Strategies for a discontinuous future.

Wednesday, November 15, 2006

So I put Innovation Wednesdays on Upcoming where you can add comments, send to friends, etc.

But since there's no option for recurring events, I have to update it every week. Kind of a pain (esp for such a killer service).

-- umair // 2:24 PM //

Innovation Wednesdays

Will be happening tomorrow (Thursday) at 7pm, venue TBD...

All are welcome.

-- umair // 2:01 PM //

Thursday, November 09, 2006
Deal Note: Accel, Index, NewMedia Spark vs Mind Candy

OK. By now you know that Mind Candy, the guys behind Perplex City, have taken $7m from Accel Partners, Index Ventures, and NewMedia Spark.

Let's deconstruct the rationale behind the deal a bit, as well as it's implications.

1) First, kudos to these funds for doing this deal. It's a great deal. Not because Mind Candy will be the next Google.

Like any other industry, venture has to learn - to shift down a learning curve. Yesterday, it was software. Once most funds had mastered what it takes to make software investing in software successful - relationships, deal sizes, marketing, etc - the pickings were rich.

Today, venture guys need to learn to invest in new spaces - media, cleantech, transport possibly (there are plenty more).

But most funds have little idea about just what it is - relationships, capital, management - that makes media investments succesful. The slow but sure amplification of churn (and, in some cases, outright implosion) on Sand Hill Road is a testament to this.

In large part, the success of today's vintage of funds depends on building this learning - especially in media, where near-term returns promise to be the greatest (relative, to, for example, cleantech).

2) What's the play being made? This is perhaps the most interesting part of this deal.

Though Index might be, Accel (especially) isn't known for huge insight in this space. Though they've done a few notable deals recently, imho, they've struggled for the last couple of years to figure out where/why/how value can be created and captured in new media.

The first point to note is that this is a bet on content. Yes, the content is user-gen, interactive, hypersocial etc - but so is, for example (geek out) D&D or Magic: The Gathering. Point being - historically, it's justifiably difficult for venture guys to invest in content, because idiosyncratic risk dominates such investments.

The Mind Candy deal is a nice datapoint that this idiosyncratic risk is beginning to evaporate (the others being deals like Lionhead and Habbo).

The risk is evaporating for three reasons. First, content players in certain spaces are less and less at the mercy of publishers and retailers (hi games industry, hi record labels). Second, and the deeper economic rationale behind point 1, is that being creative is iteslf becoming less and less risky, as marketing investment shrinks, distribution channels become circuits, etc.

But third, most powerfully - and this is likely Accel's rationale - new revenue streams are coming online. Branding is going to be revolutionized (this year and next). It should be intuitive just what a powerful platform for doing exactly that a company like Mind Candy/a service like Perplex City offers.

Now, beyond that, it should be intuitively clear that the economics behind this investment - if we can vaporize the idiosyncratic - are very compelling indeed.

Of course, there's a big danger here too. Mind Candy is pioneering a new category of gaming. This will take not just money - but freedom.

The danger is that the investors LinkedIn/Friendster them - when near term revenues fail to materialize, advise (force) management to sacrifice the economics of the underlying innovation for immediate gains.

At Friendster, for example, the CEO shuffle began as the search for revenue streams viable in the short run became the only priority.

Of course, this was a huge strategic error - if Friendster had focused on economics (instead of simply chasing more and more elusive profits), they could have crafted the same social value proposition and strategy that Myspace did, only 1-2 years earlier.

So Mind Candy's success depends, to a greater degree than most other plays in these spaces, on the team having the freedom to do what they do best, especially when things get turbulent (double esp since beancounter VCs, no matter how much they claim to love playing World of Warcraft, really have no idea about what makes games cool, and what makes consumers connect).

In this scenario, the most likely outcome is that Mind Candy ends up basically being another D&D or Magic: the Gathering; investors cash in on the brand and IP, multiplying revenues across very traditional retail channels.

Now, you might think there's nothing wrong with that - except that it's not going to make anyone the kind of returns which justify the existence of venture capital in the first place.

-- umair // 1:25 PM //

Wednesday, November 08, 2006
Innovation Wednesdays

On tonight - same time, same place, Coco Momo, 79 Marylebone High St, between Bond St and Baker St tubes, 7-9pm.

Tonight, we will be discussing the madness of crowds, who it helps/hurts, reviewing the key deals of the week, and, of course, celebrating the results of the election in the States.

Everyone is welcome, bring a friend, etc.

NB - Due to very nice clients and friends who have got me hammered for the last 5 nights in a row, and given the alarming rise in the number of drinks consumed at the last 3 Innovation Wednesdays, I have to warn you guys - I will be drinking (very) lightly :)

NB (2) - There's a big pic of me here, in case you have no idea what I look like, and you don't wanna stumble around a bar with zero information (thanks to Seamus for the tip).

-- umair // 1:31 PM //

The Day After Election Day

My predictions were (thankfully) wrong. Democracy won.

It makes me almost sick with pleasure to watch a corrupt, theocratic thug like Rick "man on dog" Santorum concede.

No, not because he's a Republican, but because he's a corrupt, theocratic thug who has no business, in a rational world, governing a republic.

Perhaps it's the guys at Redstate who put it best, if somewhat bitterly:

"...So much for Karl's permanent majority."

Which, is more simply (and perfectly) put:

"...Hehe were in yr base killing yuor doods!1!!"

(Alt version: "...Dear GOP: How Are You Gentlemen?")

For the first time in a very long time, America's cool. Yesssssssssssssssssssss finally.

-- umair // 1:25 PM //

Tuesday, November 07, 2006
Election Day Open Thread

It should go without saying, but if you're voting today (be it blue or red), be prepared for a bit of pain.

I'm already reading about (and getting plenty of emails about) long lines, machines not working, etc, etc.

I'm sure this will get much uglier as the day goes on.

Here's an almost real-time map of voting irregularities/problems nationwide (this really should have been mashed up...).

Feel free to comment away about your experiences.

-- umair // 1:09 PM //

Monday, November 06, 2006
Does Democracy Work?

A few weeks back, I posted my election predictions.

Sadly, it looks like I was right on. There was no big October Surprise - because the Republicans don't really, from a strategic point of view, need one.

All they needed to do was raise the costs of voting ever so slightly for the 10% of marginal voters who will decide the outcome of the election.

How will they do that? Two words: voter suppression (don't miss either of those links).

Impersonation and misinformation - seriously dirty tricks which absolutely sabotage the very essence of a democracy.

By now, you know that phone calls are the weapon of choice in this dirty war. It costs between 6-10 cents a call. So when you read reports of hundreds of voters being robo called - multiply that by at least 3-6 orders of magnitude. The real numbers are gonna be at least in the mid hundred thousands (statewide, not nationwide).

Now, there's a double whammy here. Marginal voters are often undecided because they're...shall we say...less effective at processing information than the rest of way.

Put another way, their expectations and preferences are far more malleable than everyone else's.

More simple: they're easier to reach with lowest common denonimator tactics...like robo calls pretending to be from the other candidate.

This is a big problem with democracy. Economists and psychologists haven't talked about it yet, but they will do...especially after tomorrow.

In a nutshell: What happens when the democratic game devolves to a bad equilbrium - one where the outcome of elections is always in the hands of the margin - but the margin is marginal exactly because it's dumb?

Note, I'm not trying to be "anti-American" etc. I'm just trying to point out the logic behind my election predictions.

-- umair // 11:55 AM //

Friday, November 03, 2006
And Speaking of Branding

...quote of the day from this MeFi thread, about Father Ted

"...Wealth, power, prestige, corruption and lust are merely different petals on the same turd blossom."

Now that's communication.

Funnily enough, I just used a pic of the massive New Life church in one of my workshops...

-- umair // 12:50 PM //

Industry Note - Special How Not to Talk to Consumers Edition

Apparently Zune's message is:

"Welcome to the Social".

Notwithstanding the fact that it's maybe a bit of a ripoff (since the only person that actually says "the social" on a regular basis, apart from grungy old academics, is uhhh...me), it's a cool idea.

The problem is it's expressed terribly.

"The social" is a phrase I use to sum up tons of academic work on the economics, psychology, and anthropology of, well, social interaction.

It means little to consumers - esp the consumers Zune wants to reach; because those guys are already bathed in the hypersocial.

Zune (for God's sake) isn't gonna welcome them to the social - they've already been living hypersociality - 10,000 friends on Myspace, 50-60 texts a day, Habbo, Neopets, Stardoll, Last.fm, etc, etc, etc - for years.

So this positioning is, I think, more of the same - yesterday's arrogance of money and market power.

Unfortunately, today, these kinds of positions today inevitably signal to consumers what not to buy - because, in fact, they're a pretty accurate signal just how out of touch the guys behind the product (and the marketing) really are with connected consumption, etc, etc.

NB - It might seem, esp to the geek kru,like I'm nitpicking, but this kind of stuff makes the difference between branding that talks to consumers, and branding that just gets tuned out.

-- umair // 12:04 PM //

Thursday, November 02, 2006
Firefox 2.0

I hate u.

Why have tabs suddenly become *such* a pain to use (if, like me, you tend to have like 8000 open at once)? Why can't I figure out how to allow popups if I want? What's with the new yet unimproved look?

Sorry to harsh on you guys, but I can't figure out where I benefit from not using 1.5.

-- umair // 12:16 PM //

Wednesday, November 01, 2006
Innovation Wednesdays

On tonight - same time, same place (7pm at Coco Momo, 79 Marylebone High St).

Everyone is welcome.

-- umair // 8:20 AM //

Thursday, October 26, 2006
Fooled by Economics and Politics of the Day

One of the problems with societies driven solely by markets is that the social - norms, decency, shared beliefs, the stuff that binds us together - dies.

And so stuff like this - Rush Limbaugh attacking Michael J Fox for having Parkinsons's (check the video to be truly disgusted) - happens.

In the discourse of the market, anything goes. When the discourse of the market comes to dominate the public sphere, it is transformed from a space for conversation, to a space for power, discipline, and domination.

OK, you know all that.

