Being Lost, Getting Found

The Apple Maps fiasco — requiring an apology from Tim Cook and an endorsement of other mapping apps —  is indicative of how important local is to Apple, Google, FourSquare, Yahoo, etc, moving forward, as more and more internet use is mobile.

Local sells mobile.

The WSJ has a nice stat today about how key local is to the rivalry of the big guys as the world moves to mobile:

Opus Research has estimated that mobile ads associated with maps or locations account for about 25% of the roughly $2.5 billion spent on ads in mobile devices in 2012.

Relatedly, if you watch this video of Dennis Crowley discussing FourSquare, he doesn’t seem as insistent about staying independent anymore.  A mega-acquisition is quite likely in the near future.  My guess is that it will be the biggest recent exit in NYC start-up history.

“if you didn’t get a picture, it’s like it didn’t happen”

This New York Times article about today’s “going out scene” in college is strangely revealing to me.  Somehow, the universal American college pursuit of drink, sex, and more, reveals the issues for the rising adult generation.

Think about “..if you didn’t get a picture, it’s like it didn’t happen” and ” Now you have to spend, like, an hour untagging photos” in the context of hiding your Facebook profile from med school admissions officers; privacy issues inherent with pictures and automatic tagging, and photos driving social networks, including a billion dollars for Instagram.

“You could have this really amazing night, but if you didn’t get a picture, it’s like it didn’t happen,” said Ms. Parr, 22, a senior at Gettysburg, whose friends often order designer outfits from the Rent the Runway Web site because incessant documenting makes wearing anything more than twice taboo. “It’s crazy how much pictures consume our lives. Everyone knows how to pose and how to hold your arm and which way is most flattering, and everyone wants the picture taken with their phone.”

…

But no matter where the drinking is done, the morning after is often the same. Tracy O’Hara, 21, a Cornell senior, said: “I can’t imagine what it was like before Facebook when you could just spend the morning after a big night out recovering. Now you have to spend, like, an hour untagging photos. And then you read your texts and you’re like, ‘Oh, so that’s what I did last night.’ ” (It’s job-recruiting season, which means even most students who can drink legally untag every photo, she said.)

All Your Pictures of Me

The second report on the current state of privacy relates to Facebook’s not-yet-deployed facial recognition software.

Our relation to our images has changed faster than almost else in the digital world.  At one time, we sat down, dressed up, got our pictures taken, the pictures were carefully curated, and these sat in photo albums under the coffee table.  Today, we live in a world of smartphones, and our images are no longer scarce, posting them online is default behavior, and we have little control over when the pictures are taken or their subsequent distribution.

The one last privacy vestige of the image glut is that we remained anonymous to viewers who didn’t know us.  Automatic tagging — as Facebook has the potential to do — adds to the further permanent “timeline” of our lives as the data is combined with the offline databases noted in the prior post to form a more complete picture (literally) of us that can be easily accessed.  With automatic tagging, we lose control of what images of us are out there and how far those images are distributed, two of the metrics of privacy.  Essentially, others can create picture books of us, even without us knowing.

Further, with the merging of databases discussed in the last post, these virtual picturebooks can be connected to other data.  We lose control of how those images could be used to interact with us in our daily lives.  So, for example, pictures could be used to track us in the real world even more closely — “That’s Jim Smith in Aisle 9 of Walmart, he has a bachelor party tonight, so send him some advertisements for his favorite brand of beer.”

Europe has temporarily said no to Facebook turning on its facial recognition capabilities; the US has no position on it.

The Too Visible Man: The Connection of Offline and Online Personas

We occasionally discuss privacy on this blog.  I have previously written that balancing the competing values — a revenue model to support the Internet versus individual privacy interests — is not easy.

Until recent history, our lives have never been documented and preserved moment to moment. Communications fade away shortly after communications, images stay in personal albums, personal spending decisions stay personal, and most importantly any recordings of our words, pictures, and actions stay local and are not broadcast as if we’re celebrities stalked by paparazzi.  We largely were in control both in what we made public and how far we allowed to be disseminated.

The next two posts are reporting on where we are in privacy.  They demonstrate that the question of balancing of values is pressing:  we are in deep water already, the waves are getting rough, and there are no lifeguards on duty.  It’s time to get ahead of the tide and figure out where we stand on these issues before we read about them in the news.

My first report is on the merging of enormous online repositories of behavior (think Facebook in this example) with offline databases of purchasing and other behavior. The FT reports on the spawn of Facebook and a data company called Datalogix:

Datalogix has purchasing data from about 70m American households largely drawn from loyalty cards and programmes at more than 1,000 retailers, including grocers and drug stores. By matching email addresses or other identifying information associated with those cards against emails or information used to establish Facebook accounts, Datalogix can track whether people bought a product in a store after seeing an ad on Facebook.

The offline database also includes information such as car make, home value, and estimated net worth.  The Facebook online database includes things like political thoughts, personal happenings, friends, photos, life events, etc.  Linking with a search engine like Google would link this information to questions we are thinking about, business ideas we might be researching, political items we might be exploring, etc.

