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Open Source Office

Saturday, August 20, 2005

I see that Sun has set up an Open Source Office in a further attempt to bring some coherence to their strategy and tactics for relating to the open source phenomenon.

This kind of activity can be viewed from different frames. I, for example, haven’t the qualifications to view it thru the Java frame. But let me comment on it from two frames I think I understand pretty well.

Sun has done some reasonably clever standards moves over the years. As a technology/platform vendor the right way to play the standards game is to use it as a means to bring large risk adverse buyers to the table. Once you got them there you then work cooperatively with them to lower thier risks and increase your ablity to sell them solutions. Since one risk the buyers care about is vendor lock-in (and the anti-trust laws are always in the background) the standards worked out by these groups are tend to be reasonably open. Standards shape and create markets. Open enables vendor competition.

This process is used to create new markets, and from the point of view of the technology vendor that requires solving two problems. First and foremost it creates a design that meets the needs of the deep pocket risk adverse buyers. Secondly it creates a market inside of which the competition is reasonably collegial. The new market to emerges when you get the risk percieved by all parties below some threshold.

Open source created a new venue, another table, where standards could be negotiated. Who shows up at this table has tended to be different folsk with different concerns. That’s good and bad.

The open source model works if what comes out of the process is highly attractive to developers (i.e. it creates oportunities for them) and the work creates a sufficently exciting platform that a broad spectrum of users show up to work collegially in common cause to nurture it.

The goals of the two techniques are sufficently different that both approachs can use the word open while meaning very different things. It has been very difficult for Sun to get that. For example the large buyer, risk reducing, collegial market creating standards approach talks about a thing called “the reference implementation” and is entirely comfortable if that’s written in Lisp. The small innovator, option creating, collegial common cause creating standards approach talks about the code base and is only interested in how useful as feedstock for the product they are deploying yesterday.

It’s nice to see that Sun has created an Open Source Office; it’s a further step in coming to terms with this shift in how standards are written and the terms that define the market are negotiated. But, my immediate reaction was: “Where’s the C?” as in CTO, or CIO, etc.

What does the future hold. Will firms come to have a Chief level officer who’s responsible for managing the complex liason relationships that are implicit in both those models of how standards are negotiated? I think so. This seems likely to become as key a class of strategic problems as buisness development, marketing, technology, information systems, etc.

Open source changes the relationship between software buyers and sellers. It has moved some of the power from firm owners and managers down and toward the software’s makers and users. But far more interestingly it has changed to complexity of the relationship. The relationship is less at arms length, less contractual, and more social, collaborative, and tedious.

This role hasn’t found a home in most organizations. On the buyer side it tends to be situated as a minor subplot of the CTO’s job; while of course the CIO ought to be doing some as well. On the seller side it’s sometimes part of business development or marketing even. That this role doesn’t even exist in most organizations is a significant barrier to tapping into the value that comes of creating higher bandwidth relationships on the links in the supply chain.

This isn’t an arguement about what the right answer is because the answer is obvious some of both models. Some software will be sold in tight alignment with carefully crafted specifications and CIOs will labor tirelessly to supress any deviance from those specs. Some will be passed around in always moving piles of code where developers and users will both customize and refactor platforms in a continous dialog about what is effective. The argument here is about how firms are going to evolve to manage the stuff in the second catagory. That’s not about managing risk, that’s about creating, tapping, collaboratively nurturing opportunities.

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Vectors

Monday, August 15, 2005

Paul Ewald’s book is a rant against conventional wisdom. It opens with a flat out denial: parasites and diseases do not tend to evolve toward more benign relationships with their hosts. The conventional wisdom is based a series of just so stories, an optomism that would do Pangloss proud and a Kansas school board model of evolution.

This stuff has consequences. It’s actionable. Bacterial, viruses, etc. evolve very quickly. When we change their environment they are almost always find ways to leverage those changes. Decisions about public health can leverage that in positive ways. Or, they can blindly ignore it and creating horrible unintended consquences.

I read, rather than skimmed, the whole book because the stories are rich in analogies to the stories I’m most interested in: those about middlemen, platforms, and networks. For example mosquitos act as a intermediary for malaria. In this domain they are called the “vector.” Like the postal system, UPS, or the rail roads they provide transportation services. Understanding many of the stories in this book demands picking apart how how the infecious agent evolves in the face of pressure from both the distribution channel and the host. If the nature of one changes the bacteria (virus, tape worm, etc.) changes to strike a different balance.

