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there are probably a couple of bad apples…But how many people have gotten raped and killed after using Craigslist? You can’t go blaming Craigslist for that.

“Former GLG Exec,” quoted as fuming by the Economist.

OK – it’s alternately hilarious and disgusting to think that someone would actually say something like this.

First, sorry Gerson Lehrman Group, you’re disruptive, but you’re not Craigslist-disruptive. They undermined the entire newspaper industry.

Second, the stories of murder and abuse that have imprinted themselves into the lore of Craigslist personals are deeply saddening. It is inappropriate to make light of them through such an irresponsible and deluded comparison. That the comparison was made while fuming, as the Economist reports, is even more distressing, for it suggests a measure of petulance, delusion and utter lack of sensitivity on the part of this unnamed individual that ignores the very real suffering realized by those who have been raped and killed.

Third, and the Economist alludes to this, as well, Craigslist has come under fire for having appeared to enabled those tragic circumstances. Those who believe it to be only a platform, beware. Many have called for safeguards and procedures that might protect users and prevent just such outcomes. But both the Economist and this nameless “former executive” ignore some basic facts that would belie the parallel, benefit Craigslist and illuminate some underlying strengths and lessons that expert networks could provide.

Unlike Craigslist, where participation is largely anonymous and without controls or records, participation in an expert network is diligently recorded and carefully organized according to a series of procedures, policies and systems that are designed to protect everyone involved. Quoting Alexander Saint Amand, the Economist writes, “If you want to sell inside information, this is a terrible place to do it.” If that’s the case, perhaps Craigslist would benefit from making similar investments in an effort to protect their users and prevent those horrible outcomes described.

Yes, there are lessons to be learned, and the parallel can yield benefits, but what delivers immediate comfort to me is that the individual is not a current but a former GLG exec. Such craven and mercenary comparisons with so little insight into the basic workings of either Craigslist or expert networks have no place at Gerson Lehrman Group, Craigslist or any other enterprise.

Our biggest fear is Raj was found not guilty

Lee S. Ainslie III, managing partner of Maverick Capital: via WSJ

The expert network brand has been severely damaged. Most insider-trading investigations to date have more to do with direct, corrupt relationships between insiders and their investment brethren. But these became synonymous with the handful of exchanges alleged to have been facilitated by the likes of Guidepoint Global and Primary Global. Through a failure of analysis, insider trading and expert networks became one and the same.

Whether it was Rajat Gupta and Raj Rajratanam or the alleged extracurricular activities of various attorneys and accountants accused of passing along material nonpublic information to a scurrilous group of investors in search of an edge, though they weren’t facilitated by a network, they certainly stained the networks. The consequences will be pervasive and persistent for the industry, and we can already see a handful of changes – among them, compliance, consolidation and repositioning. Nonetheless, the consequences will be good, and they will reinforce the benefits of expert networks. Read the rest of this entry »

London Review of Books and a startlingly nice piece on the intersection of news, newspapers, paper news, and technology.

And a quote from the editors at The National Review: observations on aggregation.

There isn’t anything inherently wrong with aggregation. On the contrary—unless we expect readers to get all their news from one publication or, alternatively, spend all day sifting through numerous websites themselves—the Web needs aggregators. And smart aggregation does, in fact, add something to the world by bringing a certain editorial judgment to bear on the selection of pieces.

The Editors, The National Review, behind a paywall: TNR

Information wants to be free….Information wants to be expensive, because in an Information Age, nothing is so valuable as the right information at the right time.

Steward Brand

Before marshalling a quote, review the source. Sometimes the sound-bite doesn’t always match up with the what the author or speaker originally intended. Walter Isaacson reminds us of this lesson in his contribution to the Atlantic’s 14 3/4 review of the biggest ideas of the year. The often ignored final clause to the old saw, information wants to be free, warns: “information wants to be expensive.” But soon after Stewart Brand observed both sides of the information question in the Whole Earth Catalog in 1984, we collectively edited it down to a revolutionary, communitarian call to arms.

