Groups with a common interest have an extremely difficult time coordinating their behavior. Even if coordinated behavior would reap a significant common benefit.
For example there are numerous tragic stories of neighboring towns standing by while fires distroyed a village or city because previously their fire departments failed to coordinate the size of their hose fittings.
Coordinating behavior for common gain is particularly difficult in competitive environments, like the marketplace. One thing that will drive the players in a market to pay the coordinating cost is a common threat to their survival. A common foe.
Here's a facinating example. The hyper-competitive Whitehouse reporters banded together against their common foe, the president's press secretary.
That kind of event sometimes is the precursor of standard setting.
Blogs are another system where we see power-law distributions. If we treat each blog as a node in a directed graph then the inter-blog linking can be used to rank each blog. A nieve observer might assume the best blogs have the most incomming links; confusing links with quality. A leading blog is more likely to garner additional links as the set of blogs increases. This is a beautiful example of "The rich get richer". A world where the assumption that quality=links=wealth drives a positive feedback loop.
Consider a simple model. At any given instant in time a blog can collect a new link for one of two reasons - Quality or Findablity. A) Quality: It's a really marvalous blog that people want to read. B) Findablity: It is a blog with lots of links so vast crowds of people find and randomly some link to it. If a million people find your lousy blog you'll garner a lot of links. If a handful of people find your marvalous blog only a handful can link to it.
The challenge for the blogging community is to architect things to that people have an easier time finding the blogs that they personally find to be great. For example the authors of news aggregators should be aware that when they bundle in highly ranked blogs they are accelerating this rich get richer effect.
This is really the heart of the RSS design problem!
What other stuff could we do?
Could we build more rankings, for example rankings that are more topical. For example it it really useless that when browsing one of those blog ecology graphs I keep ending up at the same handful of blogs. Power-law distributed graphs have that kind of "black-hole effect". All the tools need to compensate for that! What would it mean to create some kind of graduated income tax for blog linking?The folks playing with graphs of the blog community ecology need to get some attributed quality rating scheme going. If I link to 10 other blogs I should be empowered to broadcast what I know. For example I know this link goes to a guy that's funny, and that one to a site that's reputable, and this one to a leading proffesional of kind foo.
Maybe news aggregatoring tool vendors provide schemes that measure the "use value" of a the blog on the other end of a link. How often did the link get followed? It could then publish that - for what it's worth as one ranking attribute of the link.
Then there are freshness issues. I use NetNewsWire for an aggregator. I have about 40 RSS feeds in there. Some are pretty solid, but a lot come and go as I try out various blogs to see if they can hold my interest. I wish my aggregator helped me do that.
Google's solution to the librarian's problem - findablity - stands on the presumption that links create a valid proxy for quality. It works delightfully when the population manufacturing links validates that hope.
Google is great in all kinds of esoteric domains where thousands of enthusists and domain experts are laboring way stitching together the web.
It seems to fall down when the domains become less esoteric. For example it's useless when commerce is has created a fog of links that effecively jam the algorithum - e.g. try "I feel lucky" for cheap long distance service. Conversly it breaks down when the topic gets sufficently esoteric that there too few people working on it to create enough links that google can see 'em - e.g. try "I feel lucky" for economic displacement. Most of history is in this "under linked" catagory; for example I'm a fan of the story telling school of economics from the 50s and 60s but almost none of that is on the web.
Which brings us to the question at hand; google is moving into news! (See Google News). Will the optomistic approximation links=quality work there? I think it's going to be hard. The stuff is all fresh - so it won't have gotten a lot of linking by proffesionals and enthusasts. There is a vast industry in place (i.e. PR and the news conglomerates) that labors furiously to jam the signal.
Of course optomisticly we can hope this raises the role that tools like blogs can play on the one hand and it might reanimate the job of the expert - the job the newspaper editor used to fufill.
I wonder if their ranking of articles is informed by their ranking of the newspaper that ran the article.
The model where quality=links is interestingly similar to so many other nieve models: quality=wealth, or quality=age, or quality=income, or quality=ancestors, quality=test_scores, quality=power, quality=certification. They are all a proxy. In a world of 10 billion attributes picking one or two certain to blind those that take them too seriously and lead to that great fear of conservatives and liberals alike unintended consequences.
"A metric ton of logic doesn’t offset that feeling of loss."
Boy does that sum up what the economists call displacement; a kinder gentler word for refugee.
Of course there is also:
""The teeth of the sheep shall lay the useless plough up on the shelf."
the 13th century prophesy that correctly foretold how landowners would displace the tenant farmers of Scotland with sheep.
Sometimes though you can find a few pounds of very insightful logic.
From the amazingly affecting blog of a first year teacher in NYC (in this episode the school system hadn't managed to pay her yet).
