@T: ALWAYS THE TWAIN

Yesterday I pointed out to readers the importance of getting the “positioning matrix” spot on, using the Foreign & Commonwealth Office’s memo for the Papal visit this forthcoming September as an example of a poorly thought out and mistake laden one. There are a few key tenets in business and politics alike which affect their long-term success, or otherwise:

(1.)         Know your clients and service their needs;

(2.)         Know your competitors and provide products/services better than them; and

(3.)         Know your own company, where you want to get to (when, how and who with), and adapt to changing market conditions.

When I originally had the idea for 360-2020 it was because I was swamped with volumes of material (transaction documents, consultancy reports, analysts research, media commentary, emails etc.) in my professional life and there wasn’t any way of tagging and sorting that material into relevance and priority by color-coding it or designating it with adjectives, a timestamp and a quantitative mark that MADE SENSE TO ME.

So………in many ways 360-2020 is a tool borne from my need as a regular person/client who needs such a tool, it doesn’t exist so I have to code and develop it myself.

It’s valid to say that: 360-2020 may be one of the few truly original ideas in the world. This is because I did look beyond my own internal need and started to do some competitive analysis on whether the likes of Reuters / Bloomberg / Google Finance / Facebook and also niche analytical providers had the type of filtering and tagging tool I had in mind. What I realized was that they all filtered and tagged according to noun structures (name of company, person’s name, location etc.) and 5-star and/or -1/0/+1 systems which is………..

PRETTY MUCH THE SAME AS WHAT THE SEMANTIC WEB STACK AND SEARCH/RECOMMENDATION ENGINES DO.

Ergo, in real terms there hasn’t been that much of a step change forward as far as my experiences are concerned.

Now I’ve been aware of the 5 star system and colors since I was in nursery school because we had wall charts on which the teachers would stick different colored stars according to how well we performed and behaved in our tasks in class. This partially explains why I regard the 5-star system as suitable for babies but less smart to use for intelligent and articulate adults who have a much more extensive grasp of vocabulary, color recognition, quantification scales, intent, contexualization of connected relationships and time intertwining than babies do.

Moreover, anyone who’s been subjected to a professional performance review of any kind appreciates that assessing someone or something is a lot more complex than just giving them N stars out of five. Ditto for product reviews for a wide range of products (from iPads to sofas to clothing).

Anyway, the interest in the FCO’s positioning matrix is not a random and unrelated anomaly on my part. Actually I’ve been comparing the 360-2020 tools and their strategies to see how they stack up against where Facebook, Hunch, Google and Twitter are now and where they’re heading and I can say this:

360-2020’s competitors are still basing their sentiment analysis around -1/0/+1 (No/Yes) and 5 star rating principles whereas 360-2020 makes a leap of coherent imagination towards capturing information as “a consciousness of quantity and quality that enables differentiation and contextualization over time.”

Just look at Facebook’s sentiment approach and Hunch’s and it’s clear that 5-star and -1/0/+1  are still in play in designating positivity and negativity — just arranged differently visually on the page but functionally still the same. Sentiment and recommendations predicated along these lines are still open to flaws and lack of precision when it comes to capturing ambiguity, neutralities, underlying perceptions and values, intent and maybes.

The algorithm’s behind them are still……….not as smart or as person-specific or as granular or as holistic as what 360-2020 aims towards. Here’s what Andrew Keen, author of The Cult of the Amateur, says about Hunch and the tech sector’s attempts to understand online intent:

Divining intent has always been the Holy Grail of academics, doctors, marketers, and snake-oil salesmen. At the beginning of the 20th century, Sigmund Freud founded the school of psychoanalysis, a science of intentionality based on interpretation of dreams. And today, 100 years later, a new generation of quacks has founded a school of crowd-sourced intentionality.

The problem with Hunch is that it treats me as a crass consumer rather than as a complex human being. Web 2.0 algorithms might succeed at building search engines that are, at best, 50 percent accurate. As such, Hunch represents the intellectual bankruptcy of the Silicon Valley revolution that has attempted to replace real human expertise and knowledge with bad algorithms and even worse user-generated content.

There are ways to make the algorithms smarter whilst simultaneously complementing human complexity (particularly in linguistic, emotional and psychometric capture terms).

It’s just that Facebook, Hunch et al haven’t thought of these ways yet……whilst 360-2020 already does.

Before I dive into today’s post, it may be worth highlighting that today Nick Clegg the Liberal Democrats’ leader called for the electorate to ‘vote with your hearts’. Now I am not and have never been a political pundit but if readers recall…….This was what I wrote last Friday following the first-ever TV debate of the three political party leaders:

What became apparent during the debate is that this is an election where UK voters DO HAVE A CHOICE and CAN MAKE A CHANGE. They can choose between:

• their hearts => Nick Clegg of the Liberal Democrats because he seems like the type of regular, likeable, no airs-no graces type of guy people could have a drink with.

• their heads => David Cameron of the Conservatives because he is the more articulate, considered and pragmatic of the candidates (but not the type of guy people would have a drink with).

Unfortunately for them, no single candidate showed in the TV debate that they have the qualities yet to win hearts AND minds in the way that truly great orators, philosophers and politicians can.

So……..it’s good that Nick Clegg himself has indicated he believes voters should go with their hearts, and we now await David Cameron stating his position that voters need to THINK and compare all the policies through before they decide…………..This will validate the other half of my initial impression that it’s a “hearts versus minds” election campaign.

By the way, my mother (who’s usually more emotional and prepared to give people a chance than I am) refuses to vote Liberal Democrat — even though this election will see her changing her political choices.

“Change” has emerged as the buzzword of the UK election as it was for President Obama’s successful campaign as it is with the likes of Apple’s iPad which wants to fundamentally change the way we consume online media: away from our PCs and physical broadband connections to mobile, wi-fi enabled devices. What underpins whether a voter or a consumer adopts any change proposal is contingent on one key factor:

• COMPETITIVE DIFFERENTIATION — what is it about this political party / leader-CEO / product that makes it a preferable proposition from the other options available?