It would almost be funny - if the American right wasn't so eminently racist, sexist, in love with violence, just plain sleazy - and is there even a word for something as loathsome as making fun of someone with a chronic, progressive neurodegenerative disorder?

I'm not a Democrat - but I find it hard to describe just how much I want to the American right's ass get absolutely, totally kicked.

Remember my Fox news anecdote - where the speaker at a small conf, actually a very nice guy, kept referring to brown people as "child molesters"?

How different is this? Not different at all. It's the same poisoning of discourse that the right has perfected throughout the 20th century.

NB - For all those who've been sending me emails telling me "I love your work, I hate your politics" - you're more than welcome to stop reading any time you like; subsidizing people who are still die-hard Republicans at this point, despite Katrina, Iraq, cronyism/corruption, Rumsfeld, debt explosion, etc, is something I can live without (yes, even you, Chuck).

(I mean, you don't have to agree with what I say - but you could try and understand why a young brown guy like me feels compelled to write about politics in the first place).

NB (2) - That Chuck Norris thread (ie, Chuck Norris is now writing an anti-evolution column for a wingnut website) is hilarious. Check it, highly recommended, this should be all over the intarweb:

"...i heard chuck norris decapitated himself when he heard himself say something that stupid.

...An evolution denier can’t be the world’s biggest badass. World’s biggest dumbass, maybe."

-- umair // 12:50 PM //

Tuesday, October 24, 2006
Innovation Wednesdays

Will be happening on Thursday evening this week, not Wednesday.

Same place, same time - Coco Momo, 79 Marylebone High St, between Bond St and Baker St tubes.

Open to all, bring a friend, etc.

And if you're one of the roughly 10,000 people who's told me you want to come - come!

Topic for this week - what are the Next Big Things/where should we be putting our bets? As always, feel free to suggest away...

-- umair // 2:42 PM //


A great collection of papers related to bubbles .

-- Mahashunyam // 3:39 AM //

Friday, October 20, 2006
Research Note: The Peer Value of Money

The other night, at my NMK talk, Sam asked one of the classic power-to-the-people questions: when are we going to start really paying peers, and isn't this really not a revolution until we do - just a big house of cards to which connected consumers will stop contributing?

I get this question a lot (a lot) lately, usually with a burning revolutionary fervor ("money to the people, man!!$#$!").

Unfortunately, it's (totally) the wrong question.

Here's an existence proof for you: Revver vs YouTube. Revver's big differentiator from YouTube, as hyped when funded, was it's p-model: it shares (50% I believe) of ad revenues with video contributors.

But here's the interesting bit.

Who scaled? Who realized an exit? YouTube - not Revver. Why? Presumably, Revver's model - revenue shares to peers - created little value; and the market (tippy as it is) must reflect that to some degree.

If Revver's value proposition was so much more attractive to consumers, they would have defected en masse, rendering tippiness irrelevant. Of course, the opposite was true: the value of money, at least to connected consumers sharing videos, was much (much) smaller than Revver thought.

Now, note: I'm distinctly *not* arguing that peers don't "deserve" revenue sharing, or that financial incentives don't count.

Rather, I'm trying to clarify the strategic question - the value of revenue sharing.

The strategic question is: how much will offering financial incentives improve the quality of xyz?

In other words, what is the marginal benefit (marginal product, if you like) of offering peers a revenue share?

Put another way: in basic econ, we assume that workers are paid wages, which roughly equal the value of their marginal product. The reasoning is simple: we will always profit by hiring people until the value of their marginal product equals the level of wages we're willing to pay.

Alternatively, think about it this way - it's a less accurate way to think about the question we are asking, but may shed some light on it nonetheless: what is the labour elasticity of peers like? Just like demand for goods is elastic, so demand for wages is elastic - it responds differently to wage increases under different conditions. How does this simple relationship change in the peer production world?

The answer to this question - the marginal benefit of paying peers - isn't straightforward, but let me try and shed some light on it.

For example, take the recent Myspace + Snocap deal. Unless revenue is shared there, value creation will be deeply minimized.

But that wasn't true in YouTube vs Revver's case. There, a lack of financial incentives doesn't impact value creation a great deal. As it doesn't at Wikipedia, Blogger, etc.

Of course, you're asking: why? What are the factors that make these situations different?

I can't get into it very deeply (sorry). But I will say this: peers play vastly different roles in all these value chains. Understanding the new value chain, how value is created - and who requires the ability to capture a share of that value - that's where this question is answered.

-- umair // 7:47 PM //

Politics of the Day (2)

"... I've studied some journals of genetics and found that some of the top tier geneticists have determined that there are 58 human alleles dating back several million years. I can't pretend to understand all the terminology, but what this apparently means is that at no point in the last several million years could there have been any less than 29 (58/2) ancestors of what are modern biological humans. The geneticists also said that several thousand ancestors would have been needed to pass those traits down for 100,000 years.

...Genesis 6:1-4 seems to make it pretty clear that men were breeding with something non-human. Could it be that Adam and Eve were specially created with human souls, sinned, gave birth to Cain, Abel, and Seth, and then, their children having been corrupted from the Fall and living before any sort of Mosaic law, began mating and breeding with unsouled hominid creatures? In this way, all living humans would trace genealogy to Adam and Eve, the only 2 human beings, but would also trace ancestry to unsouled hominids, who were not actually human beings.

...It would seem that there are three basic possibilities:

1) The diversity of the genes in our gene pool was present at the origin of the race, or

2) The diversity of genes has grown dramatically in the time since our race began, or

3) A combination of (1) and (2).

...Possibility (2) also subdivides into further options:

2a) The current genetic diversity was gained due to breeding with non-humans, or

2b) The current genetic diversity was gained through artificial natural manipulation of the human genome, or

2c) The current genetic diversity was gained through artificial supernatural manipulation of the human genome.

...you'd probably need ongoing miracles to explain the spreading out of the genetic material since there is no known natural process (at least, there is not one known to me) that would allow for the original massive genetic packages to spread out into the population (i.e., why Cain and Able and Seth wouldn't just inherit mom and dad's massively pumped-up chromosomes but instead inherit ones with less genetic material).

That's a bunch of miracles, and while it could have happened that way, my instincts about the miraculous say to seek a different explanation.

...(d) is also a logical possibility, though it would require you to either accept that there was a prior human civilization capable of genetic engineering or that there was a non-human civilization (terrestrial in origin or not) that messed with our gene pool."

I stand in unashamed awe.

If there was a more compelling demonstration that the first world is about to be the new third world, I have yet to find it.

These guys can't even be bothered to gain a Wikipedia level knowledge of genetics. Amazing.

More succinctly: if there's a single lesson we can take away from history, it;'s that societies invariably decay when v(religion) > v(reason).

-- umair // 6:31 PM //

Politics of the Day

"...In a notice dated Wednesday, the Justice Department listed 196 pending habeas cases, some of which cover groups of detainees. The new Military Commissions Act (MCA), it said, provides that "no court, justice, or judge" can consider those petitions or other actions related to treatment or imprisonment filed by anyone designated as an enemy combatant, now or in the future."

1) All your civil liberties are belong to George.

2) All your truth are...errr buried on page A16 of the Post.

I don't know which is more shameful.

On another note, here are my predictions for the election:

1) Optional October surprise.

2) Optional because voting machine tricks and "suppression" tactics will easily marginally turn the election for the Republicans.

3) The biggie, to shift attention, Iran will be attacked immediately following the election.

4) Back to point 1, if there is an October surprise, it will be *enormous* - the Big Lie technique writ so large, I won't know whether to laugh or puke.

5) Points 3 + 4 ensure Dems are out of the game for at least another year.

NB - I'm not saying an Irani bomb isn't scary. I'm just pointing out that attacking them will be political, not strategic.

-- umair // 2:42 PM //

Death of an Industry

"...NBC will focus on lower-cost programming at 8 p.m. because, as he told the Wall Street Journal, advertiser interest isn't high enough to justify spending on scripted shows.

...NBC Universal's new slash-and-burn policy, which the network has dubbed NBCU 2.0."

It's not like you haven't seen this coming for a very long time.

I don't wanna rehash old posts - I will just note that a) my media econ ppt predicted this implosion in excruciating detail (and even detailed how to profit, versus get vaporized by the next media industry).

It's too bad NBC is one of the few media players not reading bubblegen.

-- umair // 2:32 PM //

Thursday, October 19, 2006
Richard Duvall

Richard Duvall, the CEO and one of the co-founders of Zopa, has passed away.

My deepest condolences to Dave, the rest of the Zopa team, and to his family on this tragic loss.

-- umair // 4:51 PM //


Simon C - I owe you a drink, nice one.

-- umair // 2:21 PM //

Wednesday, October 18, 2006
Industry Note: Power to the People

"...Comrades, working people! Remember that now you yourselves are at the helm of state. No one will help you if you yourselves do not unite and take into your hands all affairs of the state.... Get on with the job yourselves; begin right at the bottom, do not wait for anyone."

Lenin said that, at the dawn of the revolution.

Bolding's mine.

The sentiments should be very familiar - they are those expressed by an growing number of folks across media (and consumer industries in general).

Here, I don't mean people who've thought things through, like Jarvis, etc - I mean the average schmoe, whose simplistic belief in this set of anti-ideas is starting to really take root.

This is the "power to the people" question (which I get at least once a day - an irate person veering into my field of view, hell-bent on telling me that the bottom-up media revolution can lead to nothing but anarchy or fascism, you know the score).

So let me try and clarify.

The great Communist experiment is an almost perfect analogy to draw. In both cases, we are talking about redefining the institutions, the raw economics engines, which define a given thing - a society, and an industry.

The lesson we should take away is that the next generation of revolutionaries will find ways to synthesize the bottom up and the top down, to create new kinds of economic engines (AdWords, Myspace, etc).

It is about power to the people, in other words - but that's not all it's about. That's often simply a starting point. Without the special stuff on top to make that power productive, hyperefficient, etc, that power alone is more harmful than beneficial to society (not to mention profitable for firms).

