Wednesday, December 19. 2012
The bigger the risk of "getting it wrong", the less appropriate a pure online solution is
Bricks and mortar retail is coming back into fashion - NYT:
After years of criticizing physical stores as relics, even e-commerce zealots are acknowledging there is something to a bricks-and-mortar location. EBay and Etsy are testing temporary stores, while Piperlime, the Gap Inc. unit that was online-only for six years, opened a SoHo store this fall. Bonobos plans to keep opening stores, and Warby Parker, the eyeglass brand, will soon open a physical location.
Why? Well, in the words of the proverbial bank robber, "it's where the money is"
Or to put it another way, the dog days of the biggest recession since 1930 is a good time to score some cheap retail space, and come in with low cost retail techniques.
I'd also look at it strategically - it was always predictable that the online world would succeed with low cost, low uncertainty goods; i.e. where you don't need to experience it first, either because it is a commodity (or at least least getting product testimonials was fairly low hanging fruit, eg books, movies, white goods etc) and/or the risk of getting it wrong was low. But getting out of that bottom left box (see graphic above*) was always going to be much harder. Pre Internet, catalogue retailers used devices like self measurement, lots of photos, no hassle returns (satisfaction guaranteed, or your money back), "lifetime" guarantees (some to extraordinary lengths), and of course discount pricing. Online retailers are experimenting with all these, and new ways to reduce uncertainty (brand trust is playing a big part here), Amazon succeded largely by building an extremely well oiled end to end supply machine (as has iTunes in the digital world, by the way). But even so there comes a point at which you have to experience the product first, before buying, and as online retailing starts to saturate the low cost, low uncertainty (aka low risk) box, it needs hybrid strategies to do this. As yet there is no way of seeing if your bum looks big in those jeans, or that car is just "you" (and not a lemon), without trying it. At that point only trying it on or out yourself will make the sale. Also, there are still large areas of the retail market where only a relationship (high touch) will work.
And since the higher value demand mountain isn't coming to Mahommed fast enough.....here we are, the online players are gettin' on down(town). This is happening while some old Bricks and Mortar retailers are coming in the opposite direction, so it seems like a New Retail World is potentially emerging - New Argos, anyone?
Thing is, bricks and mortar have higher costs, and are easier to tax - so these hybrid retailers need to ensure that there is extra margin to cover them. Maybe temporary stores avoid this, still - one to watch....
(*That graphic, by the way, is about 20 years old, I first did something like it in the mid 90's)
Tuesday, December 18. 2012
All you need to know about why this happened, above (exalt to Pinboards via The Atlantic)
So Instagram sold to Facebook, and now Facebook is imposing their own unique concept of sharing on them (Whats yours is ours, irrevocably and forever) - NYT lists 5 impacts of the new changes to their TOS.
1. Instagram can share information about its users with Facebook, its parent company, as well as outside affiliates and advertisers.
I'm surprised anyone was surprised, its what Facebook does - its even in the Facebook T&C fergawdssakes, here is point 2.1.
Mining your data is how Freeconomic businesses make money - selling YOU to them.
Anyway, what does surprise me is the size of the backlash. Interesting..does it imply the Mass market is starting to understand the downside of FreeConomics - there is no Free lunch, and if you can't see who is paying, then you are the lunch....
As I noted a few days ago with respect to Walled Garden Services' evolution overall over the years, they only stay walled until someone spooks the sheep (and they always do eventually, cash always trumps common sense)
in my experience these models work until they don't, and all the fooled sheep wake up, jump over the wall and go someplace else.
What is quite entertaining is that they are all jumping back to Flickr instead of a New New Service, which is a shot in the arm for Yahoo. Napoleon used to say "give me a lucky general over a good one"...seems to me Marissa Meyer has just go a very lucky break.
Update - I think Fred Destin writes a very good article about the risks of Social Network "bait and switch" over here: This comment is a real take-away:
I understand why Wall Street is maniacally focused on making sure facebook can monetize its ad inventory, but I am patiently waiting for the real bait-and-switch from these guys. Once facebook login is deeply embedded into every social service and the company effectively becomes the identity API for the world, who's really going to be surprised when they start monetizing the identity calls ?
