Friday, May 21, 2004
Politics of the Day
Why does it take the Guardian to publish Nick Berg's Dad's story?
Absolutely. Unbelievable. Presumably, the media here in the States won't touch this because...it's anti GWB. Has everything in this country become so partisan that we can't bear listening to anyone that might make us think
? Like someone who's been far more affected by the war than (most likely) me or you?
Humour of the Day
Hassle the Hoff.
Thursday, May 20, 2004
In case it wasn't obvious, ZDNet has an article talking about how standards wars in the RFID industry will separate winners from losers.
Convergence in complements: PearPC.
Hutchison Whampoa says that the number of 3G users worldwide has increased sharply since March (from 1.3 million to 1.7 million) (sub).
Atkins consciousness hurts producers of carb-heavy food, like Krispy Kreme. How do they fight back? By launching a propaganda war (sub):
"...The American Bakers Association and the North American Millers' Association, which together represent companies with sales of more than $60 billion a year in baked goods and ingredients, are joining forces in a marketing and public-relations blitz that will include consumer advertising, marketing materials aimed at doctors and schools and a "rapid response" team of carb-friendly experts."
What happens to regulation when industry boundaries get destroyed?
New York regulates Vonage, classes it as a phone company. Jeff Pulver tells you very rightly why it's not.
Sony (Japan) is one of the few firms for which I have a great deal of respect. They seem to understand discontinuity much better than their competition:
"..."As the information gap ceases to exist, the power of each individual has become stronger than in the past when corporate PR still worked, and it will get even stronger in three to 10 years.
"Except for some countries, the era of mass production is being replaced by a power shift to individuals," which would change the way products are chosen, he said."
Very nicely put.
Sony (USA) is the firm responsible for atrocities like Connect.
Wifinetnews has a lot more about Cometa's demise. All of the execs quoted talk about scale; I think this business is a natural monopoly, and no 'business model' will work until one player grows large enough to realize the kind of increasing returns to scale that characterize a natural monopoly. None of them are anywhere close, because there's still too much competition.
Symantec's acquiring Brightmail.
Hmm. Very interesting:
"...The Business Roundtable -- which includes the chief executives of many of the nation's largest "old economy" corporations -- launched a public relations blitz that takes the software industry to task for developing products that are continuously vulnerable to hackers and virus writers."
Forget about Nick Carr, this is when you know the industry's really matured.
Apple shifts org structure and put iPod and Mac in separate divisions.
Component costs are threatening the cost of consoles and handhelds.
Here's a nice piece about the PSP, the Vaio Pocket, and Sony's failed Connect.
Wednesday, May 19, 2004
The Draft is Coming, Game Theory, and the End of Democracy (really)
Hmmm. I see that the draft meme is finally breaking into the mainstream blogosphere. I posted about it a few days back and linked to this article. If GWB is reelected, I think the draft is virtually a certainty, because it's in everyone's best interest to reinstate it - the army, GWB, the Senate, etc.
Oh, and yeah - it's generally not in the best interest of those who get killed, unless the war is a just war, or a war for survival.
Let's model this as a simple game. The problem is that, in a democracy, fanatics are always and everywhere willing to dedicate more time and effort to voting their party in. That's because, well, the definintion of fanaticism is thinking that there is no opportunity cost to what you do; that is, everything else pales in comparison to your party, cause, whatever. It's the most important thing - in extreme cases, like apocalyptic fundamentalists, whether Christian or Muslim, nothing else even registers.
So what this means is that the average (nonfanatic) voter is at a relative disadvantage in terms of even playing
the game. That's because their opportunity cost is much higher - they have other things they think are important, like paying bills, going out to to the opera, making friends, having consensual homosexual intercourse, and shooting up heroin. So they face a relative problem of commitment: fanatics are always and everywhere
willing to commit more than they are. Alternatively, you could say the payoffs in this game are higher for fanatics than they are for the average person.
If this is a multiplayer game, the really important bit is coordination. But coordination takes (a lot) of time, effort, and usually, money - there are significant costs to coordination. Now, for fanatics, as we've noted, opportunity costs are really low - so the opportunity cost of coordination is similarly low. But for the average person, the opportunity cost of coordination is really high - they've got lives to live. That means, in an extreme case, coordination failure: average people will fail to coordinate among themselves and influence the outcome of the 'democratic' process. But fanatics, because they're at a relative advantage, won't - at the very least, they'll always coordinate themselves better than average people.