-- umair // 5:13 PM //

Beers & Innovation

I spoke last night at NMK's latest Beers & Innovation, which was quite fun - the discussion got a bit heated at times, which is usually a good sign. Interesting conversations and people, although I guess the fact that things did get contentious meant some people are...errr...not my friends.

Thanks to the NMK kru for inviting me.

-- umair // 1:38 PM //

Monday, October 16, 2006
Of Social Construction and Value Creation

Nick C has a great post about Citizendium, about which Cory Doctorow and Clay Shirky have argued must work, because authority is "socially constructed".

As Nick says, this is "top-shelf guff".

Of course authority isn't social constructed - at least on the timescales on a community/network operates. Institutions like universities - the real arbiters of authority - take hundreds of years to build.

I may disagree with Nick about the relative value of Wikipedia, but he has been doing a very nice job of late in picking out the voluminous bs which is drowning 2.0 in a landfill of nonsense.

Doctorow and Shirky should be a lil more clued into the fact that the point of a community is (hyper)specialization - not some mystical social basis of authority.

-- umair // 6:07 PM //

Tuesday, October 10, 2006
Innovation Wednesdays

Don't forget - Innovation Wednesday get-together tomorrow, same place, same time (7-9pm at Coco Momo, on the corner of Paddington St and Marylebone High St).

Everyone is welcome, bring a friend, etc.

Tomorrow we will be discussing (what else) GoogTube vs deal math, GoogTube vs strategy, GoogTube vs branding, dudeliness, etc...

As always, leave topic suggestions in comments if there's other burning stuff you wanna talk about.

-- umair // 3:42 PM //

Monday, October 09, 2006
Deal Note: Google + YouTube

Why did Google buy YouTube?

Some reasons:

1) Google has to amplify (and protect) it's key revenue stream - ppc. Video ppc is a higher value domain, and a hugely untapped one.

2) Google wants assets at the edges of the value chain which can exert market power against 1.0 publishers - just like it's doing in book search.

The more of these assets it has across media markets, the greater economies of scope it can ultimately realize; the flipside of these scope economies is, of course, the more market power it can exert.

In other words, Google's goal is to redesign a more efficient value chain.

3) Google Video failed miserably.

Further points to note:

1) YouTube realized that to make money (revenue streams, not big fat exits), it would have to be less of pure platform play. It tried shifting to being a network/community, like Myspace.

2) Google has no idea what it takes to make networks/communities productive (ie, the hypersocial, etc, etc).

2.5) Conversely: YouTube has no dude. I don't have time to explain, but hopefully someone (who's been part of the discussions on Wednesdays, where we've been talking about this) can elaborate in comments. And I'm only half-kidding about this point :)

3) Revolutionizing branding is the real play at the heart of all this. Google thinks they are closer now, with YouTube in their back pocket - because they have a platform for experimenting with branded ads.

I think the reverse is likely true: Google has no idea what normal people want (or even are like, if you like), and so a YouTube acq might be just a nice way to geek out, possibly earn a nice marginal revenue stream (a la AdSense/Blogger), but never really redefine the value chain in the way it wants.

4) Deal math - yes, the deal is rich. Especially since YouTube is not as lightweight a business as most others - it is relatively capital intensive, and will stay that way for at least the medium term. Google can scale/scope many of these costs away, certainly.

But basically the math of the deal boils down to this: whether you believe tomorrow's attention is worth 10-20x today's revenues.

Google does - and that in itself is a data point that beancounters across industries will be chewing on for quite a while to come.

Discuss, comment, debate away...

-- umair // 10:08 PM //

Tuesday, October 03, 2006
Scale at the Edge

A very interesting (if very wrong) post on scale economies crowding out artisans in SecondLife. Recommended.

-- umair // 5:03 PM //

Innovation Wednesdays

Don't forget - our weekly get-together for all things 2.0/media/new media/innovation in general is tomorrow from 7-9pm at Coco Momo, 79 Marylebone High St (at the corner of Paddington St and Marylebone High St - map).

All are welcome, tell your friends, shout it from the rooftops, etc.

I'd like to start having specific topics of discussion every week, to structure these around.

So please feel free to suggest something topical, fresh, interesting, that's been bugging you, etc...

-- umair // 2:26 PM //

Monday, October 02, 2006
Edge Patterns: Closed to Open

Netflix decides to pioneer open innovation in media by offering a $1 mil prize for improving it's recommendation engine.

To do so, crucially, it's opening access to it's enormous dataset - it is shifting viscerally from closed to open.

A deep lesson is being taught by Netflix: in a post-network economy where value creation outside the boundaries of the firm is exploding, staying closed will, more and more often, be a dominated strategy.

Put this move in context: how different is it from what Innocentive does for cosmetics/pharma/etc? Not different at all. The point is that new economic patterns are sweeping across the economy like a tsunami, reshaping value chains, and redefining dominant strategies.

Shifting from closed to open is the most basic of these new patterns.

-- umair // 2:48 PM //

Sunday, October 01, 2006

I'm a little confused.

Is this is Valley marketing guys (sorry, have to be blunt) doing a bit of an artless bubblegen rip-off, or just a coincidence?

NB - No, I'm not going to do the Mike Arrington/Tim O'Reilly copyright shuffle. That's counterproductive (not to mention incredibly lame because it's umm fairly hypocritical).

-- umair // 11:37 PM //

Friday, September 29, 2006
Show Me the MoneyTube

Mark Cuban says: only a moron would buy YouTube.

I think that's vastly overstating the case.

Mark is obviously very good at making old business models a bit more efficient.

The hypothesis behind YouTube is just the opposite: to fundamentally and radically upset media economics and redesign the video value chain.

Is this risky? Vastly. Is YouTube on exactly, totally the right track to do it? No.

Will they probably go a long towards doing so anyways? Yup.

-- umair // 2:55 PM //

The Problems With 2.0, pt 1564622

Ross Mayfield waxes poetic about "helping" the CIA get the potential of 2.0.

One might reasonably wonder whether this goes against everything 2.0 stands for - decentralization, transparency, the edge, etc.

It's a contradiction (or sell out, if you like) which points to a bigger problem.

Every revolution needs principles. They need to be defended and nurtured because the market (analysts, etc) are inherently myopic - and revolutions take time to create value/upset the status quo.

The problem with 2.0 is that there aren't really any principles (hypotheses, if you like) anyone is standing up for. Entrepreneurs, for the most part, are just flipmeat - they have little intention of investing the time it takes to build something solid and durable. McVenture guys, for the most part, are just flipping the burgers, if you like.

In neither case are players trying to revolutionize much of anything. Hence, the long gap in any kind of significant liquidity event in 2.0. It's a shame - but it's squarely down to standing for exactly nothing.

-- umair // 2:43 PM //

Monday, September 25, 2006
Innovation Wednesdays

Don't forget - my weekly get together for all things new media/2.0/innovation in general is happening again this Wednesday at Coco Momo (formerly Dusk), 79 Marylebone High St, 7pm-9ish.

Thanks to everyone who came last week - I had a great time, many cool conversations, and I hope you did too.

Oh yah - we still need a name, so suggest away.

-- umair // 10:20 PM //

Saturday, September 23, 2006
Investing in Content (and Admin)

If you've been reading the comments, you'll notice that I've had to delete quite a few over the last few months, all from the same guy.

So perhaps I should reiterate the rules here at bubblegen.

1) This is your space to debate.

2) It's also everyone else's space to debate.

3) Be civil.

4) If you make personal attacks, they will always outweigh any argument you want to put forward, and your comment will be deleted.

It's fine to say an investment, strategy, product, service, statement is stupid, clueless, asinine. It's not fine to single out a specific person - any member of this community - and try and deliberately humiliate and insult them.

5) You may not like these rules - tough. Interacting with the commmunity here is a privilege - not a right.

Now, as to the argument the commenter keeps making. He obviously wants very much to discuss with me and the rest of you.

So, here's the argument. It's actually very simple: attention isn't scarce/unique/etc, content is, and so we should be investing in content, not in attention.

Now, I've responded to this many (many) times. I'm not about to rehash the whole non-conversations that ensued.

But here are two points to chew on.

1) What said commenter is trying to argue is that "talent" is scarce. Fine - indeed, it is (ie, "talent" assumes scarcity).

The whole point of econ/strategy is that we don't live in a perfect world. If we did (if we had perfect information/perfect competition/etc), we would identify the most "talented" producers, invest in them - and reap zero profit, because everyone else could do exactly the same, bidding margins down to nonexistence.

Rather, if we really wanted to think strategically about the role of talent, we would begin by assuming that content creators have different endowments of talent. Then, we would note that talent is hard to identify - information is asymmetric. Then, we would probably also note that talent by itself is often useless - it needs to be converted into/combined with numerous intermediate inputs to actually create value. Then (finally) we would try and model the various assumptions surrounding value capture (is there perfect competition? are there network effects? is talent, to some extent, a public good? what other variables need to go into our equation?)

It might surprise you (and the commenter), but economists have a now ancient word for "talent" - human capital. Essentially, we are modelling how human capital affects profitability/productivity/whatever.

That's a perfectly valid model. But the point is human capital isn't the sole variable in it. If it was, we would have little need to...think about much of anything.

2) In case it's not obvious, there's an existence proof the size of Jupiter which contradicts this argument: if it did hold, we could all buy (have bought x years ago) portfolios of Viacom, New York Times, Washington Post, EMI, etc - and watch (watched) them skyrocket.

Clearly, we'd be pretty foolhardy to do this: we would lose our shirts.

If the content argument holds, $100 invested in NYT/EMI/etc X years ago would be worth more than $100 invested in Google. Of course, nothing could be further from the truth: value has shifted dramatically from those players to Google; from content/publishing/etc to attention.

Comment, discuss, agree, disagree - I am really sick of talking about attention/content/etc to tell you the truth.

-- umair // 10:14 PM //

Friday, September 22, 2006
Deal Note: Should Yahoo Acquire Facebook?

imho, no - no way.

If Yahoo acqs Facebook, it will flickr/delicious-ize it: it will bring innovation to a slow but steady creaking halt (despite whatever indy structure is cooked up).

Yahoo's challenge isn't amping reach in a rich group of segments.

