Dis - Aggregation

It would seem that the e-Book industry has taken a good, hard look at what happened to the music industry in the Noughties - and decided to follow down the same road - NYT:

In the battle over the pricing of electronic books, publishers appear to have won the first round. The price of many new releases and best sellers is about to go up, to as much as $14.99 from $9.99.

Like all good plans in this space though, this one will probably not survive contact with the enemy - that is, us:

...there may be an insurgency waiting to pounce: e-book buyers.

Over the last year, the most voracious readers of e-books have shown a reflexive hostility to prices higher than the $9.99 set by Amazon.com and other online retailers for popular titles.

When digital editions have cost more, or have been delayed until after the release of hardcover versions, these raucous readers have organized impromptu boycotts and gone to the Web sites of Amazon and Barnes & Noble to leave one-star ratings and negative comments for those books and their authors.

It is totally daft - as with digital music, the punters know it doesn't cost as much to produce so are buggered if they can see why they should pay top hardcover whack. And on the Kindle there is no discounted shelf, no second hand eBookstore, no paperback version (though it will probably come).

In other words, the publishers have calculated that the margin on selling overpriced eBooks to the suckers who bought Kindles etc will more than make up for the smaller volumes. Trouble is, the suckers know this too.

And of course, as has been proven over and over again, if the public don't like the price, they opt for Piracy.

My prediction - this is yet another market full of F*ckwits (sorry, professional managers) who, by their short sighted behaviour over the next 2-3 years, will guarantee that an Apple iPod type play with the iPad or something like it, and a decent media pricing plan, will take them out.

Like the Medieval French nobility who charged English longbowmen in three battles with the same sad result, the Publishing industry seems to have learned nothing and forgotten nothing from the slings and arrows of their past misfortunes.

attended the TED first morning screening in London this evening. David Cameron gave his talk live and we patched into Long Beach for the rest of the session. I will cover Cameron's talk separately as it has Government 2.0/Social Media implications. Two of the other three talks were on behavioural economics & happiness (which also featured heavily in Cameron's talk), these are my notes:

Daniel Kahneman

Happiness is the new black, but it has a number of cognitive traps:

- failure to admit complexity, happiness covers too many areas
- confuse experience and memory (happiness about vs happiness in life)
- focus delusion - exagerrate importance of anything thought about

There are two types of self - the rembering and experiencing self - that have different happiness optima
- experiencing self has very short lived units of memory, 3 seconds or so, happiness is now.
- the remembering self stores memories of happiness which drives choices
- thoughts of the future are an anticipation of memories

Thought Expereriment - if your memory afterwards was destroyed, would you go on the same vacation vs if your memory stayed?

Because of the 2 selves, there are 2 happiness states - different optima - can't reconcile

- Can measure happiness of experiencing self physiologically
- Much harder to measure satisfaction of the measuring self eg about your life

Satisfaction differs between the 2 selves so optimizing them differs
- money (doesn't impact experiencing self, does impact remembering self)
- goals
- spending time with people you like

0.5 correlation between the two statistically for any one "happiness" vector, for example:

- climate is not important to experiencing self but is to memory self
- Gallup survey - feelings vary with income - above $60k pa flatlines experienced happiness, but remembering self likes reflecting on wealth

My Thought - So what will be optimized by policy wonks? David Cameron started to lay out his stall, but I will deal with it separately

Michael Shermer Global Sceptic

Belief is the natural state of things, science/scepticism is uncomfortable - we have evolved this way by natural selection. We have two cognitively dissonanent traits:

1. Patternicity

- We find patterns with random rewards
- Lion in the long grass evolutionary choice

- false positive (rustle in grass, assume since as Lion is unlikely, that there is no lion until evidence)
- false negative (every rustle in grass is a Lion - run).

We are designed to opt for Type 2 ie all patterns are real until proven false

Some behavioural psychology:

- Studies show that people who are more disposed to believe in ESP, UFOs etc are more likely to see patterns where there are none.

- Corporate environments study - people who feel they are out of control are more likely to see patterns in things

- More significant patterns seen by RH side of brain

2. Agenticity - the tendency to assume that its not chance or inanimate objects that do things

- We infuse patterns we see but don't understand with active agents eg angels, conspiracy theories, etc.