Now, when competitive differentiation is done properly there are three things a visionary leader will try to avoid:

(1.)          Cannibalization;

(2.)          Alienation; and

(3.)          Fickle flirtation.

The acronym of CAFF may be appropriate since we don’t want to overdose on caffeine do we? LOL.

Now if we examine Apple’s iPad, its market position isn’t pitched in direct competition with the Amazon Kindle but rather to fill an opportunity gap between its iPhone and its Macbook. In this way, Apple avoids cannibalizing its core consumer spectrums at either end. As for alienation, the company mitigates against this by maintaining its typical high production values and a price point that’s not excessive; US$499 for an iPad compared with US$299 for a 3GS iPhone and US$999 for a Macbook. It’s also well-known that Apple’s consumers are loyal to their products and tend not to be fickle. This is because Apple resists launching gimmicky features which may be considered “cool” for about 10 seconds and which people flirt with but refuse to make a commitment to. Instead, they focus on the core product being essentially durable, cool for the foreseeable future and then they build out from this base of loyalty and functionality.

[Associated point on the iPhone: any readers interested in the brouhaha over Apple's lost 4G prototype should read the Gizmodo articles.]

Meanwhile, if we examine the UK election we can see cannibalization, alienation and fickle flirtation taking place.

(1.)          Cannibalization — The Liberal Democrats are cannibalizing on the potential seats that would guarantee a win for Labor;

(2.)          Alienation — The Conservatives are alienating the electorate by their lack of communication clarity; and

(3.)          Fickle flirtation — Like the floating, undecided voters the Labor Party grandees are flirting with the possibilities of a hung Parliament with a Lab-Lib coalition which would lock the Conservatives out of power indefinitely (if the proportional representation system is passed into law).

Interestingly, relationships (whether corporate-consumer, romantic or political) are strongest, clearest and most effective when the parties involved are not cannibalizing each other’s or their own space, alienating their partners or wherein it’s easy to be tempted into temporary promiscuity with some other “shiny, new toy on the block.”

If this happens, there might be what’s known as “buyer’s remorse” later.

Specifically on competitive differentiation, I have to say that the political parties and the media haven’t done a great job of enabling the electorate to compare the three qualities that are, arguably, the most important in deciding who to vote for:

(1.)          Policies;

(2.)          Pragmatism; and

(3.)          Principles and Values.

Some broad quarterly timeline guidance of when each party promises to implement each policy point would also be helpful. For example, when will this GBP6 billion of efficiency savings by the Conservatives take effect and how do the savings tranches breakdown?  Ditto for the deficit reduction plans from Labor and the Liberal Democrats, respectively.

To my knowledge, none of the media outlets have drafted an overview table that allows for side-by-side comparison of the differentiating features which sets one political party apart from another. This would be helpful for the electorate and the political parties to gain some insights into how they really stack up on a QUALITATIVE BASIS rather than these quantitative polls from the likes of YouGov, ComRES, IPSOS Mori etc. that keep being published.

Let me give this example of how absolute quantitative numbers don’t tell us about the underlying qualitative dimensions of a company or a political party. Readers may be aware that the SEC recently launched a fraud case against Goldman Sachs for a specific mortgage CDO issuance (the ABACUS2007-AC1 product), in which investors allegedly lost over US$1 billion. Goldman Sachs reportedly earned US$15 million in fees for structuring the product and lost US$90 million by investing in it themselves.

Now this legal case means that the authorities may start investigating the mortgage CDO issuance during the mortgage bubble build-ups which subsequently resulted in the Credit Crunch. Here are two lists from Dealogic, a financial information provider, on the relative mortgage CDO issuance of the major banks during the 2005-2008 period:

Dan Davies in a Credit Suisse report has used these issuance figures to indicate the banks who may be at litigation risk from the regulators, following on from the SEC moves on Goldman Sachs.

It’s clear that Goldman Sachs did not issue the most mortgage CDOs in value terms; more than a handful of other banks are above it on the Dealogic list. To the untrained Joe Main Street eye, it would appear that Bank of America-Merrill Lynch created the most of these products. However, trained banking strategists would point out that BoA acquired ML in an all-stock deal valued at US$50 billion (US$44 billion of common ML stock and US$6 billion of options, convertibles and restricted stock) so their collective US$16.8 billion figure breaks down to less than US$10 billion from each of BoA and Merrill Lynch as separate entities before their merger, which was induced by the global financial crisis.

According to Dealogic, UBS is the bank which issued the most mortgage CDOs in value terms (US$15.8 billion). Having access to these Dealogic figures also helps to put into context the levels of writedowns and losses reported by the various banks throughout 2008 and 2009. So far in Q1 2010 the reported profits of Goldmans, UBS and BoA are a clear improvement on their financial performance during the Credit Crunch.

A trained corporate strategist would also dig deeper and examine HOW the ratings agencies like S&Ps/ Fitchs/Moodys and analysts’ notes were writing about the various mortgage CDOs in order to gain insights on the constituents of the product, the risk profiles of each layer and the insurance wrappers which would indicate how likely any payment defaults were and when this would happen.

So whilst Dealogic’s absolute figures seem to be useful, they provide negligible indication of the quality of the mortgage CDOs and it’s the quality which counts. The underlying POOR quality of most mortgage CDOs is what triggered the Credit Crunch because investors started to realize that poor quality = low value => exit them as soon as possible.

“Quality” instead of “change” in competitive differentiation terms is what really sets Presidential/Prime Ministerial and corporate products apart from the also-runs. It’s interesting that 360-2020 is about QUALITY CAPTURE as much as about quant capture, hmmn?

