Friday, December 24, 2004
Politics of the Day - Xmas Edition
Merry Xmas from GWB and his economic bunglers:
"...Charities forced to suspend programs
...In one of the first signs of the effects of the tightening U.S. budget, in the past two months the Bush administration has reduced its contributions to global food aid programs aimed at helping millions of people climb out of poverty.
With the federal budget deficit expanding and President George W. Bush promising to reduce spending, the administration has told representatives of several charities that it is unable to honor some promises.
The cuts to charities, estimated by some charities at up to $100 million, come at a time when the number of hungry in the world is rising for the first time in years and all food programs are being stretched.
"We have between five and seven million people who have been affected by these cuts," Lisa Kuennen, a food aid expert at Catholic Relief Services, said."
Meanwhile, idiots like Lileks are sanctimoniously arguing about the true 'meaning of Xmas'.
Just a thought - maybe it has something to do with helping the poor not starve. (Links via MeFi).
BT vs WiMax
So a buddy of mine just moved into a new place, wanted to get a phone line (which means basically means BT in the UK)...BT said they can't install until the END OF FEB. Yes, BT sucks.
Can you imagine a bigger target for innovators to destroy? I mean, this kind of inefficiency is staggeringly unbelievable - I have gotten lines hooked up fast all over the poorest parts of the 3rd world. Welcome to Wimax market drivers.
Wednesday, December 22, 2004
Sponsored archive reprints - PeopleSoft sponsors the NYT to open access to a compelling series of articles about manufacturing. Veeeeery interesting - this is real innovation. (Via MeFi...again).
Born in the USA
You see, what the Middle East fears is that liberation = occupation. Does it? You decide - here's what we're doing in Fallujah:
"...The ongoing policy of house-to-house inspections, combined with ultra-tight security regulations aimed at not allowing suspected guerrillas to reenter the city, is supposed to insure that everyone inside the Fallujahn perimeter will not only be disarmed but obedient to occupation demands and desires. The name tags and the high-tech identity cards are meant to guard against both forgeries and unlawful movement within the city. The military-style work gangs are to insure that everyone is under close supervision at all times. The restricted entry points are clearly meant to keep all weapons out. Assumedly kept out as well will be most or all reporters (they tend to inflame public opinion), most medical personnel (they tend to "exaggerate" civilian casualties), and most Sunni clerics (they oppose the occupation and support the insurgency)."
I imagine if someone showed up at my house on the East Coast and wanted to liberate me by:
- forcing me to wear a name tag at all times
- restricting my movements
- forcing me to work in a gang
I might reasonably be less than compliant, and a little suspicious of the liberators' motives.
Publishing 2.0 is Dot Com 2.0
More about Google's Harvard/Oxford/etc library digitization plans:
"...The project eventually will allow any Internet user anywhere in the world to search inside millions of volumes, seeing the pages exactly as they appeared in the originals, complete with illustrations, charts and photos.
"When you see the old typefaces (from books) copyrighted in the 1800s, juxtaposed with Google and the search box, it's an almost indescribable feeling to see these two worlds colliding," she said. "This is one of the great milestones in the shift of our culture from paper-based to electronic," said Andrew Herkovic, a Stanford librarian working with Google on the project. "There is in effect a social recognition that we need to transfer the information from paper-based as in the past into the delivery medium of the future."
Gives a nice sense of what the cards are going to look like for the publishing industry in 3-5 years time.
Got this comment:
"...After all the court battles and hype, the music companies finally got their act together and now what are they doing? Selling you Britney Spears on iTunes. Yep, you pay �7.99 (or you nick it) not �13.99. But apart from that, what's changed?"
It's a good point. What's changed is not straightforward. But a change has happened - it's that the market size for media publishers who depend on scale economies has shifted downwards dramatically, and the market size for creative media publishers has expanded dramatically.
Right now, this isn't evident, unless you use, for example, SoulSeek. But think about iTunes - the big labels stand to make much less from iTunes than they did before, because Apple's got all the buyer power - they're going to get squeezed. That makes life much better for the little guys, who don't have to worry about Apple, but can now distribute their content much more effectively than in the past.
Speaking relatively, one segment's expected revenues shrink, and the other segment's expected revenues expand.
Publishing 2.0 - Responses
"...Print is hard to kill. The printed book is especially hard to kill. Why is that? Because it embodies its technology. It needs no device to make it work. What musical reproduction technology is comparable? The music box? The player piano? Books are relatively inexpensive, quite portable, very durable, and easy to use. Good luck trying to replace it."
I get a lot of flak like this, so I'd like to clear it up.
I am not arguing that books will die. I agree, books (and other embodied technologies) are here to stay. What's going to die is the current industry structure, value chain, and economics.
To use one example from the trends outlined before: it's now becoming economical for micropublishers to print books just-in-time - that leaves room for a couple of outsourced printers (a la Flextronics). Carried to it's logical conclusion, it eviscerates the way we publish books.
We rarely argue at the technology level here at bubblegen, because we think it's the implicit economics of technologies that count.
I think the far more interesting argument is that human capital counts for a lot in the publishing industry - that editors select books for the market efficiently. The point is that this equation has changed.
Before, the market couldn't select it's own books - it couldn't coordinate. Those few mechanisms which did coordinate consumers (ie, the NYT bestseller list) soon turned into strategic tools (ie, publishers game the bestseller lists regularly.
But now, the market can coordinate. That is, mechanisms like Amazon's reviews and author rank have reduced search costs for consumers in finding the best books (even within a given segment). Here's another nice example - bookswelike.
So the argument now has to be that editors can choose books for the market more efficiently than the market can choose books for itself. The second half of this equation is necessarily bounded by the efficiency of information mechanissm - if Amazon reviews are bs, then the equation doesn't work.
I think it's a tough sell to argue the above equation in favor of editors (or record label execs, movie producers, network execs, etc). If we simply look at the blogosphere, Technorati's done almost as good a job in predicting book deals/tv/print exposure/etc as people have.
But that's only because Technorati is people - it's the market's aggregate preferences made visible. Which is a fairly incredible thing - it's rarely happened in history before.
So, I think now that we can choose what we want, we won't need editors so much - their choices will, in general, be worse than the aggregated market choice. I think we will see them moving to a new, much more interesting role - one where the market chooses it's own winners, and editors/human capital are like John Peel - they're not so much talent-spotters as experimenters.
Which is what they should have been in the first place maybe.
Google vs Google
So we know now about Google's shifting of the web app paradigm - using js and xml to embed dynamic client-server communication into the page itself. One problem, as I've discovered today, is that some security systems (like the one here at LBS) don't deal especially well with the extensive http calls (redirects etc) that are required to pull this off. I am having serious problems accessing Gmail at the moment - it's turned into a big hassle, and I've had to go somewhere else just to check email. Argh.
Tuesday, December 21, 2004
Politics of the Day - Flameage Edition
Note to Hugh Hewitt, who seems to have missed the Enlightenment: the reason we reject religious arguments is that they're based on faith, not driven by evidence or logic. In short, empiricism and rationalism are why we reject religious arguments against, for example, stem-cell research, theocratic governments, and being rapture ready.
Empiricism is not a 'sneer' at faith - the great achievement of the Enlightenment was that empiricism was a more efficient way to understand the world around us. A simple experiment can demonstrate the existence of light's wave/particle duality, and reject the hypothesis that light is 'miasma' (or whatever). What can religious arguments demonstrate? What is the support for their claim to moral superiority?
I would really like an answer to this question from Hewitt, although as someone who's lived under a theocratic government, I already know the answer a bit too well: there is no answer.
How do we know this? Because the same arguments have gone on for well > two millenia. Example. It's an ancient debate, which won't end soon - but it should be happening in Saudi, not in the US. Perhaps Hewitt would feel better living in a society where the appropriate length of beard is considered a compelling topic of debate.
Related humor of the day:
Quantum Christodynamics. Funny stuff.