Caveat (Free) Emptor......
Saturday, December 15. 2012
Will automated author algorithms be the first Turing test cases? It just had to come.....Singularity Hub:
Who needs monkeys and typewriters, that's inefficient and messy - algorithms are where its at:
And the economics?
A sampling of the list of books attributed to Parker is instructive:
It gets better - some types of fiction are also very formulaic, like Romance. Boy meets Girl meets Algorithm:
So, it may well be that the first real Turing Test will be passed when an algorithm authored book wins the Bad Sex award....after all, we know porn leads the way, and it trumps literature every time
Monday, December 10. 2012
Geometric Progression of patent trolling (Source: Scientific American)
We've been writing about how broken the Patent system - especially the US one - is for some time. Now patent trolls are now 61% of all US patent lawsuits - Reuters:
For the first time, individuals and companies that do not themselves make anything - commonly known as "patent trolls" - are bringing the majority of U.S. patent lawsuits, according to a study by a California law professor. The sharp increase in this type of lawsuit serves as a milestone likely to exacerbate the tension over patent issues and increase calls for patent reform and scrutiny of the system.
The other side of the coin is that many of these companies do try and ride over real patent owners:
....many patent litigants who do not make products or develop technology think of themselves in a better light. Many of them represent inventors, sometimes university researchers, who often cannot afford to defend patents on their own.
Even so,the cost of filing a patent is many orders of magnitude lower than the cost and risk of setting up a technology business. The cost of setting up and running a Patent Troll business is negligible compared to that of actually starting a productive business, which is why its such a growth industry. The problem is the the risk and rewards are massively skewed here.
Of course, as we have argued for some years, many tech patents shouldn't actually exist (just type "patent" in this site's search function...) as they are not much more than a paper napkin idea turned into a patent, or are so everyday that prior art is everywhere - yet the US system lets them through. - a view which Technology heavyweights are now putting some muscle behind (interesting development).
Be interesting to see how long it takes to break this, as any ecosystem where nearly 2/3 of all patent challenges are by non-players is unsustainable, and killing the golden goose is seldom a good survival strategy - especially if a lot more than the trolls aneed the goose to live. Probably needs some form of law around risk sharing - ie original patent owner gets xxx% of revenues after $yy sales, so it can be factored in to any business plan.
Tuesday, December 4. 2012
Speaking of the decline of Consumer Web VC money, there is an interesting article on Gabe Rivera and Techmeme (who have never taken VC money) on Bloomberg. To recap, Rivera created Techmeme in 2005, tracking the output of blogs and news outlets tracking the technology scene. Techmeme used algorithms to decide the day’s most important headlines and grouprd together similar posts from different sites. Rivera started with $55,000 in personal savings. In 2006, he began selling ads and buying staff. Techmeme now has a staff of 12 who mostly work from his San Francisco apartment or their own homes (low cost or what....). While the algorithms for sifting news have improved, Techmeme has had to use human input as well (that really interested us, as it proved a hypotheis we had - for now, anyway).
Techmeme has always interested me for 3 reasons - the technology, the possible impact on the media market structure, and its business model - the opposite of the "get rich quick" startup model, its a long term game to create a valuable service sustainably. It has never gone for VC, looking instead to grow organically, from it's roots as it were. Many VC's have wanted to invest in it over the years, Rivera turned them down:
“The first time I asked Gabe if he would be interested in an angel investment,” said [Jeff] Clavier, “he replied something like: ‘I don’t want to deal with the obligations attached to raising money, and I still want to be able to take a nap after lunch.’”