There is a facinating insight here: severity of the disease is tied to the nature of the distribution channel. For example diseases which use mosquitos for as their vector, like malaria, are usually more severe than airborne diseases. A mosquito borne disease tends to be severe so it can immobilize it’s host and assure that the mosquito has an easy time feeding and when it does it’s meal contains carries the infection. If we can arrange for the patients to be moved into well screened houses where they can’t be reached by the mosquitos then this scheme falls apart. In which case it’s preferable for the affliction to evolve to keep their hosts mobile – i.e. a less severe varient of the disease emerges. This kind of modeling suggests why the common cold is relatively benign (it needs to keep the host mobile). It is very suggestive about why the trenches and field hospitals of the first world war may have generated the 1918 influensia epidemic; where the army provided continual supply of fresh hosts and mixed them intimately with those infected.

Key to many of the interesting scenarios around networks, standard, and businesses are the situations where the links are made between two different groups and these stories with the disease is the leveraging services of two distince parties seem quite analagous. A middleman, in a business context, covers his expenses by charging the parties on either side, usually differing amounts. So the dating service will charge men more than women while eBay will charge sellers while it advertises to buyers.

The same pattern happens here. Malaria is reasonably benign from the point of view of the mosquito. Analagously the fraud around eBay, the broken hearts around dating services, the viruses on Windows, the spam in your mail box are all reasonably benign from the point of view the intermediaries.

Reading this book you begin to think that any time you see mixing between two classes of actors you need only look and you’ll find a parasite that’s discovered a way to play the middleman. The stories I found the most disturbing are the ones where caretakers become the vector. There is a disease of coconut palms that uses the machette’s of the plantation workers as it’s vector. That story has the horrible plot twist that there are two ethnic groups and only one of these group’s plantations were infected. It had nothing to do with how they ran the plantations, only that the disease agent was issolated because the two groups never exchanged machettes.

He believes, but doesn’t quite have the research to prove, that many of the horribly virilent diseases that have emerged in hospitals over the last few decades can be explained, and then controled, by using these ideas. That these deseases have evolved so they can use the doctors and nurses as vectors and the patients as hosts. The key to pulling that off is to evolve to be benign in the vector and virilent in the host. Any difference between patient and caretaker is an opportunity waiting for a mutation to leverage. Newborns are particularly rich in these differences. So are patients taking antibiotics because they have suppressed their entire spectrum of bacteria. There is an ugly story about an outbreak of murderous diarrhea in Chicago. All cases were traced back to 27 hospitals; but how did they spread between the hospitals?

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Escaping the Long Tail – an infectious disease example

Friday, August 12, 2005

Imagine the plight of the poor bacterium. It want’s to be a big player, but it’s just one of a huge number of bacterium and it’s tough climbing up the rankings. First off it needs to get past that huge barrier to entry, the stomach. Very occationally it manages that. But now it discovers that the ecology it’s entered, the intestine, is crowded with vast numbers of natives. These guys aren’t very welcoming. Worst yet they are well adapted to local market conditions. Early adopters I suspect. What to do?

Cholera’s solution to this problem is to: appeal to the Government, manipulate the platform vendor, trick the host body. It delivers a swift kick to the digestive track wall, via a toxin, and the host body flushes the entire digestive track. This empties out the ecology of all those pesky competitors. The end result is that Cholera’s ranking isn’t so far down the tail anymore.

I wonder if there is an example of this pattern in business. The direct analogy would require a platform vendor who regularly deals with bad actors by flushing out the entire ecology. Sort of like the police clearing out a marketplace when ever fights start breaking out among some of the market participants. Democratic governments with regular elections might be an example. A varient of the classic problem of regulatory capture. Which then reminds me of the phrase “A new broom sweeps clean.”

In point of fact Cholera’s not particularly interested in capturing the host’s regulatory system. The goal is actually to achieve the maxiumum reproduction and then to spread successfully thru it’s distribution vector; i.e. the water supply.

Some of the management cult memes exhibit that pattern. They aren’t particularly focused on enhancing the operations of the firm but instead infect the minds of the employees who then leave carrying the memes to other firms. Their success is then enhanced by triggering the exodus of existing employees.

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Escape from the Long Tail

Friday, August 12, 2005

Ian Holsman wonders about what causes things to rise up out of the long tail. That, certainly is the question! It’s the question the activist asks; how do I get my movement to move? It’s the question standards maker asks, how do I get folks to climb on my bandwagon? It’s the question the entrepeur asks, how do I launch my product, generate my buzz. It’s the question asked of the infectious desease in the jungle, will you become the next plague? It’s the question asked by the investor, when is this idea about to sweep thru the crowd becoming the conventional wisdom? It’s the question that every open source project asks, what keeps the community together and moving forward? All of these domains have answers to the question. It’s amazingly tedious reading your way thru it all!