Yahoo's challenge (should you choose to accept it) is to redefine branding.

A year or two ago, I noted that there was an enormous market gap for Yahoo to be a social search pioneer. They blew it. Myspace did it instead.

Now, Yahoo stands on the cusp of an opportunity of perhaps similar magnitude - revolutionizing branding.

Sure, there's an argument to be made that Facebook will help them do this - but let's note that that argument is in no way the rationale driving this deal.

I would spend half the amount Facebook wants on a huge number of experiments with a very focused intent - revolutionizing brands. Of course, Yahoo's labs mean this can never happen, but that's another story...

NB - I'm starting deal notes to kick off discussions around key deals, so leave your perspective in the comments if you're so inclined...

-- umair // 2:49 PM //

How Not to Think Strategically About Revolutionizing Branding, pt 425225

"... The project begins today with a test of a campaign for Saturn, bundling together several Google products and services like clickable video clips, the Google Earth satellite mapping tool and geographic finding of computer users.

Visitors to a variety of Web sites in six cities around the country that are home to 22 Saturn dealerships will see what look like typical banner ads for Aura, a new Saturn midsize sedan. Clicking on an ad will produce a view of the earth that zooms in on the dealership nearest to the computer user.

The doors to the virtual dealership fly open, revealing the general manager, who introduces a brief commercial about Aura. After the spot ends, the general manager returns, standing next to an Aura and offering choices that include spinning the car 360 degrees, inspecting its engine, printing a map with directions to the dealership and visiting the Web sites of Saturn (saturn.com) or the dealer."

Nice evidence for the hypothesis that Goog will never be branding 2.0's distributor, leaving a huge market gap for other players (who desperately need to find a way to do so, hi Yahoo).

If it isn't intuitive why this is the wrong approach, it should be - this is just the same old branding, but Googlized; made a bit more technological.

The point, instead, is to change the deeper economics of brands.

-- umair // 2:43 PM //

Wednesday, September 20, 2006
Utopia and Dystopia

One thing I've been taking flak quite a bit for recently is this idea that somehow I am in the camp of 2.0 utopians.

I find this absolutely mystifying, considering almost every one of my research notes talks in excruciating detail about the problems with 2.0/new media/etc.

As I've pointed out in the past, the whole utopian/dystopian argument is a bit silly. There will never be a perfect world, blah, blah.

The real question is: are we all better off, or worse off?

Talking about utopias and dystopias is just a distraction.

Which is exactly why I don't argue either of those perspectives.

-- umair // 2:22 PM //


Guys...the multimedia swicki rocks (honestly, just check the pic I get for "arbitrage"). But can someone tell me why I can't choose a simple white background for my swicki...?

-- umair // 12:27 PM //


Hi everyone, this is an open thread for admin stuff. Burning issues, stuff I've missed but you want discussed, etc...

Also, I would like to add some Drupalish community features to bubblegen for everyone to enjoy.

So, I need someone more technologically competent than myself to discuss and help install these...I would be eternally grateful if you can help.

-- umair // 10:59 AM //

Monday, September 18, 2006
Innovation Wednesdays

Guys, I am going to start holding weekly get-togethers for those interested in media/www/consumer/edge vs core/innovation in general.

These are going to be informal, not clubby, and the point is just to have a few interesting discussions.

The first one is going to be at Coco Momo (formerly Dusk), 79 Marylebone High Street, this Wednesday, from 7-9. All are welcome (esp anyone who can think of a cleverer name).

-- umair // 11:41 AM //

Saturday, September 16, 2006
Edge Strategy

"...If you create value, you can make money. There are very few companies (if any) these days who have created something wildly successful but fail as a company because they can’t make money from it."

Says Ev; he's exactly right (if you've been following the discussion here).

-- umair // 11:44 AM //

Tuesday, September 12, 2006
How Not to Think Strategically About the Future of Media, Consultants Edition

"...What will it take to win? ...Distributors and creators should focus on the content management that sits between distribution and content creation. Distributors should buy the content that will generate the highest return on investment from their customer base. Creators should sell their products through whatever combination of platforms generates the most revenue.

...media companies need to know more about their customers than the customers know about themselves. They must anticipate customers’ changing preferences and rapidly turn those insights into new offerings."


I should invest...where I will capture the most returns? I should learn...about consumers!? Main screen turn on, you are on the way to destruction!!!

Note to FT: Ask me nicely for a quick article next time or something.

-- umair // 6:35 PM //

Research Note: Show Me the Money Markets, Networks, and Communities

My dad has a great line. Whenever he asks me how things are going way, and I tell him things are going pretty well, he quotes Jerry Maguire: "show me the money".

His point is that I should go be a prop trader or something, because, contrary to popular belief, I'm not exactly loaded. To my dad, if it can't be converted into cash today - it's worthless.

Of course, my perspective is a little different. I think value has to created before the cash starts flowing. And here's where Dad has a point. What if you create value, but you can never capture a share of it?

I bring all this up because Fred has a nice post looking at YouTube's potential power to capture a share of the value it's created. Though Fred's assumptions are a bit shaky ($15 average CPM would make almost 2.0 play rich), it's a nice starting point.

But I also think Fred is missing the point a little bit too. The next great game isn't about just microchunking ads (preroll, postroll, blah, blah) - it's about making ads part of the hypercultural and part of the hypersocial.

Now, Fred's key assumption - a $15 CPM - actually comes from a comparable play - Heavy. In fact, Heavy charges even more - up to $40ish for featured videos, I believe.

But there's a very big diff, from a strategic pov, between Heavy and YouTube. The most obvious is that Heavy invests in content; YouTube doesn't. The second is that Heavy is a set of channels; YouTube is a platform.

What that means in the real world is that Heavy users spend >30 mins consuming mindless drivel; but YouTube users only spend a fraction of that amount of time doing likewise.

So it's unlikely that advertisers will pay for $15 CPMs at YouTube, because they will never see any returns by microchunking 10 second preroll ads into content which doesn't stick to users. In addition, the user base will evaporate, no one will click, and those who click won't buy.

This is, to beat a dead horse, just a simple application of the much-heralded paradigm shift: media going from push to pull, from mass to micro, from centralized to decentralized.

But there's a lot more to the story than that.

In fact, it's stopping here, imho, that led Polaris to back Heavy - though it's still very possible a desperate acquirer (hi Viacom) might offer a 5x-ish return.

What does this graph tell you about Heavy? It should begin to tell you that Heavy is not the juggernaut it is unquestioningly made out to be.

Heavy's traffic is extremely volatile - and growth is decelerating. Contrast that with YouTube for a moment.

Now, each has a different problem. Heavy's traffic (=attention) pattern is typical of content - it goes in and out of style, and so it often makes a pretty bad investment; unless it's a more neutral way to structure content (think Habbo). Even if it can be monetized, the cash flows it generates it will be volatile and at the mercy of players further down the value chain.

YouTube's problem is that though it's traffic pattern is killer - low volatility, constant growth - it will be hard pressed to monetize this attention, because it doesn't really exist anywhere along the new media value chain except as a platform at the very back.

The moral of the story is simple. You should see Heavy and YouTube as opposites in strategic error. Heavy doesn't create enough value consistently enough to be able to exert enough pressure to capture a significant share. YouTube, on the other hand, is creating a great deal of value - but also can't exert enough pressure to capture a significant share.

Let me put it more simply: focusing on being a channel or being a platform is the gap between value capture in the next media economy. It is going to be a kind of mournful refrain, an error players make over and over again.

Instead, capturing value for consumer-focused players depends critically on being able to plug brands and ads into the social and cultural structures of interaction itself, to make return on attention hyperefficient - like Myspace is doing.

If that sounds obscure, think about in Google terms: Google captured value by making return on attention for advertisers and consumers hyperefficient. Myspace promises to do the same.

YouTube only does it for consumers. Heavy only does it for advertisers. The gap is still yet to be bridged - in large part, because it will require the deep, fundamental redefinition of inert brands into living microcultures.

That's the next big media thing. It is about markets, networks, and communities - which are deeper changes sweeping across the larger economy.

Of course, that's also why YouTube's been trying - without much success - to transform itself from simple platform, to Myspace-like network. And it's also why Heavy will try and do the same.

But at the edge, time counts - you can't go backwards - and so these players would be better off thinking about markets. But that's a topic for another note.

NB: Yes, I know how much Heavy is making in revenues. But we're talking about value capture here - it should be clear at this point that Heavy's model can't/won't scale nicely enough to yield category-killing margins.

-- umair // 4:42 PM //

Sunday, September 10, 2006
"Reform" at IMF

All the more reason for non-G7 countries to walk out of yet another "multilateral" institution.

It's about time for an alternate world economic order to emerge. There is no reason why the G4 cannot create global institutions that provide alternatives to the IMF and the WTO. After all, if competition is to be a catalyst for creating efficiency, there're no more suitable candidates for losing their relevance in the marketplace of globalization than today's sclerotic multilateral institutions such as the UN, WTO, IMF etc that have essentially just served as instruments of perpetuating the West's economic and political power and condemned the majority of the world to economic deprivation.

-- Mahashunyam // 9:30 PM //

Saturday, September 09, 2006
God's Country?

Must read analysis of evangelicals gaining power in Foreign Affairs magazaine.

On a lighter note, here's the perfect gift for your friendly neighbourhood bible-thumper.

-- Mahashunyam // 8:24 PM //

Bottom of the Pyramid Debate

I blogged about CK Prahalad's BoP thesis some time ago. There's a renewed debate on that idea, kicked off by Prahalad's colleage Aneel Karnani at Michigan Business School. Indian economist Atanu Dey plays host to an interesting debate on this over at Deeshaa : here and here.

Why is this debate relevant? First, it is important to understand the economic dynamics of how the vast majority of mankind lives in order to bring them into "our" ecosystem. You can see this in the context of Umair's take on what's next for 2.0. Private enterprise can, and must, step in to tackle this Big Hairy Problem.

