Strategies for a discontinuous future.

Friday, April 28, 2006
Every Breath You Take - Columbia Business School

Every Breath You Take - Columbia Business School


-- Mahashunyam // 11:59 PM //

A Tiny Model of The Long Tail of Peer Production

Nick has a great and inflammatory post about numbskulls and 2.0. Which is important, because it crystallizes a lot of the (flawed) thinking about 2.0 lately. You might also wanna check Ross's latest post for more context.

First, Nick's argument: most open-source contributors are "numbskulls", a tiny fraction are "experts" whose ideas/opinions create value.

"...Wikipedia had over 850,000 articles in English, and 2.9 million across all languages ... This content was generated by fewer than 50,000 contributors in English, and 103,000 total."

To be honest, I'm not quite sure what the point of this argument is. That the ratio of contributors:articles should be > 1? Does it matter? No; by itself, it's a meaningless observation based on silly pseudo-math.

Let's recast this question to gain some real insight.

We know preferences are heterogeneous. For the last few centuries, economics has focused on consumption preferences. We like different things; I like My Little Pony, you like Miike Takashi.

Now, the pendulum is shifting. In a world of abundance, we must understand the implications of heterogenous production preferences.

Let's assume a world of perfect information or zero transaction costs.

In this kind of world, what do heterogenous production and consumption preferences really mean?

Not what Nick is saying; that there will always be one big long tail of peer production.

Rather, they imply two things.

First, agglomeration economies mean people with similar consumption preferences will group together in communities focused on different products/markets/outputs. If I wanna discuss makeup, I have go to MUA - that's where the discussion happens. These are simple natural monopoly dynamics.

Second, for each community (or set of people with similar consumption preferences), there will be a long tail (or some similar power-law distribution) of peer production; because they will have different production preferences as well.

For each Wikipedia, for each MUA, for each Basenotes, for each Squidoo. And this is, in fact, exactly what we see in the real world at those communities.

Pretty cool.

Now, these dynamics only create problems in two cases.

First, where there is no selection of different outputs regulated by that community. In that case, the most productive members, even if they're morons, will produce eternal crap unstoppably.

Think Geocities.

Second, where there are no experts involved in regulating outputs. If there aren't, the crap will never get filtered out.

Think blogosphere.

Now, those two examples should make it clear that revolutionary peer production models - the ones that make cool stuff - work because they're the opposite of what Nick is saying.

Put another way, it is the coordination that takes place in markets, networks, and communities that filters out the power of numbskulls.

But more to the point, if you follow the heterogeneity argument above, you may be a numbskull at Wikipedia - and a genius at MUA.

The point of open source, to put it another way, is not that everyone does contribute - it's that everyone can contribute. Now, this may not yield perfect outputs - but it does yield, in many cases, hyperefficiency: outputs at radically less opportunity cost than the firm could produce them, or far more innovative ones.

So you should see by now that the argument that open source models "rely" on the intelligence of their participants is a neat sleight of hand (after all, everything does - from firms, to anthills). The genius of these models is that they tap the space where expertise and heterogeneous production preferences intersect - something that almost never happens in firms, despite big bonuses, nasty bosses, and the other nice things about the rat race.

I've italicized that because I really do think it's absolutely revolutionary from an economic point of view.

There's a longer version of all this forthcoming in the long awaited (but rarely hyped) Bubblegen book.


Second, a bit of selection bias. Is Wikipedia "mediocre"? Perhaps. But Wikipedia's an easy target, because it's such a mammoth undertaking.

Let's choose some other open source outputs. Is Firefox mediocre? Is Apache mediocre? Is Linux mediocre? I doubt it.

So Nick's argument begins to look a little more dubious.

Let's take it further. Let's say I'm a makeup lover. I trade info about make up at MUA. Is this info "mediocre"?

By expert standards, sure. But the standards of the community are often very different. In many cases, communities exist to overturn "expert" orthodoxies - by hacking, tweaking, and remixing things. The point of Wikipedia is not to be the "best" encyclopedia - but to revolutionize the terms of "best" from most accurate to most ubiquitous, up to date, and easily accessible one.


Finally, self-contradiction: in telling us that 2.0 is utopian, doesn't Nick reveal that he is, in fact, the ultimate utopian? After all, here is a guy using a blog to tell the world essentially that if everyone wasn't a numbskull, they could make the world a better place...

Ah, irony.

-- umair // 1:10 PM //

Tuesday, April 25, 2006
RIP Jane Jacobs

One of my favorite thinkers. She will be sorely missed.

-- umair // 6:43 PM //

MySpace vs Facebook

An interesting comparison from a users' POV.

