Ross Mayfield's Weblog

Trash Talk and Wifi

When I posted about Conference Wifi I said When people create and share networks from their Powerbooks, it causes collisions that interfere with everyone's access. Turns out I am wrong, Macs are the victims here, as Kevin Marks pointed out:

The more common problem at conferences is Windows users accidentally creating private networks with the same SSID as the public one, causing routing failures, The Mac Airport software will not allow this to happen, unless you explicitly over-ride a lot of options.

Asked Nikolaj from Organic Network, he said Kevin was right and they create the disruption for the mac powerbooks, as the powerbooks will often default to the p-2-p (adhoc) network rather than the infrastructure (ap). Kevin pointed out this was Apple following the spec and it assumes all senders with the same SSID are part of the same network, so they choose the one with the strongest signal.

Meanwhile, Jeremy's Trash Talking idea has progressed and someone has even started coding it. Seems the app for Macs would be to signal to them why their wifi won't work. Perhaps being a friendly informant is more constructive than vigilantism. It could also suggest ripping the PCMIA card out of their neighbor's PC, if it felt nasty.

Kevin suggested: The real tool you need is one that finds the rogue Windows AP box and sends it a popup message to stop it. Lazyweb? This is a real big problem for even less than big groups and I hope someone solves it.

E-Mobile

While in Tallinn, Estonia, Esther Dyson sent me a snapshot of the view from her hotel using her Treo 600 camera phone:

UPDATE: This photo is part of her column in the NY Times

Esther also posts on part of her Estonia experience paying for wifi with her cell phone, points to the Estonian Hot or Not and some factoids:

Some facts gleaned from Estonian Airlines' magazine: Of Estonia's 1.4 million people, 48 percent are Internet users (who may pay their taxes online) and 68 percent are mobile-phone subscribers. The government's Cabinet does not use paper but instead relies on a Web-based document-management system.

Some other Estonia factoids here and here.

Power Laws and Private Equity

Power laws exist in complex systems where interdependence prevents equlibrium. There is no doubt that the forces of globalization and decentralization are increasing the amount of interdependence in markets. Perhaps no other market exhibits as much inter-dependence as venture capital. Venture rules of thumb acknowledge the power law indirectly: such as there is only room for three players in a market and you really only want to own #1 or #2. But consider the complexity when each of the following markets exhibit strong interdependence between and within themselves.

• Public Equity Markets
  
• Limited Partnership Markets
  
• Portfolios
  
• Private Equity Markets
  
• Sectors
  
• Stategic Investment/Alliances
  
• Product Portfolios
  
• Management
  
• Commodity Markets
  

Power laws exist in each of these markets (even salary and employee performance) and we are just beginning to understand how to manage emergence. A recent article Strategy+Business article by Mark Buchanan (reg. req.) eloquently describes the literally emerging field of complexity management. Public Equity is just beginning to realize that traditional methods of managing risk based upon statistical probability fail to account for the extreme fluctuations.

Risk management has always learned from trial and error. Bets are made on models. A catastrophe like a heat wave in Chicago spikes the price of electricity a thousand fold, companies go bankrupt, new factors are discovered, the model is refined and liquidity increases significantly greater than before. The grand horse pucky of risk management was Long Term Capital Management, a massive rock star hedge fund that bet on convergence only to discover the spillover of the Asian currency crisis to Russian default and more. Since then, new models accounted for fatter tails and confidence in markets increased (till Enron, but that's a whole other story).

So say you are a VC, woke up one morning and realized that everything you practiced was wrong? Essentially that's what happened with the telecom and dot com bust. The fattest tail imaginable smacked everyone in the face. But still, not everyone has woken up. The structure of markets is fundamentally different from what most assume:

With this view, the world is flatter and the tails are fatter. The tail on the right is probability catastrophe, the one on the left is success beyond your dreams. If you still think that the world is one big peak, you probably missed investing in differentiated categories of the consumer Internet that are performing so well right now. I don't blame you (LPs won't either because of lowered expectations, but they are going to smack you with something greater than a tail if you keep sitting on their cash), as the public markets are just beginning to figure this out:

LTCM’s risk management was appalling,” says statistical physicist Jean-Philippe Bouchaud, CEO of the Paris-based hedge fund Capital Fund Management (CFM). CFM relies on ideas from physics to take power-law fluctuations explicitly into account when building investment portfolios and when calculating VaR. Typically, the contract between a hedge fund manager and an investor states that the latter has a 1 percent chance of losing something like 10 percent of the total invested value. The manager has to make sure that this estimate of 10 percent is realistic. “The power law is much better than the bell curve at establishing this risk,” says Dr. Bouchaud. It is also better at helping hedge fund managers avoid the painful consequences of “unexpected” fluctuations."