Another trend that makes it even more imperative for us to tackle this BHP by ourselves, is that the hope of using free trade as powerful macroecon tool to bring prosperity to most of the world has been diminishing over the last few years. This is because the WTO is effectively dead as a mechanism to share trade benefits. Developed countries have been loading up on economic benefits by tilting the playing fields in their favour through multilateral trade agreements for ages, but poor countries have now wisened up and they are now clamouring for getting their fair share. However, there is little chance that entrenched farm and manufacturing lobbies in developed countries will ever allow their ill-deserved subsidies and market entry barriers to be jeaopardised. This is going to lead poor countries to remain isolated from global commerce and make it even more difficult for them to fight poverty. Of course, they are right in refusing a bad deal at the WTO, but unfortunately they don't seem to have a game plan to continue beyond that.

2.0 crowd must step into this vacuum and tackle the BHP head on.

-- Mahashunyam // 7:59 PM //

Friday, September 08, 2006
Industry Note: Media vs Innovation

A question: how often have you heard the phrase "media innovation"?

This is a point I've been making to clients recently.

You've read enormous numbers of articles (listened to presentations, etc) about strategies, business models, tectonic shifts...but the words "media innovation" are as elusive as the Yeti.


This is the heart of the very big problems the media industry faces. It's been so protected for so long, it's forgotten not just how to innovate - but it's even forgotten the idea of innovating.

Though many people may talk about strategies and business models (etc), unless they approach these from the perspective of innovation - radical change - little insight can result; because these endless discussion all hinge on the same tired, obsolete assumptions.

What we must have is innovation - and it must stop being a dirty word; it must be a word that is discussed from boardrooms to newsrooms.

-- umair // 3:10 PM //

Deconstructing The Crash, Pt 1

"...E-Offering health analyst Caren Taylor doubts Drkoop will attract many new investors. "We believe the only exit strategy for the company - aside from bankruptcy - is a merger," Taylor wrote last week in cutting her rating on the stock from "buy" to "hold."

Like other 1.0 dot coms, Drkoop spent heavily to drive traffic to its site. The company has $147 million in portal deals, including a four-year, $89 million agreement with America Online. Such obligations help explain why Drkoop lost $56.1 million on $9.4 million in revenues in 1999."

Why did the Crash happen? In no small part, it was because the institutional arrangements which dominated yesterday's media and industries were deeply out of sync with the nature of value creation itself.

Here's a great example. Drkoop, one of the most notorious bombs, was far from unusual in spending huge amounts of cash on deals to essentially buy attention. These deals, interestingly, were characteristic both of the venture industry and 1.0 media - where risk is diversified by syndication (or affiliation, same diff). That might have been a great strategy - because the price of attention has today, exploded.

Except for a big assumption, which ultimately, led to a fatal error - buying attention from yesterday's monolithic attention brokers couldn't work for the very simple reason that control was shifting to consumers themselves.

The game was won by Google - who pre-empted the threat of revolution by decentralizing and democratizing control, not fighting this great economic shift. That's an important (but probably very opaque) point which we'll return to later.

Worth remembering, as the pace and fury of deal-making in 2.0 media accelerates.

-- umair // 2:09 PM //

Levinsohn vs BGSL

"...Levinsohn: We have to be broad, but within that broad consumer-facing sphere there are lots of 'micro-niche' vertical networks with specific focuses that are certainly worth examining."

Interesting to hear Levinsohn using concepts that sound suspiciously BGSL to make sense of media.

-- umair // 12:56 PM //

Somebody Set Up Us the Book

Hi guys, I am just finishing up my book, and I would like to consider a few more examples of interesting markets, networks, and communities that I have perhaps not considered.

These don't have to be strictly "2.0" - there are interesting markets, networks, and communities far outside it (example).

Leave a comment here if you want to rec someone/yourself (and remember I have the obvious ones covered :)

Thanks for suggestions.

-- umair // 12:29 PM //

Industry Note: How Not to Think Strategically About the Edge, Special Disney Edition

Perhaps you've been amazed that ABC/Disney are willing to spend $40 million with the prospect of zero return (no ads) on a naked piece of propaganda - which will incur further massive costs in brand equity.

Let's not quibble about politics. I call this film propaganda, for the simple reason that even the 9/11 commissioners have admitted it's largely fictional - but Disney was very clearly attempting to sell it as factual (viz, the Scholastic deal to use it as teaching material).

You may disagree - it doesn't matter. The point I want to make is strategic, not ethical.

From a strategic pov, propaganda is fine; certainly businesses have the right to lobby regulators, directly, or indirectly. So let's treat Disney's agit-prop flick like we would any other investment. Although Disney thinks it's actually a pretty good investment, they're deeply mistaken.

We have to begin by noting that it's not an investment in production/attention/etc - because it's clearly not going to earn returns that way (ie, no ads). So why the $40 mil (+ brand equity lost, + opportunity cost) investment?

Disney's most valuable assets are, of course, it's characters/brands/stories/etc. Remember Eldred vs Ashcroft, and Disney's enormous pressure for more and more copyright extensions? From Disney's pov, this is the greatest investment in the world - a few million bucks on lawyers and $40 mil in propaganda earns them billions in future cashflows. These are mega-returns, Skype style returns.

Of course, neither move - coypright extensions or side payments to politicians in the form of propaganda - are in the least good for the economy, because they destroy more value than they create, through the stifling of potential innovation, competition, and new capital formation. This is crony capitalism at it's finest - we make your propaganda, you protect our assets; this is the kind of anti-capitalism that ends up destroying economies (hi Japan).

But, lucky for us, information is cheap and so returns to crony capitalism are dropping. Perhaps the most interesting bit of the story is simply that this is just another flawed tactic to protect a rotting core.

Remember, Disney has not exactly been going gangbusters lately. It has been thoroughly pwned by Pixar, the intarwebs - almost from every angle imaginable.

So I think a nice way to see this is as a nice mini-case study of why a single-minded focus on the core is leading so many incumbents deeper and deeper into competence traps and strategy decay.

Put more simply: Protecting brands and other key resources by draping iron curtains around them is the surest way to destroy their long-run value in the post-network economy.

Who's even gonna care about Mickey Mouse if he's not on YouTube/Myspace/Stardoll/etc in the next year or two? No one.

I would say shame on Disney - but instead, I'm a bit impressed with their obtuseness. It takes a special kind of genius to blow that much cash and brand equity on a move that only sinks you deeper into the hole you're fighting to get out of. Nice one, guys.

Let me summarize:

1) Disney is focusing resources at the core; a strategy which is yielding diminishing returns. This is strategy decay.

2) Disney makes propaganda in exchange for further protection of it's core focus.

2.5) Viz, effectively in exchange for propping up strategy decay.

3) Disney never learns edge leverage. Instead, it shields Mickey from YouTube, Myspace, Stardoll, etc.

3.5) ...A near perfect example of a competence trap.

4) Who cares about a Mouse trapped in a rotting core as value shifts to the edge? No one. Disney = game over, bye bye.

-- umair // 10:43 AM //

Tuesday, September 05, 2006

Got an email asking me about Facebook's rev, what I think, etc.

To be honest, I think there are some good ideas there. One of the defining principles of 2.0 is to create value by vaporizing yesterday's artificial distinctions between public and private (but yes, it would be wise to make many of the new features optional, at least at first).

But, on another level, (how can I say this nicely) I'm not so interested - and possibly, you shouldn't be either.

I think there are bigger fish to fry, and it's time to put on our collective thinking hats again - instead of worrying about incremental changes to what is essentially yesterday's radical innovation.

-- umair // 3:58 PM //

Research Note: Next Big Things - 2.0 vs Globalization

I've been thinking a lot lately about where 2.0 should go.

Now, before you read this, remember, my definition of 2.0 isn't technological: to me, it is about the new economic possibilities markets, networks, and communities are opening up.

So here's what I've been mulling over for some time now.

2.0 vs media is pretty much over. 2.0 (very decisively) won. We have imploded the insatiable death star of lameness at the heart of the media industry - the one that chewed up every good idea and replaced it with a mass-marketed, boardroom-approved, star-saturated simulation of itself. Though most journalists, industry analysts, execs, and venture guys won't realize it until there are billions of dollars in the bank and new Ferraris in the driveway, it's game over for media 1.0.

If you're under age of 30, you know exactly what I'm talking about - because you're living it.

At this point, you're going to say - was that it? That was all?! No, not at all - plenty of startups will continue to be born and profit enormously. But from the point of view of innovation, the radical stuff - the value chain imploding, industry reshaping stuff - has now happened.

Or you're about to leave a comment about the "tricky" business models issue, which is really the same question in reverse. So let me talk about it a bit more deeply for a moment. The truth is that business model innovation at the edge is not so hard. There, it's value creation that's the hard part. When it comes to 2.0, business models happen - they're the products of deep, consistent experimentation.

But the key insight is that once you've created the value, if you do experiment, you will more than likely learn how to capture it - that's an almost inevitable function of persistence, risk, and reward (viz Google, Myspace, Skype, etc). Though the question may be tricky, it is, in fact, loaded deeply in your favour.

OK. Back to the larger argument. Now that 2.0 vs media is over (or at least winding down), we have to figure out what's next. Here's what I think.

2.0 was a product of hipsters. Hipsters are concerned with things like music, fashion, dating, and films - and so 2.0 targeted media first. Now, our whole community has to grow up a bit.

Today, we're ignoring new markets which are where the principles of 2.0 can drive enormous growth and profits - and where they can create some serious, durable, meaningful value. And by we I mean almost all of us - from open source guys, to venture guys, to creative commons folks, to entrepreneurs, etc. I mean almost everyone thinking about 2.0 in the Valley/NYC/Tokyo/Paris/London.

Globalization is unleashing a deep tide of squalor and misery (highly recommended link), which most of us pretend we're ignoring - we avert our eyes at the laborers on the street corner waiting for work, or the guy in the back of the cafe down the street who we know works 100 hours a week for little in return.

I'm as guilty as anyone; last year I went to the cornershop down the street from LBS to buy some cigarettes. There, I discovered the guy that owns/runs it - an old Indian guy - was shouting at (and possibly had just finished beating) a woman who was obviously a menial laborer from India, who couldn't speak English and barely had the skills to survive in Western society.

