Strategies for a discontinuous future.

Consulting & advisory, research notes, in the press, about bubblegen,
next wednesdays.

Saturday, June 25, 2005

Business 2.0 :: Magazine Article :: Features :: The CEO's Secret Handbook

-- Mahashunyam // 6:12 AM //


'You've got to find what you love'

Steve The Visionary at his very poignant best. Uber-cool!

-- Mahashunyam // 1:14 AM //

Friday, June 24, 2005

Investors flock to clean technology

Smart money is moving into sustainable energy reources. I have written about this earlier : here and here.

-- Mahashunyam // 9:33 PM //

Thursday, June 23, 2005

Tags vs Search

Lemme take a min or two to outline some thoughts on tags and search, using Google as an example, because I think they illustrate some coming micromedia dynamics.

Let's imagine a zero search cost world. Whatever you want to find, you type it in, and it's found. In such a world, AdSense marginal revenues drop to zero.

The point I'm trying to make is that Google finds itself facing a similar tension to Macrovision. If Macrovision makes perfectly efficient DRM, it puts itself out of business. If Google makes perfectly efficient search, it loses revenues fast.

Now, let's think about tagging for a second. As the size of the tagosphere grows, the number of clicks it takes me to find the the thing I'm looking for drops.

In other words, search costs are falling rapidly as the tagosphere grows and gets interconnected between taggable apps across media.

At some point, tagging becomes more efficient than search. This point is reached when the number of Google clicks is greater than the number of related tag clicks (or similar proxy). When this happens, tagging becomes a perfect substitute for search.

Alternatively, you could consider a world where tagging picks up where search leaves off - you search for tennis racquet, click over to racquetworld, and then tag your way over to the perfect racquet. This is imperfect substitution, but still close enough to cause Google problems.

Now, in either case, I think we've explained a couple of fairly interesting things. First, why exactly it is that Google refuses to play with tags very much (despite the fact that even a not-so-ubergeek like me can code up a working tagging engine in less than a day); or, alternatively, why it is that Yahoo embraced tags. Second, why it is that Google's search gets more efficient across domains, but almost never within domains (ie, web search is barely more efficient than a couple of yrs ago).

Another interesting (geeky) point to note is that this line of thought helps clarify tag b-models. That's because it implies that the value of related tags rises nonlinearly. The first one isn't worth much, but later ones are more and more valuable. This is an example of the snowball effect: demand for tags increases at the margin.

-- umair // 12:29 AM //

Wednesday, June 22, 2005

I'd Have to Disagree With Gartenberg Disagreeing With Cory's Position on DRM

All due respect, in this case Gartenberg's argument is (really) flawed. He says Sony's DRM was 'mainstream' and points to iTunes sales as evidence that consumers 'will accept DRM'.

The flaw in this argument is straightforward: if we're thinking strategically, we have to consider the opportunity costs of our various strategies. It's not that Sony went bankrupt because of DRM (clearly, it didn't), it's that Sony missed the opportunity to, well, build the iPod - the Walkman of the 21st century - because it's content acqs forced it to incorporate silly DRM. Does this sound familiar? It should because...

It's not that iTunes is getting killed because of DRM - it's that Apple is foregoing huge opportunities in reshaping the digital media value chain because of it. To give you just one simple example, DRM restricts Apple from ever turning iTunes into what I've called a reconstructor - a tech that remixes snippets of micromedia based on your preferences. Folks like last.fm are going to dominate this space. Alternatively, you can value the opportunity cost by thinking about about the counterfactual: how successful an iPod that only played AAC tracks would be (hint: not very).

In fact, I think if you really wanna to analyze DRM in an Apple context, he'd look at the number of AAC tracks vs the number of MP3 tracks per iPod. My bet is that the ratio's (way) below one.

But all this is kind of besides the real point. The open vs closed debate is, I think, about the media industry shifting from goods to services. So simply concluding that 'consumers will accept DRM' kind of misses this fundamental point, which should probably be at the heart of any digital media analysis going on these days - because it suggests how much to open your goods.

And it also implies the big-picture fundamental tension in Media 2.0 strategy: that if you can't transition to services, you have to protect your goods with DRM. But if you have to do that, then you're in a competence trap.