It is literally all in the mind - for example if you stimulate temporal lobe and you get Oot Of Body Experiences

Anyway, those are the notes.

Forrester is cutting back on the ability of its analysts to create Personal MicroBrands, says Sage Circle:

Forrester CEO George Colony is well aware that savvy analysts can build their personal brands via their positions as Forrester analysts amplified by social media (see the post on “Altimeter Envy”). As a consequence, a Forrester policy that tries to restrict analysts’ personally-branded research blogs works to reduce the possibility that the analysts will build a valuable personal brand leading to their departure. In addition, forcing analysts to only blog on Forrester-branded blogs concentrates intellectual property onto Forrester properties increasing the value of the Forrester brand.

Dennis Howlett notes (that's where I read this) that Forrester may not have their Econometer correctly tuned:

I won’t discuss the precise numbers here but let’s say that neither the people I mention [Jeremiah Owyang, Ray Wang] were benefiting more than 5% of the revenue they brought in, often with zero support from sales. In other words, Forrester had 90-95% margin on the back of personal blogs but against which it was not prepared to compensate two hard workers. The same was true for Charlene Li the year before. Given what Ray and Jeremiah were doing, that should have sent a loud red flag signal to Forrester exec. Apparently not.

Possibly, but the IP ownership issues go deep - expect more of this in future. I await the Forrester Report on the topic with Eager Anticipation

Update - not a Forrester Report, but a response of sorts on the Forrester blog Groundswell, which was started by one of those who have left (Charlene Li). Anyway, it says:

But for Forrester, it serves our clients better to be able to get to all our blogs from one place, and to know the opinions of analysts that they see are part of the other opinions they read in our reports, in press quotes, and in everywhere else we talk.

Forrester does not yet have individual analyst blogs on our site, but that's coming quite soon. This is why it's so ironic to read comments that "We don't let analysts have individual blogs" or "Forrester should read Groundswell." I cowrote Groundswell, and I believe our policy is the right one. Groundswell says that your employees will be blogging -- it doesn't say that content companies should have their content creators blog anywhere they want. If you're creating content for a content company, that company ought to host your blog.

So, byelines on the company blog then. Seems like the best solution over all, after all newspapers and magazines have used it for many, many years.

Very interesting discussion going on about a NYT article on Microsoft's inability to innovate vs Apple:

But the much more important question is why Microsoft, America’s most famous and prosperous technology company, no longer brings us the future, whether it’s tablet computers like the iPad, e-books like Amazon’s Kindle, smartphones like the BlackBerry and iPhone, search engines like Google, digital music systems like iPod and iTunes or popular Web services like Facebook and Twitter.

The NYT offer up:

Good old silo sieges....

When we were building the tablet PC in 2001, the vice president in charge of Office at the time decided he didn’t like the concept. The tablet required a stylus, and he much preferred keyboards to pens and thought our efforts doomed. To guarantee they were, he refused to modify the popular Office applications to work properly with the tablet. So if you wanted to enter a number into a spreadsheet or correct a word in an e-mail message, you had to write it in a special pop-up box, which then transferred the information to Office. Annoying, clumsy and slow.

...but you get those in every company, thats a given. What you need is something in the knitting that stops the legacy business silos (which have the big budgets) from squashing the New Things.

Unlike other companies, Microsoft never developed a true system for innovation. Some of my former colleagues argue that it actually developed a system to thwart innovation. Despite having one of the largest and best corporate laboratories in the world, and the luxury of not one but three chief technology officers, the company routinely manages to frustrate the efforts of its visionary thinkers.

But even then its not a Microsoft thing only, and its not enough just to squish the Barons - Apple was in the Doldrums after Jobs left, and perked up when he came back. Ballmer is no Jobs (nor a Gates, for that matter), he's an excellent Operator of What Is, but not a Visionary of What Is Not. Ozzie has not had enough impact (Vista, anyone?). Excellently executing the Status Quo makes not much issue over 2 years but makes a big difference over 10 years (to paraphrase Bill Gates), which is why share price has been falling for years. Take the endgame of that tablet story:

...even though our tablet had the enthusiastic support of top management and had cost hundreds of millions to develop, it was essentially allowed to be sabotaged. To this day, you still can’t use Office directly on a Tablet PC. And despite the certainty that an Apple tablet was coming this year, the tablet group at Microsoft was eliminated.