Mark Suster, who I also have a lot of time for, believes it is not "VC" able
Techmeme has already has an influence far greater than its revenues, it genuinely did "change the world" in being the first believably viable real time media search engine - it just didn't follow that it should also "get big, fast" too. I'm sure it would have been possible to take loadsamoney, charge down a bunch of verticals with the Techmeme engine, and find all sorts of creative ways to spend VC money to pump up the volume of hits, and probably even IPO it in the Bubbletime - we've seen all that before. Rivera has also launched a separate site that aggregates media news, Mediagazer, and expects to do the same for other news-driven verticals, but at an organic pace - Once set up, the running cost of this technology is low cost, but the running cost of feeding a beast that is too big for its market is exorbitant. I think this quote from Rivera is telling:
“I don’t believe anyone aiming to build the ‘biggest company possible’ could have made something like Techmeme,” said Rivera. “Any such person working on something remotely similar to Techmeme would instead focus on how to reach tens of millions of users as quickly as possible, and as a result, the relevance of the product for a community as focused as Techmeme’s would suffer.”
I have a hunch Techmeme will be around long after some of today's other Web 2.0/Social Media darlings have colllapsed, as its based on real user demand and an economically sustainable cost base.
There is also a difference in motivation between a "build-to-run" entrepreneur and a "build-to-sell" one, I liken it to the difference between an artist who creates what is true to them, vs one who creates what will sell, now. Big studios love commercial art, but there is another whole market for "indie" art, which is often highly influential over time, and it doesn't always require starving in a garret.
Anyway, the lesson for Consumer Web startups in this most declining of VC funding times is to start looking at organic, sustainable growth business models - Techmeme shows it can be done, it doesn't necessarily mean starving in a garret, plus you could build some great stuff and create a lot of personal karma. And take afternoon naps.....
Sunday, December 2. 2012
Wikipedia - Gartner Hype Curve
On Friday the Grauniad/Observer asked us what we thought of the current Groupon brouhaha, what can we say except our story hasn't changed since 2010, when I summarised this post, where I was jousting at the Groupon boosters, with this view of Groupon:
...its a nice, viable business - but not the New New Thing that it is being hyped up to be....once the hype is over - smaller market [cap], lower margins, back to Coupons 2.0
When it IPO'd in 2011 we noted that a lot of people were going to lose their shirts:
We can only apologise to the readers of our Bubblewatch series, in that we never predicted an attempt to IPO a Greater Fool Theory dotcom business before the big one [Facebook] had gone out. Move the notch up one (see chart in linked post). DotCom II is nearly here now*....a whole bunch of dumb pension funds will invest - with your money. [But} This Time It Is Different, as everyone seemed to arguing at D9.
For what its worth, I am unimpressed with all the calls to remove the CEO's head, its the kneejerk response of the panicking class. It works if he is under-executing, or a Bright New Thing can take the company in a bright new new direction, but that is not the problem here. The problem here is as old as snake oil: greedy-but-dumb investors thought that social media fairy dust would transform a coupon company (typically trading at 1 x revenues + cash) to a super-dotcom trading at dotcom values. It won't, and the social media bubble has now deflatuled, so everyone is overcorrecting like mad as they slide into the Slough of Despond (see Hype curve above). I think human "animal spirits" have a lot to answer for!
And the CEO, Andrew Mason, has done a darn sight better than many, he managed to IPO in the bubbletime, at the top of the Peak Of Inflated Expectations and keep $1.2bn cash in hand while getting the company to be both market No 1 and to break-even status. He has thus given Groupon a hell of a lot of runway to "pivot" on, or improve their efficiency, or downscale, or whatever - the point is they have the cash so they have the room for manouevre. Many others don't.
But fundamentally, the issue is that they are a coupon business - it's a real business, so it has real business costs, as we said to the Observer, and that means it could never sustain those dotcom valuations in the short term. Reminds me a lot of directory businesses like Yell.
*it's gone now, Facebook saw to that.
Thursday, September 27. 2012
Recent bit of research implies Spotify may be ending its growth run....PaidContent
Music industry analyst Mark Mulligan, presenting at Future Music Forum in Barcelona on Thursday, sounded a note of caution…
So, is there a natural limit of about 800,000 people who pay for this sort of music? If not, where is it?
