The Potential and the Risks of Data Science

Columbia University held a daylong symposium on Friday as a kind of brainy coming-out party for its new Institute for Data Sciences and Engineering. The institute is a collection of interdisciplinary centers including ones for cybersecurity, financial analytics, health analytics, new media and smart cities. It points to the direction universities will have to take if the bundle of technologies called Big Data â€" new data and artificial intelligence tools â€" really are to transform industries, as its champions predict.

The symposium, “From Big Data To Big Ideas,” was mainly a celebration of the promise of the technology in fields from health care to transportation, with presentations from Columbia professors and computer scientists from companies like Google, Facebook, Microsoft and Bloomberg.

The privacy and surveillance perils of Big Data came up only in passing. But during a question-and-answer portion of one panel, Ben Fried, Google’s chief information officer, expressed a misgiving. “My concern is that the technology is way ahead of society,” Mr. Fried said. There is danger, he suggested, if only a technical elite understand Big Data and its implications, with the risk of a runaway technology or a public rejection.

I spoke with Mr. Fried briefly afterward. “I think it is a mistake if conversations about this technology leave out the humanities,” he said. Broader social concerns, he explained, should be a guide and will affect the spread and use of Big Data technology.

Mr. Fried works for a company that has at times tested the limits of Big Data technology, notably the privacy threat posed by overaggressive data collection. But he makes a good point, and he’s not the only one making it.

Alex Pentland, a computational social scientist at the MIT Media Lab, is leading a group at MIT and elsewhere in exploring the implications of what he calls “a data-driven society.”

At Columbia, Mark Hansen, a professor of journalism and director of the institute’s New Media Center, has his own plan for bringing the humanities into Big Data. He teaches students from Columbia’s Graduate School of Journalism how to do some data programming. The goal, Mr. Hansen explains, is not to make them professional programmers, but mainly to give journalists â€" whom he calls “society’s explainers of last resort” â€" a firmer understanding of computer technology. Software algorithms, he said, are not impartial. They are written by people, and can embody human values and biases.

Mr. Hansen’s small-scale educational program recalls the major initiative at Dartmouth College in the 1960s, when mainframe computers, the transforming technology of the day, came into widespread use in business, government and science. It was there that two professors, John Kemeny and Thomas Kurtz, developed Basic, a simplified programming language, initially for Dartmouth students. They were influenced by the concerns raised by C.P. Snow, the English scientist and novelist, in his 1959 lecture, “The Two Cultures,” which analyzed the difference between scientific and literary intellectuals, and pointed to the danger of the schism.

The Columbia data sciences institute is just getting under way. New centers could be added. One of the panelists on Friday suggested Columbia might want to add something like the Berkman Center for Internet and Society at Harvard University, which focuses on the impact of technology on society.

The Columbia institute is a science-led undertaking, and its director is a computer scientist, Kathleen R. McKeown. Incidentally, Ms. McKeown, who was the first female professor to receive tenure at Columbia, holds a bachelor’s degree in comparative literature.

Talk: Mark Pincus Thinks Angry Birds Won’t Hurt Your Kids

Mark Pincus Thinks Angry Birds Won’t Hurt Your Kids

You are the founder and C.E.O. of Zynga, a company responsible for addictive games like FarmVille and the forthcoming Draw Something 2. You know, every time I see my 4-year-old son playing Angry Birds on my phone, I imagine that his little brain is rotting.
I can commiserate because I have twin 2 ½- year-olds, and they’ve mastered the iPod Touch. I don’t think it’s rotting their brains, if you compare what it’s replacing â€" TV. My kids are mastering puzzles, it’s challenging their thinking. I want to ultimately reward them with screen-time minutes for chores and achievements.

Mark Pincus

Have you managed to get 2-year-olds to do chores If so, I’d love to know your secret.
Literally on the morning that they were born, I said to the nurse, “I really want an iPod app that is a job wheel.” But I was just told by our nanny that I have to stop bribing my kids, so I’m not sure that the achievement thing is a good idea.

The night you met your wife, Alison, you asked her what she thought about Carmen and Georgia, the names of your future twin daughters. Is it true you told her you had no future unless she agreed to those names
It was actually the second night. I had made up these almost-cartoon characters of Georgia and Carmen over the years, and I fell in love with them. Georgia Pincus was this funny, bigger-than-life Jewish Southern belle, and Carmen was this feisty Latin Jewish girl. It wasn’t a deal killer, but if she hated those names, then maybe we were coming from different places.

