WSJ: In the past, promising new economics PhDs who didn’t want to work in government or academia probably aspired to work on Wall Street. In the future, will they aspire to work at companies like Google?
Varian: I think marketing is the new finance. In the 1960s and 1970s [we] got interesting data, and a lot of analytic fire power focused on that data; Bob Merton and Fischer Black, the whole team of people that developed modern finance. So we saw huge gains in understanding performance in the finance industry. I think marketing is in the same place: now we’re getting a lot of really good data, we have tools, we have methods, we have smart people working on it. So my view is the quants are going to move from Wall Street to Madison Avenue.
WSJ: Is that because the Web can now provide companies with the density of information once available only for things like stock prices and interest rates?
Varian: Absolutely. Adaptive forecasting, how I revise my forecast to take account of updated information, you use that a lot on Wall Street, where you have time series of stock prices. And some of those things carry over into things that Google is doing, that have this real-time flow of data. How do I detect unusual events, and react to them?
--Hal Varian, the new chief economist at Google, on marketing as the new finance