Sunday, December 25, 2005

Squid Labs Salon (6-dec-2005)

In Neal Stephenson’s Baroque Cycle trilogy (Quicksilver, The Confusion, and The System of the World), there are a number of scenes portraying meetings of the Royal Society of Science in its early days. (They're too long to include here - see pp. 183-186 of Quicksilver, or just search for "Royal Society Meeting", for an example.) I was struck by the eclectic no-boundaries mix of topics, the “anything’s possible” attitude of the participants, and the juxtaposition of wide-ranging theory with very specific practice. I have no idea if he accurately captured the feeling of those actual meetings, but I know he did a good job of anticipating the feeling of a meeting I attended earlier this month.

Squid Labs is a Bay Area engineering consulting firm. They sponsored an informal salon that pulled together a couple dozen presentations, described (roughly in the order they were presented) below.

  • Laser-scored origami: An origami artist showed off some of the creations he made by using a computer-controlled laser-cutter to pre-score the fold lines into the paper. The scoring let him expand his already impressive range of work to include even more complicated forms, including curves.
  • Yew bow: At the previous salon, someone demonstrated how to shoot arrows using a bow made from cross-country skis. This time the material of choice was a 5-foot-long yew branch (collected from fallen wood, of course, since everyone knows it has better properties :). Notable quote to encourage audience participation: “I‘ve got arrows; we’ve got an alley”.
  • Pop-up font: You know those pop-up books that make all kinds of shapes lift up when you open the pages? Saul wanted to make some pop-up text, so he designed a font, complete with fold marks, that he could use to drive the laser-cutter to cut and score any message he wanted in cardboard.
  • Holiday crackers: A couple of people showed us how to make holiday crackers from readily available material. They bought some “pull string get spark” starters in Chinatown, a variety of flash cotton, paper, and string at a fireworks supply site, and assembled several crackers while riding BART to the salon. Their version is more dramatic than the commercial variety – pulling the string produces a 6” burst of flame. (My 4-year-old son loved the spare that I brought home.)
  • Microwave fun: I’ve seen microwaving a light bulb to get it to light up; I hadn’t ever thought of putting the base in a cup of water to keep it from sparking. Another fun trick – measure the frequency of your micro's wave’s by using thermal paper (e.g. from an old fax machine) pressed to a wet paper towel – you’ll see “hot spots” separated by the wavelength (in this case 12.2cm). And finally – microwave grape plasma - tricky to make work, but impressive if you pull it off.
  • Racecar shoes: A shoe designer showed an early prototype of some new kids sneakers. They look like little racecars, with the bonus feature that if you hold the “key” next to the sneaker, the headlights turn on and you hear the “engine” revving up.
  • Cyclist air filter: A bike commuter decided to do something about breathing car exhaust every day, so he rigged up a personal HEPA air filter out of a vacuum cleaner bag in a backpack, some tubing, and a dive mask/snorkel. (When asked if he actually wore the rig in public, he responded “no comment”.)
  • Flocking birds fight cybercrime: A researcher at Paypay described and demonstrated an approach for finding needles of fraud in a haystack of transaction data by using an approach called particle swarm optimization. The first step (which is proprietary and wasn't discussed) is determining what fraud smells like. The second step is, roughly speaking, to turn a flock of virtual birds loose on your data and have them all look for bad-smelling regions. The trick he showed was having each bird respond to a mix of "social" (look where the flock has had the most success) and "individual" (look where I've had the most success) motivation, resulting in collective behavior that was pretty good at finding global peaks while avoiding getting trapped on top of local hills.
  • Shared bike lockers: One of the people working on the Bike Link project for getting more use out of bicycle lockers at rapid transit stations described and demoed the core technology.
  • LED bike wheel: Another bicycle commuter (we were near Berkeley :) showed off the light show he built onto his wheel By hooking up four spoke-aligned rows of red/green/blue LEDs to a programmable microcontroller at the hub, he's able to create dozens of different patterns (many vaguely Spirograph-like) as he rides.
  • Wireless motes: Elaine Cheong from Berkeley showed us some prototype “motes” (miniature distributed sensors that communicate wirelessly), and demonstrated some software for simulating their behavior.
  • Sample size = 1: A paper by Seth Roberts (of Berkeley) was summarized (not by Seth). The paper describes a variety of physiological and psychological experiments he ran on himself over several years. One of the more interesting results was successfully changing his body's target weight (it's "set point") by regularly consuming flavorless calories in the form of sugar water. The presenter was in the process of trying to duplicate the results on himself.
  • Pedal light: Another bicyclist showed a way to build a mini-generator into existing bike pedals, so that your pedaling would automatically light up some rear-facing LED’s.
  • ROKR replacement: a Motorola employee showed us his design for a better combined cell-phone/music player than the ROKR – he velcroed an iPod Nano to the back of a Motorola Razr, and demonstrated all the resulting features (including the ability to balance vertically while sitting on your desk). (Your call how far his tongue was in his cheek.)
  • Consciousness and God: Frank Heile presented a paper on Primary & Symbolic Consciousness, in which he suggests that humans have two parallel mechanisms for processing and responding to the world. The lower-level one is often in charge, but the higher-level one is the one that uses words, and hence the one in which our sense of identity resides. He suggests that at least part of the reason humans have a concept of God comes from the interplay between these two systems.
  • Monetizing plastic: The inventor of a clever new plant hanger, Hangit, talked about his quest to make money from a cheap piece of plastic. (He cited that little table-shaped thing that keeps the top of the pizza box from sticking to the cheese as one of his inspirations.) He successfully created and shipped a useful-sounding product; it's too early to know if he will be equally successful at making money from it.
  • Aero lamp: One of the designers of an airplane-shaped lamp made from laser-cut aluminum and steel talked us through the design process. One interesting point – they decided to “open source” the design, so anybody could build their own copy of the lamp if they had the right tools/materials. Another point – the economics of China. In quantity 1, it cost the designers $400 to build a lamp. In quantity 10, it would cost them $200 each. If they ordered 1000 from China, the cost would drop to $25 apiece.

