Strategies for a discontinuous future.

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

Saturday, July 16, 2005

Public Art of the Day

The Rock Garden in Chandigarh, India. (via MeFi).

-- Mahashunyam // 11:26 PM //


Snowball Effect

Case study.

Think about this in the context of demand and price discrimination. The price to the first few people that discussed was zero (plus bandwidth). Then, the price was the aggregate value of blog ads on discussing entries (plus bandwidth) Now, the price is the value of the NYT's ad revenues from this story (plus bandwidth). A very nice example of Media 2.0 reverse price discrimination along an upwards sloping demand curve - the total inversion of Media 1.0 price discrimination and demand.

-- umair // 12:57 PM //

Thursday, July 14, 2005

Adverse Selection, Spam, ID, and Guns

A very nice piece that points out SenderID et al are textbook examples of adverse selection. One of the many reasons i don't have a lot of faith in naive id schemes - it's the guns problem redux: the problem with guns isn't that they kill people, it's that when they're legal, criminals end up being the most likely people to buy guns. So the argument that people can defend themselves better is specious.

Similarly, bad guys will always end up selecting themselves into schemes like SenderID, selecting good guys out of the market. So the argument that a locked-down world of total ID is less spammy (or, at the limit, what Intel and the gang are gonna start telling us soon, full of higher-quality content) is specious.

-- umair // 7:26 PM //


Dear TED,

For a conference that's about the 'shared future' and 'network effect', you're remarkably closed. I think if you opened up more, your discussions would be a lot more relevant - and everyone else might begin to think you meant the stuff being discussed in the first place (full disclosure: I used to work closely with one of the people discussed in this article).

-- umair // 7:20 PM //


The Economics of Aid

SPIEGEL Interview with African Economics Expert: "For God's Sake, Please Stop the Aid!" - International - SPIEGEL ONLINE - News

Note to Bob Geldof et al: yes, you are all fighting for a very noble cause. However, more aid or debt relief is *not* the solution to the problem of world poverty. The Dismal Science explains why.

Let's think about debt relief for a moment. What is the consequence of removing debt? The naive argument is that it is going to free up resources for the poor countries that would be invested back in the economy for their development. What assumptions does this argument rest upon? Two critical assumptions are: 1.Financial resources is what these economies need for development. 2.Economic managers will efficiently deploy the resources to realize maximum development.

The first assumption is of tangential relevance at best: what these economies really need are skills, property rights, rule of law and access to rich markets much more than they need money. The second assumption is just stupid : social and political governance structures in these countries are abysmal, in fact, that is largely why many of them are poor to begin with. It is much more likely that the extra money will end up being "invested" in gold faucets in the "presidential" palace of the Dictator du Jour than in a world class engineering or business school. The said Dictator du Jour will, in fact, have even *more* incentive to raise more debt with their countries' higher credit rating made possible by the very debt relief, and then go on to waste it all over again. See the vicious cycle here? Economists have studied this for ages and given it a name : Moral Hazard. Unconditional debt relief did not work for teens in Illinois in 1800's nor did it work for Argentina in the late 1900's. I am betting that it won't work for Africans either.

Let's now turn to more aid. As the insightful comments of Mr Shikwati illustrate, aid does not go to those countries as free dollars with spending control, but mostly in the form of dumped goods from rich countries and little authority over how it iis spent or deployed. Disturbingly enough, it also tends to come with socio-political strings attached, such as this one for example. In fact, dumping goods through foreign aid has become a part of the marketing strategy of rich countries' politically connected producers such as pharma and agri-business companies. This then invariably ends up destroying local economies - say, by making local farmers uncompetitive against dumped food supplies as Shikwati points out, or by resricting the import of cheaper generic substitutes enforced by the donors to protect their suppliers' IP rights. The end result for a poor country is likely to be much more harm than benefit, as in this example. In fact, this is almost downright perverse: rich countries' drug and pharma industries get to collude with their venal politicians to rob rich countries' taxpayers and indirectly create captive markets in poor countries. Of course, restricting local and foreign competition in poor country markets is an added bonus. No wonder that rich country politicians are falling all over themselves to increase "aid" a.k.a. tax-payer funded handout to their pharma and agri businesses, but not giving an inch on reduction of agriculture subsidies in the Doha round.

