It was October 2006 and Jaffray Woodriff was having trouble concentrating on his quantitative hedge-fund business. The programmer kept finding himself obsessing instead over a million-dollar contest that Netflix Inc. was running. It was part of the movie service’s push to improve its viewer-preference algorithm. The money would go to the person who wrote code that gave it the biggest lift. Lots of quants were caught up in it. Figuring out how one...