My personal reaction - "wow". I love living in a world where people have that much passion on that many different topics, and have the right mix of persistence and knowhow to turn their passions into practice. Next time, I intend to have something of my own to show off.

- dG

Saturday, December 24, 2005

The Long Tail – A Short Introduction

The “long tail” is an idea that’s been getting a lot of buzz in the tech blogosphere over the last few quarters, often by the same people discussing (or dismissing) “Web 2.0”. However, based on a very informal survey I’ve done over the last few weeks, it hasn’t yet spread to the mainstream. I think it’s a powerful idea.

This post is an attempt to introduce the idea of the long tail to more people. (And, selfishly, to clarify my own understanding in the process.) Note that I have no hard data here, and am not attempting to be rigorous – this is a qualitative introduction only. I first came across the idea in Chris Anderson’s Wired article – see his website for a much deeper discussion with more insight into real-world numbers.

In a nutshell.

I think it’s easiest to start with an example. Let’s imagine a graph of the number of books sold by your neighborhood bookstore. (For example, Kepler’s, in front of which I’m currently writing.) Draw a vertical bar for each title, with the height of the bar determined by the number of copies of that title sold each month. Sort the bars from tallest to shortest, so the best-sellers are on the left, and the niche titles on the right. The graph will look something like:
Kepler's short tail
Now – draw the same graph for Amazon. By definition, the rough shape will be the same – there will be a tall “head” of hits on the left, and a shorter “tail” of niche titles on the right. However, Amazon has a much bigger inventory (although nowhere near as nice ambience :), and there’s reason to believe that a lot of Amazon’s sales come from books far down their best-seller list. If true, Amazon’s graph will look something like:
Amazon's long tail
The central idea of the long tail is that, in today’s world, the proportions of many such curves are changing, and the tails are growing longer.

That means that the relative importance of “niche” offerings vs. “hits” is increasing. It does not mean that hits are going away, or that we’re shifting to a completely flat world where all books are equally popular. It does mean, though, that the total contribution of niches is climbing compared to the total contribution of hits.

If I had hard data and wanted to quantify things, I would look at metrics like the mid-point of total sales – at what point on the curve is the area to the left (total sales of books more popular than the mid-point) equal to the area to the right (total sales of books less popular than the mid-point). In a short-tail world, that mid-point is pretty far to the left, and therefore represents a fairly popular offering. In a long-tail world, that mid-point has shifted to the right, and therefore represents a less popular offering.
shifting midpoints

So what’s going on here?

Is this just about books? No. The dynamic of a weight-shift from hits toward niches applies across many industries and domains, including:
  • Television channels. Not that long ago, most markets had much less than the 10 or so possible VHF stations. Then UHF added the potential of a couple of dozen stations. Now cable makes it’s easy to have hundreds of choices.
  • Movies. Old movie theaters were designed to give large audiences the choice of one or two films. Then they started sub-dividing those big rooms. Now a dozen or so screens is normal, and only occasionally on the release of big hits do they show the same title on more than one screen.
  • News. The authoritative voice of the news used to be a network anchor (you had a choice of two or three) your local paper, and one of a handful of national/global papers. Now, not only have the number of network anchors and easily-accessed newspapers / newsfeeds proliferated, the entire MSM (“mainstream media”) has had the long tail of the blogosphere appended.
  • Cars. We’ve come a long way from Henry Ford’s one model available in “any color you want, as long as it’s black”.
In my opinion, this shift is driven by lower transaction costs. The dramatically lower level of information friction means that it’s easier for more consumers to connect with more suppliers. That means there are more opportunities for people to bump into more stuff that they want. Suppose I want to learn about lemurs (a long-tailed primate). Whereas before I might have settled for a pretty-good information source (e.g. a book on mammals), or just given up and decided to learn about something more popular instead (e.g. dogs), now I can easily choose between several books that are exactly on topic. Because I have access to many more choices, I’m more likely to find a perfect fit. And because my perfect fit is different from yours, at least some of the time I’m going to choose things that are less popular than I would have settled for choosing before. Hence, the tail gets longer.

Are long tails good?

In my opinion - yes. Transactions happen when a buyer values something more highly than a seller, and when there’s an opportunity for the buyer and seller to connect. Transactions create value, because both parties are happier with what they get than what they give. (Otherwise they wouldn’t choose to consummate the transaction.) In economics, that's called the transaction surplus, and negotiating prices is all about deciding how to split the surplus between the buyer and the seller. In all cases, though, value has been created by the swap.

In a long-tail world, buyers have more choices. Instead of being limited to a few best-sellers, they can and do pick some newly available niche items. Therefore, they are choosing things they value more, which creates more value than was possible in a short-tail world.

Note that not all transactions are as directly financial as buying a book – I might be exchanging my time, my attention, and/or my money for your words, your ideas, and/or your stuff. The dynamics are the same, though – now that it’s cheaper and easier for us to choose between many ways to meet our needs, it’s more likely that some of us will make less popular choices, and our collective weight will shift from hits towards niches.

- dG

Friday, December 09, 2005

Disney p.s. - I Saw Fireworks

One thing to add to my recent post about Disneyland technology - their fireworks. Not only did they do the usual great show with synchronized sound, light, and fire; they also included a few shapes I'd never seen before. My previous "how did they do that" highwater mark was the smiley face - a circle, two eyes, and a mouth in three different colors. This time, I also saw:
  • a wireframe cube (kind of like a Necker cube, but really 3-D)
  • a globe with an equatorial ring (sort of like Saturn), plus a couple of perpendicular longitudinal rings
  • my personal favorite - a fully-outlined five-pointed star
Someone must have some great design tools, and/or some great intuition, to get all the right projectiles to burn in the right place at the right time.

(By the way - IMO, the best place to see the show is from Main Street facing the castle, preferably at the end away from the park entrance and near the statue of Walt and Mickey.)