"Allegedly, I'll be getting an "emergency" check on Tuesday (Monday is Yom Kippur and the schools are closed), but I'm living through this three day weekend on the "State Quarters" that I've been saving since I applied to be a Teaching Fellow last October. At the grocery store this morning, the man behind me in line wanted to know if I'd been to Atlantic City, since I was paying from a paper cup full of quarters. I had saved those quarters to use for teaching; I didn't spend a single one that came into my hands in 10 months. Good thing, too, I guess. After making sure that I saved two of each in the holders I have (a map and a folder), I had a bit more than $20 which will hold me through the weekend and get me to work on Tuesday."
Start at the beginning or start with the latest but do read it. It will be interesting to see how long she can keep it up before the institutions around her find a reason to shut her down.
Like the computing industry the bandwidth industry is downstream of mind amazing technology progress. That's wonderful for creating fertile opportunities for innovation, but it's very disruptive. All communication industries have potent network effects. It tends naturally to huge concentrations of power in the hubs of those networks. The hubs in such systems are very resistant to change. A tension emerges - a gap between what is obviously possible (a social good) and the disruption to existing stable structures (a social bad?).
MSN, AOL, and the entire rest of the "internet" economy want the disruptive new stuff to happen - well, they want to absorb a portion of that stuff into their platforms. We, the society, hack out solutions to this tension in standards, regulation, and platform (or maybe entrepenurial) competition.
The choice to privatize huge swaths of the bandwidth some years back has us denied some of the tools we used to have. If the players would like to lower the risk of/to their investments so we could get on with this they now lack a forum to negotiate in. Their only tool now is the Cato Institue's certified moral means: rent seeking and property rights. Contrast this situation to the situation with 802.11b where the players did work out a negotiated open solution at the FCC/IEEE/etc. - that solution is limited in scope (i.e. 802.11b has severe limits on broadcast range) but even so it has created huge social benefits.
The incumbant powers - telecomm companies to take just one example - would like to resolve the tension gradually. The neighboring platform companies would like to disipate the tension in a lightning strike of distruption that creates fresh markets. They hope.
I'm reading "The Architecture of Markets: An Economic Sociology of Twenty-First-Century Capitalist Societies" by Neil Fligstein. I'm a fan of what might be called the "network theory of firms" - e.g. that a firm can be usefully modeled as a node in a network of linkages to other entities in the economy. The theory gets interesting when you begin to classify the kinds of links and their attributes.
Fligstein provides a nice enumeration of some of the attributes of these linkages.
"Networks usually are a stand-in for other sociological variables such as resource dependence, power, often ownership, information, trust, or status."
This is a wonderful book. If books were meals then Barabasi's book Links would be a salad and this book would be beef stew.
The sentence actually reads: "Networks usually are a stand-in for other sociological variables such as resource dependend (Burt 1983), power, often ownership (Mizruchi, Stearns, and Brewster 1988, Lincoln, Gerlach, and Takahashi, 1992; Palmer et al. 1995), information (Davis and Stout 1992), trust (Uzzi 1996), or status (Podolony 1993)." but...
Fraud: Having trouble getting a handle on corp. scandals? I doubt this will help. thanks kimbo
Pop?: v.s. Soda (requires java).
Things to worry about: asteroids! "... early warning satellites detected an explosion in the Earth's atmosphere June 6, at the height of the tension [India/Pakistan] with an energy release estimated to be 12 kilotons. Fortunately the detonation, equivalent to the blast that destroyed Hiroshima, occurred over the Mediterranean Sea. ... In 1996, our satellite sensors detected a burst over Greenland equal to a 100-kiloton yield."
9/11: Blueman group, the tragedy. Be sure to look at the scraps after the flash animation.
Keychain: lock your keychain or screen from the menubar on OS X 10.2
Gimp-Print!: Oh happy day, this suite of print drivers from the open source community allows my Mac, running OS X 10.2, to print on the nice Epson printer that I just happen to have lying around already. Meanwhile the vendor has been working on drivers for this thing for a few years. Once again developers with a personal need for a solution outrun developers being paid by disinterested product marketing people.
Kits!: Beautiful hobby kits for kites, boats, planes.
Catalogs: The catalog search tool at Google is amazing. Try something really obscure!
Market Making: Emerging marketplaces and how the rules that govern them come to pass is one of my interests. This is an essay by an early seller in the marketplace established by Google for buying awnsers to your questions.
Fax Away has a very civilized pricing model. They will send your fax for you, anyplace in the world, for reasonable costs/minute. They charge only for what you send. They use a prepaid model; you put ten dollars in to your account and then to send a fax in the US is 11 cents a minute. You email them the document you want faxed. Works perfectly for me. Meanwhile eFax.com will give you a free incomming fax number.