Thats not the fault of silos, thats an inability of top management to get the big battalion barons off the pot. That can only be solved by the absolutely resolute Top Management - ie the CEO.

I think this one is also a key point:

Part of the problem is a historic preference to develop (highly profitable) software without undertaking (highly risky) hardware. This made economic sense when the company was founded in 1975, but now makes it far more difficult to create tightly integrated, beautifully designed products like an iPhone or TiVo. And, yes, part of the problem has been an understandable caution in the wake of the antitrust settlement. Timing has also been poor — too soon on Web TV, too late on iPods.

The value chain is now far more integrated. Its not clear to me that Microsoft needs to own the hardware (like Gates, I agree its very risky) but what they do need to do is be able to do is build great software as a fast follower.

Why is it Android, not a Microsoft OS in the competing smartphones to the iPhone? Where are they in lightweight e-Readers and tablets? As Stowe Boyd points out, they should (and could) have done a lot better in the Social Media tools arena.

No, I think this is Microsoft's top management being too keen on keeping the fat profits of the existing products but forgetting to watch the disruptive stuff closely enough. The irony is that Microsoft (and Sun et al) profited from the last generation of IT companies falling into the same trap. IBM and the BUNCH (Burroughs, Univac, NCR, etc), DEC et al were so wedded to the margins of their existing mini and mainframes they just couldn't bring themselves to invest (and cannibalise) their own revenues with DOS and UNIX boxes and got nailed. IBM had a cathartic shift - a Creative Destruction Moment if ever there was one- and the rest went to the wall. Microsoft now faces that challenge, and doesn't have a Jobs it can recall. Who will play Gerstner for Microsoft then?

And before anyone praises Google too much, that's them in 10 years or so - we are already seeing their inability to make money and great products outside of their core competence of search Ads.

(Incidentally, re Disruption Management, I spent some time last year working with Adriana Lukas (one of the other contributors to the Social Media in Enterprises event this week) trying to piece together how companies might manage themselves through all this. More Later, as they say.

I tried posting a comment on Mashable's post about 4 "Major Trends in Technology" but its one of those sites where you have to log in to comment, so I took my comment and posted it here instead

Anyway, the article posits 4 trends. But, while these look like "no brainer" trends, I'm afraid that they are falling into the classic trap of just assuming that what has happened in the immediate past will thus predict the future. I can think of a number of forces pushing against them - in brief, per trend these are:

1. Web accessible everywhere - requires infrastructure buildout, that's not cheap, and ROI is a diminishing returns game. Ignores developing world economic issues.

2. Web access not in the computer - in reality, you need computer power to make the Web more than barely usable (see Mobile phones, failure of till iPhone), and you keep on needing more - it's more accurate to say the computer will not always be in the computer anymore?

3. Web being Mediacentric - well, in the sense that it is all media, sure. But if you mean video as opposed to text I think that is less likely - for so many applications, text can be parsed far faster. And Time is the non renewable resource. In many ways time spent consuming video media is what we do with our "junk" - ie low value time. Follow the money.

4. Social Media will be its largest component - bah humbug - the "killer app" of the internet - apart from Porn - is that people just want to talk to each other. The current bottle this old wine is in is called "Social Media", in a few years time it will have morphed as the technology shifts. And of course email is dead, not

And then there are the "known" and "unknown" unknowns, where:

- "known" equal predictable surprise shifts that you can see coming, eg what happens when today's smartphone power is a $5 commodity and the size of a peppermint (Moore's law redux); and

-"unknown are, well, unknown, But try this one - in the last c 150 years, a totally revolutionary comms medium has been invented about every 30 years (Telegraph, Radio, Cinema, TV, Internet). The 'Net is 40 years old, the Web is 20.

What's Next?

The error here is a common one in pop-punditry - look at the last 10 years or so and assume the next 10 will be the same, just more so - the trick is to look at the last 100 years or so and see the patterns and waveforms. As Santayana said, those that forget the past are doomed to repeat it.

Nice article from Chris Dixon on the areas where the Internet can disrupt the financial services industries (He is responding to Sarah Lacy's original article where she wonders how come the 'Net hasn't disrupted the Financial Services industry yet). He has a number of areas of retail banking, but I want to focus on where the real material differences are - the merchant banking functions:

Credit cards. Charging 20% interest rates (banks) and skimming pennies off every transaction (Visa and Mastercard) is a very profitable business. Starting a new payment company that doesn’t depend on the existing banks and credit card companies could be disruptive. Paypal seems to have come the closest to doing this.

