Search, Markets, and Google vs RSS

Particletree kicks off the tags and RSS and substitutes for search meme. It's a good insight; if you've been checking out bubblegen, we've talked about it quite a bit in the last 6 months or so.

Gartenberg talks about a coming big deal in RSS land, but can't say what it is. I would think Google announcing RSS AdSense is open is a fairly good bet.

Now, more interestingly, guys like Shirky are beginning to talk about the problems with massively distributed production. Tags, RSS, and other decentralized mechanisms by themselves are not infallible, as Shirky rightly points out.

Where I disagree with Shirky (yet again) is that all of these massively distributed systems are, as I point out in my peer production presentation, essentially micromarkets.

Think about del.icio.us: it's a market, where tags are a price mechanism. When you tag something, you're letting others know how you price it (in a binary sense).

Now, what this implies is that if you get the market structure right, decentralized people driven systems (markets) will be more efficient than centralized bits driven systems (search engines).

The real issue for Search 2.0, I suspect, is going to be getting market structures right. How do you do this? Focus on the incentives different structures create.

For example, a simple way for Wikipedia to fix it's edit wars problems is to impose some kind of contribution risk. Similarly, del.icio.us is gonna get astroturfed/spammed (soon), as soon as the benefits of doing so exceed the costs, because there's no contribution risk.

There are plenty of other mechanisms to do so. The fundamental insight I'm trying to draw attention to is that the www 2.0 may resemble a vast set of interlocking markets for information, where the www 1.0 resembled a vast set of interlocking information networks (mail lists, discussion boards, etc).

Massive Change

Miracles for Rs 7.50

Wow!! This is phenomenal: Yeshasvini, a pioneering micro-insurance initiative, provides critical surgery coverage to rural poor in the state of Karnataka in India. It was launched by Narayana Hrudalaya, a private healthcare organization. Here's an article by Dr Devi Shetty, the head honcho of the trust, on innovations and knowledge capital.

What makes Yeshasvin so spectacularly successful? As always, the key is the right incentive structure and the economics. They got everything right : spreading risks on a massive scale, solving the problem of adverse selection by restricting coverage to large pre-existing groups rather than allowing voluntary individual participation, identifying excess service capacity and introducing supply-side competition by making hospitals bid for contracts to drive down costs through a market mechanism for standardized products, and restricting the coverage to only the most critical and life-threatening surgeries based on very sensible actuarial analysis. It's no big surprise that the whole enterprise is self-sustained and running in surplus. In just a couple of years, this has grown to serve 2.5 million rural poor. All of this for less than $2 per person per year!!

Perhaps there are a few lessons in here for policy-makers in healthcare systems around the world.

Politics of the Day - Some Advice to the Dems

Dems don't play rhetorical games nearly as well as Republicans do. Which is a big reason why they continue to lose.

For example, words and phrases like 'faith-based', PATRIOT Act, and evildoers are, like it or not, evocative and powerful.

But slowly, the Dems are waking up to the necessity of the art of rhetoric. So here's a suggestion.

I think 'faith crimes', which I nabbed from this Beeb article, is a vital phrase - one that conveys the essence of the terrible, idiotic things done in the name of religion the world over (including America).

It also contradicts the fundamental assumption behind the Republican use of the word faith: that faith is always and everywhere a force for good. '

Faith crimes' very neatly implies what most Americans, paradoxically, seem to have forgotten: that unbridled faith, throughout history, has usually led to terrible atrocities.

Living Rooms Wars - Intel + Hollywood vs The World

An interesting job posting from Intel focusing on building alliances with Hollywood and record labels makes me wonder if Intel is about to Sony itself.

Now, that may be reading a lot (too much) into such a small thing, and I know Intel's Content + Services group has been around for a while, so let me make my argument.

By Sony itself, I mean that Sony's malaise can be traced back almsot canonically to it's content acquisitions, which were in almost direct opposition to it's core competences. This is where the strategic tensions that led to all kinds of misguided tactics like ATRAC and MD - and almost 15 years of missed strategic opportunities - came from.

Think about the counterfactual for a second: a Sony which didn't make suge huge errors in almost every other market but games (where, thanks to Ken Kutaragi, it continues to play an almost perfect game). Such a Sony would be an immensely succesful and powerful firm.