And that, boys and girls, means a massive market failure in democracy itself
, when the population of a country tips and enough of the population becomes fanatics. That's the key variable to the whole game - without it, the coordination failure among average people doesn't matter, because aggregate payoffs equalize across the two groups. If it's not obvious, note that this number need not be a simple majority of the population - it can be far less
Is this what we're seeing in the States today? You decide. One thing's for sure - medicating mentally ill people just so you can kill them is pretty consistent with the above definition of fanaticism. In fact, it's a great real-world example of the simple game outlined above
Strategy is not marketing (despite what one of my profs would have you believe) - here's a great example of how the two get confused.
Cometa shuts down. The WiFi bubble begins to burst.
Google posts a list of 'software principles'...dangerous, the first step down the not-so-long road to rigidity and ultimately, strategy decay. Better to just say 'not evil' - it doesn't really need to be decomposed into atoms of thought like this.
DIY ringtones nicely disrupt a fat revenue stream for record labels and telcos alike. Nice one.
A bit about new gadgets in Japan.
Will the farm states drive the economics and politics of biotech? Interesting question.
More about the Nick Denton bubble, WeblogsInc, whether profits really exist in this market, and why both of them are laying low.
An interesting post about iTunes and group emergence.
Semacode in Wired. I've gushed over Semacode recently, so I won't do it again for a while :)
France's 35 hour workweek isn't working too well. What a surprise.
Politics of the Day
Value Chain, who's been writing some pretty cool stuff, responded to my Yahoo vs Google argument - my response back:
AdSense is (as you rightly notice) a risk-allocation mechanism - and a damned good one. But for any third party risk-allocation mechanism to really work, the third party has to be trustworthy, because they're acting as the agent for both the risk-taking and the risk-making principals.
My intuition is that Overture simply does not have the trust to be credible with risk-takers
- users (please note I mean those who buy, or 'take on' risk, as opposed to like skydiving style 'risk-taking'). I'm sure that corporates will buy into it - but given the flap over GMail and privacy, and given that Google is a massively more trusted brand (apart from the SEO industry and the conspiracy theorists) than Yahoo or Overture, I'd guess that they'd face a lot more potential criticism than Google has. This means that if you're an existing Yahoo user, switching costs just dropped; and if you're a potential Yahoo user, potential benefits just dropped significantly.
Even if they can build
trust, they leave themselves hugely vulnerable to offensives from any number of potential rivals while they do so - so the opportunity cost is high as well.
Interesting stuff to think about!
Tuesday, May 18, 2004
56% of American kids are law-breaking hacker terrorists.
I can't believe the Post prints this propaganda - the study was commissioned by the (industry-paid heavies at the) BSA. Their interests are not exactly, shall we say, impartial.
Drop them a line here: [email protected]
Politics of the Year
Oh my god...I was looking through the website below and I found a pic and post about public beheadings. Not as bad as the Nick Berg video by a mile, but still pretty graphic.
RIP both this guy and Berg - nobody deserves to die like this.
This blog is highly, highly recommended. Forget tech, business, and $$ for a second and read it.
Politics of the Month
Here's a Saudi blogger who even makes fun of the religious police. You should really
read this - find out what life is like there. Shades of early Salam Pax.
".... The Religious Policemen are getting really worked up over this. Unfortunately the poor girls involved are getting their career options closed down, not that they had many in the first place. Become a teacher, or, if you've really got connexions, work in a Womens' branch of a bank.
This reminds me of when TV satellite dishes first came out. They were banned of course. Some Cops even went round shooting at them! Nowadays you see them everywhere".
Not a bad piece about the market orthodoxy of why oil prices are rising.
Of course, you could also buy into the conspiracy theory that prices are being jacked by OPEC, kept up by hedge funds, and are only gonna fall at election-time - when Prince Bandar promised GWB he'd boost his re-election bid by bursting the bubble and dropping prices. Not that I would ever believe in anything like that. No way.
The music industry's past. The music industry's future.
OK, I'm being facetious. The firm itself is not
going to be replaced - social capital and collective learning build competences in groups which are difficult if not impossible for individuals to accumulate. But the corporation itself, and the cheesy tactics it uses, will undergo a massive, radical shift, in almost every industry that becomes hyperconnected - because they've both become too costly to be of much use.
aaagh. MediaBuddies is a new social networking service in London. Here's how the dot com game works in Europe:
1) Find cool business model for emerging technology (in US)
2) Wait 18-24 months
Ok, that was a bit harsh. But the truth is very little original innovation is coming from Europe. Look, how long has it been since you knew about 'weak ties'?
