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:

• Terra Nova "Exploring Virtual Worlds" blog
• Bill Gurley's blog post on The Revolutionary Business of Multiplayer Gaming (Quote: And if new paradigms, architectures, and broadband speeds allow for titles that meet the needs of a wider demographic, ignoring MMOGs may be equivalent to ignoring the successor to television.)
• Some user-created video trailers that show off the Second Life experience
• Neal Stephenson's Snow Crash - the 1992 SF novel that coined the term Metaverse (dG: one of the classics - great ideas, fun characters and action, over-threshold plot)
• Vernor Vinge's True Names: And the Opening of the Cyberspace Frontier - a 1981 SF story, plus 11 essays on its effect (dG: I haven't read it yet)
• Dave Taylor's blog post on Nexon's $250 million Kart Rider, including a pointer to a BusinessWeek article Dude, where's my digital car?

---

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.

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:

• JK: Joe Kraus of JotSpot
• DH: Dave Hornik of August Capital
• BG: Bill Glazier of Redwood Ventures and TimeBridge
• DC: David Coleman of Collaborative Strategies
• SP: Sam Pullara of Gauntlet Systems

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

JK:

• 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."

DH:

• 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.

BG:

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

DC:

• 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.]

SP:

• 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?

DC:

• 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.

JK:

• 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)?"

SP:

• 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

BG:

• 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"?

DH:

• 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).

JK:

• "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.

DC:

• 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.

JK:

• 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.

BG:

• 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?

BG:

• 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

JK:

• 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)

SP:

• 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?

BG:

• 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

JK:

• 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.

DC:

• 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" ?

DH:

• 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.

DC:

• 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

BG:

• 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?

JK:

• 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?

JK:

• 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.

DH:

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

BG:

• 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

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 COSTS	Fine Print	Capital Cost	Useful Life	Annual Budget
Laptop	Dell 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	$2000	18-24 months	$1200
Paper I/O	Dell A960 printer/fax/scanner/copier; was $250 two years ago; new equivalent Dell A962 is $130	$130	2-3 years	$50
Network	DSL router/WAP downstairs; 10/100 switch + WAP upstairs; mixed brands	$200	3-4 years	$60
Cordless Phone	old Uniden 2-line with speakerphone and headset; new equivalent is probably TRU8866	$150	3-4 years	$45
Cell Phone	Blackberry 7105t	$250	1-2 years	$170
	TOTAL	$2670		$1525
ONGOING EXPENSES	Fine Print	Monthly Cost		Annual Budget
Cell Service	T-Mobile unlimited data + 1000 weekday voice minutes	$70		$840
DSL	SBC Yahoo DSL Pro - 3 Mbps down, 384 kbps up	$25		$300
Phone Service	SBC, 2 lines, caller id + call waiting + voicemail	$53		$620
Web Hosting	Verio '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 Hosting	MailStreet Exchange mailbox w/100MB storage + Blackberry Enterprise Service	$23		$275
Domain Name	GoDaddy registration with anonymous whois	-		$10
	TOTAL			$2345
FREE STUFF	Fine Print	Annual Budget
Web Email	Gmail, with 2GB+ storage	0
Instant Messaging	Yahoo	0
VoIP	Yahoo + Google Talk + Skype	0
Desktop Search	Lookout + Google Desktop	0
Blog	Blogger	0
Security Patches	Microsoft Update, set to download but not install	0
Development Tools	JDK 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
	TOTAL	~ $0
	GRAND TOTAL	~$4000

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.

Coefficient of Information Friction

F_f = F_p μ_f

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 – F_f is the force of friction, and it depends on both F_p, the perpendicular force between the objects, and μ_f, 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.

---

μ_I

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, μ_I , 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(μ_I --> 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 μ_I 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 μ_I . We're just starting to learn what it's like to live in a world where μ_I is tiny.

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 bubble.com 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 order	further faster than horse	publish existing content onto the Web
second order	build US highway system	interact around content, social networks, …
third order	shopping mall	consumer 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.

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: http://www.ojr.org/ojr/stories/050714gardner/.)