I told him off, but I should have reported him to somebody who could have regulated him a bit.

The point I want to make is simple. This vast ugliness that globalization is exposing is an enormous market gap for 2.0 - for markets, networks, and communities to create value by really unlocking the potential of globally mobile capital - rather than letting owners of that capital amplify their returns by literally beating the time, effort, dignity, and life out of poor people.

That's still a bit too complicated. Let me try and make it even simpler. Globalization creates wealth at the cost of the social, the cultural, and the human. 2.0 creates wealth by amplifying the social, the cultural, and the human. For the next wave of entrepreneurs, this will be the market gap where profits are to be discovered.

Remember my anecdote? I think there are enormous numbers of ways a simple market, network, or community could have prevented the ugly scene I chanced on in the cornershop - and by doing so, could have created new value and expanded the pie for everyone.

Let me try and express it another way. Where can connectivity - not bandwidth, but connectedness to resources, insitutions, other people - create the most value?

I think, right now, the answer is where people who are ruthlessly exploited because they're disconnected from their homes, their families, the states, each other, and, to be honest, almost anything but sheer labour - where the social, human, and financial costs of these deeper kinds of disconnectedness from all the kinds of capital (social, human, financial, etc) are enormous.

This is why, for a while now, I've thought that Kiva is hands down the most revolutionary startup I've seen for ages - it is awesome because it hints at the enormous possibilities in harnessing the principles of 2.0 on a global scale, and to create value where value counts most.

I think that's going to be at least one of the Next Big Things. I think the challenges will be big, too. VCs will have to learn how not to mess this one up; entrepreneurs will have to learn about markets they've never considered before; and the rest of us will have to put on our thinking hats again, and come up with ideas that speak to the rest of the world, instead of just the geeks, beancounters, and hipsters.

-- umair // 3:27 PM //

The Hypersocial

WoW mini case study.

-- umair // 3:20 PM //

Death of the Blockbuster

Oh yah - never posted about this, but it should be obvious to bubblegen readers. Redstone vs Tom Cruise has nothing to do with Tom being a flaky scientologist - it has everything to do with the fact that returns to marketing for blockbusters are falling off a cliff, and so starpower is worth a lot less today and will be in the future than ever before.

The NYT has an article which almost talks about this, but not quite.

Now, before I get the inevitable comments - I'm not saying there won't be any stars. Just that their fame will be short-lived, won't be worth 30% of the cost of making a creative good, etc.

-- umair // 11:45 AM //

Friday, September 01, 2006
How Not to Think Strategically About the Future of Media, pt 1838134

Mini case study: SpiralFrog.

It's almost the end of 2006. A few years back, you would have thought that by now, the music industry would find a way to revolutionize it's industry and business model.

Unfortunately, you would have been wrong - they can't. Here we have a classic example of a competence trap. The short term costs of doing so far outweigh the short term gains - and to they will keep rolling out plays like SpiralFrog, essentially, until they die. They are trapped; and unless they can overcome their own myopia, and learn that taking a few knocks now is the price of future profitability, they are also dead.

How do we know SpiralFrog will fail? It should be obvious. The bet is that the costs of sorting junk on p2p platforms exceed the costs of 90 seconds of advertising + DRM on SpiralFrog.

There are two problems with this scenario. First, they don't- if anything, the equation is balanced agains SpiralFrog. Second, SpiralFrog is a product of 1.0 thinking and assumptions - it completely ignores the fact that Myspace and Last.fm now already own - from an economic, if not a strategic pov - this market space.

Also note the name. It's trying very hard to be 2.0, but it just ends up reminding me of an amphibian being impaled by a screw...nice one guys. Talk about not getting it.

-- umair // 1:12 PM //

Wednesday, August 30, 2006
How Not to Think Strategically About the Future of Media, Snake on a Plane Edition

Everywhere I look, people are pointing to Snakes on a Plane as evidence of the weakness of 2.0/the net/etc; as evidence of the longevity of the blockbuster even in the post-network economy.

Nothing could be further from the truth.

In fact, Snakes on a Plane is the big studios' first - and largely successful experiment - with Snowballs, and the democratization and edge competencies they requires.

The point is simple: unlike blockbusters, Snakes had incurred relatively tiny marketing expenditure - and so returns are already present.

And in fact, though weekend returns may not be enormous, remember the deep differences in dynamics between Snowballs and blockbusters - remember the Snowballs graph in my media econ presentation: it's convex (aka slopes acceleratingly upwards).

That implies that, unlike blockbusters, Snakes should earn larger returns going forward than in the past - it should make more and more money (per given unit of time/whatever, rather than less and less, as blockbusters generally do). Focusing on first weekend returns is looking at completely the wrong measure, because demand for Snowballs accelerates, whereas for blockbusters, it falls off a cliff.

-- umair // 5:04 PM //

Monday, August 28, 2006
Snowball Effect

"...�Main purpose of my recording is to hear the other�s suggestions about my playing.� He added, �I think play is more significant than appearance. Therefore I want the others to focus on my fingering and sound. Furthermore I know I�m not that handsome.�

A visceral illustration of just how different Snowballs and Blockbusters really are - do not miss.

-- umair // 12:30 AM //

Rise of the Edge

Metafilter jobs is verrrry interesting.

I won't say too much, but this is the kind of domain that true communities like MeFi are going to absolutely crush, own, and monopolize in the future (like Goog has done with ads) - their economics utterly dominate these value activities.

Note how not LinkedIn MeFi jobs is to make this understanding intuitive - ie, LinkedIn = zero social value creation.

-- umair // 12:24 AM //

Friday, August 25, 2006
Politics of the Day

"...Sati's gone, nobody in India burns widows, so when Indians immigrate to Sydney, or London or Toronto, they're not building pyres in the front yard for grandma anymore."

Surely - you jest?

"...multiculturalism isn't the first ideology founded on the denial of truth. You recall Herman Goering's memorable assertion that 'two plus two makes five, if the Fuhrer wills it'."

OK - maybe not...

"...Multiculturalism seems to operate to the same even-handedness as the old Cold War joke, in which the American tells the Soviet that 'in my country, everyone is free to criticise the President' and the Soviet guy replies 'same here! In my country everyone is free to criticise your President'."

I don't understand why people on the hard right are mostly so...uhh...dumb.

My kid sister could point out to this guy that comparing the USA and Soviet Union (or Afghanistan, etc) is not exactly worthy of any kind of debate - it's just empty rhetoric.

Or that "multiculturalism" is a social ideal, not a political one, and that he's just comparing apples and oranges, and telling us apples aren't orange.

But what's the point.

-- umair // 7:08 PM //

Industry Note: Facebook + MS = Error

Got a few emails for thoughts on Facebook + MSN deal.

I think it's pretty simple. MSN offered a sweeter deal, Facebook went for it. If the rumour is accurate, the offers on the table the Facebook kru turned down (justifiably so) tell us that money counts for them. Fair enough.

The larger context of this deal is that serving ads isn't going to make or break the next media revolution, which is going to be squarely about redefining branding.

But it's difficult to see how a supplier without edge competencies is going to have much success at revolutionizing branding. And if there's a single company in the world who I would pick to never, ever succeed at the edge, it's MS.

They violate nearly every single one of the new principles of management that are the roots of edge competencies every day (you know, transparency, sharing, all that good stuff). Being evil is in the Microsoftian DNA. Unfortunately, returns to evil must necessarily diminish in a world where markets, networks, and communities are redefining value creation.

It doesn't matter how much money they throw at redefining brands - in fact, more often than not, $$ kills innovation dead. Rather, what matters are all the things we keep talking about here - all of which are anathema to MS, etc, etc.

-- umair // 2:10 PM //

Admin: Intern Wanted

Hi everyone, I'm looking for an intern to help me do a bit of research/editorial for my forthcoming book. Preferably a student doing undergrad/grad work in econ or an MBA. Bonus points if you can name at least three viral funpacks.

You don't get $$ (but if you're really desperate, we can talk), you do get time with me, an understanding of bleeding-edge strategy, potential contacts across the media/www/consumer space, and most importantly...insight.

Someone based in NYC/SF/London is also preferable.

-- umair // 1:37 PM //

Wednesday, August 23, 2006
Humour of the Day

While we're talking politics, I think this may be the most tragicomic political cartoon I've seen in a very long time - absolutely brilliant (although this was a close second, and this was a very close third).

-- umair // 7:26 PM //

The Decay of the Core and the Rise of the Edge

Ford mini case study is a textbook example.

-- umair // 7:07 PM //

Bush Smackdown of the Day, Strategy Edition

"...As for Iraq, it's no news that Bush has no strategy. What did come as news�and, really, a bit of a shocker�is that he doesn't seem to know what "strategy" means.

Asked if it might be time for a new strategy in Iraq, given the unceasing rise in casualties and chaos, Bush replied, "The strategy is to help the Iraqi people achieve their objectives and dreams, which is a democratic society. That's the strategy. � Either you say, 'It's important we stay there and get it done,' or we leave. We're not leaving, so long as I'm the president."

The reporter followed up, "Sir, that's not really the question. The strategy�"

Bush interrupted, "Sounded like the question to me."

First, it's not clear that the Iraqi people want a "democratic society" in the Western sense. Second, and more to the point, "helping Iraqis achieve a democratic society" may be a strategic objective, but it's not a strategy�any more than "ending poverty" or "going to the moon" is a strategy.

...Could it be that he doesn't grasp the distinction between an "objective" and a "strategy," and so doesn't see that there might be alternatives? Might our situation be that grim?

...Nicely administered - and it's probably a lot grimmer than that, considering that foreign policy is just the tip of the Bush iceberg that's about to sink America - consider water, hunger, global warming, energy, poverty, crime, the growing innovation gap or the macropocalypse, for example.

Hey, and, just when you thought things couldn't get any worse - look, it's our old pals from the Taliban back in action again. What a huge surprise.

-- umair // 6:58 PM //

Politics of the Day - Why We <3 Bush Edition

So, by now you know that the friendly guys at Powerline are Bush's biggest supporters and fans. It was Assrocket who wrote the still-unrivalled:

"...It must be very strange to be President Bush. A man of extraordinary vision and brilliance approaching to genius, he can't get anyone to notice. He is like a great painter or musician who is ahead of his time, and who unveils one masterpiece after another to a reception that, when not bored, is hostile."