Scoble asks billg to open-source product development for an MS competitor to the iPod. Veeery interesting, if only because it shows open-source management and innovation techniques are gaining serious support.
"Two of the book industry's giants, frustrated by two years of little to no growth, appear to be taking their frustrations out on each other.
...Last week, Peter W. Olson, the chief executive of Random House Inc., the nation's largest publisher, disclosed the company's tentative plans to sell books directly to consumers through its own Web site. On Friday, Stephen Riggio, the chief executive of Barnes & Noble Inc., the country's largest bookseller, said that he was "deeply concerned" by Random House's plans to enter into his business, raising the possibility of a growing rift between the publishing companies."
Link. It's interesting that the industry is beginning to cannibalize itself, and radical innovaters still aren't entering the market...a huge market space just waiting to be revolutionized, as discussed last week.
Link of the Week
SkypeCasting - PodCasting, but leveraging skype to kill transaction costs and do other very cool stuff. Highly recommended.
Monday, December 20, 2004
Public vs Private
This NYT piece talks about something we discussed a few weeks back as a serious Next Big Things driver - the blurring of the line between public and private. Recommended - more insight into how value equations in media markets are shifting tectonically.
Welcome to Big Brother. But don't worry, it'll help us win the war on terra.
"..."I know that these actions would be controversial in this age where we still think the Internet is a free and open society with no control or accountability," Mr. Tenet said, "But, ultimately, the Wild West must give way to governance and control."
The Day the MPAA Tried to Kill the Net
By shutting down as many BitTorrent trackers/linkers as they could, in case you don't already know. Complete with arrests in various countries. SuprNova closure FAQ.
This is going to be a day to remember, because it's the day the film industry chose strategy decay over user learning and innovation.
Now, the simple fact is that this is a huge error. Look what's happened in the music industry - we're seeing filesharing being driven further underground. But all that means is that it's further under the RIAA's nose - it hasn't gone away. What's actually happening is a Darwinian process - the emergence of niche-specific networks in response to this kind of selection pressure, which are far more efficient at distributing content than general ones (viz SoulSeek).
You could also think about the selection pressure this away - BitTorrent itself was selected by the RIAA's closure of less efficient networks.
This is exactly how the tech trajectory of p2p will evolve - network and protocol hyperinnovation in response to extreme selection pressure - and it will be more costly for the film industry, because there's a lot more competition from the rest of the world for viewer share than there is for listener share. So, beyond absolutely enraging the IntarWeb, I think the film industry just dug it's own grave.
Saturday, December 18, 2004
It happened to Japanese-Americans during WW II, so this comes as no surprise. Courtesy Metafiler.
Friday, December 17, 2004
"But when the eureka moment arrives, we will cross the threshold into a new era of science."
Geeks 0, Jocks 1
"...Silicon Valley lost a decisive round in a long and hard-fought battle Thursday when the organization that sets corporate accounting standards served notice that companies would have to deduct the value of stock options when calculating profits."
Getting past the hype, there are many, many ways to game this rule, and the real winners are gonna be the beancounters. The Valley will find a standard trick or two to bring their books back into line.
That said, it's a very stupid idea. First, the problems that cost the most are at banks, hedge funds, etc - not at tech firms. Second, CEOs will continue to draw massive compensation because they still exert board-level control. So, this legislation will (as usual) create more problems than it solves.
The real victim of politics these days is, it appears, innovation. Perhaps Grove and co wanna hire a PR firm and recast 'innovation' as 'good ole Yankee ingenuity' or something - the geeks are losing.
End of the iPod
Playboy offers iBod, or free pics of naked chicks for your video iPod. I mark this as the moment when the iPod jumps the shark - let the uncooling begin. The demise is gonna be catastrophic (and pretty funny - iPod pretension knows no bounds these days). Via LinkFilter.
Earth might have a new moon.
"...An amateur astronomer may have found another moon of the Earth. Experts say it may have only just arrived.
Much uncertainty surrounds the mysterious object, designated J002E3. It could be a passing chunk of rock captured by the Earth's gravity, or it could be a discarded rocket casing coming back to our region of space."
More Publishing 2.0
Took some flak from readers asking how exactly Publishing 1.0 will die. It's pretty simple:
1) Push-button publishing. Blogger is the first in a very long line of such tools - expect similar ones to emerge across all publishing markets.
2) Open-source/massively distributed content. Ohmynews/WikiNews are the first movers in what's going to be a massively competitive space.
3) On-demand printing & distribution. Like the new breed of on-demand micropublishers, all of whom have extremely cute .com names I've forgotten (but you can check the archives, we've written about them before).
4) Advertising 2.0. Advertising is becoming more effective and targeted, because it's becoming intelligent (or, at least, responsive). Partly, this is due to the Net creeping into every artifact that surrounds us. Investing in any kind of advertising that isn't intelligent - like in traditional publications - will become less and less attractive.
5) eBay/Google - will eviscerate/are eviscerating many niche markets dependent on asymmetrical information.
Together, these trends point to publishing markets where anyone can publish anything at anytime (or, anyone can read anything...). OK, I exaggerate, but the point is barriers to publishing will, for the most part, disappear. At the same time, barriers to consumption will drop as well (ie, distribution costs will drop to zero, the average price of all goods in each segment will fall etc). So the structure of the industry will change radically.
How can the publishing industry compete? I'm not sure it can - it's deliberately walled itself off from innovation for a very long time. But if I had to give advice, I'd say break the walls around your walled gardens, co-opt massively distributed models before they erase you (buy/make WikiNews), develop push-button publishing solutions (why didn't any of you develop Blogger, or even a clone?), fund open-source search and auctions to put massive innovation pressure on Google and eBay. But probably the most important is to begin building a new business model before your industry economics begin to really change - I would build a lab to run cheap experiments by offering radically new kinds of book deals, ads, etc.
Thursday, December 16, 2004
Humour of the Day
"...MPAA anti-piracy chief John Malcolm said the trade organization's actions were not aimed at criminalizing P2P technology itself, citing "legal torrent" services that specialize in public-domain material as examples of the technology's non-infringing potential.
Malcolm described the operators of the targeted servers as "traffic cops connecting those who wish to steal a movie with those who have a copy of it."
"These people are parasites leeching off the creativity of others," said Malcolm."
The irony almost killed me. From an obligatory Wired piece on the MPAA vs BitTorrent.
Next Big Things - Publishing 2.0
I think that the next media industry to be vaporized by IntarWeb 2.0 is going to be the publishing industry - as opposed to everyone's current favorite candidate, the movie industry.
Now, we've heard a lot of talk lately about 'citizen journalism' etc. This is the tip of the iceberg - publishing is a much bigger industry than simply journalism: it encompasses books, journals, magazines, and various other periodicals.
There's no lack of well-trained analysts, but there has been a lack of well thought out analysis of the the impact of technological disruption on this space. Most of the publishing industry is complicit of the same kind of moral hazard that the music industry's been (model here). They foist dumbed-down authors on an audience that deserves better, because their hit-driven business model is basically a vicious circle of rising marketing costs and winner-take-all markets.
At the same time, the vast majority of them have adopted a walled garden Net strategy - if you don't pay, you can't play. Others offer the same value prop as Publishing 1.0, but giftwrapped in pretty, but valueless technology (ebooks etc). Even the 'innovators' in this space - like KeepMedia - offer essentially the same value proposition, with cosmetic changes in terms of the timing of revenue streams.
The point is that the IntarWeb demands a fundamentally strategy, because it's economics are radically different. Walled gardens don't work as markets expand. They're massively exposed vital points for smarter, nimbler competitors to strike. Look at the multitude of uses Blogger's being put to - this is how strategy decay happens: at the edges of the network.
Right now every blogger's dream is to grab a book deal. In a few years, the opposite will be true: market dynamics will experience a tectonic shift all parts of the publishing industry. Winner-take-all dynamics will disappear, and gains will be redistributed across multiple authors (ie, Tom Clancy won't be the only war novelist people pay to read). When everyone's got a book deal, a book deal simply won't be worth that much - but a reputation will be. That's what will be both costly and valuable.
