When to listen to your users. And when to ignore them

Posted on by

Robert Scoble has a very insightful post about the row over FaceBook’s new look. (Apparently lots of users are up in arms about it.) He writes:

Here’s the phases of Facebook:

Phase 1. Harvard only.

Phase 2. Harvard+Colleges only.

Phase 3. Harvard+Colleges+Geeks only.

Phase 4. All those above+All People (in the social graph).

Phase 5. All those above+People and businesses in the social graph.

Phase 6. All those above+People, businesses, and well-known objects in the social graph.

Phase 7. All people, businesses, objects in the social graph.

Phase 5 is known as when Facebook is really going to find its business model. This is why Mark Zuckerberg is absolutely correct to say he can’t listen to people who wants Facebook to get stuck in Phase Four. It was a nice phase, yes, when Facebook only had people in the social graph, but those days are over.

Zuckerberg, in Scoble’s opinion, is a real leader because “he doesn’t care what anyone thinks. He’s going to do what he thinks is best for his business. I wish Silicon Valley had more like him.” So those who are saying the new design sucks “should NOT be listened to.”

Yeah, I know a lot of people are going to get mad at me for saying that. After all, how can a blogger say to not listen to the masses? Easy: I’ve seen the advice the masses are giving and most of it isn’t very good for Facebook’s business interests.

I suspect Scoble is right. It’s an interesting new slant on the Christensen dilemma, though. If you’re too attentive to your customers and your existing business model then you will be wiped out by disruptive innovation coming from elsewhere. On the other hand, if you don’t stay close to your customers then you may go out of business. I suppose the big difference with FaceBook is that it’s users aren’t really customers. They’re getting it for free.

Thanks to Jack Schofield for the original link.

The banking crisis: lunatics now running the asylum

Posted on by

Interesting column from Paul Krugman, one of the few people who talks sense at the moment.

So now we have a bank crisis. Is it the result of fundamentally bad investment, or is it because of a self-fulfilling panic?

If you think it’s just a panic, then the government can pull a magic trick: by stepping in to buy the assets banks are selling, it can make banks look solvent again, and end the run. Yippee! And sometimes that really does work.

But if you think that the banks really, really have made lousy investments, this won’t work at all; it will simply be a waste of taxpayer money. To keep the banks operating, you need to provide a real backstop — you need to guarantee their debts, and seize ownership of those banks that don’t have enough assets to cover their debts; that’s the Swedish solution, it’s what we eventually did with our own S&Ls.

Now, early on in this crisis, it was possible to argue that it was mainly a panic. But at this point, that’s an indefensible position. Banks and other highly leveraged institutions collectively made a huge bet that the normal rules for house prices and sustainable levels of consumer debt no longer applied; they were wrong. Time for a Swedish solution.

But Treasury is still clinging to the idea that this is just a panic attack, and that all it needs to do is calm the markets by buying up a bunch of troubled assets…

Krugman’s becoming increasingly vehement about this. Why?

Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.

That’s the nightmare. I’m not usually a pessimist, but I have a sinking feeling that the people who are supposed to be in charge of this are really out of their depth. And — as Joe Nocera and David Brooks pointed out so eloquently yesterday — the politicians are, if anything, making things worse. Here’s Brooks:

You’d think if some tiger were lunging at your neck, your attention would be riveted on the tiger. But that’s apparently not how it works in the age of global A.D.D. As a tiger sinks its teeth into the world’s neck, we focus on the dust bunnies under the bed and the floorboards that need replacing on the deck. We live in the world of Perverse Cosmic Myopia, an inability to focus attention on the most perilous matter at hand.

The tiger, of course, is the collapsing world financial system. Americans actually have a falsely mild view of this crisis because the economy is worse abroad. The U.N.’s International Labor Organization projects between 30 million and 50 million job losses worldwide. Central European countries are teetering; Japan’s economy is horrifying; and the Chinese job creation machine is losing the race against its demographic pressures.