-- umair // 4:46 PM //

Politics of the Day (2)

Ah, there's nothing like good ole fashioned American racism:

"...U.S. Housing Secretary Alphonso Jackson shed little light Monday on the future of public housing in hurricane-battered New Orleans, but said that �only the best residents� of the former St. Thomas housing complex should be allowed into the new mixed-income development that replaced it, according to the information-restricted NOLA.com newslog"


So what happens to the...uh...not so best residents? Righht, I forgot, we're not supposed to care.

-- umair // 4:02 PM //


Since my TagCloud hasn't updated itself in months - I'm assuming TagCloud is dead?

-- umair // 3:14 PM //

Business Models

Nick talks about the Google float; ie, Google making $$ by earning interest by holding on to other people's cash.

It's a nice idea, but I doubt this is really a serious source of revenue for Google. Where it is is in the insurance industry, which is also the new media distribution
(so, you know, put 2 + 2 together).

-- umair // 2:46 PM //


Politics of the Day

Why do most Americans say they place such a high value on freedom, and then submit to small insanities like this?

This kind of thing would only fly in a few other countries - Saudi, Iran, the more war-torn parts of Africa. Anywhere else in the civilized world...you know the score - people wouldn't stand for it. It's abusive and stupid.

What's the deal? Why are people in the States so scared of everything all the time?

Oh, right, I forgot - it's because most of our leaders are basically a bunch of whining babies.

-- umair // 2:28 PM //

Monday, April 24, 2006

LinkedIn is the new Friendster

Not to put too fine a point on it. But I have to say: LinkedIn sucks.

Once a month, I log in to accept invitations. Like I did today. Occasionally, I try and do something meaningful - update my profile, interact, etc.

The problem is - I can't do anything. Even editing my profile is narrowly restricted to a tiny universe of what LinkedIn would like - not what I would.

Having spent a fair bit of time analysing social media, it's pretty clear to em that LinkedIn is going sideways because it's making almost exactly the same mistakes Friendster made.

Briefly, LinkedIn has done a perfect job at limiting interaction to such a narrow subset of the possible, nothing happens. That's why there's such little interaction on LinkedIn, beyond the meaningless exchange of "connections". There's a lot more to it than that, but that's the core of the manifold problems.

Guys, you can do so much better. LinkedIn is such a great idea. But you really need to rethink your social value proposition, how it's delivered, and how it scales (hint: you don't have one at the moment). You are creating little value, and your market window is closing fast.

-- umair // 9:15 PM //


Edge Competencies and Media 2.0 Profit Pools

So you read the NYT MySpace piece. Lots of great conversation surrounding it, for me, the best was Scott asking, in a phenomenal post: will Media 2.0 be less profitable than Media 1.0?

He does some quick CPM-fu to demonstrate that MySpace isn't making a huge amount of cash from it's voluminous traffic.

Some points to note. First, I think Scott is asking a great question. But it's the wrong one. Yesterday, newspapers were the most profitable industry in the economy - for the better part of a century. in the bigger picutre, media markets were characterized by local monopolies or very heavily protected oligopolies with fat margins.

So profits don't really have any historical room to grow. If they did, it would be a fairly huge economic phenomenon.

Now, that begs the question: for average players, do profits rise, or fall?

The answer is straightforward - the evidence is already voluminous.

There's no middle ground. Those players who stick to yesterday's models - whether content creators, distributors, publishers - get hypercommoditized. This should be crystal clear: just think of the huge number of media players getting killed, from newspapers like NYT and WPO, to magazines like Meredith, to broadcast networks like Sinclair, etc.

OTOH, those players who leverage the edge - who learn to create and capture value from the new forms outside the boundaries of the firms, like markets, networks, communities, commons - will capture the lion's share of returns. This should be crystal clear: think of players as different as Apple and Google, both of whom are turning the media industry inside out by using markets and networks.

There's another, simpler way to see this. It is a great economic discontinuity, which is already flowing like an avalanche across the economy: value will shift outside the boundaries of the firm, to more economical modes of coordination; it is those players who own or leverage them - who learn to build strategy and advantage around them - who will earn supernormal profits.


Now, the MySpace example is also flawed. Scott is using CPM to value MySpace. MySpace's success is predicated on shifting the industry away from the flawed assumptions and logic of CPM, much like Google has done. MySpace's challenge is to do the same thing for branding - to create a hyperefficient form of interaction, much like it's already done with sponsored profiles.

Put another way, MySpace is focused (like Google) on breaking or disrupting CPM (and the rest of yesterday's silly media metrics). When it does so, like Google, it's success will largely be at the expense of older, slower players.

-- umair // 2:32 PM //



Gets banned from a local community college. Blah, blah...

-- umair // 1:27 PM //




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