You’ve done a Tony Robbins retreat, hired a life coach, and since Zynga’s founding, people like Apple board member Bill Campbell have come in to consult on your management style. Is there a problem
Maybe this reveals the difference between the coasts you and I live on. A New York point of view would be “What’s wrong with you,” but in California it’s more like “Wow, you want to work on yourself, that’s so cool.” Bill Campbell is supergrounded, and he was really helpful in the last couple quarters.

I thought the venture-capital firm Kleiner Perkins Caufield & Byers brought Campbell in because the stock was down and executives were leaving in droves.
I’ve sought out everyone I could find who could help me. If you want to be a great entrepreneur, you’re going to have to burn your résumé and stop worrying about your reputation, because you’re probably going to go through long periods of people calling you stupid.

You once said that you learned you should be an entrepreneur because you got fired from every job you had. Why did you get fired so often
I thought of myself as C.E.O. at every company I was at. Not many companies are set up so people low in the hierarchy can challenge everything like a C.E.O.

You’re one of the original investors who became billionaires when Facebook went public, and Zynga’s games have been instrumental in the site’s success. But the relationship between Zynga and Facebook has been strained at times. Did your relationship with Mark Zuckerberg suffer
No. We have a good relationship. It’s pretty amazing how both our businesses initially got together without a single sheet of paper being signed between the companies. It might be a first in business history.

Is every day still “Bring your dog to work day” at Zynga’s San Francisco headquarters It must stink.
This place is almost as full of dogs as employees. But I don’t ever smell a dog, and I never see dog hair. My dog Zynga used to be in every meeting. She would sit in chairs and look at who was talking. It freaked some people out, but it spices up your day.

Did you make any attempt to take advantage of the fact that Alec Baldwin got kicked off a plane for playing Zynga’s Words With Friends
I got on the phone and brainstormed with Alec Baldwin, but those ideas never made it to life. We’re not at a point that we can justify, say, a $15 million Super Bowl ad.

INTERVIEW HAS BEEN CONDENSED AND EDITED.

A version of this interview appeared in print on April 7, 2013, on page MM16 of the Sunday Magazine with the headline: ‘I Don't Think it's Rotting Their Brains’.

No TV No Subscription No Problem

LAST Sunday afternoon, some friends and I were hanging out in a local bar, talking about what we’d be doing that evening. It turned out that we all had the same plan: to watch the season premiere of “Game of Thrones.” But only one person in our group had a cable television subscription to HBO, where it is shown. The rest of us had a crafty workaround.

We were each going to use HBO Go, the network’s video Web site, to stream the show online â€" but not our own accounts. To gain access, one friend planned to use the login of the father of a childhood friend. Another would use his mother’s account. I had the information of a guy in New Jersey that I had once met in a Mexican restaurant.

Our behavior â€" sharing password information to HBO Go, Netflix, Hulu and other streaming sites and services â€" appears increasingly prevalent among Web-savvy people who don’t own televisions or subscribe to cable.

It’s hard to know exactly how common it is: traditional analytics firms like Nielsen and comScore can’t track it, and cultural research organizations like Pew haven’t done extensive surveying about it. An informal BuzzFeed survey, which was a partial inspiration for this column, found that several dozen people in its office used someone else’s account information for HBO Go. And based on countless anecdotes, conversations, tweets and text messages, such behavior seems to be on the rise.

“It also seems like a pretty serious problem,” wrote John Herrman, a senior editor at BuzzFeed and author of the polling report. “While our office is fairly young and not representative of HBO’s broader customer base, it is representative of a rising generation of people who 1) like watching HBO shows and 2) cannot fathom paying for them.”

Do the companies, particularly HBO, view this as especially problematic I hesitated before asking, worried that any inquiries would prompt a crackdown, with the result that I’d become the most-hated person on the Internet.

But to the collective relief of nearly everyone I know, the companies with whom I spoke seemed to have little to no interest in curbing our sharing behavior â€" in part because they can’t. They have little ability to track and curtail their customers who are sharing account information, according to Jeff Cusson, senior vice president for corporate affairs at HBO. And, he said, the network doesn’t view the sharing “as a pervasive problem at this time.”