Sunday, December 04, 2005

Disney's Magic Kingdom of IT

We just got back from three days at Disneyland. In addition to having a great time in the physical world (California Screamin's 0 to 55 in 4 seconds is just plain fun, even if it is tame by today's standards), I also enjoyed some glimpses into the magic kingdom of technology.

No deep thoughts this time - just some interesting trends and gadgets:

  • AstroBlasters: The newest ride at the park is Buzz Lightyear's Astro Blasters. It's a very simple ride - your two-person buggy follows a flat track through a bunch of scenes of aliens and evil robots; you have a joystick that lets you spin the cart to a new heading, but no control over speed or path. The twist is that you have a "laser pistol" that you can use to shoot targets in the scenery, and the ride keeps track of your score as you go. And -- it automatically takes your picture, superimposes your score, and lets you email it to yourself (or to anyone to whom you want to brag). And -- to blur categories even further -- there's an online version of the game that lets people at home form teams with people physically in the park, cooperating to earn even higher scores. Is it a ride? Is it a video game? Is it an arcade game? Is it a mMORPG? I find the blurring of the lines fascinating, and expect to see many more experiments in that kind of blurring in the future.

  • VMK: Disney introduced the Virtual Magic Kingdom,, this summer. It's a fairly standard MMORPG along the lines discussed in my earlier post on virtual worlds. One small twist is that a big piece of the commercial model is pure marketing -- they're creating more reasons for more kids to want to visit the parks. (See this article on "advergaming" for some examples of and concerns with this sort of marketing to children.) Another, and IMO more interesting, twist is the crossovers they built between the real and virtual worlds. If you correctly answer a few questions in a park scavenger hunt (e.g. "which of the following five animals is not found in Critter Country?"), you get a code good for some virtual schwag (e.g. a fancy sofa for entertaining virtual guests in your virtual house). Again, I expect to see many more experiments with these sorts of crossovers in the future. (FYI - my kids didn't find very interesting - other virtual worlds were more captivating. Your mileage may vary, though.)

  • May I take your picture? I once worked with a CFO who started his career as a beach photographer - he'd walk up to people on vacation and offer to sell them a picture of themselves, following up (I believe) by snail mail . Technology is changing the mechanics of that business for the better - we saw several generations in play at Disney. (These aren't unique to Disney; I was struck by how many different versions were in use at once, though.)
    • Wandering photographers offer free 60-second photo shoots at key points in the park, handing you a slip of paper with a serial number. On your way out of the park, you can walk up to a counter, preview your photos, and pick up instant prints of any that you choose to buy. (One small fun twist - a "point to the ground and look surprised" shot that's doctored to show you looking at a creature popping out of the pavement.)
    • Major rides automatically take your picture at key points (e.g. the big drop), have a bank of displays at the exit to the ride where recent photos are visible, and a counter to buy/pickup prints if you like them.
    • AstroBlasters (see above) not only displayed your picture; it superimposed your score and let you email it to yourself. Note the different commercial model here - the cost was low enough that they made it a feature of the ride, not a direct revenue opportunity.
    • The "visit with Stitch" booth (see below) gave you a wallet-sized card with a personal URL to access your photo online.

    I predict many of these mechanisms will converge by tying more and more to your user ID, which you'll carry around on your park pass (as a barcode today, and RFID tomorrow). All sorts of images, events, points, and promotions could be tied to your ID, resulting in a personalized "My Visit To Disney" web page to view when you got home (or from your PDA while waiting in line at the next attraction). If done right, I'd like it as a consumer, and it could easily lead to both more repeat visits and more opportunities to sell me stuff. (Of course, if done wrong, the privacy concerns could kill it before it got off the ground.)
  • Picture picture. There were many pictures hung around the park of classic Disney scenes - no surprise there. The fun part is that the pictures were actually collages of many small (~1"x2") snapshots of people. Sort of like a full-color version of those old ASCII-art renditions of the Mona Lisa, where each pixel was made up of a character with the right amount of black. To my eye, the visual effect was just okay; the concept, with its implied message of "Disney is 50 years of people", is what made it neat.
    Mashup suggestion: select an image on Flickr/Riya, and auto-generate a collage by replacing rectangles with appropriately colored miniature pictures containing the same tags/people as the original. For example, how about a graduation photo made of scenes from four years of college life, or a 50th wedding-anniversary photo made of scenes from 50 years of of family life?

  • Innoventions is a showcase of almost-available products and technology, often with some heavy-duty advertising for its sponsors. A few things that caught my eye:
    • Touchscreen virtual aquarium: a large flatscreen display running a virtual fish tank program (like the screensavers), but interactive - click on a fish and it changes to another, draw a fish and it swims around the tank, click up top and it adds food that the fish swarm to eat, etc. No rocket science, but nicely done.
    • Who needs a lap?: a video display built into a pair of sunglasses, and a little box that projects a working picture of a keyboard by detecting finger motion. Put them together, and we're not far from being able to pack everything a laptop does into an iPod-sized package. (Unfortunately, you couldn't actually play with these, so I'm not sure how usable they are.)
    • Talk to Stitch: step into a small booth with a person-size video screen at the front, and have a conversation with a cartoon character. The sense of actually talking to a character was very good - enough motion, body language, and emotion to feel real (or at least, as real as talking to blue cartoon aliens ever feels :). There's clearly a human operator - the technology here isn't about speech rec and AI; it's about creating a convincing virtual avatar.
All in all, a great trip. I haven't been to other parks recently, so I don't know if Disney is still pushing the edge of what's possible, but I certainly liked what I saw.

Thursday, December 01, 2005

Riya Launch - Am I a Dinosaur?

I attended the Riya launch party at Michael Arrington's house Friday night before Thanksgiving. The party/launch felt like a great success, and the semi-public alpha is now underway. But ... there's something I just don't get ... why do people want Riya? It's very cool technology - automatically parsing tons of photos to extract and recognize faces and text is impressive. And the user experience looks good. It's the app that leaves me cold - it scratches an itch I just don't have.