There are many questions that flow with this.  Was it proper to combine the various sources of offline data into one database?  What issues and comfort level do we have with going a step farther — that is bolting together our intimate sharing that we have consented to communicate to certain people on Facebook being combined with a bunch of accumulated offline data that we have forgotten about?  Is this all stored in a database and how do we know it is not?  Do we get to verify or know what is in that database?

There is a national conversation that needs to happen that is not happening.

Elon Musk: The Role of Analogy and Reasoning From First Principles in Disruptive Entrepreneurship

In terms of getting an insight into “Tony Stark’s” head, the last 5-ish minutes of Kevin’s Rose’s Foundation interview of Elon Musk is a gem:

I think its important to reason from first principles rather than by analogy…The normal way we conduct our lives is we reason by analogy…

We are doing this because it’s like something else that was done..or it is like what other people are doing…slight iterations on a theme…

“First principles” is a physics way of looking at the world…what that really means is that you boil things down to the most fundamental truths…and then reason up from there…that takes a lot more mental energy…

Someone could –and people do — say battery packs are really expensive and that’s just the way they will always be because that’s the way they have been in the past…

They would say it’s going to cost, historically it cost $600 KW/hour.  It’s not going to be much better that in the future…

So first principles..we say what are the material constituents of the batteries.  What is the spot market value of the material constituents?  It has carbon, nickel, aluminum, and some polymers for separation, and a steel can..break that down on a material basis, if we bought that on a London Metal Exchange, what would each of these things cost.  oh geez…It’s $80 KW/hour.  Clearly, you need to think of clever ways to take those materials and combine them into the shape of a battery cell, and you can have batteries that are much cheaper than anyone realizes.

The contrast that Elon makes is between reasoning by analogy and reasoning from first principles, i.e., finding fundamental principles and reasoning up from there. The assertion he makes is that the method of being truly creative is reasoning from first principles.

This assertion is surprising in a sense.  We tend to intuitively think that reasoning by analogy is superior.  In fact, it is important in some cases, such as when you use an analogy that is distinct — bringing ideas from completely disparate fields to spark a new way of thinking of your problem.  Think of Da Vinci and Darwin.

I think it’s better to think of Musk as criticizing close analogy.  This is dangerous in at least two ways.

First, you can become an incremental thinker, chasing and seduced by ideas like:

• We are the pinterest of X…
• We are the foursquare of Y…

This type of thinking is seductive in Tech World, in parts, because it is also very amenable to venture pitches, easy communication, and Tweets.

Second, and I think perhaps more dangerous from Elon’s perspective is that analogical thinking squashes creative ideas.  The example he uses above — the cost of batteries — is illustrative.  Using reasoning by analogy, conventional wisdom drawn from past electric battery efforts was that cost could not be reduced past a certain point.

As explained by Musk, from a first principle perspective, this was not true if you thought of the battery problem in terms of the cost of the components.

Another example from Elon’s world is with rockets.  Analogizing to the experience and costs of government space programs hampered almost everyone’s thinking as to the viability of private space ventures.  SpaceX’s efforts, so far, have shattered this conventional wisdom, and manned space exploration is next on its radar.

A place where this comes up in personal efforts at entrepreneurship is thinking about the way certain markets are today.  You have a choice:

If you see a problem in the relation of a market structure and the results that flow from that structure, you can analogize to past or current status quo thinking, and can be deterred in moving forward, thinking that there is a good reason that past efforts have failed or there is an inevitable reason that the market structure is the way it is.

Or, you can examine rigorously from a first principles perspective.  If after exhaustive exploration of the first principles, and the reasoning built on that, you can remain convinced that you are correct about the problem in market structure.  Then the question is do you have the courage to move forward and tackle it to change it and create customer value.

Better Than A PowerPoint

This is Jack Dorsey today in the WSJ:

We definitely have a lot of plans and we stick to them and hold ourselves accountable to them. But the way we funded ourselves is not [showing investors] a 40-page business plan. It was by asking, “Do you have a credit card? I’d like to show you the new product.” Once they are hooked, say, “Here’s how we will scale. Here’s how we will build it.”

Getting to the MarketPlace

In my last post, I explored how to think about building community into the center of the marketplace.  The related question is  constructing and setting the marketplace in motion.

Simon Rothman, an EIR at Greylock, identified two key issues in a fantastic recent post:  liquidity and centralization.

Liquidity

Rothman’s first rule concerns liquidity: the reasonable expectation from the demand side of finding what you are looking for and from the selling side of selling what you are offering.  He says:

Marketplaces strengthen with scale and scale comes from liquidity.

Liquidity isn’t the most important thing. It’s the only thing.

Until you reach liquidity, you’re vulnerable. After, you have the opportunity for dominance.

My comment on this, and this is one of the big changes that I have seen from the approach in the late 90s and now, is that emerging marketplaces I have seen are very careful in the beginning to keep access controlled so that transactions are few but they all clear as the kinks are worked out.

Centralization/Decentralization

The second key issue is what functions of the marketplace are centralized (platform makes choices and does the work) or decentralized (user makes choices and does the work).  Rothman argues:

At a high level, decentralization gives you speed, but the cost is an inconsistent and possibly poor user experience. When you structure your marketplace you need to evaluate each action and decide whether it should be centralized or decentralized.

