"When you have smaller data sets, you need to fill that with modeling," Mortensen confirmed to me over the phone. "It is not as good as having more data."
Now, take a deep breath and let this idea sink in. And don't Dumb Algos make the massive, inexplicable, intractable problems of the information age suddenly become as pristine as a moonless Antarctic midnight sky.
Peering at the edge of the Web
Think about it. No matter how smart Google's geniuses think they are and how effective heavily modeled algos can be for certain data problems, for the truly awesome consumer experience that Google (GOOG - Get Report), Facebook (FB), Amazon (AMZN) and all the rest invest in, there is little choice but to harvest as much digital stuff as possible. But there's a rub: The grim, no-money economics, created by these information age giants, means even the Googles don't have the resources to pay for the data it needs. So it has no choice but to lure users to give it their information -- which almost invariably means offering ever-more complex and expensive services for nothing.
Go ahead. Pick an information-based business and run the "Dumb Algos Rule" notion against it. Take Translate. To get the words Google needs, Google vacuums up available words on the Web, but it also offers Gmail and Docs -- all good businesses in their own right -- for free. Google gets its data and the once-lucrative office software market gets trashed in the process. And worse, investors are stuck with yet another feeble margin, ad-supported service called Google Translate.And since you never ever have enough information in this data-addicted age, there's little choice but to offer yet more no-cost services that need yet more free data that create yet more no-cost services. That all means, friends, that we investors can plan on 2013 bringing a veritable universe of new Big Data, information-based products and companies. But the planets of value in this investor cosmos will be just that: tiny dots of warmth and profit in an otherwise ice-cold expanse of data dark matter. Speaking of which, my best wishes in this new year to you and yours. I'd like to thank you all for reading and commenting on these Digital Skeptic columns with such enthusiasm. Creating these pieces has turned out to be my most exciting challenge yet.