According to HBO, 6.5 million of its 30 million subscribers have signed up for HBO Go. When I asked Mr. Cusson if the network would consider figuring out a way to capture and monetize those slippery users who were piggybacking on others’ accounts, he declined to speculate on what might be possible.

“The best business approach at the time is in the business model that we currently have,” he said.

In other words, it isn’t financially viable for HBO to offer a cheaper, digital-only subscription, either sold separately or bundled to an Internet service. So, to a point, account sharing is allowed.

OTHER subscription streaming services have a different approach. Spotify, the music streaming service, does not allow two people to play songs simultaneously using the same account. A representative at Hulu says that the company’s paid subscription service, Hulu Plus, is designed for a single user and that the company doesn’t let people stream the same show to different screens at the same time. (Amazon and Netflix did not respond to requests for interviews, but both companies have similar mechanisms in place for their services, though different users on the same account can watch different programs at the same time.)

On Amazon Prime, for example, if two people try to watch the same episode of “Pretty Little Liars” using the same account, both streams will be frozen and a warning message will flash. But one user can simply watch something else until the first person is done trying to figure out who “A” is.

This feels like a missed opportunity for all these services. It’s the failure to grasp the future of television as a shared social experience online. Sure, we are all scattered around, watching all sorts of programs. But then there are moments, as in the days of old, when we are all huddled together â€" figuratively speaking â€" tuning into the same show or event at about the same time each night. These days, though, we are watching through some kind of connected device, whether it’s a smartphone, a laptop or a Web-connected television.

Nor does social viewing have to be around a big event. For example, I watched “Friday Night Lights” all winter on Netflix, along with someone I don’t know who also shares the account. Every time I log in, I can see the last episode that this mystery viewer watched â€" and yet there’s currently no way for us to chat about our reactions to it. That would be much more fun than bugging my other friends about plot twists and turns they saw ages ago, when the show was first broadcast.

A version of this article appeared in print on April 7, 2013, on page BU4 of the New York edition with the headline: No TV No Subscription No Problem.

Digital Domain: Wearing a Badge, and a Video

Wearing a Badge, and a Video Camera

Joshua Lott for The New York Times

Some police departments are turning to wearable cameras, allowing their officers to record interactions with citizens. At the Taser International headquarters in Scottsdale, Ariz., Joseph LeDuc, a police officer, checked a video made with such a camera.

HERE’S a fraught encounter: one police officer, one civilian and anger felt by one or both. Afterward, it may be hard to sort out who did what to whom.

Officer LeDuc wore one of the cameras on his sunglasses.

Now, some police departments are using miniaturized video cameras and their microphones to capture, in full detail, officers’ interactions with civilians. The cameras are so small that they can be attached to a collar, a cap or even to the side of an officer’s sunglasses. High-capacity battery packs can last for an extended shift. And all of the videos are uploaded automatically to a central server that serves as a kind of digital evidence locker.

William A. Farrar, the police chief in Rialto, Calif., has been investigating whether officers’ use of video cameras can bring measurable benefits to relations between the police and civilians. Officers in Rialto, which has a population of about 100,000, already carry Taser weapons equipped with small video cameras that activate when the weapon is armed, and the officers have long worn digital audio recorders.

But when Mr. Farrar told his uniformed patrol officers of his plans to introduce the new, wearable video cameras, “it wasn’t the easiest sell,” he said, especially to some older officers who initially were “questioning why ‘big brother’ should see everything they do.”

He said he reminded them that civilians could use their cellphones to record interactions, “so instead of relying on somebody else’s partial picture of what occurred, why not have your own” he asked. “In this way, you have the real one.”

Last year, Mr. Farrar used the new wearable video cameras to conduct a continuing experiment in his department, in collaboration with Barak Ariel, a visiting fellow at the Institute of Criminology at the University of Cambridge an assistant professor at Hebrew University.

Half of Rialto’s uniformed patrol officers on each week’s schedule have been randomly assigned the cameras, also made by Taser International. Whenever officers wear the cameras, they are expected to activate them when they leave the patrol car to speak with a civilian.

A convenient feature of the camera is its “pre-event video buffer,” which continuously records and holds the most recent 30 seconds of video when the camera is off. In this way, the initial activity that prompts the officer to turn on the camera is more likely to be captured automatically, too.

THE Rialto study began in February 2012 and will run until this July. The results from the first 12 months are striking. Even with only half of the 54 uniformed patrol officers wearing cameras at any given time, the department over all had an 88 percent decline in the number of complaints filed against officers, compared with the 12 months before the study, to 3 from 24.