"...In 1973 Mark Granovetter, Professor of Sociology at Stanford University, US published a classic paper called, "The Strength of Weak Ties," that analyzed how people found jobs. He found that most people - about 56 percent - found their job through a personal contact".
If the Europeans were smart, they'd think about networking software, and get what's becoming really, really obvious: it's evil, because it recreates the worst parts of social structures.
Look, with software, we have the ability to reconstruct our social worlds without
costly effects like 'weak ties', which, if you think about it, are just the other end of the spectrum from, for example, getting your job by lying your ass off in ten rounds of case interviews. That is, 'weak ties' are a sociological mechanism - the other end of the (search and pricing mechanism) spectrum is a perfectly efficient market.
But neither is inherently 'good' - it's up to us to choose. And if you think about it, all social software does today is accelerate
the process of living in real-world social structures. But surely networking to find a job is just as much a PITA as the ten rounds of case interviews. So why do we see only these two mechanisms? There's a universe of possibility in between them. Why use the same old structures instead of creating better ones?
I think the answer is because we're focused on the machine, not the humans - we still think it's so cool that we can
do this, we haven't thought much about why
we're doing it - despite Shirky and the gang - I think they're concerned with the what as opposed to the why. More on this topic hopefully soon.
Under the radar games of e3.
The journos think Intel's strategy's changed when all that's changed is technology - it's strategy is still exactly the same: jump off the commodification curve as soon as you can to obsolete yourself (before your competitors do); aka, technology leadership.
The point really is that it won't
change it's strategy at the same time that it has to essentially discard an old competence - shrinking chips - and build a new one - parallelizing them. That's a difficult thing to do at the best of times. Of course, these are both reinforced by Intel's massive competence in chip design. And, of course, it's competitors have to make the same jump - AMD to a bit of a smaller extent than the rest. And, oh yeah - Intel is one of the platform leaders of the possibly the most succesful platform in the universe. So IMHO, this is a non-issue.
A bit about corporate taxes in the op-ed section of the Post.
The NYT has a gushing article about the Prof who's patented automated P2P spoofing. I've tried to point out that 'security' business models essentially parasitic; they never have an incentive to stop the thing the buyer wants them to stop fully, because they put themselves out of work. It's much better to not have to rely on 'security' and provide your own - by fixing the economics of your business model.
That said, there's a lot not to like about this - a Prof trying to cash in on P2P spoofing is just lame, lame, lame. Here's some choice bits from the patent itself:
"...A primary object of the instant invention is to make search engines built into media brokering systems such as, without limitation, Napster and Gnutella ineffective, thus rendering them decidedly unuseable...Another object of the instant invention is to provide an automated process for systematically sharing decoy files which resemble proprietary media.
...The invention is best appreciated when viewed as five basic interrelated processing components; system initialization 3.03, scanning for media 3.05, manufacturing decoy media 3.18, sharing media 3.38, and checking system protection levels 3.50".
Hmmm. Despite their best efforts in the NYT to pitch this as something more than automated spoofing, it's basically just exactly that. The real spoof is, apparently on the PTO and the NYT - who don't seem to have a clue.
Gameboy DS, Pt 3
Despite the increasingly predictable nonstrategies of games publishers - all focused around imitating EA's licensing and branding resource building - Nintendo and Sony continue to push the envelope by actually innovating and exploring new possibilities. The Gameboy DS is a great example of architectural innovation - it reconnects the handhled, adds a stylus and touchpad, and creates huge new potential for value creation.
How to save your job. That is, if you really want
your job. This is a great signal of the perfect futility of labour in the corpocracy. Not to mention the perfect example of how the machines have rebuilt our social structures and psychologies. I've gotten a lot of flak for saying that lately, so here's a great example.
Look, I am not trying to be facile or provocative when I talk about 'machines', 'humans', and strategy. My point is actually really simple: I think it's extremely bad strategy to let machines strip purpose, meaning, and excitement from work, because it creates inertia, raises barriers to innovation, creates communication, coordination, and enforcement costs, etc, etc - I could write an almost endless list of wrongs. The interesting bit is that the machine I'm talking about is, of course, in this case, the corporation itself, which is an organization-machine in the same way that a nuclear reactor is a power-machine.
Monday, May 17, 2004
Seven Business Models for Open Source
2) Property rights
Not revolutionary, but not a bad read.
Marketing + Future
In the future, marketing in virtual worlds will be just like...the same old tedious marketing in the meatware world. (Via Mefi).