Brooks is critical of Obama.

The president of the United States has decided to address this crisis while simultaneously tackling the four most complicated problems facing the nation: health care, energy, immigration and education. Why he has not also decided to spend his evenings mastering quantum mechanics and discovering the origins of consciousness is beyond me.

The results of this overload are evident on Capitol Hill. The banking plan is incomplete, and there is zero political will to pay for it. The president’s budget is being nibbled to death. The revenue ideas are dying one by one, while the spending ideas expand. By the latest estimate, the health care approach will cost $1.5 trillion over 10 years and the national debt will at least double, while the Chinese publicly complain about picking up the tab.

But at least Obama is distracted by Big Issues. Congress, on the other hand, has lost its marbles…

The Washington political class has spent the past week going into made-for-TV hysterics over $165 million in A.I.G. bonuses. We’re in the middle of a multitrillion-dollar crisis, and our political masters — always willing to throw themselves into any issue that is understandable on cable television — have decided to risk destroying the entire bank-rescue plan because of bonuses that account for 0.001 percent of the annual G.D.P.

Even this is not the most idiotic of the distractions. For that, you have to look abroad.

Joe Nocera wrote an impassioned polemic against the righteous bloodlust which has gripped the House of Representatives over the A.I.G. bonuses.

By week’s end, I was more depressed about the financial crisis than I’ve been since last September. Back then, the issue was the disintegration of the financial system, as the Lehman bankruptcy set off a terrible chain reaction. Now I’m worried that the political response is making the crisis worse. The Obama administration appears to have lost its grip on Congress, while the Treasury Department always seems caught off guard by bad news.

And Congress, with its howls of rage, its chaotic, episodic reaction to the crisis, and its shameless playing to the crowds, is out of control. This week, the body politic ran off the rails.

There are times when anger is cathartic. There are other times when anger makes a bad situation worse. “We need to stop committing economic arson,” Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson…

Nocera’s point is that while the bonuses are indeed repulsive, they are a sideshow. And they will have the effect of ruining the chances of taxpayers ever getting their money back. For example,

During his testimony on Wednesday, Mr. Liddy pointed out that much of the money the government turned over to A.I.G. was a loan, not a gift. The company’s goal, he kept saying, was to pay that money back. But how? Mr. Liddy’s plan is to sell off the healthy insurance units — or, failing that, give them to the government to sell when they can muster a good price.

In other words, it is in the taxpayers’ best interest to position A.I.G. as a company with many profitable units, worth potentially billions, and one bad unit that needs to be unwound. Which, by the way, is the truth. But as Mr. Ely puts it, “the indiscriminate pounding that A.I.G. is taking is destroying the value of the company.” Potential buyers are wary. Customers are going elsewhere. Employees are looking to leave. Treating all of A.I.G. like Public Enemy No. 1 is a pretty dumb way for a majority shareholder to act when he hopes to sell the company for top dollar.

All of which brought Edmund Burke to mind. The reason we have representative democracy is to strike a balance between the need to respond to the public’s wishes and the risks of lurching on the tidal surges of public outrage. Congressmen (and MPs) are representatives, not delegates. We pay them to make up their own minds, to consider things in the round, to ponder the knock-on effects of policies — in short to think.

Tweetie pie

Posted on by

This morning’s Observer column.

Twitter’s been around for ages, but it’s now gone ‘mainstream’ – ie, been taken up by the brain-dead media, possibly because they’ve discovered that celebs have Twitter accounts. Jonathan Ross (@wossy in Twitterspeak) used it to send dispatches to his admirers during his banishment from the airwaves. I’ve just checked and he has 156,092 followers. But this horde is dwarfed by Stephen Fry’s (@stephenfry) 321,578.

This gives Mr Fry a certain amount of clout. A few months ago he pronounced on the BlackBerry Storm, a new phone being touted by Vodafone. “Shockingly bad,” he tweeted. “I mean embarrassingly awful. Such a disappointment. Rushed out unfinished. What a pity.” Given that many Twitterers are, like Mr Fry, gadget freaks, his tweets effectively shut down that corner of the market.