The question of the day is if I can experiance schadenfreude by denying another the dose of schadenfreude he was looking forward to?
- ps ... every blog should have a posting entitled Schadenfreude.
Some more random links from my browser history...
Dialup Internet: Wasted a little time looking for an dialup internet service to use when on the road. The Freedom List appears to be the place to do that shopping. You can get unlimited dialup nationwide for 6-16$ a month from dozens of vendors (so called ISP - or Internet Service Providers). The costs of an ISP break down into four parts: customer service, his computers (and thinks like storing mail and setting up the mailin handing), and then his access to the internet backbone packet routing, and his access to one or more of the or more of the local dial-in phone networks. Most of this costs are in these last two, I suspect. Those long lists of local telephone numbers your call are maintained by the dialup network providers. There are a handfull of these UUNet, QWest, Telia, etc. This ISP is one of the few that expose that the cost of the different dialup providers. Generally the ISPs also provide few really minor (i.e. cheap and easy to do) services. Mail handling is one example. Customer support is not cheap - so when you read reviews you can see that mostly that's quite spotty.
Credit Card: I got a new credit card recently. I got it from these guys Farm Bureau Bank; they have been very pleasent to deal with on the phone - unlike the large card company I have been using who was always sending me thru vast phone mazes and trying to sell me junk while generally being clueless. The real reason I picked them was I get 2% [not any more, it's now 1%] back on all my purchases, in cash, if I play their points game right. I found them using the Credit Card Goodies site which is mostly a place where people who like to shop for credit card deals hang out. It includes nice java applet that plots the advantages of various reward programs for you. Credit cards are a money substitute. Stores trust currency because it's backed by the goverment. Stores trust credit cards because the credit cards twist their arms - "you will always take this, otherwise you will lose sales" - the store gets the benefit that people can buy stuff more casually. For that benefit they lose some money. So when you pay a $100 on card the store only gets 95$. How much they get depends on their deal/relationship with their bank/credit-card processor. The credit card companies (Visa, MasterCard, AMex, Discover, etc) are bridges between buyers and sellers. Another kind of standard that creates efficencies in the supply chain; but in this case it's an owned standard and taxes are collected by the owners. My 2% cashback on the new card is the card issuing company bribing me to bring my credit card cash flow of this bridge thru their company. Some portions of the traffic flow across this credit card bridge are so concentrated that the Goverment thinks there are anti-trust issues (you can read court documents about that).
Safe Car?: There are various ways that members of an industry "conspire" to set standards to improve overall efficency. The auto insurance industry collects statistics about car safety, theft, etc. that they use to set insurance rates. It used to be this info was hard to get your hands on, but now much of it is on their web site. The frightening/facinating stuff there are the videos of crash testing. The real meat - what they use for setting insurance rates is the detailed data found here.
Amazing realtime data showing the flow of water in rivers and streams all over the country.
Malcom Gladwell's web site has his very delightful articles for the New Yorker. In his latest article you can learn how some people can read people's emotions from their faces. The article just prior to that is a light but unsurprising look at "The myth of talent."
John Siracusa has done a heroic job in his series of articles on Mac OS X; you can reach the entire set by starting from his latest review of the Jaguar release. These are arstechnica a very high quality zine of about high technology, all their articles are worth reading. [You can subscribe using to their announcements bboard via this URL: http://arstechnica.com/etc/rdf/ars.rdf].
I'm surprised I'd not previously come across Bennett Carter's political cartoons. He won this year's Pulitzer prize. I particularly like his cartoons that illuminate the reframing at the heart of much PR.
I think this business, creating a diamond from the carbon in a corpse, is morbid.
I bought long distance service for my parents using this site, which shows the real price per minute and includes a number of services with no monthly 'membership charge'. My house hold pays about 7$/month for long distance.
Mapquest maps are better than Yahoo's.
Network effects. By definition, the utility function of a product with network effect is dominated by a term that grows with the number of users of that product. For example a phone is more valuable than a intercom entirely because there are more users on the otherside of the telephone network than there are users on the other end of an intercom.
Products with network effect - it would appear - have the key aspect required to generate a power-law distribution, i.e. they link up more customers in proportion to how many customers they have already attracted. It is common to say that products with a strong network effect tend rapidly to a winner take all monopoly outcome, e.g. an extreme case of the power-law distribution.
If you are a dominate vendor in such a market differencial pricing is a critical part of your toolkit. To get (and maintain) the network effect of a large installed base you must serve users with a low willingness to pay (say residents of the third world) while conversely you want to harvest the high revenues of users who are less price sensitive (say residents of the first world).
