Openness is the key

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It’s nice to be cited. Today, in a speech to the FCC on “Preserving a Free and Open Internet: A Platform for Innovation, Opportunity, and Prosperity”, Julius Genachowski, the Chairman of the Brookings Institution, said this:

Why has the Internet proved to be such a powerful engine for creativity, innovation, and economic growth? A big part of the answer traces back to one key decision by the Internet’s original architects: to make the Internet an open system.

Historian John Naughton describes the Internet as an attempt to answer the following question: How do you design a network that is “future proof” — that can support the applications that today’s inventors have not yet dreamed of? The solution was to devise a network of networks that would not be biased in favor of any particular application. The Internet’s creators didn’t want the network architecture — or any single entity — to pick winners and losers. Because it might pick the wrong ones. Instead, the Internet’s open architecture pushes decision-making and intelligence to the edge of the network — to end users, to the cloud, to businesses of every size and in every sector of the economy, to creators and speakers across the country and around the globe. In the words of Tim Berners-Lee, the Internet is a “blank canvas” — allowing anyone to contribute and to innovate without permission…

It’s an excellent speech. Worth reading in full.

Keynes redux

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I’ve been reading Robert Skidelsky’s new book on Keynes, which is absorbing and well-written. I never accepted (as most of the neo-con economists did) that Keynes had been overtaken by history, as it were and Skidelsky backs that up by picking out three Big Ideas from Keynes which, he thinks, have an enduring resonance. They are:

1. The future is unknowable, so economic storms, especially those originating in the financial system, are not just external shocks which impinge on smoothly operating markets, but part of the normal working of the market system. (This is something an engineer would know intuitively, so it’s always been a source of amazement to me that economists and investors seem unaware of it. Market capitalism is an intrinsically unstable system.)

2. Economies wounded by these ‘shocks’ can, if left to themselves, stay in a depressed condition for a long time. (As the Japanese know to their cost.)

3. A moral critique of societies which worship the pursuit of money and efficiency above all other objects of human striving. I thought of this while passing the Cambridge Arts Theatre, which Keynes was instrumental in founding. In a way, it’s the most profound of his ideas, and the one most flagrantly ignored in the last two or three decades.

Skidelsky has a lovely Coda in his Preface in which he writes:

“Once I started writing this book, on 1 January 2009, I stopped reading the newspapers on a daily basis to avoid filling up my mind with ‘noise’. Any coherence my argument may have stems from this act of self-denial.”

No wonder I am sometimes incoherent. I read too many papers.

Amazon close to achieving Bezos’s dream?

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I’ve always believed that the business Jeff Bezos wanted emulate was Wal-Mart. He started with books simply because they were objects that people will buy without having to handle them. But in recent years I’ve bought an increasing number of non-book items from the UK store. Today, the NYT is claiming that Amazon is closer to realising the Bezos dream than many of us realised.

Fifteen years after Jeffrey P. Bezos founded the company as an online bookstore, Amazon is set to cross a significant threshold. Sometime later this year, if current trends continue, worldwide sales of media products — the books, movies and music that Amazon started with — will be surpassed for the first time by sales of other merchandise on the site. (That transition already occurred this year in its North American business.)

In other words, in an increasingly digital age, Amazon is quickly becoming the world’s general store. Alongside the books and CDs and DVDs are diapers, Legos and power drills, not to mention replacement car clutches and more arcane items like the Jackalope Buck taxidermy mount ($69.97).

“Amazon has gone from ‘that bookstore’ in people’s mind to a general online retailer, and that is a great place to be,” said Scot Wingo, chief executive of ChannelAdvisor, an eBay-backed company that helps stores like Wal-Mart and J.C. Penney sell online. Mr. Wingo envisions e-commerce growing to 15 percent of overall retail in the next decade from around 7 percent. “If Amazon grows their market share throughout that period, and honestly I don’t see anything stopping it, that is pretty scary,” he said…

And that’s ignoring the whole new S3 cloud-computing business that Amazon launched a while back and which now seems to be powering every major Web 2.0 service. In a way, Amazon is a more astonishing company than Google, because it has to deal directly with the public all the time. And it’s very good at what it does.

Update your FaceBook profile. Then go to gaol

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This is almost too good to be true.

According to The Journal in Martinsburg, W. Va., a local resident came home to find that a burglar had broken in through a bedroom window and rummaged around, making off with a pair of diamond rings worth more than $3,500. Apparently wanting to travel light, he did not take the victim’s computer, but he did use it. To check his Facebook page. And he forgot to log off. Jonathan G. Parker, 19, of Fort Loudoun, Pa., was arraigned Tuesday on one count of felony daytime burglary and remains in custody in lieu of $10,000 bail, probably wondering what kind of grief his Facebook friends are posting on his wall.

Simple pleasures

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It’s been one of those perfect September days — sunny and warm and incredibly peaceful. Late in the afternoon my daughter and I went out into the local hedgerows to pick blackberries for supper. It’s one of the loveliest pleasures of this time of year — getting one’s hands sticky with berry juice; deciding which ones to eat and which to bring home; wondering about the injustice of the law which determines that the best, juiciest blackberries are always out of reach.