Rialto’s police officers also used force nearly 60 percent less often â€" in 25 instances, compared with 61. When force was used, it was twice as likely to have been applied by the officers who weren’t wearing cameras during that shift, the study found. And, lest skeptics think that the officers with cameras are selective about which encounters they record, Mr. Farrar noted that those officers who apply force while wearing a camera have always captured the incident on video.

As small as the cameras are, they seem to be noticeable to civilians, he said. “When you look at an officer,” he said, “it kind of sticks out.” Citizens have sometimes asked officers, “Hey, are you wearing a camera” and the officers say they are, he reported.

But what about the privacy implications Jay Stanley, a senior policy analyst at the American Civil Liberties Union, says: “We don’t like the networks of police-run video cameras that are being set up in an increasing number of cities. We don’t think the government should be watching over the population en masse.” But requiring police officers to wear video cameras is different, he says: “When it comes to the citizenry watching the government, we like that.”

Mr. Stanley says that all parties stand to benefit â€" the public is protected from police misconduct, and officers are protected from bogus complaints. “There are many police officers who’ve had a cloud fall over them because of an unfounded accusation of abuse,” he said. “Now police officers won’t have to worry so much about that kind of thing.”

Mr. Farrar says officers have told him of cases when citizens arrived at a Rialto police station to file a complaint and the supervisor was able to retrieve and play on the spot the video of what had transpired. “The individuals left the station with basically no other things to say and have never come back,” he said.

The A.C.L.U. does have a few concerns about possible misuse of the recordings. Mr. Stanley says civilians shouldn’t have to worry that a video will be leaked and show up on CNN. Nor would he approve of the police storing years of videos and then using them for other purposes, like trolling for crimes with which to charge civilians. He suggests policies specifying that the videos be deleted after a certain short period.

A spokesman for Taser International said it had received orders from various police departments, including those in Pittsburgh, Salt Lake City and Hartford, as well as Fort Worth, Tex.; Chesapeake, Va.; and Modesto, Calif. In the San Francisco Bay Area, the police department of BART, the transit system, has bought 210 cameras and is training its officers in their use, part of changes undertaken after a BART police officer’s fatal shooting of an unarmed man in 2009.

Before the cameras, “there were so many situations where it was ‘he said, she said,’ and juries tend to believe police officers over accused criminals,” Mr. Stanley says. “The technology really has the potential to level the playing field in any kind of controversy or allegation of abuse.”

Mr. Farrar recently completed a master’s degree in applied criminology and police management at the Universiity of Cambridge. (It required only six weeks a year of residency in England.) And he wrote about the video-camera experiment in his thesis.

He says his goal is to equip all uniformed officers in his department with the video cameras. “Video is very transparent,” he said. “It’s the whole enchilada.”

Randall Stross is an author based in Silicon Valley and a professor of business at San Jose State University. E-mail: stross@nytimes.com.

A version of this article appeared in print on April 7, 2013, on page BU4 of the New York edition with the headline: Wearing a Badge, And a Video Camera.

Disruptions: The Logic (or Lack of It) in Appraising Start-Ups

I have a vision of how suitors decide how much to offer for a start-up they want to buy. Several executives go into a conference room. Each scribbles a number on a piece of paper and places it in a hat. Then the chief executive pulls out a number, and there it is.

It might sound like a stretch, but given the seemingly random and sometimes nonsensical amounts for which start-ups with no revenue, or no users, or even no product are bought, I might not be far off.

But let’s say there is a logical way to value a company. During Bubble 1.0 there seemed to be â€" at least sometimes. Tech start-ups were valued by the number of eyeballs they attracted. When Broadcast.com was acquired by Yahoo for $5.9 billion in stock in April 1999, it was estimated that the company paid $10,000 per user.

Today, when eyeballs mean much less, how do start-ups with no revenue come up with a valuation Well, it depends on a buyer’s reason for wanting the company.

One of the growing forms of acquisitions is an acqui-hire, in which a company is bought for its talent.

“If the company has no revenue and no users, then it comes down to the price of each engineer, which on average ranges between $750,000 to $1.5 million per person,” said Sam Hamadeh, chief executive of PrivCo, a firm that follows privately held companies, who noted that such acquisitions were up 91 percent from a year ago. “Facebook certainly pioneered and popularized this phenomenon as it made acquisitions to essentially snuff out competition.”