Powerful enough, in fact, to exert more power over content providers, than, paradoxically, it's been able to by acquiring them. Funny, huh.

Intel, I think, is about to find itself in almost exactly the same position, given it's newfound emphasis on the role of content providers in the value chain by investing heavily in DRM.

Either that, or consumers will miraculously not arbitrage rigid property rights away, and Intel's lockdown DRM will own living rooms across the world.

I'm putting my money on the former scenario - not the latter - largely because I think first that consumers aren't idiots, and second, because I think that China and India know a big opportunity when they see one. In fact, I'll probably be teaching fresh MBAs cases about how Intel screwed the pooch by ignoring it's core competences and essentially trying to arbitrage it's own ecosystem for another.

Of course, Intel and Hollywood have one big force working for them: the natural tendency for quality to erode when margins get atomized out of a value activity. Here's a very nice example: an unintended consequence of totally decentralized distribution a la BitTorrent is also more efficient distribution of spyware and adware.

Workshop in Behavioral Finance, April 5, 2005

A collection of interesting papers from a recent workshop at Yale. All you mutual fund investors out there, don't miss this one:

Dumb money: Mutual fund flows and the cross-section of stock returns

Iraq: the wrong war

Not a garden-variety anti-war argument but an interesting strategic analysis. Here's another interesting analysis : The US's gift to al-Qaeda. (via MeFi).

NYT vs LAT - Open vs Closed

It strikes me as pretty funny that the LAT's decided to do exactly the opposite of what the NYT's doing. The NYT is locking up it's editorial content; the LAT isn't just open-accessing it, it's open-sourcing it (ie, you can remix wikitorials, not just read them).

Now, I am gonna be watching this closely, because it's a great test of my model - will openness create massive value through complementarity and increasing returns? Even if it does, will the LAT be able to capture any of it?

If you've read my latest work, you know i think the answers are yes and yes. But I've been met more than a little skepticism, especially from content guys and mass media strategists, for whom this value inversion is a lot to stomach.

So, if you're into peer production and Media 2.0 econ, I think you, like me, should keep a very close eye on wikitorials vs editorials, because it's one of the first times an old-school media incumbent is experimenting with a (real) open-source content model (to be differentiated from an open-access model).

One additional (geeky) point. I would advise the LAT to think carefully about complementarity in the context of wikitorials. By this, I mean that if you overwrite everything I write, my peer production contribution becomes a net loss (because I work hard to produce something that's never consumed, ie, what econ heads call a 'bad'). Complementarity is never realized.

Now, all my goods might have been bads anyways - everything I had to wikitorialize about might have sucked. But this - the fact that wikitorials are rival in production (to use an awkward turn of phrase), and so may prove kind of difficult to leverage for snowballing complementarity - is their key relationship to manage.

It might be nice to have left/vs right wikitorials, or some other mechanism that takes into account the inevitable edit wars that hyperpolarization will create.

Collaboration vs Production

OK. The meme starting to flow around the net is that peer production is 'collaboration'.

I think production is a better word - and I'm not just playing semantic games. Here's why.

Collaboration implies that people aren't self-interested - that they're altruists helping each other produce things out of the goodness of their hearts.

I think this is a pretty big error for people who are thinking seriously about peer production to make. If you assume people are altruistic, you'll end up setting exactly the wrong incentives for peer production.

But if you (in the face of a serious lack of evidence) assume that people are still mostly selfish, you'll set strong incentives for them to internalize some kind of peer production gains. These could be reputation or status effects (MeFi), revenue shares (OhMyNews), prizes (Yahoo Buzz Mkt), whatever.

So, that's why I used to originally call peer production 'massively distributed production' - not collaboration.

The Big Picture

Immigrants in Canada: Have Ph.D, must sweep

Canada is doing an appalling job of integrating skilled immigrants into its society. This is unfortunate on so many levels. Canada is failing to build upon its only competitive advantage against other immigration destinations : a tolerant society. Canada needs to capitalize on the strongest of the three T's - Talent, Technology and Tolerance - that it has going for it. I have ranted extensively about this earlier. Richard Florida has picked up on this at the macro level.