:*).

Economists and accountants tend to be about quant analysis and there is a well-known adage about accountants:

They know the costs of everything and the value of nothing.

I, though, am a trained corporate strategist rather than an economist or an accountant. Strategists strand in quantitative, qualitative and other dynamic elements simultaneously. Typically, we’ve studied macroeconomics and accounting either at business school and/or have professional ACCA qualifications. Moreover, those of us who are any good at strategy appreciate the importance of not having either linear or silo perspectives about anything, but a comprehensive and coherent view on contributing constituents (numerical, geopolitical and personalities).

Here’s an example of how to do competitive differentiation with quant+qualitative+timeline facets:

Remember the Twain definition of information: a consciousness of quantity and quality that enables differentiation and contextualization over time.

This definition has been influenced by the practicalities and insights of specializing in corporate strategy.

*****************************************************

Yes, 360-2020 could be applied as a methodology for qualitatively benchmarking complex financial products in the future. The potential applicability of the solution reflects my direct experiences and knowhow so……..it’s feasible across the dotcom space, banking, corporate strategy and FMCG sectors.

This announcement immediately made me think about 3 things which relate to 360-2020 and its potential business model(s):

(1.) How critical it is for social networks to have a PURPOSE to underpin the other fun updating features they offer. Facebook and Twitter rose to prominence because they were either credited for helping in the Democratic election campaign or cited for raising real-time awareness about issues, brands and characters.

The opportunity here about the incorporation of PURPOSE possibly resides in the way MMORGs manage to sustain online users’ interest. There are usually sets of objective  (or mission) in the game which requires multiple participants to contribute their knowhow and play strategy.

(2.) How important it is to get the monetization strategy right from the outset so that a platform is self-sustainable and not be dependent on either a parent company or investor group, who can pull the plug on users’ content.

The option here about MONETIZATION possibly resides in turning current “pay to play” models on their heads and asking, “How much would companies PAY TO BE PRIVY TO PEOPLE’S PERCEPTIONS AND POTENTIAL PARTICIPATION IN PRODUCT DESIGN?”

(3.) How there seem to be cultural differences between the small-knit, innovative start up and the globally spread, sometimes red-taped corporate which results in integration issues.

The solution here is simple: make sure the management team has big company and small dotcom experience and can navigate between the two cultures.

When readers click on the image of Bebo’s UI below, they’ll be directed to a PaidContent article with more details about AOL’s planned strategic exit of Bebo:

Interested parties typically want to know the competitive opportunities for a business so instead of writing 1,000 words, here’s a picture for 360-2020:

This is the only strategy slide I’ll be sharing on @T and it’s a snapshot in time.

A business plan, financials, IP filed and a demo are all progressing. The numbers focus on the US$450+ billion annual global expenditure in online advertising, the smart tools are designed to quality filter and contextualize content and the marketing model focuses on how to service diverse cultural groups. Since I’m Chinese and speak several languages, 360-2020 has cultural perspective seeded into its systems DNA.

Additionally, one-click capture is what 360-2020 will aim for.

Now, I’ve analyzed enough case studies in business school, gained insights into dotcoms from direct experience and blogs, and even incubated-financed some techco’s to know that for startups there are usually 3 schools of practice:

(1.) Plan nothing on the basis of “Build it and they will come.”

===> sell to Google / MS / etc.

(2.) Plan everything but fall apart in execution and marketing.

===> hope seasoned angels will nurture it.

(3.) Parallel project manage the coding and the writing of the business plan, but both end up out of synch.

===> liquidate and learn nothing.

There are issues with each of the three practices, even before we take into account that the tech sector is unpredictable and no one can predict anything accurately 100%.

In the first instance, there’s a big old graveyard of Web 1.0 and Web 2.0 ventures that were built in haphazard higgledy-piggledy ways, attracted millions of traffic hits (mostly ramped by spambots), didn’t have any plans for monetization and burned through VC cash like Vesuvius hit Pompeii (scorching the earth and making it nigh impossible for subsequent start-ups to attract money).

In the second, SMART EXECUTION AND MARKETING DO MATTER. We can all pick out the Apples from the others that do professionally dumb things such as disrespect their beta community by launching with marketing videos like “We organize that s***” and then fail to deliver on those very organizational tools — despite core users’ support, collaborative troubleshooting and continuous patience. It’s no surprise that companies like these shoot themselves in the foot and through the head and sabotage their own market opportunities.

[As a Libran, I can use diplomatic euphemisms as florally as the next person but DUMB is an appropriate word when a Marketing Manager uses the word "s***" to describe a community’s carefully collected and considered information treasures.

That s-word and that approach to the community will have NO PLACE in anything I'm involved with.

^{360-2020 will endeavor to engage quality people and collaborate with strategic partners who understand and respect its community, their needs and are committed to working together conducively towards better, smarter, symbiotic solutions.]}

In the third case, what happens in parallel project management is that the executives and the tech team may be parallel but they’re on different levels where strategic direction, navigation, execution, communication and consideration for each other’s efforts are concerned. Hence they end up at the wrong destinations.

NO ORACLE, SIMPLY AN EXPLORER

I don’t have the definitive “Do this and strike digital gold” answers because:

(1.) I’m human and therefore as fallible as anyone else.

(2.) No single company has THE killer answers (and any who claim to are snake oil salesmen).

(3.) That company would own the universe and no company owns the universe.

(4.) There’s no room for discovery, fun and learning from mistakes if those definitives already exist.

(5.) I’m only at the start of a journey and I can only share my analogy of the Twain approach as I tackle 360-2020.

It’s like a……..FRENCH BRAID.