I'm not writing this out of schadenfreude. The point is there is a great opportunity to re-evaluate how venture works. Private Equity earns its historically amazing 25% returns through long-term investing in a diverse portfolio. You invest in a diversified portfolio, and if one out of 10 has greater than 10x returns while the rest are losers, you carry yourself high as a winner! And if not, you get 2.5% just for playing.

The point is that if markets are more interdependent than you model (the Network is the Market), consider four strategies:

• Greater diversification -- the easy one
  
• Seek portfolio synergy -- the kiretsu approach is well known, but find ways of building synergy without compromising diversification. Build greater networks for the firm and within its portfolio (one example is Socialtext network for sharing best practices and leads)
  
• Gain advantage from shared knowledge -- most of the information that could be used to a firm's advantage is kept in partner's heads. I am always amazed at how little venture firms eat their own dog food and support themselves with systems beyond isolated address books.
  
• Real options -- okay, this is the real point. View and value every investment as an option and iterate as frequently as possible. Small EIR-level bets can turn into something big, and start the process of preferential attachment for the power law itself. Value beyond the linear projection of the initial product, but the economies of scope and span that can be realized (there is a similar point for operational and technology risk, but lets stay focused on market risk). Multiple exit points should be a premium. Go beyond discounting cashflow and use real options at least as a general framework for considering opportunities.
  

The above only applies to portfolio strategy, but also consider evaluating markets differently. The technology adoption lifecycle hasn't changed, it just may be flatter and shifts faster. This means there may be greater startup costs and a larger opportunity in the early adopter segment and you could time crossing the chasm too early.

The hardest part of being a venture capitalist today is recongizing the early patterns of emergence, some fall into viral metrics, but others don't. Its easy to write off early fanatical customers as innovators, but each segment is inter-dependent beyond reference with the others -- and fanaticism is transitive.

Aformentioned article also provides some advice worth considering:

The power laws of complexity science reveal that regularity and predictability are neither as regular nor as predictable as business leaders have come to believe. Power laws suggest that today’s organizations, in following modern science beyond a misplaced fixation on predictability, face three closely related tasks:

1. To follow the financial and insurance industries in taking the “fat tails” of power law systems seriously. Expect change to arrive not gradually, in a way that will allow the organization to adjust in real time, but in sudden discontinuities of great consequence that reshape the business environment, bringing both dangers and opportunities.
   
2. To recognize that globalization and decentralization bring risks as well as rewards, and that more is sometimes different — that increased interdependence can create the conditions for “emergent” threats that are traceable to no specific element within the system.
   
3. To take note of the human element in efforts to become adaptable, in part by organizing practices to decrease “entrainment of thinking.”
   

The last point deserves a little exploration, its the thinking of IBM's David Snowden: Ideas and practices that have proven effective in the past become akin to accepted norms; they acquire inertia, and often for a very good reason. On-the-fly experimentation in the real world is a dangerous thing; hence, we naturally cling to ideas that have worked before. “We do this in order to survive,” says Mr. Snowden.

To help teams deal with discontinuities, Snowden exposes them to them constant exploration (read: exploring options). Lots of companies have learned good things to help them surivive the last couple of years. But those same good conservative things may just as well be the end of them. Help them unlearn.

Good partners with good deal flow get lots of exposure to new ideas. But it is an asynchronous market and first pitches are the least revealing. When ideas are abundant and execution is scarce, the best information comes from working constructively with prospects. Even better, expose them to your network. Not just your trusted advisor buddy, but people from entirely different networks. In social network analysis is this is plugging structural holes, what you could call bridging communities, what creates the greatest value. When done right, this is a win-win regardless of the investment decision.

And with all this interdependence, why would you do anything that isn't a win-win?

Fleshbotted

Lost of people visiting this blog with sex on their minds today. My previous post on Sauna Whisk was Fleshbotted:

We think these synthetic sauna whisks (intended to replace the traditional birch leaves used for self-flagellation in Northern European saunas) are poised to become the next hot S&M accessory. (If you're also a fan of hunky, sweaty Estonian men in towels, you might want to check out the television commercial too.)

Guess there is nothing wrong with this, not because sex sells, but it is a product for your health. And what could be more healthy than sex?