An investor report released by PrivCo in late March found that 12 of the acquisitions by Facebook last year were of this type. Often Facebook integrated the engineers and then shut the newly purchased company. The report also found that Twitter had acquired eight companies to get their engineering talent. Yahoo, Google, Apple, LinkedIn and Airbnb have also done transactions just for engineers.

Given Mr. Hamadeh’s estimate, we can begin to guess at a start-up’s value if it’s clearly an acqui-hire. If a company has 10 employees, no revenue and no users, it could be worth about $15 million. Throw in the cost of some office equipment, shutting down the technology and paying back investors, and it’s valued at $30 million.

Chris Dixon, a general partner at the venture firm Andreessen Horowitz, said in an interview that although some of the recent start-up acquisition prices might seem high, many are amortized over four years, which makes some deals seem more rational. “If you’re paying $1 million per engineer in an acqui-hire, that’s split up over four years and ends up equaling the salary of other engineers in the Valley,” he said.

But some of these transactions have people scratching their heads â€" like that of Summly, a news-reading app built by a 17-year-old with two employees, which Yahoo bought for a reported $30 million last month. As Emin Gün Sirer, an associate professor at Cornell, noted, Summly didn’t use any unique technology and has only a couple of employees.

When a company has users and it’s a straight-up product acquisition, the numbers can be more difficult to figure out. Amazon recently purchased Goodreads, a social media site built around sharing books, for a sum said to be $150 million. Mailbox, which had not properly begun, sold for $100 million last month to DropBox. And, of course, there is Instagram, bought for $1 billion./p>

Thomas R. Eisenmann, a professor at the Harvard Business School, said that when companies weren’t being acquired just for their talent â€" like Goodreads and Instagram â€" three possible calculations were used to determine a valuation. The first requires exploring how much time and effort it would take to build the product from scratch and attract new users. The second is potential cash flow.

The third is “in the realm of, ‘What number do we need to put on the table to convince the management and investors to part with their dream’ ” he said. “Often, they end up somewhere in the magic middle.”

Of course, all of this math starts to fall apart when a start-up receives an exorbitant amount of press and exposure on social networks. Then suitors become irrational, making the price people are willing to pay seem as if it were plucked out of a hat.

E-mail: bilton@nytimes.com

Disruptions: The Logic (or Lack of It) in Appraising Start-Ups

I have a vision of how suitors decide how much to offer for a start-up they want to buy. Several executives go into a conference room. Each scribbles a number on a piece of paper and places it in a hat. Then the chief executive pulls out a number, and there it is.

It might sound like a stretch, but given the seemingly random and sometimes nonsensical amounts for which start-ups with no revenue, or no users, or even no product are bought, I might not be far off.

But let’s say there is a logical way to value a company. During Bubble 1.0 there seemed to be â€" at least sometimes. Tech start-ups were valued by the number of eyeballs they attracted. When Broadcast.com was acquired by Yahoo for $5.9 billion in stock in April 1999, it was estimated that the company paid $10,000 per user.

Today, when eyeballs mean much less, how do start-ups with no revenue come up with a valuation Well, it depends on a buyer’s reason for wanting the company.

One of the growing forms of acquisitions is an acqui-hire, in which a company is bought for its talent.

“If the company has no revenue and no users, then it comes down to the price of each engineer, which on average ranges between $750,000 to $1.5 million per person,” said Sam Hamadeh, chief executive of PrivCo, a firm that follows privately held companies, who noted that such acquisitions were up 91 percent from a year ago. “Facebook certainly pioneered and popularized this phenomenon as it made acquisitions to essentially snuff out competition.”

An investor report released by PrivCo in late March found that 12 of the acquisitions by Facebook last year were of this type. Often Facebook integrated the engineers and then shut the newly purchased company. The report also found that Twitter had acquired eight companies to get their engineering talent. Yahoo, Google, Apple, LinkedIn and Airbnb have also done transactions just for engineers.

Given Mr. Hamadeh’s estimate, we can begin to guess at a start-up’s value if it’s clearly an acqui-hire. If a company has 10 employees, no revenue and no users, it could be worth about $15 million. Throw in the cost of some office equipment, shutting down the technology and paying back investors, and it’s valued at $30 million.