I agree, this is an area ripe for lower cost competitors. Paypal is not loved by a lot of people, but there must be someone who can build a better online alternative.

Proprietary trading. A big trend over the last decade is for more of big banks’ profits to come from “proprietary trading” – which basically means operating big hedge funds inside banks (this trend is one of the main causes of the financial crisis and why the new “Volcker rule” is potentially a very good thing).

...........

Given that the stock market was flat over the last decade and hedge funds made boatloads of money, the loser in this game are mostly unsophisticated investors (e.g. my parents in Ohio).

As Chris notes, they use powerful algorithms to out-trade less well equipped people (read The Predictors about how this all started). It occurs to me that with the power of computers today, and social media, it may be possible to give small traders technology that matched them. Failing that, education. As Chris notes;

Any website that encourages unsophisticated investors to buy specific stocks is helping Wall Street. Regular people should buy some treasury bonds or maybe an S&P 500 ETF and be done with it. That would be a huge blow to Wall Street.

And how better to spread good practice than via social media. A similar process could be applied to Trading

Trading. The more you trade stocks, the more Wall Street makes money. The obvious beneficiaries are the exchanges – NYSE, NASDAQ etc...... ....But the real beneficiaries aren’t the people who charge you explicit fees; it’s the people who make money on your trading in other ways. For example, the hot thing on Wall Street is right now is high frequency “micro structure” trading strategies, which is basically a way to skim money off the “bid-ask spread” from trades made by less sophisticated investors.

As for the above case, it must surely be possible to give ordinary users technology of similar power today.

Investment banking. .... ....Regarding mergers, there have been endless studies showing that big mergers only enrich CEOs and bankers, yet they continue unabated. This is part of the massive agency problem on Wall Street and can probably only change with a complete regulatory overhaul.

The best thing ordinary shareholders can do is use social media to become active shareholders - I wonder what would happen if more people started to become far more active pressure groups on the activities of their own retirement funds, as Chris points out:

Mutual fund management. Endless studies have shown that paying fees to mutual funds is a waste of money. Maybe websites that let your peers help you invest will disrupt these guys. I think a much better way to disrupt them is to either not invest in the stock market or just buy an ETF that gives you a low-fee way to buy the S&P 500 index.

But I think We The People could do two other things right now:

- Use social media to pressure bankers, politicians etc to behave ethically and get the banking reforms done. Right now there is another asset bubble happening as public money is poured into the banking system (just look at how the stock markets ave jumped) but teh banks are behaving exactly the same ways they did to cause The Crunch - so there will be another one unless things change, and things will only change if the vox populi clamoure s for it.

- Start pulling money out of areas that don't favour them, and where they can't (Penasion funds) satart to pressure them. I also feel there has to be a role for co-operative style independent advice using modern technologies. I like things like Stocktwits as its using real time discussion that any user can access.

The other issue that needs solving is to tear down the artificial barriers that raise entry costs in so many of these areas, allowing them to charge hig prices as there is so little competition. Social action has worked in other areas.

Sadly, the average Facebook or Twitter user is far more likely to show support for a discontinued chocolate bar, or join a Twitter freedom of speech in Iran campaign or similar, than take part in mass action for sorting out the disgraceful behaviour of the people managing their hard earned savings, Until that changes, nothing will change.

Partly its education, but partly its will.

Good article in the NYT prompted me to write this post. The NYT notes that:

Just as Mongol invaders could not be stopped by the Great Wall, Chinese citizens have found ways to circumvent the sophisticated Internet censorship systems designed to restrict them.

This is spot on - from the Great Wall through to Constantinople. on to the Maginot Line and then to the Berlin Wall, trying to erect walls to keep enemies out has failed historically, and will do again. This is as true of ideological walls as well, the barbarians at the gates will - given enough time and will - find a way to outflank or undermine them

I am also of the opinion - call this melodramatic if you like - that Google pulling out of China is as near to a declaration of a "Cyber-Cold War" as one can imagine. The balloon has gone up, its been officially admitted what is going on, and the resources of the West will probably now be co-ordinated and focussed on it in a way they have not been till now.