At £9.99 a month that's about £120 pa that Spotify charges. When we looked at the UK music industry a few years back (to help a client work out the viability of music on smart mobiles, oddly enough - and I'm too lazy to look up the latest data as I doubt things have changed a lot in numbers or propensity), it bifurcated into 2 markets - "singles" and "albums". These few years back, "singles" buyers were about 5m people in the UK and spent c £12 pa, so this demographic are not Spotify paying customers. There were about 15m "album" buyers who spend c £80pa on average, so the higher spending of them are the potential customers. But £120 pa is c 50% higher than their mean spend of £80, so how many of the 15m will pay it?
Allow me a quick blog-packet calculation. Assuming a standard normal distribution curve (a bell curve), only about 2% of all users lie outside the 2 standard deviation level, and about 16% outside the single standard deviation limit. Making the assumption that a 50% increase in the mean price is outside the 2 standard deviation limit one can estimate that the total UK market for Spotify customers is about 2% of 15m, or c 300,000 people. If its above one standard deviation there are c 16%, or 2.4m people, who are potential customers. This is not to say that all will be customers, of course - converting 50% of all these higher end album buyers to Spotify yields a market ceiling of 1.2m people (remember that Apple and various others are also in the hunt for this spend, never mind the people who just won't want to pay hard cash for music they dont own), at 1 standard deviation. (I find it hard to believe that a 50% higher price point above the mean is much less than 1 standard deviation). If you believe that they can only convert less that 50%, or that the price of £120pa is greater than 1 standard deviation from the £80 mean, then that number starts to fall quite fast (for example, 1.5 standard deviations is a mere 7% or c 1m potential customers in total).
If you assume instead its a power law operating (say the 80/20 spread), then you believe that the top 20% will spend 80% of the money, so about 3m people will spend about £360 a head -so for them, paying for Spotify is a bagatelle. But how many of them wiill spend it? Again, assuming a 50% penetration only yields about 1.5m users. Now to be sure, there will be a few from the next 20%, but not many - power laws recede very fast, the next 20% spend only 12% of the money, so its about a £50 mean spend for this quintile - clearly most of them are not Spotify paid users. Now you can play with various distributions, but the fact remains there are not a lot of people who are going to spend £120 pa on music, no matter which you use, and much fewer of those who will buy it from Spotify (or any of the streamers for that matter, I merely use Spotify as it was the one commented on).
In summary, Mark is probably right, at this price point there is not huge room for further growth.
The other thing that came out of this piece was even more "interesting":
Spotify is having to acquire 1.9 million new customers a month in order to retain 400,000. It’s a huge, huge marketing problem. The average pay TV service would want to see churn rates in the low single-digit percent.
Never mind the cost of new customer capture.....
But to my mind the fundamental threat they face is from good old offset funding, from good old offset funders like Google (who is a fairly regular player in this offset funding game) with YouTube - as Mark says:
And all of their cases are challenged further by an uneven playing field. While all those music services have to charge for mobile access and have some gaps in their catalogues, YouTube provides unlimited access, on all mobile devices, with the world’s largest music catalogue, with video, for absolutely no cost at all to the consumer. As far as streaming goes, there is one rule for YouTube, and another for the rest. Until that anomaly is fixed, the rest will be swimming against the tide.
The only thing that has stopped YouTube from being the category killer yet is that no one has written a music playlist playout UI as good as Spotify's yet.
I was an early "Free" customer. Would I pay £9.99 a month? - No, but mainly because I know that its $9.99 (about £6.70) in the USA a and Euro 9.99 (about £8) in Europe. Comparison shopping ftw....my price point starts at the same deal everyone else is getting.
Thursday, August 2. 2012
Just saw this on the Wall Street Job Report following up an original Bloomberg article:
Analysts who broke away from the herd and told investors to avoid Facebook Inc. (FB), the biggest initial public offering ever by a technology company, are looking like heroes after the stock plunged.
But here is the bit I really liked - we are some of those Heroes!