Suddenly companies are beginning to think that having a lot of Twitter followers might be a good idea…

LATER: Jason Calcanis’s stunt generated an inspired spoof about Twitter “premium accounts”.

Six years in the Valley

Posted on by

The Economist’s correspondent in Silicon Valley is moving on. Here’s his valedictory report.

IN 2003, when your correspondent arrived in Silicon Valley, a common response to “How is the Valley?” was “In a nuclear winter.” The dotcom bust had incinerated an entire generation of start-ups. A much-debated essay argued that “IT [information technology] doesn’t matter.” The Valley itself seemed to matter less.

Its geeks were desperately looking for their “next big thing” and minting neologisms (“utility computing”, “the digital home”) in the hope that one might stick. But ordinary people outside the Valley were no longer paying attention. Valley geeks were already hopping onto Wi-Fi hotspots and playing with “smart” phones, but most people were still dialling up to connect to the internet and using mobile phones only for talking. There was some excitement about a fairly new gadget, Apple’s iPod, but nobody suspected that its progeny, in the form of a phone, might one day make the internet “mobile”. Nor did a popular search engine, Google, show signs that it might be a lucrative business, much less a new technology superpower. It was still a world of personal computers, dominated by Microsoft through its Windows operating system.

But towards the end of 2003 two conference organisers, Dale Dougherty and Tim O’Reilly, were brainstorming when Mr Dougherty used the words “Web 2.0”. They immediately realised that the phrase—with its software connotation of a newly released, better and more stable version—had enormous appeal as a rallying cry for the Valley. The Web 2.0 Conference was born, and the first one, in San Francisco in October 2004, created a stir…

Nice piece, which reminds one of how much can happen in a few years. Essentially his stint saw Google rise from an ingenious start-up to a commercial giant.

In praise of coffee

Posted on by

Nice graphic essay by Christoph Niemann.

I like coffee so much that I have tea for breakfast: The first cup of the day in particular is so good that I’m afraid I won’t be able to properly appreciate it when I am half-asleep. Therefore, I celebrate it two hours later when I am fully conscious.

Thanks to Michael Dales for the link.

I love Niemann’s New Yorker covers.

The future of news (and of lots more besides)

Posted on by

Three interesting pieces have appeared recently, each of which sheds light on the seismic changes underway in our media environment.

First of all, Emily Bell had a perceptive column on the TMA (“too much stuff”) syndrome, and the $64 billion question:

How does an industry that has force-fed all manner of output to an audience that can’t digest it draw back? The economic downturn will make this confrontation easier to resolve. The way out is for a narrowing at one end of the distribution pipe – the creation end. Production companies in the UK are now bigger and more powerful than broadcasters, not least because of the over-commissioning spree.

There is as much good television now as there has been for a long time – Iran and the West, The Devil’s Whore, Mad Men, Red Riding – yet it barely has space to breathe. We are moving, probably for all manner of creative content, toward the “iPlayer model”. The number of shop windows and the level of output will drop dramatically with closure and consolidation, but the opportunity to consume will exponentially expand through technology.

Rationally this is something every media business knows, but moving towards it is incredibly painful and often extremely expensive. Not to mention slow. The light at the end of the tunnel is the possibility that, when all of the current attrition is over, there will still be enough revenue from advertising to support the very best of the content. Shrinkage is the new black, even the stylish Lygo can see that. The war against too much stuff has officially begun. The challenge is to make sure we are left, when the gloom lifts, with the right stuff.

