Rethinking Markets

I have a sort of interesting question, though perhaps it’s less interesting than I imagine it to be. Given the following two scenarios, which is more likely and why?

Scenario 1:
In the first case, we have a series of attributes attached to a person, and then we can make arguments (empirical, theoretical) about how these attributes lead to outcomes. A person who is value-conscious is likely to pass on high-ticket items; a person who is sexually adventurous is likely to seek out partners to participate in kinky sex; a person who likes crappy romantic comedies is likely to see Miss Congeniality.

To make these kinds of arguments, we would have to seek out attributes to are causally related to the outcomes in question. In this case, if we want to predict what kinds of parties a person would want to go to, we would ask questions about their introvertedness/extrovertedness and the results of these questions would have a positive/negative/null effect on the kinds of parties they either go to or report going to. That is, the empirical and theoretical difficulty is in finding variables related to the outcomes we want to know about.

Scenario 2:
In the second scenario, the argument is that we should give primacy to a likeness or correspondence analysis to help understand what kinds of parties you want to go to – and a whole host of other things.

In this case, we rely less on the causal relationship between introvertedness and the kinds of parties you would want to go to, and more on the fact that whatever you want to do, another person who is just like you would also want to do those same things. If this were true, then what’s important is not so much to find a causal link between what kind of person you are and what kinds of parties you want to go to. Instead, the challenge is in finding what makes you different from one person and similar to another. If we can somehow ‘clump’ all the similar people, we would be more likely to know what kinds of things they like and do, regardless of their specific characteristics.

In this case, a person who is value-conscious, sexually adventurous, or likes crappy romantic comedies is likely to like the same kinds of things as other people who are value-conscious, sexually adventurous, or who have questionable movie tastes.

I think that approach #2 is behind much of the recommendation engine work that has emerged of late, but I’m wondering in a more and more pointed fashion which of these is a more reasonable approach to understanding what people like. What do you lurkers think?