Alan Patrick of Broadsight described the Facebook hype as being like a bubble, The Guardian says. Although he wrongly predicted that the Facebook stock price would rise on the IPO’s first day of trading, claiming that “There are always ‘greater fools’ prepared to buy at a higher price,” Patrick did say that he thought Facebook would have a tough time at that valuation of meeting performance targets.
As to us thinking the price would rise, the Guardian interviewed us 2 days before the IPO, one day later we had come to the conclusion they probably would not even rise (they had upped the number of shares on sale for e.g.), as we told Brasil Economico that evening:
....people should note there is always a lot of carefully manufactured hype around a big IPO like this, to create "irational exuberance" buying patterns, quite often the stock price goes down for a while afterwards. The biggest risk is declining growth and/or revenue per user - their last quarters report showed slowing growth - and the long term risk is that they have priced the company very high, so a lot of things have to "go right" for it to grow into this valuation.
Blowing our own trumpet - hell yes!. Not only does it prove our superior analytical methods*, but, As Gore Vidal (RIP) said, "The four most beautiful words in our common language: I told you so."
(For what its worth we are not Analysts per se, which makes it even more amusing.)
By the way, with Facebook now at c $20 a share, just a few more pennies down and it may be worth thinking of buying some shares, probably wait till the next Quarter figures though. (Obligatory Caution - we are not Investment Advisors etc etc either...)
*I think taking an independent, analytical look at the facts goes a long way....
Saturday, June 23. 2012
Recently I've had cause to look at Evolution/Intelligent Design, various contentious historical issues, and one or two about more controversial current political movements (think children's exams....) and have of course gone to the Internet as a first source. The result has left me a bit disturbed, in that the Page 1 of Google is increasingly not full of truth, but full of very biassed (and wrong) information put out by very enthusiastic special interest groups. I can't measure it, but I am fairly certain it has got a lot worse over the last few years since the Web became mainstream. I think the reason is twofold
(i) Idealogues/Zealots/Enthusiasts/Extremists/Evangelists of all stripes are just far more active than the silent majority, and put their stuff out there, link to it, read it often etc. Google's search algorithms and Social Graphs see "popular" as "better", so up go the ratings of this content.
The result is seemingly that "Bad Information is driving out Good" - which of course reminded me of Gresham's Law
This doesn't mean one has to value poor money more highly, it is as bad if they are valued equally. When there are two forms of commodity money in circulation which are required by legal-tender laws to be accepted as having similar face values for economic transactions, the then artificially overvalued bad money tends to drive the artificially undervalued good money out of circulation.
When I replaced "money" by information, and "Government" etc as "Search System" I got this:
Gresham's law of information states: "When a search algorithm compulsorily overvalues one type of information (poor/false information) and undervalues another (good/true information), the undervalued information will leave the open Web or disappear from circulation into hoards, while the overvalued information will flood into circulation." It is commonly stated as: "Bad information drives out good", but is more accurately stated: "Bad information drives out good if their exchange rate is set by (search algorithmic) law."
As above, you don't have to value the poor information more highly, this law applies equally when there are two forms of information (good and bad) in circulation which are required by search algorithms to be accepted as having similar face values for search transactions. The Nobel prize-winner Robert Mundell believes that Gresham's Law could be more accurately rendered if it were expressed as "Bad information drives out good if they exchange for the same price." The "same price" is that a search engine treast all links as of the same value. The now artificially overvalued poor information tends to drive an artificially undervalued good information out of circulation (ie off Google Page One).
Replacing "money" with "information" for Greshams law thus seems to be quite a useful thought experiment. It is therefore worth taking Gresham's analysis further, and looking at some research summaries of its impact from Wikipedia and see if here are parallels:
Rolnick and Weber (1986) argued that bad money would drive good money to a premium rather than driving it out of circulation. However, their research did not take into account the context in which Gresham made his observation. Rolnick and Weber ignored the influence of legal tender legislation which requires people to accept both good and bad money as if they were of equal value. They also focused mainly on the interaction between different metallic monies, comparing the relative "goodness" of silver to that of gold, which is not what Gresham was speaking of.