There are numerous actions that can be centralized or decentralized and a choice has to be made about each.  These elements can include: customer support, payments, ratings, reviews, photos, pricing, metadata, fulfillment, transaction terms, communication, location, user and supplier verification, insurance, and on and on.

Again, my impression is that emerging marketplaces today are much more centralized (Apple versus PC) than they were in the late 1990s.  The reason to be centralized is to develop and engrain a consistent and magical user experience at birth.  On first glance, it does not make sense in terms of growth, because, for example, how do you scale if you’re managing the picturetaking for properties that folks want to list (AirBNB)?  It turns out sometimes that there are answers to these questions, and one of the lessons of so many marketplaces is that you may never have the chance to scale if the platform starts off on the wrong (and messy) foot.

Curation Networks, Bookmarks, and Single/Multi-Player Mode: Bringing Community to a Marketplace

I found yesterday’s discussion on AVC relating to building your own network invaluable and pulled out some nuggets to structure one of the questions that occupies my thinking:

How do you bridge marketplace with community so that a robust network on both the talent and customer side develops.  

Some conceptual models from the comments in the discussion jumped out for me.  They all suggest, as an answer, dual-use curation, where the user action has some standalone value to the user, but it also sparks some sort of community engagement, as people react, borrow, mix and match, etc.  There is a benefit to both the individual and the community, and the community engagement builds out the network.

These are the conceptualizations that popped out to me:

• “Curation networks”  — Fred notes, using pinterest and tumblr as examples, that in curation networks people push content to these services and then users engage around it.

• “Bookmarking” — The discussion noted, using pinterest and delicious as examples, that such services are essentially “bookmarking” sites at the core, where people can pin stuff that they find interesting and can go back to, but then a community emerges around it.

• “Single and multi-player mode” – Chris Dixon in the comments, linking back to an old post on his blog, conceptualizes that services can have stand-alone use (single player) and/or multi-player (networked) mode.  Having both has particular value.

I am specifically thinking of talent marketplaces.  In the talent world, suppliers naturally curate, bookmark, or have single-player mode actions that they rely on.  For example, I have a number of models and examples that I have as a go-to file when a new matter comes up.  Lawyers, bankers, doctors, engineers, etc. all have analogous actions.

Now to move it online to create a network.  The key may be providing a service that allows me to do something useful with this in stand-alone mode , but then also multiplies the value many times by allowing a community to grow up around the standalone action.  One does this by allowing both sides of the marketplace to  react, remix, or just use the standalone use as a resource.  This multi-player mode us can create the community around the marketplace, resulting in greater sign up, stickiness, and participation on both the demand and supply side, increasing the reach and ultimately the power, utility, and efficiency of the marketplace network.

Moreover, where the single-player mode, is also a signal of quality in the marketplace, it can also serve as a signal to customers about the value of the supplier’s ability, while further incenting the supplier to participate actively on the network.

Probability Nugget, Certainty Shell

Another one from Michael Lewis’s piece on President Obama, on making decisions for highly probabilistic outcomes, but then having to “feign total certainty.”

But if you happen to be president just now, what you are faced with, mainly, is not a public-relations problem but an endless string of decisions. Putting it the way George W. Bush did sounded silly but he was right: the president is a decider. Many if not most of his decisions are thrust upon the president, out of the blue, by events beyond his control: oil spills, financial panics, pandemics, earthquakes, fires, coups, invasions, underwear bombers, movie-theater shooters, and on and on and on. They don’t order themselves neatly for his consideration but come in waves, jumbled on top of each other.

“Nothing comes to my desk that is perfectly solvable,” Obama said at one point. “Otherwise, someone else would have solved it. So you wind up dealing with probabilities. Any given decision you make you’ll wind up with a 30 to 40 percent chance that it isn’t going to work. You have to own that and feel comfortable with the way you made the decision. You can’t be paralyzed by the fact that it might not work out.” On top of all of this, after you have made your decision, you need to feign total certainty about it. People being led do not want to think probabilistically.

The Flow of Obama

One of several interesting passages in Michael Lewis’s Vanity Fair article about Obama.  This one centers on focusing your ability to make decisions by eliminating the routine decisions.  In the extreme, the cost of eliminating all routine decisions is also the loss of serendipity.

You also need to remove from your life the day-to-day problems that absorb most people for meaningful parts of their day. “You’ll see I wear only gray or blue suits,” he said. “I’m trying to pare down decisions. I don’t want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make.” He mentioned research that shows the simple act of making decisions degrades one’s ability to make further decisions. It’s why shopping is so exhausting. “You need to focus your decision-making energy. You need to routinize yourself. You can’t be going through the day distracted by trivia.” The self-discipline he believes is required to do the job well comes at a high price. “You can’t wander around,” he said. “It’s much harder to be surprised. You don’t have those moments of serendipity. You don’t bump into a friend in a restaurant you haven’t seen in years. The loss of anonymity and the loss of surprise is an unnatural state. You adapt to it, but you don’t get used to it—at least I don’t.”