And history also shows success is even more likely if the people inside the walls are keen on letting the barbarians in! This is the case in China - the NYT article goes on to describe how the Chinese themselves are busy undermining the walls:

They are using a variety of tools to evade government filters and to reach the wide-open Web that the Chinese government deems dangerous — sites like YouTube, Facebook and, if Google makes good on its threat to withdraw from China, Google.cn.

It’s difficult to say precisely how many people in China engage in acts of digital disobedience. But college students in China and activists around the world say the number has been growing ever since the government stepped up efforts to “cleanse” the Web during the Beijing Olympics and the Communist regime’s 60th anniversary last year.

This is no doubt worrying the Chinese authorities hugely. And this is especially hard with the Internet, which was architected to be as hard as possible to stop.

But as the East Germans found, the economics of a Stasi state - where nearly 2% of the population were employed on spying on the rest - just doesn't work. That's just too many smart productive people creating zero value themselves and stopping other smart productive people from creating value.

Unfortunately, East Germany had to suffer a generation of misery before the Wall came down. Walls slow things down, but they don't stop things.

Jaron Lanier has written an essay on the dark side of Web 2.0 and Social Media, he accused it of being a World Wide Mush. In doing so he touches on many of the areas we have in the last 2 years, but has a turn of phrase that is well worth reading:

On the Myths of Open Source's Inevitable Excellence

The "open" paradigm rests on the assumption that the way to get ahead is to give away your brain's work—your music, writing, computer code and so on—and earn kudos instead of money. You are then supposedly compensated because your occasional dollop of online recognition will help you get some kind of less cerebral work that can earn money. For instance, maybe you can sell custom branded T-shirts.

We're well over a decade into this utopia of demonetized sharing and almost everyone who does the kind of work that has been collectivized online is getting poorer. There are only a tiny handful of writers or musicians who actually make a living in the new utopia, for instance. Almost everyone else is becoming more like a peasant every day.

No Innovation?

Here's one problem with digital collectivism: We shouldn't want the whole world to take on the quality of having been designed by a committee. When you have everyone collaborate on everything, you generate a dull, average outcome in all things. You don't get innovation.

If you want to foster creativity and excellence, you have to introduce some boundaries. Teams need some privacy from one another to develop unique approaches to any kind of competition. Scientists need some time in private before publication to get their results in order. Making everything open all the time creates what I call a global mush.

On the issue of social collaboration being the best approach to problem solving

There's a dominant dogma in the online culture of the moment that collectives make the best stuff, but it hasn't proven to be true. The most sophisticated, influential and lucrative examples of computer code—like the page-rank algorithms in the top search engines or Adobe's Flash— always turn out to be the results of proprietary development. Indeed, the adored iPhone came out of what many regard as the most closed, tyrannically managed software-development shop on Earth.

Actually, Silicon Valley is remarkably good at not making collectivization mistakes when our own fortunes are at stake. If you suggested that, say, Google, Apple and Microsoft should be merged so that all their engineers would be aggregated into a giant wiki-like project—well you'd be laughed out of Silicon Valley so fast you wouldn't have time to tweet about it.

On the perils of Freeconomics

Over the last decade, many of us cheered as a lot of software, music and news became free, but we were shooting ourselves in the collective feet.

On the one hand we want to avoid physical work and instead benefit from intellectual property. On the other hand, we're undermining intellectual property so that information can roam around for nothing, or more precisely as bait for advertisements. That's a formula that leaves no way for our nation to earn a living in the long term.

On why selling T Shirts instead of content is not a viable option

Before too long—in 10 years, I'd guess—cheap home robots will be able to make custom T-shirts from free designs off the Internet. When that day comes, then a T-shirt's design will be no more valuable than recorded music is today.

The T-shirt-making robot is only one example of a general principle. As technology gets better and better, more and more jobs will essentially become threatened, just like today's jobs for reporters or recording musicians.

On Advertising in a Freeconomic world

The owners of big computer resources on the Internet, like Google, will be able to make money from the open approach for a long time, of course, by routing advertisements, but middle-class people will be increasingly asked to accept a diet of mere kudos. No one should feel insulated from this trend. Poverty has a way of trickling up. Once everyone is aggregated, what will be left to be advertised?