Part of Riya's sales pitch is that there are "30 gabillion" photos out there, and we need better tools to cope. That's just not true in my world - we take pictures, we send a few to family now and then, and we make an album occasionally. To me, digitial photography is a hassle-reducer, not a game-changer. I like not dealing with film, and I like ordering prints online, but moving from atoms to bits hasn't changed the number of images in my life or the way I relate to them.

Tara Hunt of Riya suggests the opposite - she believes that digital photography is deeply disruptive:

Camera companies keep trying to come up with printers that make it easier and easier to print your digital photographs, photo printing outlets give you the option of printing your shots through big machines - but printing out photographs is passe. It is online photo networks and photo sharing that understood the true disruptiveness of digital photography.

If Tara's right, I'm a dinosaur, and the climate is changing. That's certainly plausible - digital photography does dramatically lower the cost of creating/storing/sharing images, and therefore could lead to the kinds of slower and deeper changes that I've discussed earlier. If so, we just need a few more pieces of enabling infrastructure to kick in, and all of us dinosaurs will see the (flashbulb) light.

So how close is digital photo infrastructure to enabling deep change? My opinions are:

  • Capture tools are way over threshold - price/performance of digital cameras is great and improving, including ubiquitous camera-phones at the low end. Most images these days start life as bits, not as atoms.
  • Management tools are at threshold - desktop support (on both Windows and the Mac) and Web services (like Flickr and, of course, Riya) feel functional enough and almost easy enough for most people to use, once things tip enough for most people to care.
  • Display tools are below threshold - systems like Tivo Digital Photo (view my PC-managed photos on my TV screen) and Ceiva (Net-connected LCD picture frame) are good ideas, but IMO aren't yet easy enough to seamlessly integrate into my life.

My bottom line - I probably am a dinosaur, but I'll have lots of company for a while longer. Riya-like technology is necessary to live in a world where we all take and view gabillions of photos, and is helping to pave the way to that world. However, we're not yet there, and Riya alone is not sufficient to take us (or at least, to take me) there. Riya's rate of success will depend on where I fall on the adoption curve - if I'm typical of the early majority, dinosaurs still rule the earth, and Riya's growth will be slow. If I'm typical of the late majority, the dinosaurs are about to die off, and Riya's usage should explode.

Friday, November 18, 2005

Brave New Virtual Worlds

I attended an MIT/Stanford VLAB event called A Brave New (Virtual) World: Commerce and Community in Virtual Societies on Tuesday night. It was fascinating -- something's going on that I wasn't aware of, still don't fully understand, but think probably matters. I'm not sure yet if it's a Major Trend or a fun fad; either way it's interesting.

My executive summary: the boundaries between the physical world and the online world are continuing to blur. More and more things that used to require atoms can now be done with bits. Therefore, people are spending more and more of their time and energy online, which is creating a demand for even more elements of the real-world human experience to be available online. Figuring out the right ways to satisfy that demand will create a lot of value; figuring out the right ways to monetize it will capture a lot of wealth.

See below for a (long) writeup that includes a lot of the data and anecdotes presented at the event, some pointers to other resources, and some half-baked musings over what it all means. If you're interested but short on time, I suggest just looking at the "surprising stats" a little ways below. If you have a little more time, continue by skipping down to the musings at the bottom. And of course, feel free to read it all.

Presenters were:
  • F. Randall Farmer, Virtual Worlds Pioneer & Community Strategist for Yahoo!
  • Philip Rosedale, Founder and CEO, Linden Lab (creators of Second Life)
  • Will Harvey, Founder and CEO, IMVU; Founder, There
  • Bill Gurley, General Partner, Benchmark Capital
  • Daniel James, Founder and CEO, Three Rings (creators of Puzzle Pirates)

Some surprising stats:
  • FRF: In Korea, >90% of all Internet-connected people have avatars.

  • PR: Second Life users spend ~$3M/month (dG: all currency figures are in US dollars, not play money) buying virtual products and services from each other, and exchange ~$400K/month between US dollars and Linden dollars. The average purchase size is just over $1; the average purchase rate is 1.3 per user-hour; the average amount of currency exchanged is $20-30.

  • PR: There are ~450 people making >$1000/month of income 'in-world' (and one, Anshe Chung, making $150-200K/year buying and selling virtual real estate). Businesses include building and selling virtual products (e.g. clothes, guns, vehicles) and offering virtual services (e.g. wedding planning, including setting up an island to host your event).

  • PR: The Second Life world contains ~8M total objects (~1.7M of them interactive user-created objects), is hosted on 1400 CPUs with 1 Teraflop of aggregate crunch, and occupies 90 square kilometers of virtual real estate.

  • PR: The real-world demographics of Second Life participants are ~40% women (~50% by usage hours), ~25% international, and have an age distribution that matches the general population. (dG: That's surprisingly out of step with my "D&D geek" stereotypes.)

  • BG: A Korean virtual racing world, Kart Rider [Korean language site], is expected to generate $250M of revenue this year selling virtual accessories. And - some real-world advertisers are paying the better racers to put decals on their virtual cars.

Some entertaining anecdotes:
  • Bill Gurley said his 'aha moment' in the space came in a 1994 meeting with Pony Ma, CEO of Tencent, a company with 200 million active IM users in China. At the time, Tencent was making $100M a year selling digital content for avatars (including branded content - e.g. Polo shirts). Their new innovation was realizing that virtual clothes could, and therefore should, wear out over time just like real clothes. Bill said "I was hooked at that point."

  • There's a long list of crossovers between Second Life and the real world, including a dating site (DigiLuv) for Second Life avatars, a "real newspaper for a virtual world" (the Metaverse Messenger) covering in-world happenings, an in-world book signing for a real book (Cory Doctorow's Someone Comes to Town, Someone Leaves Town), and in-world fundraising for real-world causes (run by Vertu).

  • Many (all?) kinds of real-world mischief occur in virtual worlds, and therefore many kinds of governance mechanisms are being experimented with. Example: somebody bought some virtual land and built something on it; their neighbor was unhappy and built big walls around it so nobody could see it. Example: somebody put up a for sale sign in front of property that wasn't theirs, and collected money for the equivalent of selling the Brooklyn Bridge. Example: some people have started a utopian socialist community in a neighborhood of Second Life. Example: somebody built a cryptographically secure virtual notary system for Second Life.