In other words, we treat the business plan, the coding and the parties involved (target audience, strategic partnerships, investors, etc.) as synergistic strands of the whole. We progress them not in parallel but with re-iterative integration wherein each contributes to the development of the others synergistically and synchronistically. Yes, it means whoever’s hand(s) are doing the braiding — i.e. the team of VISIONARY LEADER-DRIVER-EXECUTORS — need to be reasonable, smart, dynamic, collaborative and operationally pragmatic to appreciate how each strand fits in with the other strands.

It also clearly involves male-female-X-Y combinatory organic synthesis wherein input-output are aligned.

This philosophy of synching strands may prove to be productive; we shall see in the long-term if this is so.

WHY CREATE 360-2020?

Well, the simple reason is that in addition to gaining 360 perspectives it’s also important to have 20/20 clarity of vision and coherence of connected information. The challenge and fun is to build and aspire towards this.

The more complex reason is that it is a necessary evolution to the bigger economic challenges.

Here are some facts about whether we have 20/20 clarity online at present: 5-star ratings, recommendation engines and institutional ratings mechanisms (e.g., S&P/Moodys credit, bank reputation, Interbrand’s analysis) are flawed at worst and non-smart at best. We know this because if they were smart, reliable, insightful and contextual these events would not be true:

* global financial crisis

o the credit agencies rated the toxic mortgage assets from AAA to ABB which made them seem more financially sound than they actually were. In fact, some of the products were…….sludge at best (and slag at the bottom of the oil distillation process at the worst).

* consumers buying items that rate a 3 and 4 rather than items that rate 5

o quality, price, human perceptions and aspirations are not captured in 5-star rating systems so whilst a 3 may seem to mean “average” it may also mean “affordable” and “non-niche”.

* Virgin, Newscorp and Hutchison Whampoa not appearing in the Top 100 of Interbrand’s survey whereas Zara does.

o those three diversified conglomerates have a lot more established marketing presence and revenue streams than Zara.

Therefore, social graphs and quantitative surveys like the ones below are constantly churning in my head whilst 360-2020 gestates and is built.

I believe online content can be filtered and connected in a much smarter way to reduce the noise, spam and nonsense for us all so that we have more time to genuinely collaborate, enjoy ourselves and collectively innovate………….

So building 360-2020 is one way to “walk the talk”.

START SMALL & SCALE SPHERICALLY

There is a plan in place for each of the 3 levels of the 360-2020 tools. The entry-level will have over a dozen classifications compared with the 5 classifications in 5-star rating systems and the 2 in -1/+1.

Over time, the number of classifications in 360-2020 will be increased within a realistic rollout.

CONVERSATIONS WITH CEOS & CONCERNS ABOUT IP PROTECTION

Whilst I’m keen to propagate 360-2020 as a concept and to source people who can collaborate in its realization, I’m also aware that some of them may try to appropriate (read STEAL) my methodology and innovations. This is a risk for all entrepreneurs and inventors and I am by no means the first or last person to happen upon these situations.

That’s why it’s advisable to have some helpful conversations with IP lawyers, be mindful of what you disclose as the inventor and FILE IP AS APPROPRIATE.

Without breaching any confidentiality let me share what the CEO of a financial platform said when I met him for an informal chat recently about what I’m doing with 360-2020:

It’s not an easy problem to solve. There are so many variables and dimensions involved. Plus there would be a bias in the sample population — especially since there’s research to say that only 1 percent of online users ever even bother to rate content with 5 star ratings in the first place, so how would you get people to use 360-2020? You’d need it to be on a site with millions of users………

I’m not a programmer so I don’t know what you’d need to you’d solve it. The person you should talk to is [name of X, a US high-end programmer].

This was broadly my reply:

I can program and I have a sense of the maths behind it and, well, actually [Mathematical Formula 1 which I studied at university and won’t disclose] and [Mathematical Framework 2 which I’ve applied in a challenging project before and won’t disclose] metrics can be applied to deal with the variability and confidence issues so even if it is an initially biased population sample, we can account for it and normalize the tool to extrapolate.

As for market potential, it could plug into something like Amazon or eBay recommendations as readily as just on someone’s personal blog. It just replaces where the 5-star bar sits now.

Plus it would actually have less bias than existing 5-star rating systems since that provides almost no qualitative or benchmarking information around the 2, 3 and 4 ratings — only the extremes of 1 and 5 — so that’s an area of ambiguity which, historically, has led to people buying goods or hedging a market with incomplete information, on the assumption that 1 is a “don’t trade/buy” and 5 is a “go ahead, trade/buy”.

Now, we can either stick with the status quo where all of the known ratings systems and the emerging Semantic Web Stack’s classifications have limitations and are not providing us with the context that we really need. Ergo, we can all continue to be frustrated by our and the machines’ inability to connect the dots and make sense of silo information — which invariably results in scenarios like a global financial crisis because people are trading, investing and transacting based on incomplete information (3 out of 6 perspectives on a Rubik’s cube) or it results in scenarios where companies are inferring our consumption behavior and end up either over-stocking or under-selling……….

OR………

We can approach it with the 360-2020 methodology, which approaches information contextualization differently — along DNA mechanisms rather than a Rubik cube’s rigidity. Yes, the computational mathematics involved is substantial — some of it will have to be invented anew — but it’s feasible and there are already components of it published. It’s just a matter of having the imagination and execution to synergize that.”

A week later and I’m still being a pragmatic optimist that that CEO will respect that 360-2020 is a proprietary solution and is covered by IP.

Moreover, only someone with my career insights, skills and knowhow would even originate and then attempt to executive such a solution! That’s not complacency, myopia, narcissism, delusion or bravura on my part. It is what it is……….

360-2020 = TWAIN

I did get 99% in my Probability + Statistics exams and the highest mark in my university class for my Econometrics project on Tiger economies, so…………………………….I have some sense of where and how to source the computational mathematics and the AJAX / PERL / PHP / SVGML / Flash AS4 / JSON / jScript / Pascal / Fortran / LISP / Squeak / Semantic Web Stack components etc. to solve and synch what is a non-trivial model and code challenge.