Bizarro World, pt 633
Plogs. Please, someone tell me this isn't happening.
Why are virus writers so hard to catch?
"..."There does not seem to be too much diligence in some of these public Internet cafes with all these public terminals. You can go in, log on anonymously, slip in a floppy with a virus, spread it all over the world within a few minutes," said Vincent Gullotto, vice-president of antivirus research at Network Associates (NYSE: NET - news) and head of the McAfee Anti-Virus Emergency Response Team".
Or you could simply argue that they have every incentive to write more and more destructive viruses, and the 'security' industry has little incentive to stop them and put itself out of business.
Or you could follow the advice of the guy above, and end up here.
Wired thinks it's radical when the Berkman Center discusses Pigouvian taxes for digital music and net access. Note to Wired: this is something the rest of, oh, the entire Net has been discussing for the last year and then some. What would be radical is if somebody actually came up with a - wait for it - new business model.
Analysts think there's a cultural gap in game tastes in Japan, the US, and Europe. Is there? Not really - what sells in all 3 markets are great games. The difference is a self-fulfilling prophecy: what's marketed in all 3 markets is what publishers think will sell. That's why there's a thriving gray market for imported games in each respective country.
e3. Lamer and lamer. Will the games industry end up like Hollywood, a bunch of geriatrics eking out the defense of a dead business model?
If it's not smart enough to see the seeds of that kind of destruction are being sown right now in the total economic distortion that currently passes for a business model in the games industry, yes - and it won't take a century or so for the games industry.
Second Lifestyle is creepy for so many reasons. A brand without a discernible business model, whose identity is focused on the rise of the baby boomers as the driver of the European economy.
Outsourcing the audience - globalization and technology are shifting the competitive dynamics of the film industry. Highly recommended.
Virgin teens have the same STD rate as normal teens. Hilarious.
Here's a nice Guardian article that's related.
"...Sweden, for example, radically changed its sex education policies in 1975. "Recommendations of abstinence and sex only within marriage were dropped, contraceptive education was made explicit, and a nationwide network of youth clinics was established specifically to provide confidential contraceptive advice and free contraceptives ... Over the next two decades, Sweden saw its teenage birth rate fall by 80 per cent." Sexually transmitted diseases, in contrast to the rising rates in the UK and the US, declined by 40% in the 1990s".
A nice example of the machine in control.
Dot Com 2.0
The rebirth of internet grocers.
Legislated internet morality: coming soon to a town near you.
Go help Google IPO Swami make a lot of money at your expense. I have to say, as far as scams go, this is a brilliant one.
Cash-in or evil Google? You decide. (Via Mefi).
Sunday, May 16, 2004
Updated my email address - if you've been trying to get in touch me and it's bouncing, check the contact section.
The Economist gets e-commerce all wrong.
ï¿½...The web is the most selfish environment in the world,ï¿½ says Daniel Rosensweig, chief operating officer of Yahoo! ï¿½People want to use the internet whenever they want, how they want and for whatever they want.ï¿½
Look, Yahoo is my favorite victim these days - but any decent strategist has got to have figured out there's a lot more to the Net and business than switching costs. In fact, the Net offers unparalleled opportunity to raise
switching costs exponentially - take a look at Meetup, eBay, Amazon, Blogger, etc.
I've argued before that 'ecommerce' was always kind of a silly notion that was doomed to fail - because the economics of the Net support an entirely kind of business model. The Net is not just a 'channel' through which to sell pet food or DVD players - in fact, the most powerful business model for the Net is the switchboard model, which exploits the fact that the Net is really a massive infrastructure for rare direct network externalities (which raise switching costs), in a number of different ways.
The term 'network effects' has been bandied around enough to gloss this over - most 'ecommerce' business models ignore the very special economics of the Net entirely and simply recreate the same old model with a different facade - ie iTunes. These 'ecommerce' models are doomed to die because the Net has massive information problems compared to the real world - 'ecommerce' is an infrastructure for massive adverse selection, because of huge information asymmetries between buyers and sellers. Do you really know whether you're buying a lemon?
Almost certainly never. This is why the 'transaction costs' argument put forth by the Economist is not valid (and is very 1998) - anyone doing business online knows now that 'transaction costs' - more accurately, negotiation or enforcements costs - can be much, much higher than in the real world. It's only search costs that are, by definition, lower on the Net - search economies are great, but they're not a strategic advantage by themselves, because their gain can be offset by the potential loss of adverse selection. Succesful Net business model use these search economies to deliver guarantees against information problems via network externalities - we see this in playlists, in Amazon's review system, in eBay's reputation system, etc, etc.