What poor countries need is help in building up infrastructure, reform of governance structures, and skills and competence building to create human capital. Then they need to build their economies through entreprenurship and access to rich country markets in a fair trade regime. More aid and debt relief are just recipes for continuing the disaster in poor countries while presenting profiteering opportunities to well-connected rich country producers.

Update: I came across an article making similar arguments in Yale Global that I thought was interesting. A co-author of the article is Thilo Thielke, the interviewer of James Shikwati in the earlier link.

-- Mahashunyam // 7:16 PM //


How Value Chains Atomize

Almost a mini case study, using the film industry as an example, courtesy of Wired. Essential reading (you could check out my ppt for context if you have no idea what I'm talking about).

-- umair // 2:17 PM //


Media 2.0

A new Corante blog focusing on it, 'Rebuilding Media'. Sounds familiar (ppt) :)

-- umair // 1:55 PM //


Market Gaps - Web 2.0

Link aggregators are incredibly powerful ways to navigate the www. What I can't understand is why so many current players are foregoing this huge opportunity. Feeds (distribution) and tags (revelation) are an important half of the picture, sure, but so is semi-smart aggregation, which can provide a quick snapshot of what the community values now.

I use blogdex, as I have done for a very long time - because, amazingly, no one's built a better mousetrap yet, despite many, many attempts to do so (read: there is a big market gap here).

Technorati used to have a nice link aggregator, but now it only counts traditional news sources. Why don't they include blogs and other micromedia again? Most likely, they don't want to cannibalize their enterprise offering.

I think Google is the same story. Think about how easy it would be to expose the huge amount of info that passes through Blogger every day. My kid sister could code a rough and dirty version in about a day. Why don't they do it? Because it ends up costing Google a nice chunk of marginal revenue if users learn to quickly navigate through link aggregators, instead of slowly through the larger www.

Bloglines has a relatively open link aggregator that counts traditional sources and micromedia...but it's really slow, and cumbersome. By slow, I mean that the links decay too slowly - I don't wanna see yesterday's news.

There are a number of other competitors, but I'll only mention one more - del.icio.us/popular. I don't use it so much because it's noisy - because del.icio.us's user base, which makes up the collaborative filter, is like an extremely biased sample, most of whose interests are totally irrelevant to me. I suspect this will become more useful as del.icio.us penetration becomes a bit more rounded.

Some general points. I would give users control over the decay function - how long it takes for links to not get counted any longer. That way, I can set the freshness of my own links. Second, I would get a little vertical. It shouldn't be that hard to extract contextual information to sort links into basic categories. Third, interface matters, a lot. A big part of the reason I use blogdex is that I have little time to trawl links, and I can get a lot of information very fast just by glancing - unlike Memigo, where I have to concentrate to extract relevant info.

-- umair // 1:04 PM //

Wednesday, July 13, 2005

Brilliant Ideas, Cleantech Edition

TerraPass - nice one, guys.

There are lots of things to say about this. Probably the most important is that the rate of innovation in cleantech related stuff is accelerating hard, despite a lack of serious institutional support. This is probably why most plays in this space are, well, so cool (viz FutureForests).

The other very interesting thing to me is watching new market (versus regulatory) structures that will ultimately capitalize a cleantech economy emerge and evolve - this is, after all, what plays like TerraPass and FutureForests really are.

In the rest of the venture world, market structures like these were laid down long ago and don't really evolve (save get massively disrupted every decade or so).

Also, having spent a lot of time in the 3rd world, I think one can safely say that regulatory solutions have almost zero percent chance of being at all effective in helping a global cleantech economy emerge (since, no matter which way you cut regulation, 3rd world consumers will essentially end up subsidizing 1st world consumers, which is unsustainable because it's eminently arbitragible).

-- umair // 8:17 PM //


The Most Interesting Question I've Heard All Week

Is Web 2.0 really just about price discrimination?

You know, it sounds silly, but it's a great question. Now, I don't think the writer means price discrimination in it's purely econ sense. But if you take the question that way, it is a deep one indeedy.

-- umair // 8:03 PM //


New Stuff

I am enjoying Michael Parekh's blog as well as the Hitchhiker's Guide to 650 quite a bit. Recommended.