Sauna Whack

My Father-in-law has invented and patented something truely unique, leading the media to call his company the Nokia of Estonia. No, its not a mobile phone or RFID thingy, its a Saunaviht, or Sauna Whisk. Sauna is a centuries-old tradition of health and relaxation in Estonia, Finnish and other Scandinavian cultures. Here's the value proposition:

Saunaviht Sauna Whisk

Regular Sauna Whisk

Pretty simple, which Sauna would you rather be in?

A cornerstone of the Sauna experience literally beating yourself with a birch branch -- to enhance circulation, massage muscles and open pores. Its a borderline S&M activity and seems to make as much sense as jumping in the snow, but such things are part of the tradition and are actually good for you.

Its apparently become all the rage in Estonia, possibly because of this funny TV commercial or that good news travels fast in small countries. Finnish TV is covering it too. There is a little debate because it challenges conventions, although its hard to tell if the competition doesn't realize how disruptive this technology is or it appreciates not having its limbs cut off.

My wife is exploring the possibility of distributing it in the US (tips appreciated). You won't find it at Macy's or written up on Gizmodo, Engadget or Cool Tools -- although it could be a good fit for MobileWhack.

In the meantime, you and your Sauna friends can buy it on eBay.

UPDATE: Uh, this post has been Fleshbotted: We think these synthetic sauna whisks are poised to become the next hot S&M accessory.

UPDATE: Hey, the auction was a success! I re-listed the auction, if you want to buy your own.

Jon Udell on Socialtext

John Udell paints the wide landscape of enterprise social software in his InfoWorld column. You may recall that Jon wrote the book on practical internet groupware some time ago and has an in-depth understanding of the promise of lightweight web-native collaboration.

We are social animals for whom networked software is creating a new kind of habitat. Social software can be defined as whatever supports our actual human interaction as we colonize the virtual realm. The category includes familiar things such as groupware and knowledge management, and extends to the new breed of relationship power tools that have brought the venture capitalists out of hibernation...

Computer-mediated communication is the lifeblood of social software. When we use e-mail, instant messaging, Weblogs, and wikis, we’re potentially free to interact with anyone, anywhere, anytime. But there’s a trade off. Our social protocols map poorly to TCP/IP. Whether the goal is to help individuals create and share knowledge or to enrich the relationship networks that support sales, collaboration, and recruiting, the various kinds of enterprise social software aim to restore some of the context that’s lost when we move our interaction into the virtual realm.

Restoring, or constructing social context is especially important because the vast majority of knowledge work involves remote collaboration, an accelerating trend. Jon also takes on the issues of transparency which enables group memory:

In networked environments, everything we do can be monitored. Absent the natural cues that establish social context — it’s hard to see groups form at the water cooler or hear voices in the hallway through e-mail or IM — social software systems ask us to strike a bargain. If individuals agree to work transparently, they (and their employers) can know more, do more, and sell more...

Of course, we humans don’t always need to discover new collaborators. We’re already members of teams. Within those teams, there isn’t a one-size-fits-all social protocol. Outspoken individuals author the blogs popping up on corporate intranets. But other team members may prefer to contribute to a wiki, which is a collaborative space for Web writing. Ross Mayfield is CEO of Socialtext, a company whose hosted workspaces support both modes. “A blog enables people to express their identity,” he says, “while a wiki page de-emphasizes the individual and emphasizes the collective understanding of the group.”

The same person may find both modes useful in different ways. Adam Hertz, VP of technology strategy at Ofoto (a division of Kodak), uses Socialtext to coordinate his development team. During a period when he was traveling a lot, he says he started an internal blog to keep his team updated on his outside activities. It was helpful, but was unnecessary after he rejoined the team.

Whatever the mode of communication, the primary goal, Hertz says, is to create group memory....

The article describes how enterprise social networking services can help in sales intelligence and identifying collaborators. These are tools that take more explicit approaches to building relationships, where connection comes before content. They raise different privacy and transparency issues than tools that encourage people to opt-in to conversations and participation in different ways.

The Socialtext approach is similar to how people network using weblogs in public. There, content comes before connection. Social context supports the decision to connnect and the group memories of conversation enable greater trust.

UPDATE: Wish more had made it into the article, as Jon says himself, here's an interview with Valdis Krebs.

Conference Wifi

Wifi has become an expected standard at industry conferences. Steve Gillmor take the point further that access should actually work and we should demand open access, power and cell phone coverage from organizers before attending.

