Algorithms in the Attic

The February 2007 issue of the Harvard Business Review has an article on “Breakthrough Ideas for 2007” (sorry, pay-only link: HBR isn’t much for making stuff available for free). One of the breakthrough ideas is given by Michael Schrage of the MIT Media Lab under the title “Algorithms in the Attic”, a play on the title Rembrandts in the Attic, a book on unlocking the value of patents (for better or worse). Schrage argues:

For a powerful perspective on future business, take a hard look at mathematics past. As computing gets ever faster and cheaper, yesterday’s abstruse equations are becoming platforms for tomorrow’s breakthroughs. Companies in several industries are now dusting off these formulas and putting them in the service of new products and processes.

Examples Schrage cites are include:

Procter & Gamble has been restructuring its supply chain with complex “expressive bidding” algorithms–based on 1950s linear-programming equations– that allow suppliers to bid online with bundled offerings of products and service levels rather than with standardized lots. Google’s search engine was possible only because the founders adapted a century-old theorem about matrices to software for ranking Web pages according to links from other sites. Networks like the Web can be expressed as matrices, and a relatively simple calculation gives a ranking of how well each site is connected to the rest of the Web. That formula for automatic ranking – which could be understood and appreciated without a PhD – is one of the most lucrative algorithms ever. The math was there for the taking.

Well-known OR researcher Dick Larson gives a nice quote:

“There are huge hidden assets in the operations-research community,” says the MIT professor Richard Larson, a pioneer in probabilistic modeling techniques. “If you gave an army of 20 grad students the mission to rake through the published literature of the past 30
years, they would find stuff that has untapped business potential worth billions
of dollars. There are many clever ideas my students worked on decades
ago that in today’s networked environment would not be an academic exercise
but a real business opportunity.”

Schrage concludes:

Whether looking for breakthroughs or just trying to improve decision making, companies will benefit from greatersophistication around even simple mathematics. A decade ago, big firmsbegan to realize that they were sitting on a treasure trove of underutilized patentsand know-how that could be commercialized for willing buyers. Those “Rembrandts in the attic,” as Kevin G.Rivette and David Kline put it in their 2000 book by that name, needed thekeen eye of an intellectual property curator to appreciate their value. Similarly, we now require quantitative entrepreneurs to seek out existing equations that meet today’s pressingbusiness needs. Technology continues to make that quest faster, easier, and cheaper.

Hmmm…. thinking over my past research doesn’t immediately lead to thoughts of business opportunity, but maybe it is time to pull out those dusty journal articles.