The crop this year has been simply wonderful. In the end, we had to tear ourselves away — otherwise there would be no crumble for supper. But in the 20 minutes or so we were out we picked two punnets’-worth. Effortlessly.

The (apple & blackberry) crumble’s in the oven as I write. Mmmm…..

LATER: Lovely email from a reader:

Reminds me that today, September 21st is St Matthew’s day. My mother used to tell me that on the next day, Sept 22nd, the Devil casts his hoof over the blackberries, and from that date onwards the blackberries became more and more insipid.

Google displays its hand

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This morning’s Observer column.

The scariest question a venture capitalist can ask a company seeking funding is: what if Google enters your market? For years, this question has haunted folk in mainstream advertising. They had already seen Google collar an overwhelming share of the targeted-advertising market via its AdSense and AdWords technology, the system through which small, hopefully relevant, text ads appear alongside the results of internet searches.

On the back of this, Google become a money-printing machine and now has nearly 70% of the paid-search market. This is nice for it in the short term, of course, but raises a strategic issue. What would the company do when the paid-search market was saturated? Where would the next growth area be?

What Google did next

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If you were wondering why Google bought DoubleClick, then look no further. It’s moving into the display advertising business.

Three principles underpin our approach to the display advertising field:

1. Simplify the system for buying and selling display ads: For example, our DoubleClick ad serving products help advertisers and publishers manage campaigns and ad formats across thousands of websites and from thousands of advertisers.

2. Deliver better performance that advertisers and agencies can measure: We're building a host of new features to help advertisers to run display ad campaigns across the Google Content Network (comprising hundreds of thousands of AdSense partner sites) and on YouTube. We're also developing better measurement and reporting technology so they can figure out what's working and what's not.

3. Open up the ecosystem: We want to democratize access to display advertising and make it accessible and open, like search advertising. We recently launched the Display Ad Builder to help businesses easily set up and run display ad campaigns. 80% of advertisers who use that product have never run a display ad campaign before.

We’ve been working hard to put these principles into practice, and today we're excited to announce the new DoubleClick Ad Exchange, a step towards creating a more open display advertising ecosystem for everyone. The Ad Exchange is a real-time marketplace that helps large online publishers on one side; and ad networks and agency networks on the other, buy and sell display advertising space.

If I ran an advertising or media agency, this would have ruined my breakfast. Most agencies made their money by having (or claiming to have) expertise in a highly inefficient and opaque marketplace. Suddenly, the game has begun to change.

The first casualty, though, (as the NYT points out) is likely to be Yahoo, which up to now had the display-ad exchange space almost to itself.

Republican psychosis

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What’s going on in the US now is really scary. The attacks on Obama make the ‘Revd’ Ian Paisley — even in his bigoted heyday — look like a bleeding-heart liberal. At the root of it is a sense of frustrated entitlement: it’s as if the Right in America simply cannot believe that its God-given right to run the country has been denied as a result of a liberal swindle. We saw some of this in the Clinton era (witness the continuous campaigns to harass and even impeach him), but what we’re seeing now is something else. It’s psychotic.

In that context, Andrew Sullivan has an interesting blog post this morning. Sample:

The pattern is now clear: the imperative to play the political game has won on the right. The longer-term pattern is just as clear: a faction of congressional Democrats sometimes backed Bush on his initiatives (such as his tax cuts). No one in the Congressional Limbaugh-run GOP will back anything this president does. Not only that; they will assault him, race-bait him and insult him in a continuous reel of populist bile.

It seems to me that the GOP was once recognizable as a human personality. It had an id; but it also had a series of responsible egos – Eisenhower, Reagan, Bush I and, to some extent, Bush II; and it had a super-ego – some kind of conscience that made it think of the broader society over partisan warfare. What we've seen in the last few years is the removal of both ego and super-ego.

What you have now is just the rage at the world and its confounding trade-offs and compromises. The knowledge of the Rove right’s total failure in the last eight years has only made the far right more fervent in its theo-ideology. Do they have a plan to balance the budget? To salvage or cut losses in Afghanistan? To integrate illegal immigrants rather than use their lives as political fodder? To get the working middle classes reliable healthcare insurance? Not that I can see beyond utopian platitudes.

But they do know that anything this president does is a threat to them. And the noise they can make and violence they can foment is out of all proportion to their numbers…

It reminds me of the old definition of ‘fanatic’ as someone who keeps bombing after he has forgotten the objectives that bombing was supposed to achieve.

Lest we forget

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This picture of Gordon Brown sucking up to Richard S. Fuld, CEO of Lehman Bros, just after opening Lehman’s new London HQ, is a still from a Channel 4 ‘Dispatches’ film about the banking collapse. It’s a useful reminder of how much the British and US administrations were in thrall to the bankers who engineered the meltdown of the financial services industry.