Bush = Picasso? Bush = Beethoven? Both - and more.

Now, I thought it would be difficult to improve on such a beautifully written and poignant paragraph. But I was underestimating Assrocket. Today, he writes:

"...I had the opportunity this afternoon to be part of a relatively small group who heard President Bush talk, extemporaneously, for around forty minutes. It was an absolutely riveting experience. It was the best I've ever seen him. Not only that; it may have been the best I've ever seen any politician...the digressions and interpolations were priceless.

...He was by turns instructive, persuasive, and funny. His persona is very much that of the big brother."

What? A Freudian slip by the lunatic fringe of the right telling us that they love Bush because they really do see him as Big Brother?

You can't make this stuff up. The irony is so thick and perverse it would take the devil's own chainsaw to cut through it.

I'm sure Orwell would be delighted.

-- umair // 1:22 PM //

How Not to Think Strategically About the Edge, pt 1733 - Special Grouper + Sony Edition

"...Grouper will promote Sony�s content and seek to build communities of users around Sony movies and television shows, Mr. Felser said."

Sony jumps into the acquisition pond with a $65 million bet on Grouper. I'm not a huge Grouper fan, but that's another story.

The real story here is how much Sony doesn't get edge strategy - how this acquisition is likely to destroy, rather than create, value. Check the quote above.

Is there any better way to implode value creation at the edge? Imagine a Grouper focused on Sony "content". How lame would that be?

Focusing on the core, in this case, is a huge strategic error. Vertical integration is the kiss of death in an atomizing value chain - unless it is done to multiply and create market space at the edges, rather than focus on controlling a decaying core. More simply, when open is the new closed, the edge is worth more than the core.

Even more simply: Sony has decided to get 2.0, by buying a community - only to forget about the economics of the edge that are letting communities revolutionize moribund industries. community. Nice one - that's pretty high on the list of strategic errors at the edge.

-- umair // 1:05 PM //

Rise of the Edge: The Social

A great article and a great idea - do not miss.

What I find interesting is that the States has been so hypperrationalized that simple, obvious ideas like this were completely outside and contradictory to the dominant logic of our culture - it was only bureaucratic, machinelike ideas grounded in the naively simple language of physics and economics that were considered legitimate.

This is an old idea, which has taken literally a century to come back to the fore - policing originally was less about guns-->control than social-->control. Fascinating, if tragic.

-- umair // 1:00 PM //

Industry Note: Viral Funpacks

Yesterday, Paul left a great comment making fun of 2.0 "strategy" mentioning "viral funpacks".

It was pretty hilarious. But also pretty insightful. Why? Because the realization is slowly dawning in the Valley and other assorted 2.0 scenes of the world that "widgets" are the next big thing.

In no small part, this is due to the revolutionary Myspace music player - the widget that made Myspace more 2.0 than 2.0, by exploding the social value proposition.

Now, the problem with this setup is simple. "Widget" is about as Valley a word as you can get. It cuts to the big problem at the heart of 2.0: a handful of old geeks and beancounters trying (and largely failing) to invest in cool services consumers luv; a bunch of hipsters trying (and failing) to revolutionize mass markets with radical management innovation.

"Widget", let's recall, is a term to reflect the banality of business: the generic, homogeneous, standardized, meaningless "product" churned out by industrial era business.

Calling the microchunked components of a new breed of radically innovative services, then, which connect consumers socially and culturally "widgets" is just setting the stage for (yet another) round of 2.0 funding gone awry.

"Viral funpacks", as hilarious as it is, gets much closer to the truth of what these things are supposed to be (and I'm sure Paul and the rest of us fading hipsters will appreciate the layers of Kafkaesque irony in this).

Now, I'm not suggesting we call these things "viral funpacks" always and everywhere (I shudder at the thought of balding venture guys asking just a bit too seriously "how will your viral funpacks scale??"); but I am suggesting we stop calling them widgets, so we can try and think a lil more deeply about why they are economically powerful.

-- umair // 12:34 PM //

Tuesday, August 22, 2006
More 2.0 Than 2.0

And the sad part is I'm only half-kidding (you know the score, plasticity, the social, etc). Somebody, do this right, and make $$$$.

-- umair // 4:26 PM //

Racism of the Day

LaShawn asks:

"Last year while on a flight back to D.C. after a road trip, I saw several men I suspected were up to no good. They were young men of Middle Eastern appearance, and one in particular was acting suspiciously...

...Do you have a �Muslims on a plane� story?"

What a coincidence, LaShawn!"�!%!

Why, in fact, I do have a "Muslims on a Plane" story.

A couple of weeks ago, I flew first-class to JFK, thanks to a very nice client. I hung out at the lounge, went to the spa, got on the plane, drank lots of champagne, revised my presentation, flirted with the cute stewardess, watched half of a crap movie, read half of a great book, took a nap, and had a very nice meal. It rocked.

Then, two days later, I did it all over again.

Amazingly enough, neither of the planes blew up.

OMG teh terror!%!!%!%^^%%!

NB - Sarcasm aside, the absolutely greatest part of LaShawn's post is her argument:

"...As a human being, I can�t help but regret and even resent the pain of others. But pain is part of a fallen world. I can support profiling and � incredible as it may seem � feel bad that it has to be done."

Now, note that this appeal to religion is uhhh.....exactly the same logic that justified the Inquisition. Or even....uhhh....suicide bombing - just replace "profiling" with "blowing people up" - see how easy that was!

Oh, the irony.

-- umair // 3:53 PM //

Monday, August 21, 2006
The First World is the New Third World

A poignant example:

"...Four days after her death, the evacuation began. The National Guard prodded the evacuees aboard buses, even a man whose mother was lying dead a short distance away.

"I wanted to go and be with her," says Freeman, his voice a monotone. "The National Guard told me I had to get on the bus. And they all had AK-47s. He told me he was doing his job. I said, 'Let me just go back there just to see her before I leave.' He said, 'No, you're not going to do anything. You're just going to get on this bus.' So I had to make a decision. . . . So I prayed to myself and the voice within me told me just to get on the bus, don't do anything, just stand still and watch my salvation." His mother was left behind."

What was it - first history, then farce? Amazing, mind-boggling, sad, that the end of the USA looks like the beginning of a third-world country.

-- umair // 12:23 PM //

Sunday, August 20, 2006
Research Note: The Great 2.0 Shakeout and Why It (Really) Matters

"...Debate now centers around whether this is a harbinger of things to come. Robert Scoble thinks so. So does Dharmesh Shah. And of course, they're right. The market has no need for so many startups doing similar things."

Ah, hysteria on a Sunday evening. Let me try and clarify the economics of the shakeout.

1) When revolutionary things happen, lots of startups jump into the market. Entry explodes.

2) There is always a shakeout, because not all of these new players can make it. Just like not every rock band gets to be the Rolling Stones (ha ha), or just like not every baby grows up to be Dick Cheney (ha ha ha). That's the nature of competition.

Even if a 2.0 startup revolutionized every industry under the sun, many would still be left to go under.

3) This doesn't mean the revolutionary thing doesn't go on to be revolutionary. Let me quote you a few examples: cars, railroads, telegraphy, wireless, etc...

4) Yes, there will be a 2.0 shakeout. If only because there about 12 billion 2.0 startups in the universe.

5) The only people that will really suffer (deservedly so) are most VCs. And even that's only for a few months - then they can go back to golfing most of the time and failing to invest in all the plays that earn enormous returns. At least they're consistent.

5.5) This is not a bubble (=inflow of capital dependent on irrational expectations, or the like). This is a Long Boom. There's a big difference: Long Booms are characterized by an ongoing and fairly ruthless winnowing of winners from losers. They are marked, in other words, by the opposite of what happens in bubbles: relative market efficiency. Think railways in the 1800s, and then consider that P&G getting 2.0 and making real money from doing so is vastly more Long Boom than bubble.

To the 2.0 crowd, because no correction has happened for a year or two, it looks like a bubble. Of course, they're ignoring the massive, persistent, and thoroughly rational transfer of value from traditional media/IT/entertainment to new media.

6) Don't focus on the hysteria - focus on the cool (I'd tell you where it is, but I'd have to charge you).

-- umair // 5:43 PM //

Saturday, August 19, 2006
Industry Note: Put Your 2.0 Where Your Mouth Is, Kiko Edition

Lots of buzz about Kiko going to eBay to sell - mostly disappointment and shock.

These sentiments surprise me. Let me try and explain why concisely.

0) Kiko didn't make billions, or disrupt a moribund industry. I feel your disappointment here. But the Kiko guys want to move on - that's their decision. There are still plenty of players in this space focusing on revolutionizing coordination, and doing fairly revolutionary things (Skobee, for example).

1) 2.0 is about making commerce better, cooler, more efficient - redefining economics by using markets, networks, and communities.

2) What could be more 2.0 than using a market - eBay - to sell a project you're tired of?

3) Would you prefer Kiko hired a boutique bank to shop it around (which they certainly could do, though any success is certainly debatable)? How 1.0 is that?

The point is that all the other alternatives are less efficient. By using a market, the Kiko guys can free up time for their next project, not pay the enormous fees an M&A shop might charge, etc, etc.

I fail to see anything at all wrong with this picture. I advise the Valley kru to chill out, stop obsessing, and go shopping or something like I did (and can I just say that I think these are the coolest shoes ever made - I always loved Memphis and esp the stupid bacterial pattern - but everyone I know hates them the way George Bush hates evil).

PS - No, despite what Paul Graham tells you, the moral of this story isn't about Google economies of scoping Kiko to death. It's that Kiko's innovation wasn't revolutionary or challenging enough.

If that doesn't make sense, think about it this way. There are costs to maintaining such a large service portfolio/such broad reach/etc for Google; not just scope economies. These costs are what they always are for larger firms - the loss of agility, speed, and innovative capacity.