  • The distribution of time and money spent online is very broad - many people spend a little; a few spend a lot. (For example, one player won $4M in the Texas state lottery, and gave a lot of it away to other players in There.) That non-flat distribution is why the industry has evolved towards non-flat pricing - people who get more value choose to spend more money; other people can do a lot of exploring for free.

  • There's a big difference between the World of Warcraft model and the Second Life model. In WoW, the game company paid an army of designers to create a world and user experience up-front (with an estimated cost, according to the panelists, of $20-40M). In Second Life, the company just created a framework; the power-users are building the entertaining user experience(s) and competing for the eyeballs of the casual users in-world. That has the benefit of putting a lot of hands to work - they estimate they have the equivalent of 2700 full-time content developers uploading ~12,000 assets daily.

    It also has the benefit of allowing emerging complexity that couldn’t have been predicted/designed up front. For example, 4-5 months ago fishing became popular, so users created the infrastructure (bait stores, rod-and-reel stores, taxidermists, etc.) to capitalize on the new trend.

    The business model is very focused on the success of a community of power-sellers - if they win, the whole Second Life world wins. That model is, in many ways, similar to the eBay business model. (You don't have to pick one of the two extremes - other companies at the event allowed their users intermediate amounts of control over the world.)

  • Philip Rosedale believes that, given today's technology, "it's better to do stuff in 3-D", meaning that a 3-D user experience should actually be easier and better for end-users than a flat one. Our brains work better at keeping track of things in 3-D. He asked "how many of the things in your My Documents folder can you remember? How many of the the things in your kitchen can you remember?" If correct, that means that a 3-D user experience should actually be easier and better for end-users than a flat one. (dG: Maybe - I like the idea, but have seen too many bad implementations of over-forcing a physical metaphor to be an easy sell.)

  • IMVU realized that there were two categories of developers out there - tens of thousands who knew how to use 3-D modeling tools, and millions who only knew how to use Photoshop. Therefore, they made it possible (and lucrative, by an appropriate revenue split) for one object-developer to make a derived product out of another developer's product. That enabled one tier to supply the 3-D models, and a much bigger tier to make multiple derived products from those models. That's turned out to be very powerful - the best 3-D modelers are very incented to make models, since it's highly leveraged.

To read more:

For those of you who are still with me, here are those half-baked musings I promised at the top. I walked away from the event feeling "there's soemething happening here - what it is ain't exactly clear." I think there are a few different things going on, and IMO nobody has yet figured out which ones are essential when. They include:
  • People invest a lot of themselves in their online identities. In many of today's systems, I barely have an online identity (e.g. my 8-character OS login and email address), and it's barely visible to other people (e.g. nobody knows that you're reading this blog right now). Humans are very interested in how they appear to other humans, which means that any time systems allow online identities to be seen by other people, users care. I think IM away messages is a great example of how much energy people are willing to put into even a very limited identity-personalization tool.

    All of the companies mentioned here give users many ways to invest their money in tailoring their online identity. In Bill Gurley's words, "people covet a particular type of representation of themselves", and therefore "spend a lot on things to affect how other people perceive them" in the real world (e.g. cars, clothes) - why should the virtual world be any different? IMVU is probably the purest play - their entire focus is heavily personalized avatars for use in rich chat.

  • Building value by harnessing OPH (other people's hands) is very leveraged. In many environments, a crowd of independent agents can think and do a lot more than almost any centralized entity. The trick, of course, is making sure the agents have enough incentives to align their local/selfish goals with some global/societal goals, enough information to make good decisions, enough ability to carry out their decisions, and enough coordination to keep from stepping all over each other. (Note that Randall Farmer's day job with Yahoo includes driving the idea of 'social media', which is all about harnessing OPH.)

  • 3-D is compelling. As I said above, I only partially buy this one -- it definitely is compelling, but it also feels limiting to me. I think the trick is going to be figuring out where the benefits outweigh the costs (e.g. a 3-D face is way more expressive than an emoticon; a 3-D filing cabinet might just be an annoying way to get to a spreadsheet). There was more consensus among the panelists about the benefits of "3-D local geography" (places I'm in feel like real-world places) than about the benefits of "3-D global geography" (places are all connected to each other in the same way as real-world places).
My bottom line (for now) is that successful virtual worlds (including stories, books, movies, command-line interfaces, and 3-D immersive environments) need to appropriately emulate the real world and appropriately improve on the real world. Technology keeps moving the line of what's possible in a virtual world, and therefore keeps giving us the chance to find a new winning balance between emulating and improving. I'll write more about the drivers of that winning balance in the future.

Tuesday, November 15, 2005

SDForum Collaboration SIG (14-nov-2005)

I attended the first meeting of the SDForum Collaboration SIG last night. The meeting was mostly a panel discussion, with a little bit of audience Q&A. The panelists were:See below for highlights of the discussion - I've done some paraphrasing, hopefully without distorting the meaning. There's supposed to be a podcast of the entire event coming if you want to hear the original - check the SIG wiki for the latest.

WARNING: This is a long post - I'm fascinated by the collaboration space, so I found a lot of worthy highlights.

Introductory Comments

  • On his level of belief in the collaboration opportunity: "I was living a really good life after Excite - collaboration took me out of that good life and back into starting a company again."
  • There are two kinds of entrepreneurs -- top-down, who apply a well-established model into a new niche, and bottom-up, who recognize emerging patterns and take advantage of the flow. Joe is the second.
  • "Wikis are useful technology trapped in the land of the nerds" - Jot is trying to free them."

  • Most ‘collaboration software’ is absolutely horrible.
  • Most solutions add work for the people who are supposed to use them – that's a non-starter - they have to remove work.

  • There's a need for someone to solve the problem of scheduling business meetings.