He mentions how Macs outperform in these environments, but what he doesn't mention is the lesser known fact that the proliferation of Macs has become perhaps the biggest problem at events. When people create and share networks from their Powerbooks, it causes collisions that interfere with everyone's access. At PC Forum there were six people doing this at one point for no reason other than ignorance.

So here's a lazyweb: The Sharing Suppressor identifies Powerbooks who are sharing networks and bluejacks to bombard them with messages until they stop polluting the commons.

UPDATE: A related concept (Jeremy, give this trash talking a purpose!)

The Big Picture

Wonderful three days at PC Forum. Diligently shared session notes and captured a few other things in the PC Forum Eventspace. Socialtext was in the Gallery this year, so unfortunately I was playing booth babe during what usually are some of the most interesting session where smaller companies dish the reality of the trenches.

Above all, the quality of the networking at this event was penultimate. Not just being able to meet the CEOs of most major tech companies, but also an air of ponder to share ideas with minds wide open. This year's theme, The Big Picture, attempted to diversify topics beyond tech and into such things that coexist with tech like politics and globalization. The content of the offbeat panels weren't perhaps as well received, but I did notice that hallway conversations were more diverse. Perhaps we have learned that the world and our interests are larger than our industry.

So what was the Big Picture? The Bottom Up phenomenon.

Large portal players on the From Player to Platform panel had dipped their toes in the blogging waters and were now grappling with the connotations that conversations in social context mattered more than content. The Users Make Content Their Own panel seemed to be the most well received, although the companies themselves were just scratching the surface of user mixes. Part of The Big Picture was pictures themselves. Steven Johnson noticed this theme too. The closing conversation with Pierre Omidyar and Stewart Brand even touched on the potential and challenges of unleashing bottom up forces for sake of social good.

So why is it the Bottom Up Phenomenon? In our days of fear, independent developers, consumers and select folks in the enterprise used the Net for social means. This is producing complex results, but also real commercial opportunities. The simplest things that could possibly work, did. This doesn't fit into the linear models, select scenarios or arbitrary assumptions of most VCs and is disruptive enough that the larger players act upon the opportunities too late. But now its happening and everyone wants to harness what is fundamentally about freedom.

Let me add a small picture, one of unmet expectations. I was really looking forward to the Attention Management panel, one of my favorite topics and nicely queued up with a talk by Eric Johnson. Eric has done some fascinating behavioral economist research looking at the impact of defaults, the second leading cause of information fatigue after abundance of information itself, which also happens to have increasing impact because of the scarcity of attention (Moore's Law vs. Simon's Law).

The panel had Raymie Stata, whose Bloomba product is perhaps the best at managing email overload (disclosure: Stata Labs is a customer of Socialtext), Irene Greif of IBM (collaboration group manager, working on a new email threading concept) and Scott Kurnit of Dotomi (even more personalized advertising) and Goodmail (anti-spam).

Here is what Dan Gillmor had to say of it:

The panelists discussing the e-mail meltdown at PC Forum have talked about lots of solutions to the various problems with the medium, notably spam and the overall difficulty of making e-mail work right for all the uses we've created for it. But there wasn't even a mention of RSS, which could solve many of the problems. Sheesh.

Spam is not only killing email, but it practically killed this panel too. Should have been a topic elsewhere and personalized advertising is part of the problem, not the solution. Raymie did talk about the better unstructured approach that relies more on search of unstructured data than attempts to institute structure and the danger of real-time. I was flattered that Irene kept giving Socialtext Eventspace's notifications as examples of how other applications leverage email. She was one 20 people to opt-in to them and had full control over their frequency.

Yes, the panel almost completely missed RSS (Bloomba is a reader too), but it also missed the role social networking plays in managing attention and interest as well. In some companies, people spend four hours a day in their Inbox, each IM carries an interruption tax of 15 minutes recovery time, volume is growing at 30% per year and its intruding into our personal lives. What's new that old guard vendors don't get is that half of attention is control. The Pull model of RSS and throttling notifications by space for users, but also giving up control to the networks you are a part of to let them filter the world for you. We have to help people get out of their Inbox (even Ray Ozzie agrees). A someone noted in the wiki: People are pulling tasks out of email via wikis, RSS and IM..

Eric Schmidt, Dan Rosensweig and Jon Miller

PC Forum is underway. First session was a conversation with Google, Yahoo and AOL. Difference this year with these players was talk of social networking and social software. Notes are here.

Rediculously Easy Panel Forming

Ah, panels. Sure does look a little like Pete and Joi.

[Via danah]