Isaacson laments that the rally-cry we’ve attributed to Stewart Brand never resolved the “tension between the two parts of Brand’s maxim.” Now, on the heels of the economic collapse in 2008 and enmeshed in an anemic recovery, the news industry in 2009 became less of a service and more of a question, as in: how can newspapers survive? Will journalism survive? Who will pay for it? For the answer, Isaacson returns us to 1710 and the Statute of Anne, when on April 10th, Parliament asked Queen Anne to assure an author the sole Right and Liberty of Printing their works. The Statute, according to Isaacson, “helped to encourage and sustain generations of creative people and hardworking hacks.” Though the Statute marks seminal moment in the history of copyright, one must not mistake it for an ancestor to today’s problem with the news industry. It underpins the age of the author, not the information age.

The Statute introduced the idea that an author could own their words and assign the right to make copies to booksellers – the copy right. Booksellers, as members of the Company of Stationers, had in many cases divested or abandoned the printing of the actual works and instead focused on amassing a portfolio of copy rights from authors, sourcing a printer, and selling the finished copies. On assignment, the copy rights would last fourteen years, following which, the rights would revert to the author. With the Statute, the author became an economically significant entity in the publication of books and letters. It was a revolutionary step. If a bookseller wanted to publish a work, they would have to negotiate for the copy right with the author, and so we can celebrate with Isaacson the role it played in encouraging and sustaining authors.

Though the author technically owned the right of copy, the only way to exploit that right was through the Company of Stationers. These booksellers acquired literary property from authors, but with the what amounted to a guild-system, they were also the only ones fully capable of publishing and exploiting the property. They maintained the register of copy rights, certificate of copy right, and storage of nine fine volumes, a process that was eventually abandoned. These were practices that had grown familiar with the Star Chamber Decree and the  Licensing Act in the seventeenth century, both of which effectively delegated regulation and censorship of the press to the Company. Without the booksellers and the Company, the authors had no real alternatives for publication. It was no wonder that many members of the Company would refuse to return copy rights to their owners after fourteen years and effectively enjoy a perpetual right.  The Statute may have introduced the author as a meaningful economic actor, but the system maintained the Company’s role as a regulator of the press.

The Statute offers a telling moment in the history of the press and the author, but today’s problems in the news industry don’t emerge from issues of authorship. There is no longer a Company of Stationers. Anyone can be a publisher, and that is part of the problem. The Company provided as much a means of control and regulation as an engine for publication. Today’s inheritors, however, have looked on with fear as the internet enabled nearly anyone to assimilate, analyze and present the news of the day and its analysis. They can’t control or regulate publications and the press in the same way they might have in the 18th century. Nor does the Statute’s protection of an author’s creative output shield them from having another consume, digest and regurgitate the salient facts and ideas of a given work. Afterall, the Spectator harvested as much in its daily rehashing of manners, mythology, and literature. Today, there is little one can do to stem the tide of commentary, analysis and alternatives that have washed over the shores of the mainstream press. While the Statute provides an ancestor to the age of the author, it remains a silent bystander to the conditions of information age.

The PEW Project for excellence in journalism recently published its annual survey on the state of the news media. The report framed readers of online news media as mysterious strangers with dubious habits and few loyalties. They read promiscuously. They spend little time with the news online. And they are quick to abandon any site that might ask for compensation. Online journalism is in trouble.

The business of connectivity, however, is thriving. Both video and internet access, whether it’s through Verizon or Comcast or another, continue to increase penetration and, seemingly, price, and the FCC’s 100 Squared initiative will spread access wider and push it deeper than before. But the PEW project pits an underfunded online news media against the mysterious stranger who doesn’t seem to recognize or care for their impact on or the consequences for the media or perhaps the higher goals of journalism itself.