This will happen as open-source/open-access solutions with bundled, viral revenue chain micropayment models emerge. These will destroy barriers to competition for authors and readers alike. Because of this, switching costs will be vaporized (so winner-take-all dynamics will disappear). As the distribution of readership itself changes, so more people read a broader variety of things, profits will get taken away from incumbents, who are still focused on building walled gardens, and redistributed to real innovators. Consumers, of course, will realize a significant surplus, as production and distribution costs are driven down.
Where will pricing end up? It's an interesting question. I think we'll see dynamic pricing mechanisms emerge (ie, different prices over time for the same product). Of course, most media industries attempt a crude version of this - the latest Britney CD costs you 15 bucks when it's released, and 10 bucks a few weeks later (or at least it did a couple of years ago). The problem is that strategists in the industry see this as price discrimination - charging early adopters who value new products more.
But it's not - at it's heart, the dynamic pricing model (like in our licenses) isn't focused on producers - it's focused on viral consumption. The price of a digital good, in this model, is a function of the present value of all viral revenue streams any consumer stands to gain from redistributing a digital good. This is a radically different notion of pricing than price discrimination, because it requires models of viral consumption - not just according to a simple utility function.
But this is getting away from the main point I wanna make: the publishing industry is living on borrowed time. Of course, it has been for a while. But I suspect the tectonic shifts unleashed by massively distributed business architectures and open-access technologies are going to hugely accelerate the rate of innovation for Publishing 2.0. I expect to see exponentially increasing new entry in the next year or two.
Another interesting point to note: unlike music and film, there won't be significant Replication Wars in this space. That's simply because the publishing industry hasn't played the patent thicket strategy with the same fervor as the music and film industries. So the evaporation of Publishing 1.0 will be relatively quicker than that of Music 1.0 - but the key point is that the publishing industry, because it hasn't destroyed it's perceptual capability with silly protection tactics, has a good chance to play a significant role in rebuilding it's own business model and industry economics.
Apologies if this is rough - no time to edit today.
Wednesday, December 15, 2004
Faultline has a nice piece on the Blu-Ray standards war, which hinges around competing visions of DRM:
"..."We picture a message popping up on a screen saying something like 'Disney movies won't play on your player any more please call this number for further information.' Or perhaps 'To fix this please call Disney with your credit card,' something like that anyway."
Hilarious stuff - funny that anyone actually believes this has a chance of success.
Blogosphere Dynamics - a Challenge
Jeff goes ballistic on Juan - this is hyperpolarization at it's finest. Blogs were (are) supposed to be conversations. So why do we see this kind of naked aggression and cheesy bullying instead?
Let's go back to my simple model (based on Sunstein): hyperpolarization happens when it's cheaper to find reinforcing information than it is to find information that challenges your beliefs (factoring in the cognitive costs of dissonance). This suggest two strategies for blogosphere mechanisms to promote true discussion.
First, make challenging information at least as cheap than reinforcing information. Second, make reinforcing information at least as costly as challenging information. In practice, what this means are mechanisms that integrate the presentation of both sides of a debate - that create barriers to access for reinforcing information, or remove barriers to access for challenging information. The Daou Report is a primitive attempt at this.
Better attempts would transform costs by automating various parts of the information flow, as well as factor in cognitive costs (perhaps by alternately weighting different sides of the debate) - that's the hard part. It's a challenge, but a huge opportunity for would-be blogosphere capitalists. I expect to see numbers of these springing up in the next 6 months or so - let's call them discussion machines for lack of a better term.
Google - Switching Costs
An almost textbook example of obtaining access to valuable and inimitable resources as a means to gain advantage:
"...Google, the operator of the world's most popular Internet search service, announced today that it had entered into agreements with some of the nation's leading research libraries and Oxford University to begin converting their holdings into digital files that would be freely searchable over the Web."
Understanding the cryogenetic abilities of other species has massive implications for for many markets - the article notes organ donation will become cheaper, since organs will be storable for longer periods of time. Nice piece.
"...Scientists say that, before winter comes, the frogs eat ravenously, storing a starch in their livers. A freeze triggers their bodies to convert the starch into other compounds, most often glucose, or blood sugar. The frogs become, in essence, extremely diabetic.
The glucose lowers the freezing temperature of water inside the frogs' cells, and because of this, the cells stay liquid, even as ice fills the space around them. This is crucial: If the water inside the cells froze, scientists say, the jagged ice crystals would destroy everything inside, killing the frog.
Tuesday, December 14, 2004
The Beginning of the End
Sony hands an olive branch, Toshiba laughs.
Since the Paramount, Warner Bros, and Universal agreement for HD-DVD isn't binding, this recent move, if true, highlights the dire situation Sony et. al. may see themselves in. Once the dust settles, this fiasco will be an interesting study - assuming Sony learned from the Betamax/VHS debacle, and given the lead Blu-Ray has with drives and hardware already available, it challenges the Law of Leadership: It is better to be first in the market than better. In fact, if HD-DVD wins, it will be a great example of the Law of the Mind: It is better to be first in the mind than to be first in the market. (To learn why, click here.)
What Sony should have done is create, or at least target, a new category. Unfortunately, managing the Innovator's Dilemma is not a Sony strength. Business 101.
Monday, December 13, 2004
"...The Oxyride battery, which went on sale in Japan in April, also lasts longer than regular batteries, allowing users to take about twice as many pictures on a digital camera, according to the Japanese manufacturer of the Panasonic brand."
Link. Well, 3.0 if you count 19th century Leyden jar-style batteries.
Lots of Aubrey de Grey buzz floating around the Net last week, here's a link to his site (engineering anti-aging technologies).
Politics of the Day
Finally, a bit of proper analysis of why Bush's privatization schemes are such a bad idea - they're vol multipliers. They massively increase the volatility of every individual income (which makes it worth much less, unless you like volatility). Now, Atrios thinks this risk is uninsurable - but the play here is that's it's not.
So are we going to essentially sell forward our privatized social security income? Obviously - we're going to end up subsidizing big corporates - not through piddling commissions, but far more through risk effects (ie, we want to insure our volatile revenue streams now).
Now, corporates will be more than happy to take this bet, because they can (in the aggregate) derisk these streams. Of course, individuals will have to pay handsomely for this service, simply because their side of the market is much more fragmented and will be able to exert less power than the relatively concentrated corporates.
It's nothing more than a stupid shell game - a massive transfer of risk to the individual, and then wealth to the corporates.
The culture jammer's encyclopedia is very thought-provoking - this kind of 'resistance', or, more properly, selection pressure, will shape the corporation (and industries) of the 21st century.
iPod vs PSP
Apparently, the buzz is that the new PSP is a fairly nice MP3 player as well. Will make for some interesting market dynamics. Here's a nice PSP faq; Lik-Sang has the obligatory post-launch pics.
Update - took some flak for suggesting the PSP would be an iPod competitor. Actually, I'm not suggesting that - just pointing out the market is giving us clues about future trajectories for the architectural evolution of handheld technology. Obviously, the PSP isn't a substitute for the iPod because of the difference in memory - but generation 2 might be, or a clone might, etc, etc.
The First World is the New Third World
The NYT with an amazing argument that algebra shoudn't be taught to kids - essentially, because technology does 'all the math'. Uhh, only when it's programmed to.
Highly recommended - I just noticed this myself and deconstructed Gmail a few days back - very impressive stuff. What we might call radical innovation, in fact.
Dot Com 2.0
Post piece about new developments in search - here's one I'd missed:
"...The other new search site to surface last week, Blingo (www.blingo.com), appeared to deliver better search results but also looked more gimmicky. The site, unveiled in test form Wednesday, offers users a chance to win such prizes as digital cameras, Amazon.com gift certificates and music CDs with every search they run. Company officials said Blingo will offer hundreds of prizes a month while they are testing the service, then thousands each month once the site formally launches."
We're gonna party like it's 1999.