The downsides of Social Media mentality and why online Whuffie will opt for popular, not good

This is all harmless enough, but the pattern can be manipulated in dangerous ways. I don't want our young people aggregated, even by a benevolent social-networking site. I want them to develop as fierce individuals, and to earn their living doing exactly that. When they work together, I hope they'll do so in competitive, genuinely distinct teams so that they can get honest feedback and create big-time innovations that earn royalties, instead of spending all their time on crowd-pleasing gambits to seek kudos. This is not just so that they and their children will thrive, but so that they won't become a mob, which, as history has shown us again and again, is a vulnerability of human nature.

Pessimistic? Sure. And even worse, its against the current US mental model of Positive Thinking rather than rational analysis when it comes to such matters , but Jaron Lanier has been fairly prescient in this space so the boy has form.

Yes, despite the earnest entreaties by a number of Noo Meedja Scholars, it appears that Youth - that species of digital natives who will ostensibly put us old farts out to grass quicker than you can say "Lord of the Flies" are actually not that different to everyone else. The Pew Research Centre has done some research and found that their Noo Meedja consumption habits and Social Attitudes are similar to everyone else's (except for Tattoos....ah, youth ).

On many of the questions in this series, the opinions of those age 65 and older tend to differ more from the other age groups than the opinions of those ages 18-29 differ from the other groups.

I know, shocking isn't it! Next they will find out that Teens are Human Too, you can just feel it coming........

(Bear in mind that quite a few Teen Tech Revolution Revisionista's reputations were made in the 2004/5 era, those kids are now 18+ and clearly do not exhibit much differentiated behaviours from their elders)

To be fair what the data shows is that there is a slight increase of social conservatism as people get older, until hey hit 65+. I think its called experience.......

Update - there is an interesting article today (2 days later) in the NYT on a similar topic, called "Old Fogies by Their 20s" they argue that the "real" difference in Net Generations is with the current 5 ear olds, though the ne thing they note is that the teens of today are better at multi-tasking:

Another bubbling intra-generational gap, as any modern parent knows, is that younger children tend to be ever more artful multitaskers. Studies performed by Dr. Rosen at Cal State show that 16- to 18-year-olds perform seven tasks, on average, in their free time — like texting on the phone, sending instant messages and checking Facebook while sitting in front of the television.

People in their early 20s can handle only six, Dr. Rosen found, and those in their 30s perform about five and a half.

That versatility is great when they’re killing time, but will a younger generation be as focused at school and work as their forebears?

Being an owner of Teens, I think that this trade-off is fairly accurate - I suspect its a brain cycle thing, ie as your work gets more complex and important you have to focus more on it thus the ability to multi-task falls.

(Hat Tip Josie Fraser)

Today marks a watershed of sorts, in that the FT is seeing the crossover point between online and offline cash collected - PaidContent:

FT Group chief executive, John Ridding, says the landmark moment vindicates the FT’s strategy to charge. He has long advocated that other publishers should follow suit and abandon a “free is good” doctrine.

“In some of the key areas we are at a crucial stage of transformation, so that we reckon next [this] year will be the first year that revenues from content overtake revenues from print advertising,” he says. “The way things are evolving, content revenues should overtake all advertising revenues by 2012.”

This will of course lead to much hand wringing by the mainstream newspapers as to why they are struggling, and no doubt redoubled thoughts in News International about The Times and The Sun. The problem is, the FT's news is well researched and niche specific (and the niche is wealthy). But if I had to pay for news on Event X and The Times had a paywall I could just go to the Grauniad, Torygraph or Indiepedant - or the BBC. The Sun may find it a bit easier as the BBC will not be running as an alternative source for nubile babes getting their t*ts out (give them time....), but that's hardly a rarity online either.

No, the basic facts are summed up by an Economist article on the subject:

There are plenty of examples of paid content thriving even when free alternatives are available. There are a great many paid-for newsletters, from the Stockman Grass Farmer to the Gaming Industry Weekly Report. Punters are happy to pay for multichannel television even though commercial broadcast television is free. Such alternatives thrive because they offer desirable content. One considerable advantage to building a paywall is that it forces newspapers to think hard about what their customers (as opposed to their advertisers) might really want.

That last sentence pretty much encapsulates the (Scorched) Flat Earth policy the MSM has followed for 20 years, but its hardly news.....