From Kevin Price
Is MIT willing to unleash real-time, dynamic-purchasing inventory control systems?
A graduate student playing around with a billion dollar price project has unwittingly stumbled upon the financial equivalent of the internet, and it was Zero Hedge where the implications of this financial search engine were reported first. The implications are enormous. This could be what Alan Greenspan called “a once in a generation acceleration in productivity,” but only if MIT allows widespread use. Instead it appears that MIT is going to keep it secret to benefit the oligarchs and the connected at the expense of the many.
Imagine real time continuously updated pricing data on all available products, raw inputs, and professional services. This new financial search engine has the ability to track anything. How about product pricing at Wal Mart? Drill bits, rolled steel, truckloads of wheat at the grain elevator level? You see you can monitor in real time the input costs and output prices of any industry or specific corporation. You could monitor your competitor and as soon as he has a sale your financial search engine will alert you and automatically match his prices.
The implications don’t stop with the above. If Wall Street financial oligarchs ( regulated utilities, like your nice local water company in Bernanke-speak), have this capability and no one else has it, then they can monitor in real time prices of all sorts of products, services, and non-exchange-traded commodity goods. They can watch the trends of input costs and output prices in real time and front run everyone. The pricing efficiencies that always go to the consumer in a free market are now exploited to the detriment of the consumer and the benefit of the small number of people who have access to MIT’s financial search engine.
As a business you can monitor all of your input costs in real time. You can monitor by region, industry, specific supplier. The search engine will also have advanced statistical features to give you directional probabilities of pricing in the short term. Instead of a rigid, just-in-time inventory approach to your inputs, your program will alert you when the likelihood of waiting one more week to buy, or buying one week early, will give you a better price.
Now imagine if MIT and the financial oligarchs don’t allow widespread adoption of this information technology. Instead they sell subscriptions to various businesses. These businesses will now be able to buy their inputs at a lower than average price, compared to a competitor without this technology. This brings supply chain management to a whole new level. If your competitor is unaware you have this technology, then you can always beat his price, match his sales instantly, and then put him out of business. The end result of uneven distribution of this information technology will be to ultimately limit competition. The pricing efficiencies that would accrue to the consumer if this technology were widely adopted would go to the financiers and the specific company, as they capture pricing efficiencies in the short term that drive others out of business.
An integrated oil company may need to monitor in real time the pricing of various drill bits. The oil company will buy a little early when statistical analysis gives a greater than 50 percent probability that price increases will continue for the next few weeks, and will defer purchasing when price monitoring suggests a continued drop in drill bit prices over the next few weeks.
Welcome to real-time, dynamic- purchasing inventory control systems!
In the long run if this technology is distributed fairly to the public it will result in greater pricing efficiencies as volatility of input costs diminish. In a competitive market these productivity improvements always go to the benefit of the consumer, because any excess profits over the marginal return will quickly signal competitors and supplies to adjust. This is why Luddites are always wrong about improved productivity.
We now have real time, lightning fast, pricing information. This will be the greatest thing since the invention of the world wide web. If MIT does the right thing and announces their discovery to the world, they can still make a lot of money and also be responsible for one of the greatest improvements in productivity in history. Imagine what a single graduate student can do. This is why I am always optimistic about mankind’s future.
However, if MIT continues to lie about why they are no longer making the data available, then this will be used to decrease competition and allow frontrunning by financiers as they alone are able to watch in real time pricing trends for specific industry, or even a specific business located in a small town near you.
The pricing efficiencies which should ultimately accrue to the benefit of all mankind will be captured by the oligarchs and select businesses willing to sign confidentiality agreements. We cannot allow this to happen. Long live the internet and the blogosphere because secrets cannot be kept long. Information should be free, or at least priced competitively!