Nice Post piece about Chinese firms' acquisition or JV focused growth strategies:
"...Sarvar had a key asset -- an industrial park run by Flextronics, a Singapore firm that makes products for name brand electronics companies. Hisense had already hired Flextronics to make mobile phones at a plant in Shenzhen, China. Now, it struck a deal to have Flextronics make its televisions.
Sixty percent of the value of the parts and labor used must come from within Europe to qualify for the locally made designation. The rest can come from China, allowing Hisense to capitalize on its low-cost base. Though its European manufacturing costs are three times what they are in China, the lack of import duties makes the equation profitable, the company said."
Yub - recently acquired by Buy.com has an interesting model - networking with discounts gained by recommending brands to friends. A simple example of a first-degree viral revenue chain - check out our concept license for a deeper model.
EMI vs File-Sharing
Tony Wadsworth is the Chairman of EMI, and wrote this piece in the Guardian, in response to some of the Guardian's research on file-sharing:
"...Everyone has a view of today's music industry, but for those of us lucky enough to work in it, some of those views can seem far from reality. In response to research on digital music carried out by Guardian Unlimited, here are my Top 10 myths and misunderstandings.
1.The i-Pod explosion will kill CD sales.
i-Pods and other MP3 devices have given lapsed music fans renewed interest in music and they need "content". Many consumers are buying new CDs to load via their PC, and recent British figures show album sales are at an all-time high. What we care about is bringing as much quality music to as many people as possible, in as many ways as they want to receive it, online or on a physical format."
This is obviously bad logic. iPod penetration in the UK isn't high enough to challenge this conclusion yet. In the States, there is a correlation between iPod sales and declining CD sales. In either case, this is a massive strategic error: iPod tracks and CD's are substitutes - you can't wish this away.
"2. Unauthorised use of P2P (file-sharing services, like Grokster or Kazaa) promotes sales and so is a good thing.
Music companies invest huge amounts in helping artists record their music. It's the right of the people involved in that process to decide how that music is made available and whether they want payment for their work. If unauthorised P2P becomes the only consumer experience, musicians and producers will be starved of investment."
Another massive strategic error. There's plenty of evidence to show that viral mechanisms promote experience goods in particular very effectively. Ask Bzzagent for some numbers. The claim that major record labels 'invest' in artist development isn't and hasn't been true for many decades - marketing is by far the biggest cost driver (and still rising). In either case, the point is that P2P isn't going away, so telling people 'it's bad' is an error - it's ignoring reality.
"3. Record companies are anti-downloading.
We believe that the net is a fantastic way to listen to new music and get into styles of music you otherwise might not hear. Through artist and official retail websites we're offering brand new content through streams and special offers. We've been building fan bases this way for more than 10 years and have used audience votes to select singles or tell the Rolling Stones what to play as an encore during their live shows."
Give me a break. Both the RIAA and BPAA are suing consumers en masse for file-sharing. But the fact that he thinks EMI's been building fan bases for 'ten years' (!) via the Net gives us a clue about why the industry's making such huge errors - they haven't built a perceptual capability. You can't understand your own industry dynamics if you can't see them.
"4. Record companies are anti file-sharing technologies.
We will work with any company that has a sound business model, including legitimate P2P services such as Snocap, with whom we are in discussion."
See answer to question 3. Also note that 'legal' (ie, price per download) file-sharing destroys value-drivers (and it can't really be called 'sharing').
"5. Record companies can't agree on which file format music should be delivered.
We aren't technology companies and aren't involved in originating those formats, but we would much prefer to see inter-operability across file formats and are lobbying to achieve this."
Any media firm is always a technologist. If they can't be, they'll be vaporized within five years. But this has always been true, from the printing press, to the Gramophone, to the blog. Technological innovation only changes discontinuously - it doesn't disappear.
"6. Digital delivery of music means artists can go direct to consumers and won't need record companies.
Music companies fulfil a key role in the recording and marketing of their artists. Their investment and expertise is valued by new artists trying to get established."
Then do it. Invest in your artists - don't simply market them. The market's smarter than it used to be (you know, information's cheap, etc, etc) - room for style over substance is declining across all media markets.
"7. Record companies were slow to adapt to new technology and so the pirates got there first.
It's a lot quicker to rip something off and offer it free than it is to build a legal framework around the same system so that artists, writers and producers can be paid for their work and develop long-term careers. There are scores of legitimate sites in place now."
...I'm tired now. If you'd done it, we'd be using it - instead, you guys built Rhapsody, and Listen, etc - which offered value props that consumers laughed at.
"8. Consumers have got used to getting music free so won't buy digitally.
From a standing start a year ago, there are now 1m legal downloads a month in Britain alone, a download chart, countless online retailers offering different ways of getting music such as streaming or subscription and a large and growing legal market for receiving music on mobile phones."
Right. Now you're getting it - ask why consumers are beginning to prefer digital music.
"9. With no manufacturing costs, record companies should be able to drop prices.
The risks and initial investment in launching an artist, which includes recording albums; paying artists, producers and engineers; producing videos and developing visuals, remain the same. Manufacturing costs are now put into huge investment in IT and digitisation."
Ha ha. This is the best answer of them all. The argument is that digitization makes the costs of music rise. Clearly, digitization makes aggregate music production discontinuously cheaper - but makes consumption more costly. It only makes costs rise if your strategy is, well, marketing and hyping artists nobody would listen to otherwise.
"10. The record industry is crazy to "sue" its customers.
We need to establish that getting music free without the permission of its creators is wrong, pure and simple."
It's not - that's the point. That's exactly why copyright's broken. Check out our licenses, play with them, think about them.
The saddest part is that British labels have a massive source of future advantage over American labels - they do focus (relatively) more on artist development. But starving this resource now will kill that future advantage. The best way to discover how powerful this resource is to expose it to the market - to experiment with new business models and industry structures. Not to keep it locked up in the basement.
Friday, December 10, 2004
Nokia creates a $100 million venture fund to support late stage (revenue generating) wireless startups.
I think these focused venture capital funds are actually a better play than their 'mishmash cover everything that might be hot' type bigger brothers. The people working here know their industries, know what's needed, and I would hazard a guess that a higher percentage of companies started by focused VCs like this actually successful. Just a guess though.
Politics of the Day - Reversing the Enlightenment
I know, I know, I said no more politics. But:
"...Students at one of the area's largest Christian schools are reading a controversial booklet that critics say whitewashes Southern slavery with its view that slaves lived "a life of plenty, of simple pleasures."
Leaders at Cary Christian School say they are not condoning slavery by using "Southern Slavery, As It Was," a booklet that attempts to provide a biblical justification for slavery and asserts that slaves weren't treated as badly as people think.
Principal Larry Stephenson said the school is only exposing students to different ideas, such as how the South justified slavery. He said the booklet is used because it is hard to find writings that are both sympathetic to the South and explore what the Bible says about slavery."
To reiterate an old theme: this is how we become them. One of the things my third world background taught me is that you can justify anything in God's name - in the subcontinent, throwing acid in the face of an 'unfaithful' woman is an act of 'faith'. For others, it's blowing up buses full of innocent people. Apparently, in parts of our country, it's slavery. How abhorrent and what a betrayal of the very idea of America.
Google Suggest Beta
A future textbook example of leveraging network externalities - Google captures the information value in related search terms by creating something close to new: a search platform for network externalities - massive value gets created for users as search costs drop. Switching costs go up, Google locks you in, voila. Brilliant move - truly impressive both technologically and strategically.
Cool Christmas present. Link
Netflix Vs the World
Amazon introduces DVD mail rentals in the UK - credible threats created a competition hole, and now Amazon can secure a nice FMA in this market.
"...Netflix shelved plans to enter the U.K. market and reduced the price on its most-popular unlimited rental plan in the U.S. to $17.99 from $21.99 after learning of Amazon's coming service. Netflix expects to have about 2.5 million subscribers by the end of the year."