-- umair // 2:45 PM //


For Tags

For tags are a brilliant idea. I spent some time about a year back deconstructing the economics of the idea of a reverse blog, which is what for tags essentially become.

I think this could be big, because it can be a disruptive addition to the value prop if tweaked a bit. It's amazing how del.icio.us continues to dominate innovation in this space, which must be a bit of a shock to players with much deeper pockets - nice play by Fred.

It also vaguely begins to occur to me that tags are coming closer to the much touted 'Web OS' (remember that...) than the other candidates (Google, browser, etc).

-- umair // 2:40 PM //


Yahoo vs Simplyhired vs Indeed vs LinkedIn vs HR

Yahoo to begin scraping jobs from everywhere, much discussion ensues.

I'm not sure if this really a strategically important move. I think the real problem in the jobs vertical is a coordination problem - not a search problem. That is, how do you connect job-seekers and decision-makers economically?

Why do I think this? Think about what headhunters do - it's equal parts coordination and search. Sure, they have to find the right candidates; but they also have to build relationships with the right decision-makers. So far, the basic model on the Net for jobs has only ever really addressed the first half of this equation. I've argued this many times before; archive it if you're really interested.

Matching jobs and job-seekers is fairly liquid on the net - the relative gap, and where Yahoo could build a strong sustainable advantage fast, is the coordination half of the value prop (which has been ignored for a veeeery long time, most likely because it's easier to build a few forms, a spider, and a database, than it is to build a whole new innovative coordination model).

LinkedIn, I think, gets this coordination problem, and has a particular take on it, which I think is kind of brittle and rigid (ie, transaction costs for referrals are pretty high, and expected gains aren't that high on average). If you ask me, the dominant design will be (a lot) more plastic, and it does not have to be centered around 'link to me' style social networking (but I can't say more unfortunately).

For a vivid example, check this query on SimplyHired - I think it illustrates that search costs are low, but coordination (ie, getting the right info to the right people) is incredibly costly, if not impossible.

-- umair // 2:04 PM //


Blogosphere vs Beancounters

Doc has a nice post summarizing the mounting buzz surrounding Technorati's recent moves (ie, enterprise blog-mining at 100k/year if the rumour's got any merit to it). Which reminds me I have a comment by Gen to respond to...coming tonight or tomorrow (I know, I know, I'm slow - sorry!!).

-- umair // 1:17 PM //


Current TV

There are many reasons that I'm not so hot on Current TV. But the biggest is something I've really been pushing here for the last few weeks: complementarity.

The micromediasphere's been such an explosive place in terms of growth of formats and users alike because of strong complementarity. Blogs are complementary to comments are complementary to tags are complementary to links...etc.

What this ultimately creates are increasing returns to adoption - increasing marginal utility, if you like. Yes, they're real - but before, they were confined to niches where there was a mechanism to actually deliver these network FX. Hence, eBay and file-sharing.

Now, what Web 2.0 is doing, economically, is bringing increasing returns across all media. This is a problem for traditional media players who are scrambling to catch up, because it's not clear yet up who exactly will internalize the value that's being created in the micromediasphere (or the value that's being eroded from the traditional media industry, if you like).

This raises a very special problem for Current TV. Namely, that more Web 2.0 focused competitors can always and everywhere offer a superior value prop, because they can leverage complementarity. Put another way, Current TV, by tying itself heavily to cable and satellite distribution, may be foregoing the real opportunity. If you follow this analysis, Current will never be able to raise relative switching costs.

Is this a symptom of a deeper...uhhh...thing? Check this out:

"...Assignment: London

Okay: We want to put together a reflective piece on the London bombings and their implications. Get out a camera -- a webcam will do -- and start talking."

Look, peer production is not about ordering prosumers around to meekly do your bidding. It's about building a platform/community that does theirs.

Not to sound harsh, but perhaps Current has the whole dynamics of this stuff backwards.

In a sense, this is the same kind of mistake that 1.0 dot commers made - assuming that the www was just another distribution/mktg channel. Dot com 2.0 peer production plays like Current seem to be assuming more and more that the www is just another production channel (supply chain, if ya like). It's emphatically not.