That and the fact that I can code means that 360-2020 is shaping up progressively. Importantly, I’m factoring in the need for the business model, reward reciprocity between company-consumer, neuroscience and other core components to fit into the whole so — in all seriousness — I am a critical component in 360-2020’s realization and potential success.

Now, returning to the relevance of what I’m trying to do wrt. the bigger economic challenges…………

BETTER INFORMATION => BETTER MARKETS

Now, without going into too much Adam Smith, what I realized whilst working in consumer-side companies and in banking is that the basic assumptions of capital markets and information about consumers are somewhat awry. This may partially explain why various global financial crisis happen.

The prime assumption being that there is so-called “perfect information” which we all have equal access to and choice over. The second one is that humans are “rational and make objective decisions” — so, for example, we don’t borrow mortgages we know we have no realistic chances of meeting the payments for. The third is that exchange between two parties happens following long distance and lengthy time negotiations.

Actually this is true:

* Market information is non-optimal.

* Humans are complex and make decisions based on ambiguous information, subjectivity and their emotions, which includes the emotions elicited by risk-return serotonin.

* Trading can happen instantaneously. We have been in real-time straight through processing for well over a decade. We swipe a credit card or press a button for “Buy” and the money is taken from our account immediately, it’s not like when there was a 7-day clearance for a check.

Anyway, I can either perpetuate the “market is perfect”-“Earth is flat”-”humans+machines-are-destined-to-stay-suboptimally-smart” stance or I can say:

ADAM SMITH WAS NOT AROUND WHEN THE WEB WAS INVENTED, SO NONE OF HIS THEORIES OR MODELS COULD POSSIBLY CAPTURE THAT THIS TECHNOLOGY WE CALL WWW CONTRIBUTED TO THE SPREADING OF IMPERFECT INFORMATION ABOUT THE US MORTAGE SECTOR BEYOND BORDERS AND TRADING JURISDICTIONS. MOREOVER, THE INTERDEPENDENCY OF NATIONAL ECONOMIES OVER THE SAME TOXIC ASSETS IS A PHENOMENON SMITH’S THEORIES COULD NOT POSSIBLY ACCOUNT FOR SINCE IN HIS DAYS THERE WAS NO WTO, GATT, NAFTA, EU ETC.

HE COULD ALSO NOT POSSIBLY HAVE PROJECTED HOW TECHNOLOGY WOULD FACILITATE THE VELOCITY AT WHICH MORTGAGE PRODUCTS WERE TRADED AND INFECTED THE GLOBAL FINANCIAL SYSTEM.

So…………………yes, as much as I respect Adam Smith as the godfather of capitalism, it is worth examining some of his core tenets to reflect the changes that the Web has brought.

Importantly, to contribute to the position that “We need tools to improve information quality” and “Humans+machines-can-become-smarter!” Since machines can only be as smart as their human inventors, we may have to “think-out-of-the-box”, “from left field”, “throw curve balls”, apply our imagination, cross-pollinate some concepts and innovate some tools to deal with……….

THE IMPERFECT INFORMATION SCENARIO

Now, when I look at the Web it’s obvious that there are all types of occurrences of imperfect information and this is manifested in everything from Google’s PageRanks algorithms to 5-star rating systems with their two extremes and through to recommendation threads where we have to plough through hundreds of non-consequential comments to get to any gold nuggets.

Then when I reflect on my experiences with semantic technologies and conversations I’ve engaged in with leading thinkers and practitioners on the issue of topic clustering rather than time stamping, this keeps distilling in my brain:

IMPERFECT INFORMATION PERSISTS because we haven’t yet built the tools that coalesce, contextualize and make sense of that information in a way which is coherent and inheritable in a way that’s also parseable and has dimension and extensibility.

A way that mimics the way DNA operates, actually. Hmmm……

Here’s a reminder of how the Linking Open Data group drew their own connections and then how I redrafted it as a DNA-esque model:

See? Even before any coding is involved, I visualize and architect the way objects and structures are related and interact in a different way from how some others see the same space.

So I have some choices:

(1.) Sit back and say, “Let’s hope that some brainiac guys from Harvard / MIT / Stanford / Imperial / Cambridge / Apple / Google / MS / FB / W3C figure it out before I die………..

So that my kids aren’t forced to use the same non-smart, imperfect information which means their generation will also cause another global financial crisis on the scales of 1939 and 2007” and corporate ignorance about their own consumer base and how to service culturally-diverse consumers persists; or

(2.) Go on vacation, catch a tan and enjoy long lunches.

(3.) Invent the solution for my generation and my kids’ generation.

They say that innovation is “borne out of necessity” so………..there it is and here we are.

360-2020 IS SO SIMPLE EVEN MY MOTHER GETS IT!

Given that my mother is a tech novice, the fact she says 360-2020 makes sense and is easy to use (from what I’ve shown her) is reassuring. Of course like that CEO she’s also said, “It’s not an easy problem to solve”.

“Yes, but when 360-2020 is fully realized, then imperfect information online will be reduced and whole new forms of computational mathematics and economic modeling that can marry with neuro-biochemical mechanisms will be invented!”

Surely that’s worth committing Twain knowhow and a lifetime to.

THE COMPUTATIONAL CHALLENGE + CAVEMEN

Well, when the tools don’t exist it’s our challenge, our imagination, our pragmatism, our collaboration and our journey to build them.

Otherwise we simply wouldn’t leave the caves!

Caves can offer us warmth, but the sun outside offers that, light, photosynthesis, Vitamin D and a whole world of opportunities and Enlightenment beyond the cave!!!

