Wednesday, March 31, 2010
Unvarnished and the Economics of Antisocial Media
Let's talk about an interesting new startup for a sec: Unvarnished
. It's an open feedback system, with a few notable catches. You can't delete bad feedback, and feedback is loosely anonymous (in the sense that it's untraceable to anyone's real-world identity).
The really big problem with Unvarnished is simple - so simple, the founders have completely and totally overlooked it. For the average person, the supply of bad feedback vastly exceeds the supply of good feedback. If you had perfect professional feedback, you'd be a CEO (or better yet, retired before the age of 25). So Unvarnished is inherently biased against the average Joe, who inherently has more negative than positive feedback - that is, after all, what being a mid-level professional means.
But wait, there's more. So much more.
Consider a hypothetical Unvarnished post about...Steve Jobs.
"Obsessive, megalomaniacal, abusive, control freak. Responsible for screwing up a major product that nearly led to the collapse of a major Silicon Valley company".
Sounds pretty bad, gives one pause. Except, of course, it gives us exactly the wrong information about the value of Steve to Apple. Jobs is the world's most valuable CEO, by a long way - but Unvarnished wouldn't give you much hint of that.
Why would that post surface? What about Unvarnished's so-called democratic self-regulation? There isn't any, really. The "community" has no better information about the veracity of a reviewer than my goldfish does, and asking them to vote a reviewer up or down is about as meaningful as asking my goldfish to choose the bicycle he likes the best.
Asymmetrical information - and a massive oversupply of bads - inevitably breed massive adverse selection. Unvarnished is a breeding ground for adverse selection in feedback itself. The least accurate, most overly negative feedback will rise to the top, making hiring decisions even less efficient than they are today.
Here's another, simpler, way to look at it. Unvarnished is a social Ponzi scheme - borrowing reputation from another, to amp up one's own (until one's own gets trashed). Those economics are so 20th century, it hurts.
Unvarnished is the endgame of the "social web". I'm going to mark it as the day the "social web" became antisocial. Increasingly, today's "social web" doesn't empower people. It empowers hate, exclusion, and polarization, to put it bluntly. That's as lame and brain-dead as what went on on Wall St a few years back: hurting others to extract value from them. Except, of course, Wall St actually made billions. Social media's as bankrupt financially as it is ethically and economically: a trifecta of lameness.
Count me out of this charade of faux sociality. You - investor, entrepreneur, banker, student, whomever - might want to rethink it too. It's time to build a better economy. And that sure ain't gonna happen by building miniature social Ponziconomies.
Tuesday, March 30, 2010
Chicken or Egg? DNA.
There's an interesting discussion
taking place about the causes of the crisis - and crises in general. Was it a global savings glut that caused an asset bubble - or did an asset bubble invoke the need for more financing, inducing larger savings?
It may sound arcane, but it has tremendous implication for policy and strategy. If asset bubbles lead to savings gluts (rather than vice versa), then monitoring and puncturing them at the macroprudential level takes precedence over interest rate manipulation and inflation targeting.
For companies, there's an even more interesting implication. Evil, lame 20th century corporations depend critically on global consumption rates staying sky-high in at least some parts of the globe - financed by excess savings in others. So this research suggests that strategy 2.0 begins by not fuelling asset bubbles, but puncturing them gently - so imbalances never spiral out of control.
Yet, I think the question of root causes hasn't been fully addressed yet.
Which came first - the chicken, or the egg? The DNA. That's my take on the above debate. The real root cause of crises and collapses are in the institutional DNA. When institutions are hollowed and emptied, a crash, a collapse - or a series of them - is the inevitable result. Amrica's asset bubbles and China's savings gluts are manifestations of a deeper bankruptcy - institutional bankruptcy, that renders both economies unable to allocate capital productively in the first place.
Here's a collection of my tweets from yesterday (thanks, Viewsflow).
adage.com - 59% of people multi-task when watching TV, tablet & mobile devices easier to play with while watching than computers. ...
Mashable - the textbook example of the social media bubble. ...
dmwmedia.com - it's nice, but is quora gonna help build a better financial/media/edu/health industry? <- ventureconomy in decay ...
blogs.wsj.com - wall st says: there's about to be a "jobs boom". i'm calling bs. weclome to your mcjob.http://nyti.ms/dcZXiK ...
blogs.wsj.com - totally bogus. these will be revised downwards without a doubt. ...
blogs.wsj.com - after the liquidity trap? the liquidity exit trap. (via @umairh) ...
adage.com - econ 101 suggested long ago: the same old lame ads would never make hulu (etc) seriously profitable. so here you go. ...
bit.ly - Facebook Wants You to “Like” Brands ...
Business Insider - Smart! Microsoft Chose 'Bing' Over 'Bang' For Its Search Engine Name $MSFT by @jwyarow ...
runway.blogs.nytimes.com - interesting discussion on magazines. polyvore + ipad = fashion 2.0. ...
hulu.com - Future of food, amazing #food #agriculture #health ...
Forgive me, but I'm (mostly) an economist. My real blog is here, at Harvard Business Review. I'm the Director of the Havas Media Lab. I give lots of talks, speeches, and workshops. This year, they're focused on reconceiving capitalism.
I started Bubblegen as a blog when I was doing my MBA. It turned into a strategy and innovation advisory boutique that worked with top-tier investors, entrepreneurs, and blue-chip corporates to build a better kind of business.
I studied neuroscience at McGill, did an MBA and research with Gary Hamel at London Business School, and more postgraduate work in economics, strategy, and innovation at Oxford. Before I grew up, I was a writer, banker, derivatives trader, and strategist. I live around here, in London.
If you'd like to get in touch, you're welcome to drop me a line anytime.
I write a lot - and a lot of what I write can feel opaque, until you're familiar with some of my key concepts. So here's a crash course in Umair 101.