The deep economics of peer production are very different - they're about supply-side network fx, strong complementarity, and increasing returns. All of which are very different from traditional media competitive dynamics, and create very different industry structures.

-- umair // 12:05 PM //



I can think of almost nothing that is more colossally irritating than Tucker Carlson's big fat face smiling at me on every single website I visit. I'm pretty sure I'm not alone.

Congratulations, you're running the smarmiest web ad campaign ever - you might be better off telling us why, in a micromedia age, we should continue to pay attention to pundits appointed by you (versus us).

-- umair // 11:30 AM //

Tuesday, July 12, 2005

Essential Reading

Barney Pell on VerticalLeap - killer notes you should review at leisure.

-- umair // 5:27 PM //


Dot Com 2.0

NumSum - for the (repressed) beancounter in you.

Highly recommended - not so much for the idea, but it has one of the coolest, simplest, most functional ajax interfaces I have probably ever seen (no kidding). Many 2.0 plays could (should) take a page out of their design book (Wondir and the new Technorati, which forces me to keep...clicking to get info, are two designs that spring to mind).

Actually, if I think about the idea, with a few tweaks, I think one could approach del.icio.us-ish traction...but I think it's just a toy, I'm not sure how seriously the coder(s) are.

-- umair // 2:44 PM //


Podcasting Problems, pt 57289 - Market Structure

Kedrosky on Cuban on podcasting b-models - referencing the less-than-illustrious fate most streaming content plays mets (viz, pseudo.com).

Mostly, I agree, except that I don't. Uhh...lemme explain.

OK. I think that on average, returns for individual podcasters will be low. But I think returns for podcast communities/aggregators/reconstructors/etc are potentially very large. Now, you probably already know that, so bear with me for a bit of fresh stuff (hopefully).

Mostly, this is because the latter can exploit the single economic property that's made the blogosphere so much more valuable than web 1.0 style homepages - strong complementarity.

A single podcast on it's own isn't very valuable, unless it's a hit (which isn't likely, on average) - but value increases exponentially in podcasts aggregated. Note, there are two conditions.

First, complementarity gains - without them, more than likely you'll realize some kind of linear syndication scale economies. That means podcasts have to change to become more plastic, like blogs - to allow links, comments, tags, trackbacks, etc. This is, if you ask me, the single biggest limiting factor in the growth of the podcasting market right now. iTunes' big push isn't economics - it's marketing. The structure of the market itself has to change to allow complementarity.

Second, a relatively efficient attention allocation mechanism. There's no point in aggregating billions of podcasts unless you can match peoples' preferences with the right ones, and so maximize value creation (which is what's really gonna entice people to switch from mass media). Right now, I'm loath to say that a really good one does - my podcast search costs are, in fact, so high, I barely end up listening to any podcasts.

-- umair // 2:30 PM //


All Your Cast Are Belong to Us

Had a beer yesterday with a bunch of current LBS students, got to talking about micromedia. One of them, apparently, was at PointCast, and he made a point of trying to convince me that the feedosphere was doomed because PointCast crashed and burned.

For some reason, I found this very funny.

-- umair // 11:17 AM //


Free Culture vs 1984 vs Free Markets

Must-read piece by Tim Wu about the Great Firewall of China.

A developing theme for me this year is the political closure of the Net. Two kinds of people, I think, should be thinking about this. First, Free Culturites, most of whom seem to be conveniently ignoring the fact that things like Creative Commons licenses are only valuable after the goods they cover are accessible. Second, the usual suspects, because I think huge market gaps are opening here (to defeat the censorship, not to build it). The value prop is almost unbeatable - I think the hypergrowth of satellite TV in the 90s might be the closest proxy.

-- umair // 11:12 AM //


Continuous Computing

Wade Roush has kicked off a continuous computing blog/initiative, about essentially the arrival of long-heralded ubiquitous computing/connectivity etc and it's effects. Very interesting stuff.

I would actually be very interested to hear if Wade has historical examples of 'info-fields', and what their economic and social effects have been. That would be a really fresh perspective on the whole thing, which help me draw some insights. I find a lot of excited chatter about Web 2.0 (etc), but not a lotta substance (sorry...)