This question seems to illuminate one of my problems with Chris Anderson’s The Long Tail. He noticed that some business models have managed to dodge this question. They avoid answering the question by betting not on an idea but instead on a vast portfolio of ideas. These businesses are not in the long tail; they are leveraging it. They solve some problem, distribution say, that is widespread. That’s a good thing, and solving it creates advantages for members of the long tail. That creation of advantage energizes them, makes them more mobile, helps them get out of the jungle and into the cities where they can spread more casually.

What Chris is calling the long tail business models are like whales. They feed by straining the vast watery long tail drawing a calories off the occationally lumpy bits So it’s not surprising that Chris frames the Ian’s question in terms of filtering. That’s how the large firms see it. But that isn’t how the small entity sees it.

The whales that Chris first noticed were disruptive about distribution channel; i.e. Amazon, Netflix, etc. can have seemingly infinite shelf space. The giant box stores like Home Depot are another example of this kind of monster. Google, for example, a whale of the filtering kind. What I think of as the “findablity” problem. The Yellow-pages was a precursor of that kind of beast.

The commercial answer to Ian’s question? Buy ad sense ads?

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Giving it all away, just to get rich.

Thursday, August 11, 2005

Paul Kedrosky writes about the source of superior investment returns; which states that the key is to find the actionable investments where you disagree with the consensus. Certainty, say that gas prices will move in a direction different from the consensus estimate, is one thing but then what action do you take?

In my noodle this got mixed up with a model of group forming I’ve been meaning to write up. It’s from a paper that Karim passed along. In this model the group has a consensus model of the world, while it’s members have their personal models. Call these vectors in belief space. Over time the group’s model shifts, if you are optimistic about the wisdom of crowds it shifts toward the truth. The member models also shift toward the group’s model via socialization, indocrination, etc.

It’s fun to draw analogies between that model and some of the other models (1, 2, 3) of groups.

More interestingly though. One of the canonical dozen questions about open source is why members freely reveal: relinquishing ownership what are presumably valuable bits of knowledge to the commons. You can ask that same qustion in an investment context.

Let’s say you are confident that we are about to transition over Hubbard’s peak and the price of oil will sky rocket. Do you reveal this knowledge to others? To first order the investment answer is no. Instead you go find actionable investments (say long haul railroads on the upside and trucking companies on the downside) and then you just stand by and wait to get rich.

But investing is a funny thing. You get your prize when the consensus model comes into alignment with your investment. Predicting the movements of the consensus is what counts, that’s only somewhat aligned with accurate predictions about reality. When calculating when you’ll be able to cash out the question isn’t “when will I be proven correct” it’s “when will the crowd believe I’m correct.” The sooner that happens the better the investment oportunity.

Investments based on any number of certain events (peak oil, global warming, China’s currency, the US balance of trade, Iraq’s oil reserves, etc. etc.) are most highly leveraged just at the moment before the crowd begins to take them seriously.

For that reason you might freely reveal your more accurate model in the hope of accellerating the crowd’s phase transition out of it’s delusions.

One driver of free revealing can be an entirely selfish attempt to increase the net present value of your investments.

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BlogDay, are you ready?

Wednesday, August 10, 2005

BlogDay posting instructions:

Find 5 new Blogs that you find interesting
Notify the 5 bloggers that you are recommending on them on BlogDay 2005
Write a short description of the Blogs and place a a link to the recommended Blogs
Post the BlogDay Post (on August 31st) and
Add the BlogDay tag using this link: http://technorati.com/tag/BlogDay2005 and a link to BlogDay web site at http://www.blogday.org

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No, later.

Tuesday, August 9, 2005

So, are the end to end principle (pdf) and worse is better really the exact same idea? Both are kind of negative in tone. Both have MIT appearing as a character in their stories.

End to end isn’t a paper about the risks of agency, or middlement, but those issues are clearly in the background. Worse is better is more conscous of the social engineering that is going on as the designer makes choices about the shape of his system. Neither is particularly clear that the designer is crafting an option space, a search paridigm, a platform, or a standard. To my mind both have become deeply assocated, over time, with our culture’s romatic notions about the little guy, the rural, the entrepenur. Ideas that are currently appear in the role of “long tail.”

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Price Fixing and Knowledge Pools

Monday, August 8, 2005

If you sell widgets you often have a choice about how to price them. You can fix their price or you can engage in differential pricing. Differential pricing, i.e. trying to charge customers more or less depending on how much value that customer thinks he will get from the product, has the benefit of increasing the number of customers you can reach. For example you can reach thrifty, poor, low usage customers. It has the deficit of raising transaction costs, for example some customers will spend additional time shopping for price. The more the buyer is aware that approximately the same goods are available at differing prices the more resource he will likely spend shopping. Note that any time the buyer spends shopping tends to imply a lack of trust. Lack of trust implies a risky market.