Meanwhile you have another problem. Some users bring exceptionally high value to your network - for example in the phone system the presense of the police and fire department brings substantial value compared to the typical residencial user. Such high value members of the product network are said to complement the network. You may wish to bribe (where the price goes negative) complementary users to get the substantial value they bring into the network.
These same issues arise when attempting to get a standard adopted. The advocates of the standard, who may only desire that the network exist so they can get on with their core activities, may find it desirable to take actions to drive prices down to drive up adoption. For example contributors to the standard may find it advantagous to relinquish intelectual property rights in support of getting the standard more widely adopted.
This kind of discounting to drive adoption occurs in both large and small enterprises. With an important emerging standard we might see IP rights being relinquished to lower the barriers to wide adoption. At the other end of the scale you might see a local grocery story use discounting to bring customers into the store. In both cases the discounting serves to increase market share. Of course network effects are not the only reason to grab market share. For example, if you can capture a relationship with a customer you can often sell him more stuff. I.e. discounting may be used to capture a customer into a sticky relationship.
Of course there is always the risk of a bait and switch. A player might actively advocate the adoption of a standard. Then, he waits until the standard has achieved critical mass and a strong network effect. Finally, he proceeds to assert his IP rights - collecting a tax from the users.
In a similar scenario a vendor might sell his product at low price points to third world customers so he can reserve the option of charging them higher prices should their nations GDP grow sufficently. That's a kind of ground cover strategy.
Joel on Software is the nice web site of a small buisiness owner. Joel's company makes two kinds of software: some for web site content management, and some for helping organizations coordinating their work.
I have a good friend who is curious why some people will freely reveal their trade secrets. For example open source authors. Joel freely reveals a lot about how he runs and thinks about his company: a great example of free revealing, but Joel's not an open source guy. He's trying to make a living.
One of his recent essays is a particular favorite of mind. In his essay on complementary products Joels gives a particularly nice peak into how large businesses work to comoditize the industries around them. For example platform vendors work very hard to create a vibrant community of complementary products that add value to their platform.
One reason I'm interested in these things is that software platforms are almost indistinquishable from industry standards and I've come to believe that one way to look at Open Source is as a new forum for coordinating the creation of standards. If you're into this kind of thing then Joel's complaints about one platform vendor's pricing model and the vendor’s response are great examples of the push and pull around this stuff.
Of course that Joel's site apparently is lacking an RSS feed does give one pause. :-)
In a follow up to the last posting on trying to figure out the lowest price for phone service in Chicago and other wonders of differencial pricing... Today's New York Times happens to have an article about using expensive software systems to decide how to price products at department stores. Playing that game, the article reports, can raise gross margins 10%. Clearly you'll be run out of buisiness if you don't play the differencial pricing game and your competitors do.
There are numerous down sides of these kinds of games. Buyers percieve them as unfair. They causes customers to delay their purchase decisions, convinced that if they play the shopping game longer they will get a better price. It tends to make the sales process lousy: vendors that bundle a lot of service into the sale get punished. Shoppers go to them first. Collect the high quality pre-sale service, and then leave and buy someplace else. Sometimes this can lead to an industry working to get the practice regulated - some people call that price-fixing.
The software that is trying to figure out what to charge you for the hotel room, airline ticket, or college education are all looking for signals from the buyer that can be used to estimate what you are willing to pay. Private schools, public housing, etc. just go ahead and have you hand over your tax returns. Other merchants may poll your credit rating. The hotel booking software takes note of the time of day when you call. Department stores, about a decade ago, started adjusting prices thru-out the day so that I can get a shirt cheap if either I drop in at 8am on a tuesday or I'm willing to drive to an 'outlet mall' in a neighboring state on a saturday.
This search for signals from the buyer about his 'hidden price' leads to this kind profiling being called prejudicial pricing.
See also via google:
Differential pricing is the art of charging customers not what it cost you to make the product but rather the maximum amout that reflects the value the buyer thinks he will extract from using that product. Sellers sometimes call this "value pricing." This black art requires - if your the seller - getting the buyer to reveal his perception of how much use he will get from the product.
For example a hotel or an airline will tend to charge more for a room/ticket the closer to the event it gets - the theory being that your need for the room/ticket is more urgent.
Ok. Let's play the game. You want to buy a local phone for your apartment. You don't plan on using it very much, in fact maybe not at all. How low a price can you pay to get the service?
A young acquantance of mine recently managed to get it down to $23.50. My friend doing volunteer service as part of Citiyear Chicago her total income the stipend they provide is $200/week.
The AmeriTech web site. To play this game you may need some some secret codes: you live in Illionis, and your area code is 773 and your phone might be in the 472 exchange. Good luck!