So you have to have the rule of accepting good and bad as equal value for Greshams Law to apply, though I do think there is some truth in the statement "bad money would drive good money to a premium", as that is what I also see happening now - bad information is driving good information to a premium, ie if you want truth you have to pay, if you want "free" information its likely to be poorer information. That is echoed in this example:
^Adam Fergusson pointed out that in 1923 during the great Inflation in the Weimar Republic Gresham's Law began to work in reverse, since the official money became so worthless that virtually nobody would take it. This was particularly serious since farmers began to hoard food. Accordingly, any currencies backed by any sorts of value became the circulating mediums of exchange.In 2009 Hyperinflation in Zimbabwe began to show similar characteristics^
I think this is parallelled now with people "hoarding" good information behind paywalls, and I think those "in the know" increasingly only go to sites they trust. But that is not what the mass search and social graph algorithms are aiding and abetting, they are still "accepting good and bad as equal value" by going on quantity oh links etc, and assuming that quantity = quality. This same effect is seen in some corollaries elsewhere:
For money, the argument is that, in the absence of legal tender laws, Gresham's Law works in reverse. If given the choice of what money to accept, people will transact with money they believe to be of highest long-term value. If required to accept all money, good and bad, they will tend to keep the money of greater perceived value in their possession, and pass on the bad money to someone else. In short, in the absence of legal tender laws, the seller will not accept anything but money of certain value (good money), while the existence of legal tender laws will cause the buyer to offer only money with the lowest commodity value (bad money) as the creditor must accept such money at face value. This reverse of Gresham's Law, that good money drives out bad money whenever the bad money becomes nearly worthless, has been named "Thiers' Law" by economist Peter Bernholz, in honor of French politician and historian Adolphe Thiers."Thiers' Law" will only operate later [in the cycle] when the increase of the new flexible exchange rate and of the rate of inflation lower the real demand for the inflating money.
Turning this round to information economics, I see the following at present:
(i) I'm trying to think of a case where the bad information is so bad that no one trusts it, and will only trade in good infirmation. I think we are getting there with advertising overall, as people are trusting it less and less so it has to become more and more obtrusive/underhand/agressive. However, although for money the examples show that in the absence of legal tender laws, Gresham's Law works in reverse, I can't see it easily in Information at present. I don't see people preferring Paid Search (though that may come), but I do see people preferring reccomendation based systems where the recommenders can be verified as bona fide.
(ii) Looking at Thiels law, in the Information cycle I can see the "flexible exchange rate" as some form of tunable search (away from recommendation by mass popularity - maybe recommendation/social graph based search). Information "inflation" may work differently in that the increasing amount of crapformation reduces the amount of Ad money per (inflating numbers of pages) it can attract and it collapses under its own Freeconomic weight, but I just can't see that its a given that eventually good infirmation will come back in and be used in preference to bad information overall.
(iii) I don't think this really applies in information flow, the closest parallel I can think of is entities keep good information (about customer real behaviour) but pass out false information in their own data. i see this a lot in campaigning statistics, where special interest lobbyists continually stretch teh definition of what is included in their cause to argue a larger % of the population is impacted by X, or is a Y, or whatever, wheres their researchers are probably well aware of what the actual reserach says.
The Nobel prize-winner Robert Mundell believes that Gresham's Law could be more accurately rendered, taking care of the reverse, if it were expressed as, That would be re-stated as "Bad information drives out good if they exchange for the same price."
The question is, will the same be true with information, given that it is hard to see easily what is true and what is not (and the huge amount of effort being put into ensuring that it is hard to tell the false apart - information counterfeiting is rife). The way this will work out is probably that some "information issuers" will become more trusted. However, the more fundamental (ist) issue I see is that will only ever be true for those who seek truth, as the reason so much of the poor information is on the Web is that it panders to those who want to believe it in the first place.