Standards are a way that industries can engage in collusion or cooperation (take your pick) to temper the risk in a market for it’s participants. Here is a nice example of that. The auto-insurance industry needs data to set insurance rates. Each company has claims data which gives it a rough picture of the risk of insuring a given demographic. The demographic data available to one company is limited to it’s current customers. A company that insures mostly elderly people in Florida will have good data for that demographic.

To improve the quality of the data they pool their data. The pool is managed by a non-profit organization setup by the firms in the industry. That data then becomes the standard estimate of the risk of insuring a given car for a given class of individual. Some of this data is available on the web..

All this reduces the risk for the auto-insurance industry and leaves them to compete on other attributes: customer service, marketing, in-house efficencies. It also reduces the chance that one company will give you a better price than another since it standardizes the measures used thru-out the industry for sizing up a customer prior to quoting him a price.

Notice how the data pool is very similar to a standards body.

It helps set standard prices.

The data pool both reduces transaction costs in a market, letting it run more efficiently and lowering risk. It tends to shift the pricing from differencial to fixed.

The data pool lowers the need for firms to merge. Without it the only way to get a large pool would be to merge. Stated another way the data pool provides a way for small firms to collaborate to gain knowledge that only large firms might otherwise aggregate.

I got to thinking about this because I was seeking other examples of collaborative knowledge pooling. I.e. other than open source, where the source code is the obivous reification of the pool. Other than a classic standards bodies, where you find patent pools.

Peering contracts, say between Internet ISPs, look like fourth example.

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Affection and Power

Monday, August 8, 2005

Stanley Kober writes about emerging alliances that don’t include the United States.

In his classic work, The Prince, Machiavelli wrote “a prince ought to inspire fear in such a way that, if he does not win love, he avoids hatred; because he can endure very well being feared whilst he is not hated.”

An idea we can sum up in this silly B-school style drawing. The line illustrates a cartoon version of what the Bush Iraq strategy has done for America.

Or consider the example of Microsoft. They began weak and accumulated a huge pool of affection. At the same time they became powerful. They abused that power, as amply demonstrated by the anti-trust case. Affection transitioned to annomosity. Meanwhile the bloom of Internet innovation lead to a perception that they were weak, or at least not as powerful as previously thought.

Or consider Google. Their “Don’t be evil” motto could be viewed as a strategic necessity; i.e. stay out of the left side of that graph. They currently sit comfortably in the upper right. Powerful, and therefor feared; but at the same time held in great affection.

When you are both powerful and well liked you need to avoid the trap Microsoft fell into. You need to exercise your power in ways that sustain that affection. The temptation is to exercise your power in offensive manners, achieving a series of short term wins, while doing progressive damange to your good will. One pervasive temptation is to exercise your power in secret assuming that you can have your cake and eat it too. It is always a bit difficult for an institution to distinquish true affection from meer sucking up to because it is powerful. Both of these can make everything looks fine and dandy until the bottom falls out. In the Microsoft case is almost a worse case scenario. It woke up to discover that it’s audience/customers’ affection was more calculating than they realized and at the same time they were revealed be a pretty offensive lot.

Notice how terrorism plays out on this plane. Your typical terrorist act has very little direct impact on the strength of it’s target. Modern open economies are hard to weaken with random acts of violence. Terror can weaken the states they target in two ways though. They increase uncertainty, risk. That lowers investment, which weakens the economy. I suspect that’s their largest effect on the vertical axis. A carefully targeted terrorist act can, of course, do greater harm becasue open market societies tend to condense hubs that make easy targets; once you notice them.

The terrorist, of course, has no affection for his target. The initial effect of the act of terror is to create sympathy for the victums; i.e. it moves the dot to right on that chart. But there is a scenario where the act of terror moves the dot to the left. The terrorist believes that this opponent is evil and that those who hold him in affection are deluded. If only they could see the reality of the situation then their affection would dissapate. So part of the goal of an act of terror is to force the opponent to reveal his true colors.

The extremely strong entity is particularly likely to fall right into this trap. Again consider Microsoft. When the Internet came over the horizon it create, in due course, a sense of panic inside of Microsoft. They responded by exercising a lot more of thier market power. Those of us who had watched that market power distroy other parts of the ecology weren’t suprised when that exercise was quite offensive. But this time around it was publically revealed by the anti-trust case.

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Artist Trading Cards

Sunday, August 7, 2005

Artist trading cards are the size of a baseball card. Artists make them to trade with each other. Some are just amazing. The one at right is one of my wife‘s. It was sent to the other side of the planet. One of these, is coming back.

You know, this Internet thing is pretty neat.

update: HA! These are just like QSL cards. I bet old ham radio guys grumble “been there, done that” just as much as old Lisp guys.