How can the fate of internet access and online media be so divergent? They’re actually intertwined. It’s not that we’re not paying for news. We are. Internet access bundles the full array of sites, services, and entertainment online with the physical connection, just like cable. But unlike cable, it doesn’t pay for the privilege.

Cable and the internet are a lot a like. Both are networks. Both distribute entertaining and educational programs and services. Both are actually bundles. But unlike the cable bill, which must pay out to the various networks, the internet bill doesn’t pay the panoply of sites across the internet. It pays only the ISP.

Cable bundles content in a way that’s immediately obvious. The guide shows a raft of networks, and with digital cable, many of these programs are available on-demand. Cable permissions the content, pays the rights-holders, and distributes it over a proprietary network — all for a monthly fee. These networks and programs are the complement to the cable network.

The internet portion of the bill, whether it’s from the telecom company or the cable company, appears to do none of that. It’s billed as pure connectivity that terminates in an ethernet connection. The ISP may market tiered levels of access, so an online gamer can experience a faster connection and lower latency than someone who only needs to check their email and stream The Daily Show. Everything about how it’s billed, marketed and promoted would suggest it has only priced connectivity, but it’s not just selling connectivity. It’s selling a bundle, just like the cable side of the bill, and that bundle includes the manifold benefits of all the sites, services, and entertainment of the internet.

Bundles solve one very important problem for companies – pricing. Not every customer will value any one product or service in the same way. A price for one customer might be too high; for another, too low. One could price each good or service to suit each customer, but price discrimination on this order is inefficient and becomes costly with each transaction. Over an entire portfolio of products or services, however, variances in customer perception begin to even out. No customer may value any one product or service, but taken as a the whole, the bundle may be valued similarly by all. Erik Brynjolfsson argues that bundles provide greater pricing efficiency and higher profits, and with digital information goods — the internet — the bigger the bundle the better. This is the power of the bundle.

The ISP bundles connectivity and its network of complements in the form of sites, services, and entertainment available online. The internet bundle, however, is distinguished in one important way – market power. The ISP wields market power in two ways. It’s not only a means to maintain and perhaps increase pricing with the consumer. It is also through the lack of market power inherent in the network of complements that constitute the sites, services and entertainment available online.

Market power starts with an explanation. Economists assume that within a perfectly competitive market no one competitor would have the power to raise prices for a particular good or service. If they did, customers would switch to a ready substitute at a lower price. These are the conditions of pure competition, in which a particular good or service is a commodity. Experience would suggest, however, that markets aren’t always perfectly competitive. What characterizes this divergence? Market power. In those cases, the company has the power to raise prices without losing customers to competition. At the extreme, market power may manifest as monopoly.

The market power of an ISP that has captured most of our attention faces the customer. It starts with the high barriers to entry associated with having laid the local loop in the form of copper lines, cable plant, and now fiber. These barriers limit competition, often to a maximum of two players in any particular area: a telco, such as Verizon, and a cable company, such as Comcast. Indeed, the FCC’s 100 Squared initiative admits 85% of markets have only one player, and in the remaining 15% markets much of the legacy telco infrastructure has not kept pace with the cable offering, so there is effectively one player. As the Berkman Center’s Next Generation Connectivity report suggests, these are regional monopolies and duopolies that have enormous market power over the consumer. Yochai Benkler’s recent op-ed in the New York Times, for example, drew stark parallels between the generous service offerings driven by regulated markets internationally than the relatively stingy offerings in the US.

What has drawn less attention is the effective market power ISPs have over the sites, services, and entertainment online. It’s this condition that allows ISPs to sell the bundle but keep the money.

The ISP operates as a broker and bundler between the user and the Internet. While selling the connection to the customer, the ISP also effectively provides access to the sites, services and entertainment available on the internet. Similar to a cable package, these are the complement to internet access, but unlike a cable package, the ISP doesn’t have to pay retransmission rights. Access is free, ostensibly. Who set the price? Who has market power? The ISP.