I call upon all of you who realize the implications of MIT keeping this amazing discovery secret to inform Google, BAIDU, Yahoo, Microsoft, and every damn business school in the world. The reason why MIT must keep it secret is because the barriers to entry are low. Anybody can do this. With a small server farm you can compete with MIT and drive down the price so that it is available to everyone, even Joe the plumber who wishes to monitor his input costs and competitor’s pricing. He will pay 200 bucks per year for this data, especially if it has some value added statistical analysis that will give him the probability of near term price changes so he can manage his inventory better.
Don’t let the oligarchs use this to cement financial control. Don’t let MIT go over to the dark side. Tell the BRIC countries. Tell everyone. The wonders of a financial search engine should not be used to gouge society, but to benefit society.
And since there are two sides to every story, here is reader Dave Narby following up with an MIT teammember, and getting direct feedback in the aftermath of our post from Friday disclosing the effective culling of the MIT Billion Price Project. The response may stun some people as to why MIT canceled any relevant public disclosure from the Billion Price Project. (emphasis added)
Subject: Re: Why did you cripple the Billion Prices Project?
Date: Sat, 23 Apr 2011 08:40:05 -0400
From: Roberto Rigobon <xxxxxxx@MIT.EDU>
CC: Roberto Rigobon <firstname.lastname@example.org>
of course you can share the response.
i really do not know what the zerohedge website is, but i have no problem at all.
one important thing is that i cannot outsource this. either i have to do it at mit or i have to do it in a private firm. there is very important IP that alberto and i have developed after 9 years of research that needs protection and unfortunately cannot be patented.
for the last 4 years i have financed this entirely by me. i’m the senior faculty in the team and everything has been done with voluntary work from mit students, and the junior faculty. because they are my responsibility, i had to make the call and direct them in the correct path if they are planning to follow a career in academia. i know people think that the government is pressuring us (i have received the hundreds of emails in that regards) but in the last 4 years i have received not a single cent from them, nor i plan to even ask.
i can assure you the data is there, and the indexes are there. we will have 40 countries and one of them has already tried to fine me or sue me. i can take the distractions but the other 20 people here can’t. i will find a way to do this.
my goal is very simple, i want to change the way in which economic data is collected on earth. not only inflation, but real estate, financial performance, environmental impact, and unemployment. those are my four long term projects. and i can assure you i will do it. the advantage of not having the indexes public is that eliminates all the distractions the team is receiving.
all the best. rr.
On Apr 22, 2011, at 11:55 PM, Dave Narby wrote:
Thanks for the quick reply. My initial response is that you should crowdsource the aspects of the project you no longer can continue to manage, or at least put out a notice that you are looking for help/resources. I have a feeling that you may get quite bit of support.
Personally I think you are doing vitally important work. Official sources for inflation have been proving increasingly unreliable, leading to increasing instability in the world economy. What you are doing IMO will help to bring about the necessary policy decisions to restore balance to the world economy. IMO, if things get too far out of hand before necessary changes in transparency and reporting are made, I believe it will be tremendously disruptive. I sincerely I hope you find a way to continue to provide this information to the public.
With your permission I would like to share your response with the website Zerohedge, there is much speculation on their part.
Best regards always and good luck,
On 4/22/2011 8:10 PM, Roberto Rigobon wrote:
thanks david, but we are not going to continue publishing the country information. it has become extraordinarily difficult for us to deal with this as we do not have the staff required to maintain the indexes and more importantly the requests from the users. we are tying to find an alternative way of distributing the indexes and when we find a solution we’ll post it on the web. for the moment we need to concentrate on the research… sorry about that. there is nothing to speculate about except that it is taking far too much of our time and we need to publish papers and not indexes…
all the best. rr.
On Apr 22, 2011, at 2:42 PM, Dave Narby wrote:
Dear Prof. Cavallo and Rigobon,
There has been a fair bit of commotion and speculation surrounding your removal of the country data from your Billion Prices Project. Many of us found it very informative and useful. Could you please comment on why you removed this data?
Best regards always,
Staten Island, NY