The point is, at the end of the day, obvious. Before the MBA's and analysts invaded, the Net was good at, well, connecting people - not pushing products (or spam, or fly-through interstitial mind-control ads). The most successful business models for the Net don't worry about 'ecommerce' - they know it's a failure; they focus instead on creating properties that exploit the Net itself - like switchboards and markets.
Buttkicker. Is kinetic audio the next step forward for this moribund industry?
A kind of bizarre demand-side stimulus argument from the Post.
Temporary credit card numbers to protect yourself from the massive trust and asymmetric info problems in ecommerce. Interesting how the market solves things - this is a much, much, cooler solution than so-called third-party ratings agencies like TrustE, etc - which, as I argued, were never gonna work. This solution is much more likely to succeed, because it's a hell of a lot more elegant, and more importantly, the mechanism, while not without it's own incentive problem, actually does
reduce risk (or the perception of it). Unlike TrustE.
Politics of the Day
Sy Hersh's latest article is the most explosive yet.
Couple that with this great Post article about the bifurcation point in the 'Muslim world's' path to modernity - reformers vs fundamentalists - which is the most dead on article I've read about this in ages (take it from me, I've spent a lot of time in the third world).
GMail - Achilles Heel
I can't send attachments >300k from my GMail account. Amazing. I suppose you can guess how that makes it almost useless to someone like me, who has to email lots of big files frequently. If Yahoo's not playing with vaporware, here's the strategic gap they need to exploit to (easily) outcompete GMail.
Yahoo's announcement of upping storage limits to 100megs to compete with Gmail is, I bet, mroe vaporware thrown out to please analysts than it is reality. Yahoo does not have the resources to make this work (AdSense).
Music of the Day
YMRockerz - Atari chip music.
Link of the Day
The professionalization of election strategy. Schumpeter argued, late in his life, that innovation itself would become routinized and professionalized, just like technique and machine do to any kind of labour. This is a great example of this process beginning to happen. Of course, it's also a great example of second-order thinking in a strategic situation.
What's the best strategy to use when faced with the kind of barrage Clark threw at Dean (as outlined in the article)? Second-order thinking tells you to 'firefight', or retaliate in kind, so your resources don't go up in flames. First-order thinking would be to stop the fire, missiles, weapons, or even neutralize the agents behind them before it reaches you (and I'm sure there's something even more clever than that).
In game theory terms, Peyton Young has pointed out the notion of stochastic stability - that in the long run, the stability of strategies depends on their total social values. That is, equilibria emerge which maximize both (or all) players' outcomes are more likely to be chosen than suboptimal equilibria. In this case, my intuition is that transparency - aka revealing your own incentives, biases, mistakes, and preferences, is the best-reply strategy to attacks, and is the first-order learning players will ultimately engage in. This neutralizes attacks by removing you from the arms race, instead of retaliation - which shifts both parties to less and less optimal equilibria. Of course, all this assumes that the players in these games can learn - which is something I have yet to see from the current crop of talking heads in DC.
Telcos and mobile operators have spawned entire industries of self-interested analysts, none of who've told them what users have known for years. For example, hidden charges ultimately get exposed. Look, I think telcos and MNOs alike are on the verge of massive disruption by players like Skype, for instance - and these kind of simplistic tactics don't help when you're facing a discontinuity. Why? Because they usually get discovered at exactly the wrong time, squander the remnants of trust with users, and put you in an even weaker position...etc, etc. (Via /.)
Does it actually slow the rate of innovation? Orthodox theory clearly suggests it should increase it, because money is supposed to be an attractor to innovators. But if we look at innovation more closely, when a technology enters the monetization stage, innovation seems to slow massively, if not stop altogether (anecdotally at least).
MT, and blogs in general, I think are a cool example (for now). Will the blog end up like webmail - a technologically inferior dominant design gets locked in until it's threatened by discontinuous innovation? Certainly, the dominant design for blogs has been established, and we've only seen incremental innovation for a while. So maybe this is the answer - 'monetization' attempts happen only after the dominant design gets established, when the rate of innovation is already decelerating.
Very very interesting - this points us to new strategies for 'monetization'. For example, you could think about a monetization strategy that was somehow related to the innovation rate or the emergence of the dominant design - as opposed to the simplistic monetization strategy we see everywhere now (aka go beta, charge zero, build the user base, charge $$, catch hell, user base defects).