Then there was Clay Shirky’s essay (about which I’ve already blogged) in which he highlighted the blind-spot that disables most media discussion about the future of news, namely the failure to distinguish between form and function. What matters is news and journalism, not the survival of one particular form (the newspaper) which — for historical and technological reasons — happened to become the dominant way of fulfilling that function until recently. Journalists are obsessed with the importance of preserving the newspaper, rather than the thing that newspapers existed to produce. This, it seems to me, is a pretty widespread misconception, and it applies to many fields other thn journalism. Libraries, for example. Travel agents. And maybe universities.

Finally, there was Steven Johnson’s speech to the South by Southwest Interactive Conference in Austin. This is another example of trying to take the long view of what’s happening, rather than constantly engaging in panic-stricken extrapolation from short-term trends. One thing I especially liked is that he shares my view that ecological metaphors are the best tools for discussing what’s happening.

The metaphors we use to think about changes in media have a lot to tell us about the particular moment we’re in. McLuhan talked about media as an extension of our central nervous system, and we spent forty years trying to figure out how media was re-wiring our brains. The metaphor you hear now is different, more E.O. Wilson than McLuhan: the ecosystem. I happen to think that this is a useful way of thinking about what’s happening to us now: today’s media is in fact much closer to a real-world ecosystem in the way it circulates information than it is like the old industrial, top-down models of mass media. It’s a much more diverse and interconnected world, a system of flows and feeds – completely different from an assembly line. That complexity is what makes it so interesting, of course, but also what makes it so hard to predict what it’s going to look like in five or ten years. So instead of starting with the future, I propose that we look to the past.

To use that ecosystem metaphor: the state of Mac news in 1987 was a barren desert. Today, it is a thriving rain forest. By almost every important standard, the state of Mac news has vastly improved since 1987: there is more volume, diversity, timeliness, and depth.

I think that steady transformation from desert to jungle may be the single most important trend we should be looking at when we talk about the future of news. Not the future of the news industry, or the print newspaper business: the future of news itself. Because there are really two worst case scenarios that we’re concerned about right now, and it’s important to distinguish between them. There is panic that newspapers are going to disappear as businesses. And then there’s panic that crucial information is going to disappear with them, that we’re going to suffer as culture because newspapers will no long be able to afford to generate the information we’ve relied on for so many years.

When you hear people sound alarms about the future of news, they often gravitate to two key endangered species: war reporters and investigative journalists. Will the bloggers get out of their pajamas and head up the Baghdad bureau? Will they do the kind of relentless shoe-leather detective work that made Woodward and Bernstein household names? These are genuinely important questions, and I think we have good reason to be optimistic about their answers. But you can’t see the reasons for that optimism by looking at the current state of investigative journalism in the blogosphere, because the new ecosystem of investigative journalism is in its infancy. There are dozens of interesting projects being spearheaded by very smart people, some of them nonprofits, some for-profit. But they are seedlings.

So here are some principles for thinking intelligently about our emerging media environment:

  • Think ecologically
  • Think long-term. What’s happening might be as profound as what happened after the emergence of print — and look how long it took for those effects to work their way through society.
  • Don’t confuse existing forms with the functions that they enable. It’s the functions that matter. Forms may be transient, the product of historical or technological circumstances.

    • Er, that’s it

    LATER: Andrew Keen isn’t entirely impressed by the Shirky essay.

    But for all the invigorating qualities of Shirky’s prose and ideas, I found the piece to be just a tad depressing. The weakness of his skeptical argument is also its great strength. Since we don’t know the ending to the news business saga, we can’t know for sure if this will have a happy ending. Shirky acknowledges that “many of these models will fail” and that “over time” some of these experiments might “give us the reporting we need”. I’ve bolded and itallicized that “might” because I suspect that Shirky isn’t himself completely convinced that a real solution will emerge. And that’s a depressing thought because a society without journalism isn’t a good society.

    And the question that I’d throw back at the laissez-faire Shirky is this: how absolutely should we stand back and trust the free market to come up with a solution to the crisis of the news business? We certainly aren’t trusting this unfettered market to solve Wall Street’s financial crisis. Nor are most Americans happy with a free market in healthcare that has left millions of people without insurance. So if we can agree that the news business, like healthcare and the financial sector, is too important to fail, then shouldn’t the government be taking a more active gardening/watering role in ensuring that at least one or two of today’s digital flowers fully bloom in the future?