To close this blog post, below is a funny spoof video on how cavemen learnt to trade, followed by a link to a scene from ‘A Beautiful Mind’ in which Nash’s equilibrium is explicated with Adam Smith’s ‘Wealth of Nations’ to provide more clarity on HOW and WHY people make trading decisions and tackle Prisoner’s Dilemma-type issues.

http://www.youtube.com/watch?v=B7Z_UnshDlY

In a sense, we’re prisoners of the Web and its current limitations. There are three doors and here’s what’s behind them:

(1.) More of the same structure and Bayesian approaches to information ranking.

(2.) The same structure with information tagging (e.g., semantics) and scalar clustering and ranking (e.g., 5-stars) that don’t enable us to QUALIFY the context or meaning from the content — merely to quantify frequency of occurrence.

(3.) A revolution of structuring, contextualizing, quanti-qualifying and coalescing information that makes sense and coherence.

Since humans are intelligent and have life choices, I choose to build 360-2020 as a key for Door (3). Even though I’m not in the league of thinkers of the stature of Smith, Nash and other greats I’m hopeful that some people of that stature and those smarts will guide and support me along this journey.

Mary Meeker’s Internet Presentation 2009

Today the FT is carrying a forum discussion on Queen Elizabeth II’s question, “Why did no one see this crisis coming?” Some of the comments are spot on and some are grossly wide of the mark and delve into all sorts of irrelevant macroeconomic theories about the roles and forecasting perspicacity of economists.

* http://blogs.ft.com/arena/2009/07/28/economists-what-is-the-point/

* http://www.ft.com/cms/s/0/21c911f6-7b66-11de-9772-00144feabdc0.html

Incidentally, the reply provided to the Queen was:

“A failure of the collective imagination of many bright people” who were all “doing their job properly on its own merit.”

LOL, a diplomatic and charming platitude albeit not one which helps us to collectively accept fault, learn from mistakes or progress towards implementable solutions.

TWAIN’S ANSWER

Firstly, banking is not about imagination. It’s about facts, numbers, analysis and decision-making (including sometimes misinformed judgment by those with sign-off power). It’s about bottom lines, value propositions, growth potentials, hedging strategies, risk management and product innovation. Unfortunately, few bankers will have the imagination à la a Steve Jobs, a Steven Spielberg or a Tim Burton to envisage the potential horrors, carnage and devastation of portfolio and value decimation, and also how to create a much more beautiful scenario of wealth creation triumphing over the financial carnage.

[Besides which, bankers are trained to deploy words like "resizing" rather than carnage so already this shows lack of verbal imagination.]

Secondly, not all bankers are bright — although the ones who are are seriously brilliant, dynamic in their intelligence and phenomenal. Meanwhile, some may be academically highly qualified (every Ivy League / Oxbridge / Tsinghua / INSEAD / Bocconi MBA under the sun), yet unfortunately they may also lack common sense and a commitment to ethical corporate social responsibility even if they’ve studied it and passed the academic exams.

My great friend GC and I recently discussed how Harvard MBAs have created their own code of ethics:

* http://www.thecrimson.com/article.aspx?ref=528381

* http://www.businessweek.com/bschools/content/jun2009/bs20090611_522427.htm?chan=bschools_bschool+index+page_the+mba+life

Thirdly, not all bankers do their own jobs properly. For example, I’ve inherited investments which were poorly due diligenced, burning cash at unacceptable rates, had barely any business model and an underperforming management. As soon as the investment was under my responsibility that changed. I’ve also read internal and external management consultancy reports which were so nonsensical it made me put a freeze on buying them.

My colleague (Harvard, Cambridge) put into my evaluation review that I’m “prodigious, highly competent and have excellent collaboration skills” but this isn’t true of all bankers and even I have my odd moments where I don’t meet my own high standards — like the time a Director of Compliance almost derailed one of my negotiations through his own misinformation and ignorance, and I became a lot less charitable in my collaboration with him. Still, I managed to make a successful case for our Legal Counsel’s nomination to the newco’s executive board, so my annoyance didn’t last long. LOL.

Most importantly and relevant to how economists missed the signs of crisis is this: economists in banks get nowhere near the information which really matters — the balance sheets on whatever transactions and bond issuance are being included into the risk management systems to comply with various Basel II, international GAAP and regulatory body requirements.

That’s not the economists’ fault. It has to do with Chinese walls between business units and lines of responsibility. Chinese walls are oriented to protect confidentiality but they may also exclude information being passed to enable business units to risk manage and do their jobs. It’s the way the system is: needs improvement, work-in-progress.

Anyway, only a handful of people in CEO-Chairman’s Office may get clearance to that confidential analysis, so there’s actually little chance of any economist anywhere being able to accurately call the crisis — even if some may be being celebrated by the media as economic sages.

The media itself has some failings in its role as the Fifth Estate, to help us keep society in check and optimally functioning, wrt the global financial crisis. Some of the opinions from their business journalists have been laughable, although there have also been some excellent coverage too — such as by the New York Times and the Washington Post.

Interestingly, in one of the FT links, Galbraith is quoted:

JK Galbraith remarked that one of the greatest pieces of economic wisdom is to know what you do not know. Regulators and supervisors did not know complex financial products and processes, or the impact of low economic volatility on risk management systems.

(source: http://www.ft.com/cms/s/0/21c911f6-7b66-11de-9772-00144feabdc0.html)

I’d place an addendum to Galbraith: “An economic wisdom is to understand that to achieve perfect information for properly functioning capitalism, as proposed by Adam Smith, it’s our responsibility to find the information we don’t know and to assimilate it into our systems.”

This takes us towards building context, clarity and consensus views in a truly democratic, open and capitalistic model.

Anyway, what’s the solution to prevent future global financial crisis of this ilk? Simple: build a consortia platform involving the banks, the governments and the regulatory bodies on an international basis to share and flag bubble build-ups.

Is it do-able? Yes.

Does the technology exist? Yes.

Will it synch with the vested competitive advantage interests of different groups? Yes.

