Social media sites have evolved into the global equivalent of the
office watercooler, but could the buzz they generate be analyzed to
predict real-world outcomes?
Leading British economist Noreena Hertz
thinks so. She believes analyzing the chatter from Twitter and Facebook
for example, will become a dominant force in the business of
forecasting.
"Over the past few years I
have been really quite obsessed with how technology is changing the way
that we make sense of the world," she told CNN at Names not Numbers, an idea-sharing and networking conference in the UK.
Last year, Hertz carried
out an experiment to demonstrate the power of social networks as a tool
for better understanding human behavior.
"I was really interested
to see whether we could make predictions or forecasts by listening in on
what people were saying on social media," she said.
Her and a team of
computer scientists, sociologists, and economists worked together to
develop a method of research that they hoped would enable them to predict the winner of talent contest "The X Factor".
By developing a
sophisticated algorithm, the team effectively "listened in" on hundreds
of thousands of tweets at once and deduced not just the number and
subject of messages but also, for the first time, the sentiment. In
doing so they were able to make an accurate guess about who would stay
and go each week.
"We were pretty much beating the bookies," she said.
Hertz has made a career
out of challenging the predictive powers of traditional forecasting
models, which she says are far from perfect.
After all, she says,
analysts in the Middle East failed to predict the Arab Spring and very
few experts saw the financial meltdown coming -- something she did three
years before in her book "IOU: The Debt Threat".
An influential economist, Hertz has a knack for prescience that has put her ahead of the curve among her peers.
Her work is all about
conducting research that gives raw data some context. It's about
understanding the culture, language and psychology of social media
users, which, she says, has huge implications for both business and
government.
Under her school of her
thought, in order for social media marketing to have any real value we
need to understand what people's actions really mean. "If somebody
tweets 'I like Coca-Cola', does that mean that they're actually going to
buy Coca-Cola? One can? Two cans? Three cans? If they retweet someone
else's Tweet, does that mean they're going to buy it?"
At the age of 19, Hertz
gained her degree at University College London (UCL) and then moved to
the U.S. to study for an MBA. In her early twenties, she found herself
in St. Petersburg educating Boris Yeltsin's advisers in market
economics. Here she gained inspiration for her PhD thesis, "Russian Business Relationships in the Wake of Reform", at the University of Cambridge.
In 2002 she wrote the book "The Silent Takeover,"
which discussed the migration of power from government to corporations.
In it she correctly anticipated that unregulated markets and huge
financial institutions would, in the near future, have grave
consequences for the rest of the world.
Today, Hertz is a
professor at a number of universities and one of the world's respected
thinkers. Her pioneering concepts surrounding social media analytics
have the potential to impact government policy, public security and
economic growth.
Her work highlights the
inadequacy of the majority of data used by governments and corporations
as an empirical measure of what we, the people, want.
"Language is too complex
for a computer to understand," she said. "It's not going to be able to
make sense of what people are saying en masse. We need a new type of
discipline that puts together computer scientists and social scientists,
who can add context to the situation."
She may, so far, have
only predicted the winner of a national singing contest but with the
developments made in her "X Factor" experiment, Hertz has presented us
with an unprecedented opportunity to foresee the events of the future by
simply "listening in on what the world really thinks."
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