  • When I see new solutions, I always ask "Would this pass the Mom test?" [dG: See the video of Six Apart's recent demo at Demo for someone who had fun applying the Mom test literally.]

  • We're helping support distributed and outsourced development by providing what OpenSource developers have already figured out -- "how to collaborate with people who aren’t awake at the same time as you"

Q: how is the collaboration space organized right now?

  • It’s not.
  • We track ~1000 companies; there are >150 in real-time alone. We use seven different categories, but they’re all merging together.
  • Much functionality is getting pushed down to collaborative infrastructure (e.g. presence in Vista).
  • By 2008, there will probably be only eight major vendors doing horizontal collaboration; everyone else will be in specific verticals/processes.

  • My pet theory is that email is the wellspring of a variety of specific collaboration apps that happen every 5 years or so.
    • e.g. 7-8 years ago, we all did IM over email; it got inefficient; out popped IM
    • e.g. organizing 25-person+ events over email; didn’t work so well; out popped evite
    • e.g. email Word docs around in ‘request for response’ mode; very frustrating; that's driving wikis
  • Look for opportunities to create new collaboration businesses by saying:
    • "What does email handle poorly?"
    • "Is it frustrating enough to get me to change my habit (of handling it in email)?"

  • The OpenSource community uses wikis, source control (one of the more successful formal collab systems), and IRC
  • IRC makes the presence of the channel the central tenet, not the people – it's in widespread nerd use, but has never made it to mainstream

  • The interesting piece isn't anything like the difference between real-time and async; it's about the rise of software-as-a-service. The winners aren't going to be Notes-like; they're going to
    • a) Be easy to try with minimal pain
    • b) Create barriers to switching
    • c) Get around IT (for the purchase decision)

Q: Are new startup companies being "built to be bought"?

  • I got a lot of reaction to my Built To Be Bought (Bubble 2.0) blog post.
  • There have always been companies like that, and others that are built to be self-sustaining. What's different now is that you can build companies on relatively small capital commitments and figure out if they work, so there are lots of companies doing that – testing small ideas on small amounts of money; and then (inappropriately) trying to raise VC without a big enough likely enough downstream upside (if the only exit option is acquisition).

  • "It's much easier to start a company now than it’s ever been."
  • It took $3M to get Excite from idea to product; it took Jot $100K. That because of cheaper hardware, Open Source software, offshore labor, and search engine marketing. [dG: see Joe's blog for a longer exposition of this point.]
  • It's much easier to start a company, but it's no easier to start a real business. Therefore, we're seeing lots of companies.
  • It's unclear how many new exit opportunities there are for all these new companies. I believe there are more exit opportunities (the new breed of companies are cheaper, which increases demand), but not enough more (supply is growing faster than demand).
  • It used to be that if you raised $5M at $5M pre, you'd need to sell for $25-100M to get an interesting return. Now, if you start with only $100K, you can be happy selling for $3-6M.

  • It's easier to build collaboraton software, but the value is in the people/process part – that’s not getting any easier. It's cheaper to build the software, but not to grow the business.

  • I'm not sure I agree about the 'grow the business' part.
  • Our goals at Jot were to be
    • a) tinkerable by others
    • b) a self-svc business – no large enterprise salesforce
    • c) cheap (not have the product price constrained by needing to support reps wanting to earn $240-300k/year)
  • Therefore, we had to build the company around search engine marketing. I believe that search engine marketing is actually under-hyped - the ability to acquire customers cheaply by sem is a revolution.

  • It's not any easier to create a compelling collaborative user experience.
  • You know when you've got something viral – the first time you use it, you say "how did I ever live without it?"

Q: Monetizing collaboration businesses is hard – who’s doing it well, and why?

  • eFax is doing amazingly well - $120M/year; 60% gross profit; $1.2B market cap. 95% of their users are free; 750,000 people pay $16/month [dG: I typed these numbers quickly - double-check them if the details matter to you.]
  • Not: sell enterprise sw to training dept
  • Yes: sell small recurring subscriptions

  • Pricing these days needs to be expenseable, not approvable -- what’s the max I can put on a personal credit card and expense back (as opposed to needing to make a case and get approval)

  • Yes – at the developer level, it’s <$100/month; at the engineering manager level, it’s <$1000/month
  • Try-before-you-buy

Q: What early-stage markets have huge untapped potential?

  • Scheduling and calendaring.
  • For 10 years, computers haven’t improved your ability to schedule meetings. There are huge disconnected islands of information. (It's like email in the early days – you can’t share outside of the local Exchange server.) Someone will do something there.
  • And – don’t change behavior – if it's not done primarily in Outlook, don’t bother

  • I don't have a particular space in mind, but I do have a theme that I’m really excited about -- in general, the most powerful technology revolutions are DIY (do-it-yourself) -- ones in which you enable a normal end-user consumer to do what was previously in the hands of experts.
    • e.g. PCs – computing out of the hands of experts to the rest of us
    • e.g. desktop publishing – out of the hands of typesetters to the rest of us
    • e.g. podcasting – radio out of the hands of experts to normal people
  • Do that in your market, and you increase your chances of success dramatically.

  • It's not so much about the software; it's more about people and process.
  • If we saw a vendor focus on handholding people to get successful use, we’d be very positive – the value is from people interacting with each other.

Q: What advice would you offer to someone who said "I want to take a shot at doing a Web 2.0 collaboration business" ?

  • Stop.
  • Back to Joe's comment about top-down vs. bottom-up entrepreneurs - you should want to do something that grabs you, should want to fill a void that you’re dying to fill. Great businesses are formed by really passionate people, who are excited about what they’re doing for the sake of what it is, and are flexible enough to morph it into the form that’s most valuable for the most users.

  • Look at the people buying collaboration technology - the buyers have changed.
  • It used to be innovators and early adopters – into tech; have vision.
  • Now it's the early majority – very different characteristics – risk-averse; tech-neutral at best; have a specific problem they want to solve

  • Some parts are more mature than others - e.g. audio-conferencing is a commodity, but in other parts innovation will keep accelerating
  • It's really easy to make a really bad collaboration product and/or business plan. But - the area is tremendous – it saves people time.
  • It's not about being smart, or being first – it's about being passionate, and meeting the needs of a specific group of people

Audience Q: Will wikis take over discussion boards?