How can I be confident about this? Well, you see all the institutional trading platforms out there from Equities to Fixed Income to IR-FX? Who wrote some of their investment proposals, negotiated terms of agreement, got weekly updates from their CEO/CFO/CTOs, was involved in writedowns/reinvestments and knows how their technology works and interconnects on a cross-organizational basis?

Yes, yours truly. My sole stipulation now would be that anyone who wants me to be part of project managing the build would have to remunerate me extremely well for my knowhow.

Plus that no one’s allowed to comment on my prettiness* and just lets me get on with the project.

FINANCING VIA SOCIAL NETWORKS

The FT also carries this article on how some tech entrepreneurs are crowdfunding by leveraging social networks:

* http://www.ft.com/cms/s/0/c037ae5c-7b92-11de-9772-00144feabdc0.html

This is not a new concept, it’s how some independent film producers have been raising up to GBP1 million to make their features. What the article points to is how difficult it is in the current environment to raise new capital, especially in Series B and C rounds for development financing.

Ergo, tech start-ups would be well advised to abide by Sequoia Capital’s points about conserving cash and not burning it on poor marketing strategies.

My observation from crowdfunding via socnets which is different from the VC approach is that:

(1.) It triggers issues relating to compliance with FSA/SEC/Consob etc. rules regarding investment advice and protection of investors’ interests.

(2.) Social network investment is more likely to be a one-off transaction whilst the VC is more likely to repeat reinvest.

(3.) VCs and their network of investors tend to be able to bring expertise and contacts to the company which people on a social network merely taking a “punt” of GBP10 or less may not be able to offer.

(4.) The administration involved is different. With crowdfunding there are more investors to update and the paperwork may not be of a regulatory standard.

(5.) VCs have a more established path to institutional investors which is important if your strategy is likely to involve plans for floatation or acquisition by a media giant.

Anyway, it’s a personal choice: go with a handful of VCs and investors you meet face-to-face where you can develop deep and longer-term relationships of trust or go with many kind-hearted strangers on a socnet whom you may never meet face-to-face because of geographies and get to know each other better online.

Mike Volpi, the former CEO of Joost and now Partner at Index Ventures, highlighted what I consider to be the most insightful point about online revenue generation in the current economic climate. Principally that investors will be much more interested in transaction-oriented models than platforms which rely on advertising.

As I mentioned previously, even though Morgan Stanley’s technology analysts recently released a report which upgrades the prospects for the advertising sector, with the exception of Google Adsense few companies will experience the same kind of ad revenue upside they did during the better years.

* http://kara.allthingsd.com/20090706/mike-volpi-jumps-from-joost-to-index-a-boomtown-interview-and-full-press-release/

* http://paidcontent.co.uk/article/419-interview-mike-volpi-broadcasters-own-vod-plans-killed-joost/

Notably, the majority of tech plays I’ve been involved with have had a split broadly like so:

· transaction = 80

· advertising = 10

· subscription / membership = 10

Luckily, the transaction-oriented ones survived — and even flourished — during the vagaries of the tech cycle. One of them we originally invested less than US$5 million in, to build as a consortia play. When it floated it’s valuation was US$1.2+ billion.

Even on a content basis, the information and analysis being provided on a platform, needs to serve some kind of PURPOSE. It should be an intrinsic need-to-know-or-must-have to complete a to-do. That’s what companies and Joe Public consumers alike would be prepared to pay for. It explains how Michael Bloomberg created a US$ billion company: the BBerg terminals facilitate transactions.

The transaction component is a……….UTILITY and people have a lower barrier of resistance about paying for those than paying for advertising, particularly of the push kind.

In any case, the best thing one of my partners on Project ART did was to make me think about how the advertising stream feeds into the transaction ocean rather than vice versa.

That makes strategic sense.

JOOST

For anyone unfamiliar with Joost, here are some YouTube videos which explain its rationale and also how it works on an iPhone:

What the Joost story shows is that we can have top tech veterans (founded by the creators of Skype) and sophisticated tech investors, but some blind spots on consumer market dynamics and how media incumbents will respond — like create their own VOD capabilities, jv with a video streaming provider and/or pure content syndication with a competitor — can lead to a product / service not gaining traction or settling into its USP competitive position.

It also provides us with clues about whether and to what extent people are prepared to pay for content and what caliber of content. People overlook the fact that media giants, particularly the film studios, have decades-worth of content libraries which they own the IP of and can generate income from.

One of the strategies Joost could have deployed to risk manage itself against media giants not signing syndication agreements with them or strengthening the content library would have been to create their own digital content production arm. This doesn’t mean content partnerships but rather financing and developing an in-house team of producers who would shape content strategy and create original content.

That’s a strategic option the investors should have discussed at board meetings within the first 3 months of operations. Instead they seem to have opted for the content alliances and syndication model.

In any case, IPTV will be here. It just isn’t here right now with the likes of Joost. It’s more likely to arrive with an Apple tablet and its content syndication with media giants.

Incidentally, why else is Steve Jobs my personal business hero? Well, he’s created US$ billion businesses in completely different sectors: Apple and Pixar. He gets the technology. He gets the code + consumer + transaction synch. He gets the design. He gets the content. He gets the production. He gets the marketing. He gets the branding. He gets collaborating with people who are brilliant in their own right like Alan Kay, Guy Kawasaki, Jonathan Ives, etc. He gets it all and he can do it all: technical and interpersonal synching. Plus he manages to make it all seem cooler than any other tech geek can.

Now, THAT’s…………GENIUS.

Today this is happening with Yahoo! Just over 100 days after Carol Bartz’s appointment as CEO of Yahoo! from Autodesk, the redesign of the homepage is launched as an opt-in test for millions of US users with the rollout to major European countries over the coming months.