The Pew Project for Excellence in Journalism follows the thread all the way to the end customer and dismal results. Some 82% of customers are likely to go somewhere else if their favorite news site were to begin charging for access, and only 35% even have a favorite news site. To customers on the internet, substitutes may be so pervasive and available that it often does not even merit a respondent’s identifying a single one. Taken literally, only 7% of online readers would pay for access to their favorite news site.

Does that mean that customers aren’t paying for news? No. Customers are paying for news. The internet bill isn’t just for connectivity. They’re paying for the bundle – news, among other sites, services and entertainment online. The service would hardly be a worthwhile transaction for as many people as it is at $40 a month without youtube, The New York Times, Amazon. But the ISP’s market power conveys the proceeds of the internet access bill to the ISP, not the media.

Each firm has lost business in, and has reduced investment in and output of United States equity research as a result of the free riding by Fly and other services. This is a bread-and-butter case of hot-news appropriation.

Benjamin Marks to US District Judge Denise Cote: via Bloomberg.

The case of Barclays v. Theflyonthewall.com provides a recent test of the hot news doctrine in the investment research industry. Claims that Fly on the Wall was just reporting the news from the free marketplace of ideas would not protect them. Instead, Judge Denise Cote’s findings of facts and conclusions of law following the March 8-11 bench trial would institute an injunction that embargoed recent headlines and materials from the plaintiffs from publication by Fly on the Wall. The news of her decision has lathered the industry into froth over whether Thomson/Reuters and Bloomberg may be next. But its application may be greater than that. Though the opinion ruled in an industry that is traditionally seen as different than the news industry – investment research – can its application in the broader news industry be far behind? Read the rest of this entry »

this push towards things becoming more open is probably the most powerful and transformative social change… We may be the company that really leads this movement….It’s not clear that anyone else is going to manage it correctly.

Mark Zuckerberg, outlining the steady erosion of the concept of privacy in our time: WSJ

Jessica Vascellaro’s cover-story in the WSJ seats Facebook in a tension between going public and Zuckerberg’s remarkable ability to “delay gratification” and take a seat in “a long queue of tech barons with grand ambitions.” The real story, however, may be in her subtle jibes at one who might become “world’s richest twenty-something.” More than a thinly veiled personal attack, Vascellaro may be hinting at something more substantial: that the question of privacy in the 21st century will be meaningfully shaped by an ambiguous and controlling figure. Read the rest of this entry »

Hey, computer, how does that compare to the reaction of other presidents to other natural disasters….The problem is that while our computers can process the words of our news stories, they don’t understand the meaning of these words. our machines are only able to do the very specific tasks we assign them to. They are very clever, but they lack common sense….The task of thinking is still ours.

Damon Horowitz, CTO of Aardvark: Tedx Talk – SoMa.

Horowitz discusses how computers can index and search a corpus of news articles, find those related to the earthquake in Haiti, and then extract facts and figures through semantic analysis, but he concludes that these capabilities will only go so far. If you want to understand how Obama’s reaction to the earthquake differs from that of other presidents to other natural disasters, you need to ask a person.  He then closes with the familiar conceit, which Marvin Minsky observed in 1982: computers are clever, but they lack common sense.

Lamenting the decline in interest in philosophy, Horowitz steps back and suggests that technology’s focus on solving problems is an effort to “get rid of them,” rather than learn from them. As a philosopher, he suggests, when we encounter problems: “we’re grateful. They show us that there’s something wrong about our world-view. There’s something we need to learn…the insights we get from that are invaluable.”

It follows that technology, though useful, takes us away from our primary objective – human interaction. Human interaction facilitates thinking. Thinking begets learning, and learning helps us better understand the faults in our world-view, so we can engage family, community, business, sport, life. Therefore, one should orient technology toward facilitating human interaction and identify the specific problems that must be gotten rid of to do so. Horowitz concludes: “I now believe that the primary goal for technology should not be replacing human intelligence but rather facilitating human interaction.” Hence, Aardvark and engineered serendipity.

The Speculations of Mr. Spectator

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