Google Vs Evil
Goog to test animated gifs for AdSense:
"...The Mountain View, Calif., Internet-search giant published a note on its site telling AdSense customers -- the Web-site partners that display Google's keyword-driven ads -- that it plans to accept animated ads in the GIF format from a small group of test advertisers. The test is part of an effort to expand its image ad program, which has been in beta testing since May, to include more formats."
Here's the relevant Google page. Needless to say, I think this is a really bad idea - yes, it will generate massive revenue in the short-term, but it exposes them to disruption from innovators focused on new forms of advertising. Of course, Google's public now, so priorities have changed...
Bubble of the Day
The comic bubble of the 90s, as told by a comic dealer - illustrates some classic bubble dynamics:
"...Valiant books were just insane. Being a brand new comic universe, new characters were introduced every issue. New comics soon doubled in price just because it had the first appearance of a minor character. Even old issues of Magnus Robot Fighter, previously ignored and looked down upon, were flying off shelves. Image comics were popular just because they were Image comics. Early image was staffed by folks who knew how to draw, but not how to run a business. Early issues were often ridiculously late and even more poorly drawn then usual. But people still bought them. I didn't understand it, I just sold them.
I very clearly remember the beginning of the end. It was at a comic show in Portland, hosted by Dark Horse Comics. For months, collectors were trying to find a copy of Magnus Robot Fighter #12, the first appearance of Turok. The reason being, Valiant was about to launch Turok's own comic book, and investors and speculators were looking for copies before it came out. What they didn't know is that most dealers HAD multiple copies of it, but were hording their copies until Turok #1 came out so they could sell it for big bucks. Not me, though - it just didn't feel like a good bet.
So anyway, this show happened to come out right after Turok #1 was released, and the joint was practically littered with copies of Magnus #12, all having magically materialized from various inventories. One dealer had rented a table just so he could sell his two long boxes full of Magnus #12. Turok was all over the damn place. And not a single dealer sold a single copy. The investors had totally vanished from the scene. The worm had turned, and comics fans were pissed off.
...Magic cards were THE perfect opportunity for their pump and dump schemes.
Here's how it works. Say a new card series comes out with a wholesale cost of $30 per box for a case of 10 boxes. That's $300. On day one, sports cards dealers would jack the price up to $75, well over the comfortable margin of $20-$30 per box. If they sell 4 boxes at $75, that nets them $300 right away. They've broken even. They can now drastically cut the price as low as they want and still make a profit on the case. By the second week, the price would drop from $75 to $35. Two weeks later, it would reach $20 or less. To ensure their profit margins, at least in my area, dealers would form their own little cartel and all agree to fix prices at the higher level. Smaller dealers, many of whom purchased their inventory from the larger dealers, tried to sell their boxes at a normal retail price and could not compete. They were gutting their own hobby.
Enter Magic cards. In an attempt to prolong demand and collectibility, Wizards of the Coast rationed all orders for Magic cards they received. So if a dealer ordered 100 boxes, WHAM, their order would be cut to 50 boxes. Dealers would receive maybe 10% of their order on launch date, receive their next 30% a month or so later, and so on. Needless to say, this tactic combined with sports card dealer greed and collector insanity did not result in a stable collecting environment. "
Highly recommended (via MeFi).
Thursday, December 09, 2004
Om on the death - aka, relative invisibility to pro bloggers - of individual bloggers.
Here's the problem - people assume there are no switching costs in the blogosphere (ie info is cheap, there are many similar blogs, all that jazz). This is not the case at all - the truth is switching costs are high in the blogosphere. There's evidence for this: blogrolls tend to stay locked in. Once they're made, they're rarely (if ever) updated or switched.
Here's why: while reading any old blog is costless, searching for new blogs that are worth reading regularly is costly. We can call this search cost the price of a blog (there's more to the price of blog than this, but it'll do for now).
Now, once you do find a blog that meets your preferences, you tend to lock in, until (presumably) you've at least recouped the fixed investment of searching for the blog. Or, you lock in until a new blog offers you enough value to switch, which is the value of the first blog, plus any fixed cost left.
The point is that you lock in because the opportunity cost of reading the blogs you've already found is very low - the expected value of reading new blogs is simply not that high (ie, the probability that you'll find a new one as good as the one you're already reading is low, because search costs are high). So the second case - where you switch - is pretty rare.
Now, we can complicate this model with regret effects - the mental costs of dissonance, or processing new information that disagrees with information you already believe - which raises switching costs even further. But there's no need to do so at this point - this model already explains the incredibly lengthy time decay of the average blogroll.
What this means is that reputation effects are a key market structure of the blogosphere - because they slash search costs. You might not read bubblegen if only Om mentions it - but if Om, Battelle, Wired, and BoingBoing mention it, you'll probably give it a chance. The probability of this being a good blog (and thus expected value) jumps discontinuously - not linearly - with each repuational signal the market sends you.
But the odds of this happening are pretty low - even if your blog is great, sending this many signals is combinatorially complex. It doesn't (and won't) happen often. What all this really means is that the blogosphere will ossify - it will get and stay locked into winner-take-all dynamics. Especially as the number of bloggers increases massively more than the number of readers.
So what we really need, I've thought for a long time, are new mechanisms to create churn in the blogosphere - not simply positive feedback ones like Blogdex and Technorati (and traditional media, blog awards, advertising, etc), but things like reverse syndication - and newer ones we haven't thought of yet. These are search cost slashers - or expected value multipliers, if you like. It's an absolutely huge gap in the blogosphere just waiting to be plugged.
If these mechanisms aren't created, blogonomics dictates that pro bloggers will be read more than personal bloggers - because they're more likely to generate reputation effects, and take advantage of positive feedback mechs. Believe it or not, this was part of the motivation for Blogversations.
Wednesday, December 08, 2004
I highly recommend you check out Relevanta - it's almost revolutionary. It's completely chaotic at the moment, but the potential is immense. Killer stuff.
New Market Spaces - Anomic Society
This letter to the NYT helps us understand the dynamics of the anomic market space:
"...You write of depressed and suicidal college students as if their problems were purely psychological. What if the problem lies in the social organization of universities rather than in the psyches of students?
What if first-year students come to college and can't find meaningful communities?
What if the culture of alcoholism, the impersonal lecture halls and the anonymous cafeterias make students unhappy?
What if students develop psychological problems because, in our society, jobs are scarce, personal relationships are frequently tenuous, and the future is often frightening?
As a recent college graduate, I can attest that some students do need psychiatric help. But university administrators, as well as journalists, would be well advised to ask whether student depression is a symptom of much larger problems."
This is related to what KH calls money culture - in both cases, the driver is anomie. Anomie is also driving a resurgence of religious fundamentalism across the globe.
Why is it so powerful? As the great sociologists pointed out, technological change accelerates exponentially, while our ability to socialize it (ie, the rate at which social structures can adapt) increases generally linearly. I would add a jump term to this model - we can socialize the effect of new machines only discontinuously. When we can't socialize the shockwaves technology sends through our culture, we turn elsewhere for guidance - religion, self-help books, cults, etc. All of these products being sold on the anomic market.
Now, we can skip a full blown discussion of the economics of the market, though it might be quite interesting - the point to note is that this market is going to grow hugely - the size of the growth is the difference between accelerating technological change, and linear social structure plasticity. In short, a very, very good market to be in.
Where will value creation lie? I think the key dimension of value to consider in this market is Baudrillard's notion of seduction (versus economic production). More along these lines - a nice explanation of why simulation creates so much value for so many people.
Macropocalypse - Supply Side
"...John Hyatt, vice president of Irwin Brown Co. in New Orleans, a freight forwarder, says many U.S. producers are reconsidering how they operate their vaunted "just in time" systems, which cut costs by reducing inventories to a minimum. "The problem for manufacturers that use [just in time] is that they're really relying on transportation to serve as their temporary warehouse, but that's not working too well anymore."
Very interesting - clearly, there are many drivers; currency shifts, greater security, capacity crunches in emerging markets, etc. The point is that many older systems can't cope with the pressures of supplying enterprises in a (truly) globalizing economy - JIT is probably just the first real example; they will become more and more vivid as they move up the value chain.