Which makes me think there are 2 main types of "bad" information:
(i) Belief based - wrong information to support a particular belief set
Dealing with lemons first, there is a convenient economic "Law of lemons", from George Akerlof
Akerlof uses the market for used cars as an example of the problem of quality uncertainty. A used car market is one in which there are good used cars ("cherries") and defective used cars ("lemons"), normally as a consequence of several not-always-traceable variables such as the owner's driving style, quality and frequency of maintenance and accident history. Because many important mechanical parts and other elements are hidden from view and not easily accessible for inspection, the buyer of a car does not know beforehand whether it is a cherry or a lemon. So the buyer's best guess for a given car is that the car is of average quality; accordingly, he/she will be willing to pay for it only the price of a car of known average quality. This means that the owner of a carefully maintained, never-abused, good used car will be unable to get a high enough price to make selling that car worthwhile.
The result is a Greshams Law effect, in that owners of good cars will not place their cars on the used car market. The withdrawal of good cars reduces the average quality of cars on the market, causing buyers to revise downward their expectations for any given car. This, in turn, motivates the owners of moderately good cars not to sell, and so on. The result is that a market in which there is asymmetric information with respect to quality shows characteristics similar to those described by Gresham's Law.
For information markets the not-always-traceable variables are that the reqder cannot easily test the information to know its veracity. What i am not sure I am seeing is a market where all buyers (readers of information) treat the information with increased scepticism, though as noted above the Ad industry experience (and popularity of recommendation based choice) seems to indicate this is true.
An economic lemon market will be produced by the following:
- Asymmetry of information, in which no buyers can accurately assess the value of a product through examination before sale is made and all sellers can more accurately assess the value of a product prior to sale
The rules for information lemon markets seem to be similar, the key to finding cherries would seem to be the ability to give sellers of good information a way to prove it, and/or making up the deficiency of public quality assurances for the buyer. As noted above, the way this seems to be working now is the trusted source route, allied with strong (and validated) recommendations from peers.
Which leaves us with the thorny problem of dealing with the second type of "wrong" data - belief based misinformation (eg Creationism etc), where people want to believe it, want to be misled rather than being unwittingly misled, and that drives a huge market for information publishing that drives out good information. Also, its is often funded (or at least volunteer produced) rather than purely freeconomic so will probably not collapse under its own Weimar information inflation.
This to me is the more dangerous one, as its not clear what market forces will displace it - if anything, the market forces are destroying good mainstream journalism, only the paywall material seems to be surviving. I don't see how social media solves this, as the social graph will collaborate in its own pollution and dumbing down. At the moment I am coming to the rather worrying conclusion that in the future people will have to pay for truth, which of course limits its market - so do we wind up on a 2-part state of mind here?
Tuesday, March 27. 2012
The Ratchet of Doom System Dynamic
From the FT:
Royal Mail has increased the price of first and second-class stamps by 14p to record highs, after it was given freedom to set its own prices as it heads towards privatisation.
Apparently without the price rise the service is "at risk"
Moya Greene, Royal Mail chief executive, said that without the price rise the service was “at risk”.
Nothing to do with a coming privatisation play* I suppose .
(As in, if this saves the service, then it could have been done earlier and thus wouldn't need to be privatised. )
I wonder if it was put to the Public as to whether they would prepared to subsidise rather than privatise (given the biggest risk, the pension funding, stays as a public taxpayers risk anyway) they would get a different steer.
But I also think they are putting the service at risk with such a huge (25% for first class) stamp price increase as well, as the "Ratchet of Doom" system dynamic model diagram above shows. The Inconvenient Truth of this ratchet is at some point there are just not enough customers who wish to use the service. One almost wonders if ths is in fact designed to break the service as a universal one.
The irony is that they are doing this just as Internet shopping is really taking off, so the opportunities for Royal Mail are huge. Perish the thought that the public profit from it.....
* The CEO, Moya Greene,was on BBC TV tonight arguing that the best sort of public ownership is the public buying shares in the Royal Mail IPO. There is something about being asked to pay again for something you already own, while still being stuck with the huge pension liabilities, that makes you look at this "deal" offered and suspect that Joe Public is about to be shafted. But then private benefit/public risk bailouts are so de rigeur these days.....
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