  • A new medium rarely replaces the old.
  • Wikis are good because you can both add content and affect the structure of content -- you can collaborate on both content and structure.
  • It's better to be a trend-spotter than a trend-setter (since no startup can really create market momentum - even $5M doesn’t buy that much).
  • Find stuff that’s moving already - e.g. 2 years ago, wikis were hidden in plain sight – CEOs had never heard of them, but VPs of Engineering had a few of them - we bet that the press would write about wikis with or without JotSpot.

Audience Q: EBay acquisition of Skype?

  • eBay is bringing a knife to a gunfight with Google. Google wants all of eBay's business; eBay doesn’t want much of Google's business.
  • If I were eBay, I'd be feeling exposed - the direct merchant stores are most of their business, and those are not network effects businesses, and are therefore vulnerable.
  • eBay is smart to try to use their capital to do something else while they can.

  • These are the sorts of events that continue to excite and motivate entrepreneurs for the chance at that kind of outcome.

  • It's less about the collaboration space than about the disintermediation of the telco business - there's lots of money to be made there; Skype is one of those plays

Monday, November 14, 2005

How Free is (my) IT?

A couple of readers pointed out that I've sent mixed signals about how low information friction will (or should) become. Combining my last two posts, I believe that the accidental costs will continue to plummet towards zero, the essential costs will continue to decrease slowly, and therefore the total cost drop will continue to be disruptive and transformative. That feels qualitatively right, but a little too abstract and self-referential for comfort. So -- here is one concrete data point from a survey of the IT costs involved in setting up one new small business -- me.

I actually had a lot of necessary infrastructure in place already, because the overlap between what my family 'needs' and what my business needs is pretty large. (Five people can't survive with less than five computers, can they?) Ignoring that, though, here's my inventory:

CAPITAL COSTSFine PrintCapital CostUseful LifeAnnual Budget
LaptopDell Latitude D610, 2 GHz Pentium M 760, 1 GB RAM, 80 GB disk, 1.5 Megapixel display, spare battery for 8 hours unplugged, Win XP + MS Office + Acrobat installed$200018-24 months$1200
Paper I/ODell A960 printer/fax/scanner/copier; was $250 two years ago; new equivalent Dell A962 is $130$1302-3 years$50
NetworkDSL router/WAP downstairs; 10/100 switch + WAP upstairs; mixed brands$2003-4 years$60
Cordless Phoneold Uniden 2-line with speakerphone and headset; new equivalent is probably TRU8866$1503-4 years$45
Cell PhoneBlackberry 7105t$2501-2 years$170
ONGOING EXPENSESFine PrintMonthly CostAnnual Budget
Cell ServiceT-Mobile unlimited data + 1000 weekday voice minutes$70$840
DSLSBC Yahoo DSL Pro - 3 Mbps down, 384 kbps up$25$300
Phone ServiceSBC, 2 lines, caller id + call waiting + voicemail$53$620
Web HostingVerio 'virtual server' website, with 750 MB storage + 2 GB monthly traffic; includes a lot more apps and services than I currently use$25$300
Exchange HostingMailStreet Exchange mailbox w/100MB storage + Blackberry Enterprise Service$23$275
Domain NameGoDaddy registration with anonymous whois-$10
FREE STUFFFine PrintAnnual Budget
Web EmailGmail, with 2GB+ storage0
Instant MessagingYahoo0
VoIPYahoo + Google Talk + Skype0
Desktop SearchLookout + Google Desktop0
Security PatchesMicrosoft Update, set to download but not install0
Development ToolsJDK from Sun, Emacs from GNU, UltraEdit from IDM, Eclipse (and many other choices - see here for a good overview - I'm still picking my favorites)~0

Based on those items, my annual IT budget is ~$4000. How accurate is that?

Here are some expenses that might add to the true costs:
  • Labor: like many of us in the tech business, I'm used to selecting, configuring, and maintaining my own (and my family's) systems. I didn't account for the time that takes. (But - it's really not that much time. Outsourcing email and hosting outsources most of the pain, and the fact that so many of my vendors are set up to cater to consumers forces things to be relatively easy.)
  • Backups: the biggest weak link I'm aware of in my current setup is that I don't have a great disaster recovery plan. (If anyone knows of a good cheap "backup toaster" that I can just drop on my LAN, please let me know.) But - almost all of my critical information is stored in email, and/or is on my website, and is therefore being professionally cared for. I might just decide to ensure that's true of all my critical data.
  • Apps: there's no budget for standard apps (e.g. accounting, CRM) or custom apps (e.g. Flash doohickeys on my website). But - most of what I might need is available Open Source or cheap (e.g. QuickBooks, SugarCRM), and what isn't available can be commissioned on the global market (e.g. RentACoder).
And here are some ways I could trim some expenses without too much pain:
  • I could spend less on phone/email if I weren't hooked on Blackberry's real-time sync of calendar, contacts, and email.
  • I don't really need two phone lines - that's a habit from when faxes actually mattered.
Add that all up, and I think the $4000 is a little low, but not much -- $6-8000 is probably plenty. Add a few more employees, and the cost per employee would be even lower.

What does that all mean? I think it means that IT isn't free, but it's getting cheaper, and it already can be a lot cheaper than is built in to many companies' business models. My one concrete data point above is obviously not proof, but it's consistent with anecdotal data I've been hearing. I believe there are fundamental changes leading to lower information handling costs, and those changes are slowly rippling through the economy.

According to a recent study of IT spending at 8000 companies, "On a per-employee basis, small companies ... [spend] ... $15,810 per employee, while midsized companies spend less at $13,100 per employee, and larger companies spend $11,580 per employee." As William Gibson once wrote, "the future is already here — it's just unevenly distributed." Small companies that realize they don't need economies of scale to be cost-efficient, and all companies that build their models around the new lower costs, will have a competitive advantage. And vendors that help companies take advantage of these changes to get more for their IT dollar will do well.