-- umair // 11:05 AM //

Monday, July 11, 2005

How Not to Think About Media 2.0 - Making Markets and Goatse

"...It might take only one faked film, one bogus report to weaken the bond of trust, and, conversely, one misedited report or misused image to make individuals wary once again of trusting their material to television or newspapers.

...there is an ocean of difference between keeping open a space for your audience to participate in and allowing anyone to trash your journalistic brand."

Actually, no. One is the flipside of the other.

Think about it this way. Markets are gigantic decentralized info processors, which are hyperefficient under certain conditions because the price mechanism aggregates distributed information incredibly cheaply and fast.

Now, peer production communities combine the DNA of firms and markets. So, in the same way that one counterfeit note/ponzi scheme/shady deal doesn't send the financial superstructure crashing down around us, a fake video/image/report will not - repeat not - kill a pp community.

The principle is the same - in either case, one party is trying to take profits through the other party's imperfect information. But that creates the incentive for someone else to arbitrage the first guy, by fixing the information asymmetry.

Sound familiar? It should - if enough people try and arb each other like this, you have a liquid market and a working price mechanism. This is exactly what you want to happen. That is, counterfeit notes/ponzi schemes/etc are signals that the market's working efficiently - if it wasn't, they couldn't exist.

Put another way, market failure is a very different phenomenon - it's about externalities, public goods, blah, blah - the dynamics we're talking about here are exactly those that make markets work.

Let me use a *totally* asinine example, to make the point extra clear: goatse. Goatse is offensive, sure, but it also serves a powerful signal of the quality of conversations across the micromediaverse. Strategically, you don't want to avoid goatses, like the LAT did - if anything, you want the opposite. You know your market's beginning to work when the goatses start pouring in, because goatse is one one kind of currency that's traded across micromedia communities with liquid and efficient knowledge markets (offensive as it may be).

Now, what I find fascinating is that there are three, maybe four places in the world right now that really understand this - the Valley, Korea, Japan, and maybe the Beeb...but definitely not traditional European media players.

-- umair // 12:45 PM //


Detroit is So Hollywood

Mind-bendingly cool article by Gross about the similar problems Detroit and Hollywood are facing.

The basic point, I think, is obvious - efficiency gains at the expense of any kind of creativity (let alone innovation) - aka the blockbuster effect. Highly recommended.

-- umair // 10:54 AM //


Umair vs Jeff

Please excuse (and feel free to skip) the following political rant...

Jeff, apparently, only believes in the democratizing power of Media 2.0 when Muslims aren't involved:

"...: And on Global Voices, they're aggregating views from the Muslim blogopshere. They're quoting condolences. I wonder how representative that is. If only it were."

Isn't that cute. One of Media 2.0's biggest champions dismissing, out of hand, an entire portion of the micromediaverse just because of their religion.

The blogosphere, it seems, only counts for Jeff when it's...not Muslim...White, Christian, who knows. The Muslim blogosphere, apparently, is only there to be dismissed (by Jeff).

You know, in the rest of the world, we call this position hypocritical - it's trivially self-contradictory. We might also call it something close to racist.

The unstated assumption which this argument rests on, and which Jeff still supports is obvious: Muslims bloggers, podcasters, writers, (etc) can't be trusted, because, well, they're Muslim. See the brilliant circularity?

This is coming from a so-called champion of citizen journalism/open source media. Think about that for a second.

Contrast with Matteo's comment on Mefi:

"...so the attacks are to blame also on teh murlims who don't actually bomb shit, too? cool, these dark people never seem to do anything right in your world -- damned if they bomb, damned if they condemn the bombing."

Jeff, thanks for putting your money where you mouth is. I guess now I know how much you really mean all that wonderful Media 2.0 stuff about openness and transparency and empowerment. You mean it sometimes - when it's easy and convenient. Not when it's tough, and it challenges you.

Put another way: Media 2.0 is, in a very real sense, the triumph of techno-hippie ideals of openness and transparency. I think your radical politics of exclusion are gonna destroy your cred as a serious Media 2.0 thinker.

You can't be about Media 2.0, and also about excluding anyone, well, you you don't agree with. That's so Rupert Murdoch - so tragic, so lame, so...90s.

End politics, back to regularly scheduled geekery.

-- umair // 9:53 AM //



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