I think there is a strong need for nations such as Canada that are on the losing side of macroecon to develop specific competitive strategies. All I've seen traditionally is the so-called "grand strategies" to advance national interest and maximize its economic-political power in the external arena. However, these strategies hardly ever evolve beyond the politico-bureaucratic-corporate elite protecting their own interests and deluding themselves into believing that to be equivalent to national interest. I have hardly ever seen an example of a national government consciously doing comparative advantage analysis and implementing specific competitive strategies to develop internal strengths and capabilities: Ireland is the only (refreshing) exception that I can think of. Canada is on the losing side due to its sheer insignificance in world markets beyond selling resources. However, it's making things much worse by blowing an opportunity to leverage its very strong brand equity in the migrant skills market.

Canada attracts enough talent that, given the right enablers to flourish, can transform it into a higly competitive economy with a potential to develop a number of world-class sectors from technology and international trade to finance. But this requires the government to take on entrenched lobbies of white-collar professionals within the country that are fiercely resisting competition from foreign labour. Hence the Kafka-esque situation: the left hand of the government does an excellent job of marketing Canada into the migrant skills market to attract them into the country, but the right hand of the government then does its very best to ensure that every possible obstacle is and/or remains, in place to frustrate the immigrants' integration into the economy to deprive the economy of their productive potential. The result? A dead-weight loss to the tune of as much as C$15 billion. However, as the market begins to wisen up, Canada will quickly lose its cachet, lose its critical mass of talent and relegate itself to the status of a forgotten tundra producing oil, lumber and water for the rest of the world. This would be a tragedy because it has the potential to emerge as a caring, diverse and inclusive society - indeed a model - for the world. But for now, my advice for potential immigrants to Canada is caveat emptor.

Distributed Economies of Scale

The Power Of Us. A great article about peer production. Check the presentation for more.

Aviation takes off in India

This seems to be the Next Big Thing in India after telecom. A number of domestic market sectors in India are lined up to hit the critical mass over the next many years as the growing economy and relenetless cost reduction by technology commoditization will bring consumption to the masses. Domestic telecom equipment market in India became one of the largest in the world earlier this decade, for example, clocking US $6 billion in 2002 and still growing at an exponential pace. Smart money should be looking beyond labour market arbitrage and working on domestic market opportunities in emerging economies.

The diverse ancestry of democracy

Amartya Sen on the origins of democracy: interesting.

Art of the day

PostSecret

Massive Change: The Future of Global Design

Speaking of sociological changes unleashed by technology check out this exhibit if you get a chance. Most recently, it was displayed at the Art Galery of Ontario in Toronto. With a tagline of "What if we could do anything?", this is a very interesting project commissioned by the Vancouver Art Galery and the Institute Without Boundaries. My favourites : a number of prototypes of Segway and the Image Galery that has images from atomic to universal scale.

Now reading...

Eric Von Hippel's Homepage

It's been an interesting read so far. Von Hippel delves into explaining the drivers and mechanics of user innovation. This is obviously related to understanding peer production by prosumers. What we are still missing, however, is a *sociological* model of how these economic forces are affecting our lives today. We have begun to understand the economics of peer production fairly well, but on the sociological side we don't have too many clues about how all of this is going to shape our socio-cultural lives on a large scale or how best we can harness it for societal transformation.

Sociologists seem to be narrowly focused on the construction of technology starting from the seminal thesis of Pinch and Bijker. In my opinion, this is unfortunately missing the forest for the trees. The world is waiting for much more to flow out of the massive forces of democratization of technology and the abilities of *societies* to deal with change. Just the impact of social venturing to create exponential gains in the public sector and the resulting change in socio-political structures and phenomena should keep an army of PhD students quite busy in grad schools around the world. And that's barely even scratching the surface of this stuff. Humankind has never ever lived in a social milieu that has been so immersed in technology or enabled virtually cost-less communication to bring all different cultures in each other's face. I am just fascinated by flash mobs and virtual gangs, for example. The repurcussions of these forces will be felt for a very, very long time. Don't be distracted into stopping at the economics - sociology is the real story of this centuty. Yes, you heard it here first.