The first anniversary of the Lehman collapse is a deeply depressing one, because I see little evidence that anything has changed, or that any real lessons have been learned. But who am I to say? — I don’t have any expertise in the area. Joe Stiglitz, however, does. (He has a Nobel Prize in economics.) And here’s what he has to say in today’s Guardian:

Unquestionably we should not have allowed banks to become so big and so intertwined that their failure would cause a crisis. But the Obama administration has created a new concept: institutions too big to be resolved, too big for capital markets to provide the necessary discipline. The perverse incentives for excessive risk-taking at taxpayers’ expense are even worse with the too-big-to-be-resolved banks than they are at the too-big-to-fail institutions. We have signed a blank cheque on the public purse. We have not circumscribed their gambling – indeed, they have access to funds from the Fed at close to zero interest rates, and it appears that “trading profits” have (besides “accounting” changes) become the major source of returns.

Last night Barack Obama defended his administration’s response to the financial crisis, but the reality is that a year on from Lehmans’ collapse, it has failed to take adequate steps to restrict institutions’ size, their risk-taking, and their interconnectedness. Indeed, it has allowed the big banks to become even bigger – just as it has failed to stem the flow of profligate executive bonuses. Obama’s call on Wall Street yesterday to support “the most ambitious overhaul of the financial system since the Great Depression” is welcome – but the devil, as ever, will be in the detail.

There remain many institutions willing and able to engage in gambling, trading and speculation. There is no justification for this to be done by institutions underwritten by the public. The implicit guarantee distorts the market, providing them a competitive advantage and giving rise to a dynamic of ever-increasing size and concentration. Only their own managerial competence, demonstrated amply by a few institutions, provides a check on the whole process.

At the moment, there seems to be little evidence that people in the financial services industry accept responsibility for the catastrophe they created. An interesting report from the IPPR think-tank puts it nicely:

Financial institutions have also discovered they are not as clever as they thought they were. Keynes said, ‘Practical men,who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist’. In this instance, bankers, hedge funds and the rest were slaves to the economists who told them that people were rational and financial markets efficient. They built complex risk measurement systems, based on these theories, which told them that their positions were safe because they were well-diversified and they ignored the sceptics, such as Nassim Taleb (2007), who warned that these models could not cope with extreme outcomes and, crucially, that these extreme outcomes tend to happen more frequently than statistical models would suggest. However, events have proved Taleb right and the combined wisdom of the financial system wrong.

It seems obvious, therefore, that tomorrow’s capitalism requires a transformation of culture in the City as well as enhanced regulation, as much to save the financial system from itself as to stop it creating another crisis for the rest of the economy. However, it will be very difficult to change this culture. Although there has clearly been a breakdown in trust between the banks and the rest of the economy, there is little to suggest that the City accepts it was responsible and that it has a major role to play in restoring trust. For example, after Goldman Sachs reported a $3.44 billion profit for the second quarter of 2009, there was speculation that average pay␣(salary and bonuses) at the firm would be $1 million this year.

However, City practitioners are not solely to blame. There has also been a massive failure of accountability, which allowed bankers to do what they did. Remuneration committees did not control bank executives through appropriate packages. Auditors did not sound alarm bells over what banks were doing. Institutional shareholders failed to question banks’ behaviour — indeed they egged them on, for example supporting the RBS board’s decision to buy ABN Amro. And regulators failed to appreciate the scale of systemic risk that was developing. The City’s friends were just as culpable as the bankers themselves.

If the City and its supporters are unwilling, or unable, to alter its culture from within, change will have to be imposed on it from without. Some changes seem obvious. Limits should be placed on remuneration packages to ensure they only reward long-term success, not short- term (and unsustainable) gains. And institutional investors, such as pension funds, should think about how they can encourage the City away from its trading mentality and back to a longer-term buy and hold approach.

There will also have to be changes in regulation, since the old rules have been demonstrated to be clearly inadequate. This does not necessarily mean more regulation — the US already has the most heavily regulated financial sector, but this did not stop financial crises developing there. What is needed is better regulation.

Quite. But will we get it? Don’t hold your breath. Obama has already chickened out.

Dave Barry on modern art

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In another container there was a work of art consisting of a video, repeated over and over, showing a man — not in peak physical condition, I might add — rollerblading around a vast empty space, stark naked. I’m proud to say I betrayed no emotion while viewing this work, although my daughter, who is 3, said, quite loudly: “You can see his tushy! Yuck!”

She is young, and has no art training.

Anyway, in the corner of one container there was a ratty old collapsed armchair — worn, dirty, leaking stuffing, possibly housing active vermin colonies. I asked the gallery person if the chair was art, and she said yes, it was a work titled “Chair.” I asked her what role the artist had played in creating “Chair.” She said: “He found it.”

“Chair” is for sale. The price is $2,800. Really. I looked up “Chair” on a Serious Art Internet site, artcritical.com, which said: “The chair offers not a weedy patina of desuetude but an apotheosis of its former occupant.”

See, I missed that altogether, about the desuetude and the apotheosis. I thought it was just a crappy old junk chair some guy took off a trash pile and was now trying to sell for 2,800 clams.

From one of his Miami Herald columns entitled `The Idiot’s Guide to Art’.