Chris Dixon, a general partner at the venture firm Andreessen Horowitz, said in an interview that although some of the recent start-up acquisition prices might seem high, many are amortized over four years, which makes some deals seem more rational. “If you’re paying $1 million per engineer in an acqui-hire, that’s split up over four years and ends up equaling the salary of other engineers in the Valley,” he said.

But some of these transactions have people scratching their heads â€" like that of Summly, a news-reading app built by a 17-year-old with two employees, which Yahoo bought for a reported $30 million last month. As Emin Gün Sirer, an associate professor at Cornell, noted, Summly didn’t use any unique technology and has only a couple of employees.

When a company has users and it’s a straight-up product acquisition, the numbers can be more difficult to figure out. Amazon recently purchased Goodreads, a social media site built around sharing books, for a sum said to be $150 million. Mailbox, which had not properly begun, sold for $100 million last month to DropBox. And, of course, there is Instagram, bought for $1 billion./p>

Thomas R. Eisenmann, a professor at the Harvard Business School, said that when companies weren’t being acquired just for their talent â€" like Goodreads and Instagram â€" three possible calculations were used to determine a valuation. The first requires exploring how much time and effort it would take to build the product from scratch and attract new users. The second is potential cash flow.

The third is “in the realm of, ‘What number do we need to put on the table to convince the management and investors to part with their dream’ ” he said. “Often, they end up somewhere in the magic middle.”

Of course, all of this math starts to fall apart when a start-up receives an exorbitant amount of press and exposure on social networks. Then suitors become irrational, making the price people are willing to pay seem as if it were plucked out of a hat.

E-mail: bilton@nytimes.com

Disruptions: The Logic (or Lack of It) in Appraising Start-Ups

I have a vision of how suitors decide how much to offer for a start-up they want to buy. Several executives go into a conference room. Each scribbles a number on a piece of paper and places it in a hat. Then the chief executive pulls out a number, and there it is.

It might sound like a stretch, but given the seemingly random and sometimes nonsensical amounts for which start-ups with no revenue, or no users, or even no product are bought, I might not be far off.

But let’s say there is a logical way to value a company. During Bubble 1.0 there seemed to be â€" at least sometimes. Tech start-ups were valued by the number of eyeballs they attracted. When Broadcast.com was acquired by Yahoo for $5.9 billion in stock in April 1999, it was estimated that the company paid $10,000 per user.

Today, when eyeballs mean much less, how do start-ups with no revenue come up with a valuation Well, it depends on a buyer’s reason for wanting the company.

One of the growing forms of acquisitions is an acqui-hire, in which a company is bought for its talent.

“If the company has no revenue and no users, then it comes down to the price of each engineer, which on average ranges between $750,000 to $1.5 million per person,” said Sam Hamadeh, chief executive of PrivCo, a firm that follows privately held companies, who noted that such acquisitions were up 91 percent from a year ago. “Facebook certainly pioneered and popularized this phenomenon as it made acquisitions to essentially snuff out competition.”

An investor report released by PrivCo in late March found that 12 of the acquisitions by Facebook last year were of this type. Often Facebook integrated the engineers and then shut the newly purchased company. The report also found that Twitter had acquired eight companies to get their engineering talent. Yahoo, Google, Apple, LinkedIn and Airbnb have also done transactions just for engineers.

Given Mr. Hamadeh’s estimate, we can begin to guess at a start-up’s value if it’s clearly an acqui-hire. If a company has 10 employees, no revenue and no users, it could be worth about $15 million. Throw in the cost of some office equipment, shutting down the technology and paying back investors, and it’s valued at $30 million.

Chris Dixon, a general partner at the venture firm Andreessen Horowitz, said in an interview that although some of the recent start-up acquisition prices might seem high, many are amortized over four years, which makes some deals seem more rational. “If you’re paying $1 million per engineer in an acqui-hire, that’s split up over four years and ends up equaling the salary of other engineers in the Valley,” he said.

But some of these transactions have people scratching their heads â€" like that of Summly, a news-reading app built by a 17-year-old with two employees, which Yahoo bought for a reported $30 million last month. As Emin Gün Sirer, an associate professor at Cornell, noted, Summly didn’t use any unique technology and has only a couple of employees.