"...James Dyson, the inventor and entrepreneur, will claim tonight that a "culture of rewarding failure" must be developed to help safeguard the future of engineering in Britain.
In the 29th Richard Dimbleby Lecture, Mr Dyson argues that Britain has for too long celebrated the individual who is effortlessly brilliant, like the Oxford double first, rather than the "determined slogger".
In fact, says Mr Dyson, B-grade scholars make the best inventors and business people. "They have learned to persevere and they're not scared of failure," he says."
Tuesday, December 07, 2004
Sharp has a commanding lead in the LCD market. Asides from having great products, their marketing is no slouch. This is the first really creative corporate use I've seen of mixing television, with web advertising. A compelling example of using blogs as part of the customer experience. Link
The Strategic Petroleum Reserve is like keeping money under your mattress. Right now it has 700 million barrels of oil, enough to last the US for two months. It cost us $20 billion. We seem to always attack the symptoms rather than the cause, think about it. Link
Politics of the Day - Why They Hates Us
"...A typical letter to the editor in Time magazine says that "invading a country and causing thousands of deaths and incalculable misery to innocent people is a sin." True enough; but this statement ignores the context of the prewar situation in Iraq. It is estimated -- not by the US government but by the United Nations and by international human rights groups -- that Saddam's regime butchered some 300,000 people in Iraq over 28 years. Many more dissenters were imprisoned, tortured, and subjected to barbaric punishments such as having their ears or hands chopped off.
What's more, according to UN estimates, by 1996 half a million Iraqi children had died as a result of US-led sanctions."
Look. The rest of the world isn't stupid. Of course they understand this argument. The problem, in fact, is the converse - they extend this argument to it's logical conclusion.
If this moral justification is really the reason for our actions, why don't we act similarly and as dramatically in every egregious case of human suffering - in Sudan, Ethiopia, and Rwanda (to name just a few)?
The fact that we don't, many people feel, betrays a deeper motive for our actions (not to mention the fact that making this argument helps paint us as hypocrites). And, of course, in the limit, this argument is essentially to maximize social welfare at the expense of individual outcomes - a socialist argument.
Now, lots of you reading this will tell me that I don't speak for the rest of the world. Clearly not. I'm just outlining two things. First, the rejoinder to the 'we're saving them' argument I hear from friends and colleagues here in Europe and Asia. Second, more importantly - the implicit assumption this argument hinges on - that everyone and anyone who's anti-war is too stupid to carry it to it's fairly (simplistic) logical conclusion.
That, I think, is an absurd assumption to make - it's this kind of idiotic superiority complex that makes people poke fun at America.
"...Oil exporters have sharply reduced their exposure to the US dollar over the past three years, according to data from the Bank for International Settlements.
Members of the Organisation of Petroleum Exporting Countries have cut the proportion of deposits held in dollars from 75 per cent in the third quarter of 2001 to 61.5 per cent."
No comment necessary.
New Markets - Green Economy
"...George Bush's new administration, and its supporters controlling Congress, are setting out to dismantle three decades of US environmental protection.
In little over a month since his re-election, they have announced that they will comprehensively rewrite three of the country's most important environmental laws, open up vast new areas for oil and gas drilling, and reshape the official Environmental Protection Agency (EPA).
...The administration's first priority is the controversial plan to open up the Arctic Wildlife Refuge for oil drilling. Two years ago the Senate defeated plans to exploit the refuge - home to caribou, polar bears , musk oxen and millions of migratory birds - by 52 votes to 48.
...It plans to follow with an energy bill - also defeated in the last Congress - which would investigate vast new tracts for exploitation for oil and gas. It will also encourage the building of nuclear power stations, halted since the 1979 Three Mile Island accident.
...Far more radical measures are also under way. Joe Barton, the Texas Republican chairman of the House Energy and Commerce Committee, who is to help push through the energy bill, has also announced a comprehensive review of the Clean Air Act, one of the world's most successful environmental laws.
Environmentalists predict the emasculation of the Act, which has cut air pollution across the country by more than half over the last 30 years. Not to be outdone, the Republican chairman of the House Resources Committee, Richard Pombo, has announced a review of the Endangered Species Act, for the protection of wildlife. The law has been the main obstacle to the felling of much of the US's remaining endangered rain forest. And in a third assault, Congressional leaders have also announced an attack on the National Environmental Policy Act, which requires details of the environmental effects of major developments before they proceed."
The problem with all this legislation is simple: consumers and producers alike are beginning to value green products more highly than non-green products. So legislation like this only opens up absolutely enormous market spaces for entrepreneurs to essentially privatize the old laws, and reap huge rewards in doing so. Stay tuned to this space.
Growth of Blogging
One of the first proper (equity) trading blogs - The Kirk Report. Recommended.
Tim Wu interview. Some of the same old Lessig positions, some interesting points:
"...I think things are even worse than Cass Sunstein predicted. What Cass wrote about in the 1990s was the basic problem of debate polarization. But I don�t think he expected that even facts themselves would come up for grabs, leaving each side living in fully constructed parallel universes of disinformation.
...I don�t blame the blogs. Here is the problem: we are living with the unexpected consequences of low-cost information dissemination, or �cheap speech.� Cheapness is generally good, but it also creates strange consequences. Cheap corn, for example, makes us fat. Cheap drugs, like crack cocaine, can destroy neighborhoods. And cheap information is making us stupid."
This is what I call hyperpolarization. I don't think it's only a consequence of the cost of information - it's a consequence of the cognitive cost of dissonance versus the cheaper cost of reinforcing information. In other words, it's more expensive to deal with reality than it is now to find info that agrees with what you already believe.
This is what's creating the market spaces detailed below.
The Politics of Market Space
It's interesting to see how political hyperpolarization is creating huge market spaces. Here's an example - Discovery's moribund Wings Channel is being repositioned as the Military Channel:
"...Discovery is partnering with the likes of the USO, the National D-Day Museum, the Military.com web site, and the Congressional Medal of Honor Foundation to develop programming for the channel, along with educational campaigns and public service announcements."
Link. Now, whether or not you think this is propaganda - there's a huge amount of space in this new market for complementors and imitators. Also interesting to note that in other hyperolarized countries, this market's been around for a long time - they've all got military TV channels, radio stations, etc, already.
(Not) Next Big Things
Economist Leadership Forum's Tech Panel predictions for disruptions:
"...Now for the panel's predictions on hot technologies for 2005:
Vivek Badrinath, CTO at Orange, said: "Broadband everywhere - the promise is coming to be real - we need to see what the customers do with it now."
Jean-Philippe Courtois, CEO for Microsoft Europe, said: "Rich and real-time collaboration will integrate into business life with VoIP and other networks talking to each other."
Christian Morales from Intel predicted more digitalisation of the home and workplace and the continued march of wireless.
Bell predicted that network management software in large data centres would have the biggest impact because it will allow CIOs to manage system migrations which will save them money.
Simon Powell of Comtec said: "The emergence of intelligent search engines is going to be the biggest change for the travel industry."
I don't think any of these are really on the money.
Dumb to Smart
"...A posh stationers in London's Covent Garden has unveiled an "interactive shop window" (ISW) which lets window shoppers see what's on offer before going into the store. Described as a "merging of 'clicks and bricks'", this latest shopping gimmick to hit the Bureau stationery shop is a "blend of the on and offline shopping experience"."
Link of the Week - Bubble Science
Very interesting stuff - applying nonlinear dynamical models to sales data:
"...Best-selling books typically reach their sales peaks in one of two ways. The less potent way is by what Sornette calls an "exogenous shock," which is brief and abrupt. An example is "Strong Women Stay Young" by Dr. Miriam Nelson, which peaked on the list the day after a favorable review in the Sunday New York Times. A second example is Sornette's own 2002 book, "Why Stock Markets Crash: Critical Events in Complex Financial Systems," which spiked following a favorable review by Jon Markman on CNBC and TheStreet.com. "On Jan. 17, 2003, my book was ranked 2,000-something and then suddenly it was No. 17," Sornette recalled. "A few hours later, it was in the top 10. As a physicist, it looked to me like an exogenous shock to the system."
