issues, including:
  • The positive feedback loops of authors, search engines, and readers through a page’s connectedness, its page rank, and its traffic, respectively.
  • The self similarity of network traffic, and the power law distribution of it.
  • Other web metrics which also obey power law distributions, such as inbound & outbound links.
  • Community structures that form into fairly regular bipartite relationships of hubs and authorities.

  Anyway, this paper by far proved the viability of fractal pattern analysis to a very new, vital and familiar technology.

• Chapter 7: “The Human Social Experience Forms a Social Fractal”, written by Robert R. Prechter, J., covers the concept that the financial markets are a fractal phenomena. The analysis given was simplistic, yet the concept was compelling. Thus I’ve picked up a book about that subject exactly to get a better feel… but that’s another post. Interesting concept; weak presentation.

The book also comes with a DVD containing the documentary video. It’s a very simplified intro to fractals, as in elementary / middle school usage. It’s not very detailed or thought provoking on a mathematical / scientific level. However, it’s meant to share the artistic wonder of a fractal, and it does a decent job there. My only lamentation is that the video was not remastered for DVD; there are obvious analog artifacts that distracted me from the intent of the visual experience. Additionally, I felt the Davoid Gilmour soundtrack was unnecessary / dated.

Overall, it was a good investment. 3 / 4 possible stars.