Saturday, November 12, 2005

Coefficient of Information Friction

Ff = Fp μf
Friction, in physics, is the force that makes it hard to slide one object against another (e.g. to drag a wooden bookshelf across a carpet). It depends both on how tightly the two objects are pressed together (e.g. it’s easier when you unload some books) and on what the two objects are made of (e.g. it’s easier to drag it across a hardwood floor). That what’s the formula above says – Ff is the force of friction, and it depends on both Fp, the perpendicular force between the objects, and μf, the coefficient of friction between the two objects.

A couple more facts about physical friction:
  • Friction wastes energy. (More accurately, it converts energy into heat, which isn't useful unless you're trying to start a fire.)

  • Treating surfaces can make a huge difference in how much friction there is between them - if you look at some actual coefficients, you see that steel on steel is about 0.6; add oil and it drops to 0.06. That means a few drops of oil in the right place can make things ten times easier.

Information friction, by fuzzy analogy, is whatever gets in the way of moving the information you need to where you need it. Pseudo-mathematically, we can define the coefficient of information friction, μI , as a measure of how hard it is to move a given amount of information. In the old days (say the early 1990's), that often meant phone calls, trips to libraries, research assistants, meetings with experts, subscriptions to custom data feeds, and so on. Today, that often means finding the right URL.

And even more importantly, if you can't find the right URL, it probably takes a very reasonable amount of effort to build a website that provides the right URL, both for you and for others with needs like yours. Think a few person-days to mash up a map of apartments for rent in the right neighborhood, or a few person-months (weeks?) to create a filtered news site based on collective opinion, or a few person-years to launch a business finding dates, cars, houses, or URLs.

Testing the analogy:
  • Yes, information friction wastes energy. The energy you (or your customers) spend getting the right information is energy that's not being spent doing something useful (or profitable) with that information.

  • Yes, better technology can make a huge difference. We've spent the last decade spreading Web-oil across lots of surfaces, and it has dramatically lowered the coefficient of information friction. (I haven't thought of good quantitivate metrics here - let me know if you have any.)

lim(μI --> 0) = ?

It keeps getting easier. More information from more sources keeps becoming available via HTTP, more devices to access that information in more places keep getting introduced, and more standards for easily mixing-and-mashing that information keep emerging. When μI dropped a little, we got the first-order effects of the Web - we kept doing what we were doing, but it was easier. As we saw the benefits of lower friction, we started to invest in the infrastructure to handle increased flows, accelerating the drop of μI . We're just starting to learn what it's like to live in a world where μI is tiny.

Friday, November 11, 2005

Accidental vs. Essential – When is the Web a Silver Bullet?

Brooks wrote his classic The Mythical Man Month 30 years ago (in 1975). His “No Silver Bullets” essay, written in 1986 and included in the current edition of the book, explains both why software development productivity had increased dramatically since the original book, and why it wasn’t likely to increase as dramatically in the future. His central idea is useful as we think about how the Web changes everything things.

Borrowing from Plato, Brooks describes two types of tasks necessary to create software – accidental tasks like feeding syntactically correct code to the computer, and essential tasks like decomposing complexity into appropriately-sized units and layers. The accidental is very amenable to automation, and has indeed improved dramatically from the days of punch cards and batch printouts. The essential is much less automatable, and has improved much more slowly.

The Web has tremendously reduced many of the accidental costs of life and business, and is continuing to do so. Connecting people and information has never been easier. Therefore, any activity that used to be bottlenecked on those connections (and there are a huge number of them) is being transformed. But – there are new essential bottlenecks lurking just behind the old accidental ones. These include time, complexity, and attention – now that information is at my fingertips, I need to choose which bits I’m actually going to use. (An aside – do you know why bottles have necks? It’s to limit the flow – with no neck, we could be flooded when trying to pour. As physical flow limits in the network go away, we need to replace them with new bottlenecks at the endpoints.)

So is the Web a silver bullet? It obviously depends on your target (as many people learned after the pre-millennial days), but yes. Information friction continues to plummet, and that is still rippling its way up many food chains built on outdated or soon-to-be-outdated assumptions. First-order, the Web continues to improve things we’ve done for centuries (e.g. look up reference material, comparison shop, find people with similar interests). Beyond that, the Web is starting to let us do new things (blogging by thousands feels qualitatively different than watching Walter Cronkite). And beyond that, we’re just starting to discover the new information equilibrium, with its own new needs.

Slower and Deeper

We always tend to overestimate the immediate consequences of a revolution, but underestimate the long-term consequences.
    - Dr Francis Collins (and many others)

In other words, big change is always slower and deeper than we first think. The Web is a big change, and we're now, 10 years post Netscape IPO, and 5 years post NASDAQ crash, just starting to see some of its real impact. My favorite analogy is to the introduction of cars - at first they were just direct horse substitutes ("horseless carriages"); eventually they transformed cities with department stores into suburbs with strip malls.

David Coleman recently fleshed out that analogy in an interview with Phil Leigh. My slightly paraphrased summary is:
 Cars (1900)Web (1995)
first orderfurther faster than horsepublish existing content onto the Web
second orderbuild US highway systeminteract around content, social networks, …
third ordershopping mallconsumer designs the app; open source; …

Personally, I don't think we have enough perspective yet to see the second- and third-order effects clearly. I'll be writing more about what I think should replace or extend the entries in the highlighted cells.

Wednesday, November 09, 2005

My First Post

This is my first blog post. I've been thinking of blogging for a while, but never had enough that I felt free to say, and enough time to say it, for it to make sense. Now that I'm self-employed again (for the first time in 10 years), I have both. So here I am. I expect to cover a fairly eclectic (i.e. scattered) set of topics for a while, until I either find a niche or fade away. Welcome to the experiment ...

(By the way - for anyone else thinking of starting a blog - I found this summary of available tools to be useful: