Google as Crystal Ball

Wired reporter Steven Levy profiles Hal Varian, the UC Berkeley business professor that Google (GOOG) hired in 2002 to oversee its auction of ads that run alongside search results. Varian didn't invent the technique; indeed, no one initially saw the genius of getting companies like Ford Motors (F) to bid on ads, preferring to wine and dine them at fancy New York restaurants. But Varian is an expert on auction economics, and how bidding on ads combines with what people search for to produce an endlessly refined match between consumers and sellers. It's a remarkable piece for readers who like the idea that algorithms rule the world a lot more than most people think. Here's a nice sample paragraph:

"[Varian assistant Qing] Wu calls Google 'the barometer of the world.' Indeed, studying the clicks is like looking through a window with a panoramic view of everything. You can see the change of seasons—clicks gravitating toward skiing and heavy clothes in winter, bikinis and sunscreen in summer—and you can track who's up and down in pop culture. Most of us remember news events from television or newspapers; Googlers recall them as spikes in their graphs. ... Wu didn't even have to read the papers to know about the financial meltdown—he saw the jump in people Googling for gold."