When a company has users and it’s a straight-up product acquisition, the numbers can be more difficult to figure out. Amazon recently purchased Goodreads, a social media site built around sharing books, for a sum said to be $150 million. Mailbox, which had not properly begun, sold for $100 million last month to DropBox. And, of course, there is Instagram, bought for $1 billion./p>

Thomas R. Eisenmann, a professor at the Harvard Business School, said that when companies weren’t being acquired just for their talent â€" like Goodreads and Instagram â€" three possible calculations were used to determine a valuation. The first requires exploring how much time and effort it would take to build the product from scratch and attract new users. The second is potential cash flow.

The third is “in the realm of, ‘What number do we need to put on the table to convince the management and investors to part with their dream’ ” he said. “Often, they end up somewhere in the magic middle.”

Of course, all of this math starts to fall apart when a start-up receives an exorbitant amount of press and exposure on social networks. Then suitors become irrational, making the price people are willing to pay seem as if it were plucked out of a hat.

E-mail: bilton@nytimes.com

Disruptions: The Logic (or Lack of It) in Appraising Start-Ups

I have a vision of how suitors decide how much to offer for a start-up they want to buy. Several executives go into a conference room. Each scribbles a number on a piece of paper and places it in a hat. Then the chief executive pulls out a number, and there it is.

It might sound like a stretch, but given the seemingly random and sometimes nonsensical amounts for which start-ups with no revenue, or no users, or even no product are bought, I might not be far off.

But let’s say there is a logical way to value a company. During Bubble 1.0 there seemed to be â€" at least sometimes. Tech start-ups were valued by the number of eyeballs they attracted. When Broadcast.com was acquired by Yahoo for $5.9 billion in stock in April 1999, it was estimated that the company paid $10,000 per user.

Today, when eyeballs mean much less, how do start-ups with no revenue come up with a valuation Well, it depends on a buyer’s reason for wanting the company.

One of the growing forms of acquisitions is an acqui-hire, in which a company is bought for its talent.

“If the company has no revenue and no users, then it comes down to the price of each engineer, which on average ranges between $750,000 to $1.5 million per person,” said Sam Hamadeh, chief executive of PrivCo, a firm that follows privately held companies, who noted that such acquisitions were up 91 percent from a year ago. “Facebook certainly pioneered and popularized this phenomenon as it made acquisitions to essentially snuff out competition.”

An investor report released by PrivCo in late March found that 12 of the acquisitions by Facebook last year were of this type. Often Facebook integrated the engineers and then shut the newly purchased company. The report also found that Twitter had acquired eight companies to get their engineering talent. Yahoo, Google, Apple, LinkedIn and Airbnb have also done transactions just for engineers.

Given Mr. Hamadeh’s estimate, we can begin to guess at a start-up’s value if it’s clearly an acqui-hire. If a company has 10 employees, no revenue and no users, it could be worth about $15 million. Throw in the cost of some office equipment, shutting down the technology and paying back investors, and it’s valued at $30 million.

Chris Dixon, a general partner at the venture firm Andreessen Horowitz, said in an interview that although some of the recent start-up acquisition prices might seem high, many are amortized over four years, which makes some deals seem more rational. “If you’re paying $1 million per engineer in an acqui-hire, that’s split up over four years and ends up equaling the salary of other engineers in the Valley,” he said.

But some of these transactions have people scratching their heads â€" like that of Summly, a news-reading app built by a 17-year-old with two employees, which Yahoo bought for a reported $30 million last month. As Emin Gün Sirer, an associate professor at Cornell, noted, Summly didn’t use any unique technology and has only a couple of employees.

When a company has users and it’s a straight-up product acquisition, the numbers can be more difficult to figure out. Amazon recently purchased Goodreads, a social media site built around sharing books, for a sum said to be $150 million. Mailbox, which had not properly begun, sold for $100 million last month to DropBox. And, of course, there is Instagram, bought for $1 billion./p>

Thomas R. Eisenmann, a professor at the Harvard Business School, said that when companies weren’t being acquired just for their talent â€" like Goodreads and Instagram â€" three possible calculations were used to determine a valuation. The first requires exploring how much time and effort it would take to build the product from scratch and attract new users. The second is potential cash flow.

The third is “in the realm of, ‘What number do we need to put on the table to convince the management and investors to part with their dream’ ” he said. “Often, they end up somewhere in the magic middle.”

Of course, all of this math starts to fall apart when a start-up receives an exorbitant amount of press and exposure on social networks. Then suitors become irrational, making the price people are willing to pay seem as if it were plucked out of a hat.

E-mail: bilton@nytimes.com