Sales are typically greater, however, when a book benefits from what Sornette calls an "endogenous shock," which progressively accelerates over time, and is illustrated in the book business by favorable word-of-mouth. Such books rise slowly, but the sales results are more enduring, and the decline in sales is slower and more much gradual, he found.
An example includes "The Divine Secrets of the Ya-Ya Sisterhood," which reached the best-seller list two years after it was published, without the benefit of a major marketing campaign. The book was popular with book clubs and inspired women to form "Ya-Ya Sisterhood" groups of their own. A second example is Nora Roberts' novel, "Heaven and Earth (Three Sisters Island Trilogy)," which peaked only after a slow rise and also fell slowly, which Sornette attributes to word of the book spreading among friends and family.
The slower peaks tend to generate more sales over time, Sornette said.
"Word-of-mouth can spread like an epidemic," he said.
The trajectories of many books' rankings are combinations of both kinds of peaks, Sornette says, which suggests that an effective, well-timed marketing campaign could combine with a strong network to enhance sales.
..."Is it possible to derive a quantitative law of how book sales behave?" Sornette asks. "We have derived a law of how a sale's shock to the system will jump up and decline over time. The books we analyzed behaved the same way. We can statistically predict how the system will evolve, how sales peaks can emerge, and we can predict the expected decline slope for books that rise sharply."
Basically, a quick read of these models tells me they apply sandpile (ie avalanche) models to expectations - this creates oscillating positive feedback in herding, which is a nice model for bubbles.
More links: Sornette's site. Interesting essay 1. Interesting essay 2. Interview:
"...What we have found in our studies [Johansen and Sornette, 2002] is that basically 2/3 of all shocks�of all dramatic crashes--can be attributed to an endogenous origin as opposed to exogenous origin.
...When this 30% drop is analyzed statistically at the daily scale, as is usually done in standard statistical analysis, it becomes three independent events of 10% drop. A 10% drop for example on the NASDAQ occurs once every four years statistically. It is an event that has a probability of one in one thousand to occur at any given day. It is not that rare. In contrast, what is very rare is to witness three such daily losses occurring in a run of three consecutive days, cumulating into a 30% drawdown. It is such drawdown that is hurting your portfolio, not really the daily losses, but the runs of losses. This is why I stress in my research the important of looking at these drawdowns which are much better measures of the large risks and the crashes. Now the probability of three such 10% drop events to occur in a run is the probability of one event -- times the probability of the second event -- times the probability of the third event. That is one in one thousand to the power cube. That gives a probability of one in one billion. Translated into the time of recurrence of such a run or a drawdown of 30%, it corresponds to one event in four million years.
Thus, people who are not taking into account the fact that you have a run or drawdown, which gives rise to the dramatic drawdowns, are providing an incorrect description of the event because they would predict that such events would occur once in four million years. Such large recurrence time means that such an event is practically impossible and one should never observe it. In reality, drawdowns of 30% or more are seen very often these days. So, what is the solution of this puzzle? It is that the market is characterized by the existence of strong dependencies between successive days. Such strong dependencies are however rare and difficult to qualify and detect by standard statistical techniques. We have developed specific tools to quantify them. We say that these strong dependencies occur intermittently in pockets of predictability."
Evidence that viruses share a common ancestor. Not just cool, but most likely highly useful:
"...While viral lineage is in itself a question that interests scientists, research in this area may ultimately inform anti-viral drug discovery. Structural similarities in viruses may point to sites of enzymatic activity that could be targeted with drugs."
I don't link much to bioethics/politics, because I think it's a field going in circles. But here's a very thought-provoking piece - the first I've read in a while:
"...Paul McHugh, one of the council's moderates, finds the idea gruesome. He calls the proposed creation a "weird genetic hybrid" that is "very embryolike" and has been engineered to die. Hurlbut replies, coldly but correctly, that according to the technical definition favored by opponents of stem-cell research, the thing can't die because it was never alive."
"...A new research tool developed by an interdisciplinary team of psychologists and economists could help social scientists more accurately evaluate how well individuals and society are faring. The method offers a new way to characterize the daily life experience of individuals, aimed at providing a measure that could be used in assessing social interventions, including clinical trials. Its developers are working on a way to use the method in calculating a "National Well-Being Account," to provide a broad measure of the well-being of people of all ages, akin to the economic measure Gross Domestic Product.
...In the DRM, participants revive memories of the previous day by writing a short diary. They are told to think of their day as a series of scenes or episodes in a film. Next, they answer a series of questions about each episode, including where they were, what they were doing, whom they were with, and how they felt during the episode. The goal is to provide researchers with an accurate picture of the moment-to-moment experiences associated with daily activities."
New metrics like this are sure to open up huge new market spaces.
"...By comparing the differences between the genetic material of living mammals, the researchers have now produced what they say is a highly accurate reconstruction of a section of the ancient creature's genetic sequence."
Next Big Things - Drivers
Wired highlights something I've been thinking about for a while:
"...Several years ago, Monderman ripped out all the traditional instruments used by traffic engineers to influence driver behavior - traffic lights, road markings, and some pedestrian crossings - and in their place created a roundabout, or traffic circle. The circle is remarkable for what it doesn't contain: signs or signals telling drivers how fast to go, who has the right-of-way, or how to behave. There are no lane markers or curbs separating street and sidewalk, so it's unclear exactly where the car zone ends and the pedestrian zone begins. To an approaching driver, the intersection is utterly ambiguous - and that's the point.
Monderman and I stand in silence by the side of the road a few minutes, watching the stream of motorists, cyclists, and pedestrians make their way through the circle, a giant concrete mixing bowl of transport. Somehow it all works. The drivers slow to gauge the intentions of crossing bicyclists and walkers. Negotiations over right-of-way are made through fleeting eye contact."
This is another example of the growth of public spaces, and/or the increasing ambiguity of private vs public spaces. This dynamic will be a key driver of many of the Next Big Things - for example, your formerly 'dumb' objects connecting to the Net will expose huge amounts of info about you, that, unexpectedly, you might want to reveal - because the gains might be greater than the potential costs in lost privacy.
Monday, December 06, 2004
"...Many students and career counselors say the pressure to choose the "right" major is more intense than ever because of factors like rising tuition costs and the uncertain economy."
Welcome to the future - everyone's a beancounter with an MBA. This is optimizing the individual and the short-term at the expense of the long-term.
Information is Strategy
Search log analysis as predictor. Easy to see how simple technology can be leveraged to create a huge information advantage. Also easy to see how powerful information revelation is.
Markets Everywhere, for Everything
Mediamammon. So what's after markets? Smart markets - self-arbitraging markets, etc. Very interesting stuff to think about.
Blogging from India...
Pretty cool to be back home after a long time. First impressions : the air in new Delhi is much cleaner than before, thanks to the conversion of all public transportation to CNG (Compressed Natural Gas). New Delhi now has world's largest zero emission public transport system. Meanwhile, the President of India put forward a vision for developing the Moon as a hub for energy and telecom.
NYT article about Bzzagent - who we talked about a few months back. Is C2C the future of marketing? Yup. But in very different ways from Bzzagent's agitprop - the trick will be to harness the honesty and authenticity that emerges in consumer conversations.
Industry Structure - Media 2.0
Why traditional big media must stay hidebound and why open-source media has a massive vital point to strike:
"...According to a new FCC estimate obtained by Mediaweek, nearly all indecency complaints in 2003�99.8 percent�were filed by the Parents Television Council, an activist group."
Got an email asking me to justify my claim that publishers will fragment into high-quality markets and low-quality open-source bazaars. Here's why:
"...This is what you won't see on CNN or on MSNBC or CBS News or on any major media Web site anywhere and especially no goddamn way ever in hell will you see it within a thousand miles of Fox News."