    A Continent Adrift

    Posted on by

    Paul Krugman is worried about Ol’ Europe.

    Europe has fallen short in terms of both fiscal and monetary policy: it’s facing at least as severe a slump as the United States, yet it’s doing far less to combat the downturn.

    On the fiscal side, the comparison with the United States is striking. Many economists, myself included, have argued that the Obama administration’s stimulus plan is too small, given the depth of the crisis. But America’s actions dwarf anything the Europeans are doing.

    The difference in monetary policy is equally striking. The European Central Bank has been far less proactive than the Federal Reserve; it has been slow to cut interest rates (it actually raised rates last July), and it has shied away from any strong measures to unfreeze credit markets.

    The only thing working in Europe’s favor is the very thing for which it takes the most criticism — the size and generosity of its welfare states, which are cushioning the impact of the economic slump.

    […]

    But such “automatic stabilizers” are no substitute for positive action.

    Why is Europe falling short? Poor leadership is part of the story. European banking officials, who completely missed the depth of the crisis, still seem weirdly complacent. And to hear anything in America comparable to the know-nothing diatribes of Germany’s finance minister you have to listen to, well, Republicans.

    But there’s a deeper problem: Europe’s economic and monetary integration has run too far ahead of its political institutions. The economies of Europe’s many nations are almost as tightly linked as the economies of America’s many states — and most of Europe shares a common currency. But unlike America, Europe doesn’t have the kind of continentwide institutions needed to deal with a continentwide crisis.

    This is a major reason for the lack of fiscal action: there’s no government in a position to take responsibility for the European economy as a whole. What Europe has, instead, are national governments, each of which is reluctant to run up large debts to finance a stimulus that will convey many if not most of its benefits to voters in other countries.

    Amazon waves DMCA to lock down Kindle

    Posted on by

    Another example of abuse of the DMCA. From The Register.

    Amazon has invoked the Digital Millennium Copyright Act to prevent distribution of software for extracting the personal identifier from a Kindle, used by those wanting to shop at the Amazon-owned Mobipocket store.

    The software concerned is called kindlepid.py. A simple Python script that extracts the Personal Identification (PID) from a Kindle, this file was linked to by MobileRead, who received the DMCA notice from Amazon demanding their remove both the tool and instructions on its use.

    Users of Amazon’s Kindle e-book reader are supposed to only shop at the Kindle store and have their books delivered over the whispernet direct to their device. But extracting the PID from a Kindle enables the more adventurous e-book buyer to purchase titles from Mobipocket and other sellers, prompting Amazon’s reaction – though it’s hard to see how extracting a number that enables perfectly legal shopping should fall foul of the DMCA.

    But MobileRead don’t want to take any chances, so it has removed the content – though mirrors are already popping up (http://www.di2.nu/200903/13a.htm) around the place.

    Books bought at Mobipocket actually come from Amazon, but the Mobipocket software synchronises across devices – so a book bought once can be read on a mobile phone, an e-book device, and a laptop computer – whichever is nearest or gives the greatest impression that one is working.

    So Amazon still makes money, and the extraction of the PID does not disrupt the DRM system, nor threaten to do so, so it’s not clear why Amazon has taken such a step. Most likely, it’s to do with keeping the Kindle ecosystem closed so Amazon can control, and monitor, closely. They want to know how many books users are buying and which ones. Keeping the system closed gives them greater control. We’ve asked the company and will let you know when they get back to us.

    The future of Twitter

    Posted on by

    One thing is certain. In the next 2 years Twitter is going to fill up with so much information, spam and noise that it will become unusable. Just like much of USENET. The solution will be to enable better filtering of Twitter, and this will require metadata about each tweet.

    Discuss.

    Link.