-- umair // 2:08 PM //

Friday, August 18, 2006
Metcalfe's (and Everyone Else's) Law Redux

There's a conversation happening about Metcalfe's Law, Odlyzko's article, is it all valid, what does it all mean type of stuff.

My comments (this is a very old discussion) are here.

Basically (to be blunt), the problem in this conversation is that most investors (strategists, etc) are depending on guidance in how a network "scales" (is it Metcalfe!!? Is it Reed?!�%!) because most investors don't have much of an understanding of what network fx really are from an economic pov.

If you're interested in this discussion, I suggest you perhaps read the conversation I linked to, Seamus makes some really good points.

-- umair // 12:12 PM //

Thursday, August 17, 2006
Why The Venture Industry is Broken, pt 317174

Here's an analysis from a VC - like most others - looking to invest in Myspaceconomy plays (a la Photobucket).

Now, it's not a bad analysis in itself.

Until the point when he notes that:

"...I don't believe MySpace has shown investors a clear view of whether a company in it or dependent on it can every make a venture return."

lol - exactly.

All of which lends a great deal of support to the hypothesis that the venture industry is broken in no small part because, well, most VCs are out of their depth when it comes to investing in tomorrow's growth markets (in this case, the social/cultural).

Myspace widgets won't make huge $$$ - he's right. Not that that's stopped VCs from placing their bets anyways - witness the recent (and unfortunate) funding of Photobucket, for example.

But The whole point is that VCs missed the boat, and despite that, they continue to ask the wrong questions, and learn lessons from their big mistakes in 2.0.

The real play, of course, was Myspace itself - and the new breed of players that are taking deep lessons from it about the hypercultural and the hypersocial (and I distinctly don't mean lame imitators who don't get it, like Tagged and TagWorld).

These players get very little interest from venture guys, and so the result is a huge innovation gap.

Like I've pointed out, the real chasm these days is VCs themselves - here's very nice support for that thesis. Clearstone might be better off thinking about what made Myspace happen, instead of trying to eke out incremental returns from players attempting to parasitize Myspace.

-- umair // 1:23 PM //

Tuesday, August 15, 2006
The Problems With Gutopia, Pt 13412

When I'm in London, I spend a lot of time at the LBS library doing research.

Lately, I've noticed that when I do a Google search, I no longer have the option to see Google's cached version of a page/article/whatever.

Why not? Well, the reason's simple. Cached versions offer people like me in libraries free access to a lot of stuff that the library should otherwise pay for - at least in a Googleverse. In the Googleverse, I should only be able to access certain articles if the library has deals with the right publishers (for example, Reed's ScienceDirect).

Now, this is very interesting. Because it directly supports my old argument that Google is basically the next RIAA. It will increasingly face exactly the same tensions as any publisher does, because it hasn't innovated new kinds of property rights for a post-network economy.

The natural result will be a Googleverse where information is less and less free - not a Gutopia where info is universally accessible at the click of a mouse. Like the RIAA, the more deals Google strikes, the worse off consumers will be.

Don't buy the hype that comes from Google, the O'Reilly guys, Wired, etc - the truth is that Google is now heading down a path which has been well trodden in media history.

-- umair // 6:57 PM //

The Decay of the Core

Wal Mart mini case study.

-- umair // 4:50 PM //

The Real Problem With Islam

It's not any of the inanity you hear from our leaders ("fascism", etc).

The real problem with Islam is, in fact, very simple. It's imams/maulvis/etc - the guys that run mosques, the Islamic versions of priests/ministers/rabbis/etc.

Specifically, it's that there is NO requirement of any kind to actually become an imam. Anyone can be an imam - just add the title to your name, and off you go.

Now, every other religion in the world has pretty stringent requirements. Wanna be a priest? Go get a couple of degrees at a seminary. Wanna be a rabbi? Hit the Yeshiva.

It may seem tiny. But this simple requirement has a huge effect. It (unsurprisingly) ensures a certain degree of quality, and weeds out the inept, the incompetent, the radical, and the bloodthirsty. At a deeper level, it forces people to engage with the real meaning of religion - not the nostrums taught by fundamentalists.

The result is that any idiot - and there are many of them - can set up a mosque; and, further, he can preach pretty much whatever he likes.

Combine this with the fact that the wealthiest Islamic countries - Saudi Arabia and Iran - are also the most radical; and you have a recipe to take an entire religion off the rails.

That's because these players are more than happy to provide copious funding for "imams" who meet their political agenda; since there are no requirements to actually be an imam, nearly every lunatic in the world who has such a political agenda can very easily be an imam.

The result is that moderate mosques and imams are being replaced at an alarming rate with the more and more extreme. The very fabric of the religion is being warped by a broken institutional structure married to an explosion in capital.

Now, that's not to say that this trend isn't affecting other religions as well. The rise of Christian fundamentalism in the States can be traced back directly to "ministers" who've done little more than study the Bible with their buddies.

No matter how earnestly they may have done so, this is no substitute for real learning at the hands of the more learned. It is how fundamentalism is born.

The point is that if you really want to help tackle Islamic extremists - the answer is simple, not complicated. It has nothing to with bombs.

It has to do with encouraging institutional change within the religion itself. It means ending the funding of religious "schools" which do little more than indoctrinate kids into murder. It means engaging with Islamic insitutions of learning, to discover which ones are real (and accrediting them), and which ones are just simulations (and discrediting them).

More than anything, it means helping Muslims find out whether their imams actually know anything - or whether they're just extremists off the street, with no knowledge behind them, who've been lucky enough to get enough funding to start a congregation.

Me, I think religion is mostly awful and stupid. I have a hard time understanding how people can believe in fairy tales of a glorious afterlives and miracles that seem to vanish whenever you need them most.

I've long thought that there was an existence proof God couldn't exist - if he did, why did he have to speak through people/prophets? Occam's razor dictates that if there is a God, he wouldn't worry about prophets; he'd just *poof* a Bible (etc) directly into existence.

But most of the world's 6 billion people - including mental giants like Bush and Ahmadinejad - think religion is desperately important. Fine. The answer isn't in violence - that will only beget more and more extreme violence. It's a sad nostrum today that every "terrorist" killed just creates 2 (5? 10?) more. This is a major error in strategy.

The solution is in religion itself - helping religion play the role it's supposed to play, by mending it's long broken institutional structure.

Of course, given the fact that "ministers" who are one step shy of con artists can fill up stadiums in the States, I hold out little hope for this to happen - though, very interestingly, accrediting imams is an explicit plank in the British governments response to the recent scare.

In fact, one could even argue that what's long been true in the 3rd world is finally happening in the 1st - that there is no political tool so sharp, cutting, or efficient as religion; and so Bush, Ahmadinejad, and their pals have every incentive to let the world rip itself apart in the name of religion (while their portfolios skyrocket).

NB - Wierdly enough, the Bishop of Rochester makes almost exactly the same argument today in the Telegraph - recommended.

-- umair // 3:45 PM //

Racism of the Day


Sen. George Allen (Racist-VA) is the perfect example of the bumbling morons we keep electing: someone who's not even clever to couch his racism in rhetoric, but uses the most unexpectedly obnoxious kind of slur to let us know how he really feels about...uhhh...people who aren't white (if you don't already know, "macaque" is a very nice racial slur across French speaking Africa/Europe/etc).

Nice one George, way to vividly demonstrate my recent points about institutionalized racism.

-- umair // 1:26 PM //

Monday, August 14, 2006
Fooled By Economics

"...America put Japanese in concentration camps and confiscated their homes during WWII. Yet, Japenese Americans are some of the most assimilated and prosperous Americans in the nation today. History then does not demonstate that such actions are counterproductive."


A vivid demonstration of the overweening economistic emphasis dominating American society and culture. The dominant power in the world today isn't the States, or even corporation - unfortunately for 99% of the world's population, it's the economics cooked up by academics in ivory towers.

Consider the frame of this comment. The commenter makes a simple argument: the human costs paid yesterday are more than outbalanced by the financial benefits realized today.

In other words, the fact that today Japanese Americans are "prosperous" in any way erases the massive human costs paid by their parents and grandparents. It's the kind of naively simplistic accounting argument would-be economist (and even real ones) love to make: the "account" is in debit, not credit.

Should we balance today's prosperity against yesterday's suffering?

Of course, the most obvious flaw in the argument is that it is two different parties who bear costs and realize benefits. The second most obvious flaw is that the costs and benefits are different in kind - the gains are financial, the costs are human. The third most obvious flaw is that of the disproof of some kind nebulous causality. Should we then assume the same conclusion for Jews - Israel is a prosperous country, so the Holocuast doesn't matter?

Preposterous reasoning, to be sure.

Which brings us to the crux of the matter. The simplistic assumptions and conclusions economics leads us to make are helping make a world where human life only has value in aggregates and averages. But surely we can do better.

After all, this is just the same argument made at the dawn of insurance at Lloyd's. Then, it was revolutionary - because we couldn't assign a time value to life at all. Today, we can and should be doing so in many innovative ways. Why should war or internment camps happen when we can manipulate costs and benefits in such complex ways? Why can't I offset these risks (death, interment camps, etc) with a well placed hedge?

This is a huge market gap which the next wave of social entrepreneurs would do well to focus on.

-- umair // 1:09 PM //

Friday, August 11, 2006
Breakpoint: What went Wrong

An insightful essay on Iraq (hat tip: Paul Kedrosky)

My personal take on the end game : the US will leave as the civil war breaks out. This will finally result in a trifurcation of Iraq. Two Sunni and Shiite nations will emerge that will either turn on each other, backed respectively by the Saudis (and indirectly by the US) and Iran, or collectively turn against the US and/orIsrael. Kurds will formally proclaim independence, create the third nation and live on as a virtual protectorate of the US. Western oil companies will invest in Kurdistan because that oil has the clearest exit path through Northern Turkey and the Black Sea.

Will this be in the US interests? That depends upon whether the Shias and Sunnis continue to be at each other's throats or unite in a global jihad against the US. The US will certainly try to keep fanning the flames through proxies like Saudi Arabia and Jordan.

Oil investments in Kurdistan are already happening.

-- Mahashunyam // 4:42 AM //




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