Saturday, December 04, 2004
Calculus, linear algebra, and basic stats - evangelical style. Absolutely...unbelievable. Highly, highly recommended.
So I guess when our country's full of engineers trained like this, since they won't actually be able to build anything (from a bridge to a logic analyzer) - we'll just pray for things instead.
Friday, December 03, 2004
Dot Com 2.0 - The Return of the Bubble
Catch27. Words fail me - this is so 1999.
Will this become the Starbucks of the next decade?
At first glance, I'd say no. I mean it's cereal. Something I have boxes of in my cupboards. Ah yes, but then I have cupboards full of coffee as well. But still there's something missing here....
Caffeine. Along with nicotine and heroin, the worlds most addictive substance. In fact, evidence suggests that Starbucks deliberately amps up caffeine levels in it's coffee - and it's competitors have likely followed. So if these purveyors of fine cereals start sprinkling a little cocaine on their product and market it as "icing sugar", they might have it made.
Value Creation - What Does it Mean?
Something - let's call it innovation - which makes it economically possible to do and create either totally new things, or to do old things more efficiently. Here's a great example:
"...The industry is now so big that it is possible to build a hot rod entirely from new parts. And for purists who want old parts, the Internet has eliminated the hallowed junkyard crawl, once a rite of passage. "Places like eBay have just revolutionized the way we shop for parts," said Rob Kinnan, the editor of Hot Rod magazine."
If it sounds obvious - it's not. Mapping value shifts is notoriously difficult (if easy in hindsight). But understanding this process of value creation is the heart of not just capital formation, but also of killer opportunities and ideas.
Red vs Blue
"...US distributors of the film Merchant of Venice, which premiered in London this week, have asked the director to cut out a background fresco by a Venetian old master so it is fit for American television viewers.
...according to Mr Radford, there was "a very curious request which said 'Could you please paint-box out the wallpaper?'. I said wallpaper, what wallpaper? This is the 16th century, people didn't have wall-paper."
When he examined the scenes, he realised the letter was referring to frescoes by Paolo Veronese, the acclaimed Venetian 16th-century artist, which, when examined closely, showed a naked cupid.
"A billion dollars worth of Veronese great master's frescoes they want paint-boxed out because of this cupid's willy. It is absolutely absurd," he said."
Ha ha. That is hilarious (and little disturbing...come on, Cupid is NOT Satan).
Then again, there's also this:
"...MONTGOMERY - An Alabama lawmaker who sought to ban gay marriages now wants to ban novels with gay characters from public libraries, including university libraries.
...it could also include classic and popular novels with gay characters such as "The Color Purple," "The Picture of Dorian Gray" and "Brideshead Revisted."
Hmm. This is exactly how the Saudis built a culture of totalitarian religious fundamentalism across the Muslim world. Nice one!!
Preference Shifts - Death of Exurbia
Extreme commuting demonstrates the massively growing transaction costs to an exurban lifestyle.
choosetheblue. This should have happened before the election.
Wavemarket - highly recommended. Interestingly, its the broadcasting - not the mobile blogging angle - that I think will be the most powerful, because it will let people make new kinds of ad-hoc networks (ie, for music, reviews, etc, on the fly).
Link of the Day
MSN Spaces censors blog postings. Ha ha.
A perfect example of why we think MS has (in the long-term) had it - they have absolutely no user learning capability (and no managerial cognition, it seems, to back it up). I can actually NOT think of anything bloggers value less than being censored.
My prediction - this will race to the top of the blogosphere, create a huge buzz, probably a few press articles - and there will be absolutely no response from MS (except to mysteriously tweak some of the censorware). That's how we know they have no learning capability - they don't even listen to what the market's telling them. Amazing.
Of course, this is also the moment when blogging jumps the shark. So what's blogging 2.0 gonna look like? We're working on it...
NYT piece on Snocap/legal file-sharing. Will legal file-sharing work? It's the wrong question. The real problem is copyright - it's completely inadequate for digital economics.
What's necessary for 'legal' digital media markets to explode are new licenses (which can enable the creation of new market structures) - CC's made one, but it's not commercial. You can check out our prototype for what we think such licenses will look like.
Nintendo expands horizontally into film production. I think this is a very, very good move - the market is growing massively, Nintendo has unique resources which translate nicely into rent-capture, and there's little competition (or at least plenty of room in the growing market).
I think this is the precursor of a shift away from hardware (minus the Gameboy, of course) - a trial run of such a strategy, if you will.
The Wizard of Oz
Michael Powell editorial in the NYT - makes you almost feel sorry for the poor guy, but nicely sustains a huge gap for disruptive media innovation, by forcing big old media to stay hidebound:
"...But we are not the federal Bureau of Indecency. We do not watch or listen to programs hoping to catch purveyors of dirty broadcasts. Instead, we rely on public complaints to point out potentially indecent shows. In recent years, complaints about television and radio broadcasts have skyrocketed, and the F.C.C. has stepped up its enforcement in response. Advocacy groups do generate many complaints, as our critics note, but that's not unusual in today's Internet world."
Corporate of the Week
GSK - for running forced trials on kids born HIV positive:
"...GlaxoSmithKline will be accused this week of backing drug trials in the US in which underprivileged children were forced to test Aids treatments against their will.
The trials have been taking place in New York under the auspices of the Administration for Children's Services, the body that looks after the welfare of children in New York City.
...the ACS is deemed to be the legal guardian for many HIV-positive children. According to a BBC2 documentary, Guinea Pig Kids, to be shown on Tuesday, the ACS has forced children to be involved in these trials, removing them from foster homes if the foster parent did not comply and even physically making the children take the drugs.
"...At Incarnation, if a child refused to take the medicines offered, he or she was force-fed through a peg-tube inserted into the stomach.
Over 23,000 of the city's children are either in foster care or independent homes run mostly by religious organisations on behalf of the local authorities and almost 99% are black or hispanic."
Needless to say, this is extremely disturbing. It would be nice if the beancounters that made this happen faced consequences - but I think it would be even nicer if GSK took a nice fat hit to shareholder value. It might be a good idea to short GSK for the next week or so.
Another point to note - this is another nice data point to support everyone's death of big private media hypothesis (since the Beeb broke the story, not the NYT or the Post).
Next Big Things
Backfence and the future of journalism.
Like I've argued before, I think the market will fragment into two big spaces - for high-quality publishing markets, and relatively low-quality open-source bazaars. I don't think there is room for a Backfence in the middle (unless it simply wants to be an ohmynews clone).
"...TOKYO (AFP) - Japan's growing elderly population from will be able to buy companionship in the form of a 45-centimeter (18-inch) robot, programmed to provide just enough small talk to keep them from going senile."
The beginning of the age of social machines. I think this is incredibly cool - but let's also not forget that the economics of such a market are absolutely staggering, because of massive, relatively wealthy aging populations suffering from an exponentially dropping quality of life (Via /.).
Economics of the War on Terra
"...Excluding oil, imports from Muslim countries have increased by just 3.2 percent since 2000, their growth suppressed by tariffs of 20 percent or more on key goods such as textiles, according to an analysis of U.S. trade statistics."
Helping countries stay poor doesn't exactly help end the kind of desperation and hopelessness that breed terrorism. IMHO, this is the real 'war on terra'.
Thursday, December 02, 2004
Printers go bio.
Vladimir Mironov, director of Shared Tissue Engineering Laboratory at the Medical University of South Carolina, is one of the scientists who has rigged Hewlett-Packard and Canon ink-jet printers to shoot out proteins instead of ink, and to capture tissue on specialized gel instead of paper.
The Linux Machine.
Somebody's starting to get the picture. Novell released their linux desktop version 9. From looking at the evaluation version it looks feature rich and easy to use. In fact, it looks almost exactly like Windows with some distinguishing features. If lunux ever wants to compete with windows, it will have to continue down the road of providing the same features as windows (updates, media, browsing, messenger client) with the same user interface and file structure support. Novell is well on their way.