That's because protecting your goods builds competences that are going to be totally irrelevant in a liquid Media 2.0 world, where there's an exploding supply of reconstructors, smart aggregators, and tweaked, remixed, split, cut micromedia and personal media accessible almost anywhere/anytime.

In such a world, plasticity - being able to do lots of cool things with media goods - drives value (and protection kills it).

Now, I'm not arguing this because I'm a rabid Doctorow fanboy. In fact, I wanted to post this morning about how I find Free Culture increasingly irrelevant, because it should be about finding ways around, for example, the UAE's block on Flickr - it shouldn't just be about people lucky enough to live in the developed world being able to freely remix Britney Spears.

But then my net connection went down like all day... :)

-- umair // 11:55 PM //


The selling of the counterculture | Economist.com

-- Mahashunyam // 8:00 AM //

Tuesday, June 21, 2005

When Do Networks Become Markets?

As the value of goods rises, transaction costs rise, making the potential gains to a price mechanism large enough to provide an incentive to build one. The potential gains are the size of the transaction costs saved.

Like I've said before, the Net is going to resemble a bunch of interconnected markets much more than a bunch of interconnected networks. This is a great example of such dynamics.

Case study provided by Weinberger. - highly recommended if the above doesn't make any sense.

-- umair // 6:03 PM //


Chris Abraham

Dude, you're killing blogdex (and it's lame). I cannot be the only one who's noticed this.

-- umair // 12:32 PM //


Google vs PayPal

OK, not much time to write about this so I'll make my (controversial) thoughts short and sweet.

Google's core competences are not about connecting people with other people. They're about connecting people with information, by rapidly learning what information domains people value most. In the past, I've referred to this as Google's learning capability, and it's (supply-side) economies of scale.

Where's my evidence? Well, let's think about Google's product portfolio. Most of it's products which are focused around connecting people with other people are the ones people love to pick on. Examples: Blogger, groups, etc.

eBay, on the other hand, does have probably the world's deepest competence in connecting people with other people to do productive things. Where is this competence manifested? In eBay's seamless integration of the online marketplace. Now, this is a lot harder than it appears, because it's exactly the gaps in the value chain that eBay had to come up with innovative solutions for - reputation systems to fill the information gap, the PayPal acq to fill the transaction cost gap, etc.

Anything can happen - and I certainly wouldn't write Google off. The point I'm trying to make is that, IMHO, AdSense has not built a competence that's hugely relevant to consumer micropayments/credit. eBay's the player that's built that competence, by learning a huuge amount about how to connect people with other people.

You might also wanna keep an eye on Zopa.

-- umair // 10:41 AM //


Wikitorials and the Snowball Effect

The LAT gives up Wikitorials, at least for now.

I think there are a few things to consider here.

First, trivially, anyone who wants to leverage peer production has to forgo old notions of quality. This is exactly why peer production is disruptive. I'll never read an NYT columnist say 'shitface', because of their focus on quality, but I might read RudePundit saying so, because of his focus on satire. Put another way, mass market notions of quality are exactly what peer production disrupts.

Second, I think the LAT has gotten confused between what I call the snowball effect and distributed scale economies. These are different phenomena.

The snowball effect is a function of complementarity; when you realize increasing returns from other producing complements (links, tags, comments, playlists, etc) to your micromedia good. Think Powerline or Atrios.

Distributed scale economies are about Web 2.0 technologies enabling communities of ultraspecialized microproducers to costlessly contribute tiny chunks of knowledge. Think Wikipedia.

Now, if we're after the most interesting opinion, strategically, we'd like to our dominant strategy is to leverage the snowball effect - not distributed scale economies, because we're not interested aggregating tiny chunks of knowledge. We're interested in finding the opinion that generates the most discussion, buzz, etc.

So, the LAT's made a good effort - but I think it's misunderstood the economics of the game it's playing a lil bit. If it wants to focus on Wikitorials, it should begin by understanding the distinction between different kinds of Media 2.0 economies (or by emailing me, if you like).

Oh yeah, and also by not getting scared by a troll posting a goatse, for god's sake (thought it was pretty funny). Not to make an asinine comparison, but /. and MeFi don't exactly shut down everytime someone pulls a goatse.

-- umair // 8:51 AM //

Sunday, June 19, 2005

Trade, Not Aid

Reason magazine on farm subsidies.

-- Mahashunyam // 7:22 PM //



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