Let’s track how this affects Yahoo’s share of the search market and content syndication models……..There’s a feature which allows users to update their FB status from the Yahoo! homepage.

Meanwhile, I’ve been taking a closer look at Google’s Q2 2009 earnings summary and happened across this very interesting page:

Significance? Well, let’s wait and see what happens in Q3 2009 with Google’s TAC (the word auction model took a little time to gain traction, but the strategy seems to be picking up). For this Q, the most interesting growth was in China where GOOG Q2 made a revenue increase of 25 percent over the previous quarter. It’s currently responsible for 30 percent of the market whilst the incumbent, baidu, leads with 64 percent.

Now, coincidentally, Morgan Stanley — yes the bank that offered us the wisdoms of Matthew Robson (aged 15 and 7 months who says teenagers aren’t into Twitter) — has just published a note on advertising revenue prospects ahead. It’s revised what it calls a previously “pessimistic” outlook by the sector.

Connect the dots from Google + MS documents and we can extrapolate……………..the exact month / quarter when the media sector will make a recovery from this recession. Now, THAT’S useful information to present to investors.

XLNT.

[Yes, I've calculated it for my own models.]

I’m bearing in mind that Sequoia Capital released this presentation 9 months ago as advice to tech start-ups. There are some real gems to follow here and the smarter techcos would have followed the advice. The less than intelligent ones would have wasted resources on stupid marketing and alienating their user base. The unfortunate ones would have featured in TechCrunch’s layoff tracker:

* http://www.techcrunch.com/layoffs/

Ok, I just heard that my cousins from Germany are flying in later this week. What am I supposed to do with teenage girls?

Hmmn……..Well, all teenage girls love TopShop where Kate Moss has her own design line……..and Portobello Road for kooky treasures…….and eating foods that are banned by parents or unavailable at home (like chocolate, cream scones and fish+chips — separately and not together, of course)………

Hey and their surprise visit is cool. It means I’ll be able to speak Spanish, Italian, French and German all within the next month along with English and Chinese! There was I thinking I may have to watch another movie by Tom Twyker or Der Untergang (Downfall in English, btw) again to remind me of what German sounds like. Incidentally, it’s an Oscar-nominated film, a must-watch and is gripping with exceptional performances:

German and I have a strange relationship; it’s my least favorite of the European languages — lacks poetic lyricism — and yet it’s the language of some of the world’s best philosophers.

My German languages teacher was pretty upset I chose chemistry instead of German as an elective. Mostly because in the last German exams I ever took I got 99%, the first time anyone she’d taught had passed the 85% mark. Oh well, at least I opted to stay in her French class and she got to write in my report, “Twain has a natural flair for languages!” Ha ha. If she’d had her way instead of my mother, I’d have studied all the major languages, marched off to the LSE / Sorbonne, studied European Studies and become a UN interpreter or something.

LOL. Of course, if I hadn’t studied chemistry SmithKlineBeecham wouldn’t have let me play with their Nuclear Magnetic Resonance machine when I was 17, compound my own paracetamol, glass blow my own test tubes and round-bottom flasks, and then two years later I wouldn’t have been in the development team (at what is now IFF) that created the world’s first alcopops, right? I wouldn’t have spent one summer synthesizing one cola as close to Coke as I could, right? And promptly lost all interest in soft drinks because if you spend 10 hours a day in a lab concocting and testing it, the last thing you want to do at the w/e is drink it!

Most importantly, I wouldn’t know an iota about chemical mechanisms to propose that THIS is a much smarter and more natural way to envisage and realize the Global Brain, when crossing it with linking open data:

See? There’s cause+effect and a natural connective order to each of our lives. I gained insights on this and it created neural paths to enable me to make successive leaps of know-how and cross pollinate it into another sector.

Hmmn, maybe it wouldn’t take much to translate that entire Google knol into Chinese, French, Spanish, Italian and German, and to ensure that colloquial Anglo-Saxon phrasing is suitably cross-checked to reduce “lost in translation” issues. Maybe then researchers from all over the world will have one source on the Global Brain which is written in all the major languages. At the moment, no single source exists.

[Note to self: must learn more Russian beyond "perestroika" --- LOL.]

See? All these to-do’s, to move Semantic Web concepts more spot-on along with Project ART commitments to disrupt online business models. Ergo, I’m a wee bit busy to join Facebook’s translation project group, particularly since (even in English) they can’t communicate it in a clear way that makes us understand what their request is!

* http://www.alwaysthetwain.com/blogs/2009/07/15/facebook-im-rotflol/

Also, I know from translating M+A deal documents (French => English, Italian => English, Spanish-Italian => English) that translators cost GBP15-20 an hour. Obviously, I decided to translate those documents myself instead.

Hmmmn……Now, please can anyone explain, “WHY SHOULD ANYONE TRANSLATE FACEBOOK WHICH HAS A VALUATION OF US$10+ BILLION, ACCORDING TO THE LATEST INVESTMENT OFFER BY DIGITAL SKY TECHNOLOGIES, AND CASH IN THE BANK TO PAY FOR TRANSLATION SERVICES AS PART OF GLOBAL ROLLOUT STRATEGY? FOR FREE?”

There too the question about the paid content model, users’ contributions and who owns what copyright arises.

Suppose we help Facebook translate itself. Suppose that some of us even create an algorithm that flags similes and non-translate-ables. Or even a methodology for someone in China to grasp the concept that that there are quantifier conjunctions in English which don’t exist in Chinese. Then suppose one day Facebook decides to charge us to upload our content in the same way that hosting providers charge us for storage space and our ISPs for connection. That means that instead of earning per hour for our translation abilities, we’re giving away our time and efforts for free. It also means that FB owns the algorithm and the methodology. It means the users will have added to the valuation of FB, yet they own no shares in the company, they’re not management or employed staff on a salary — not even temp / agency / consultancy staff — and they haven’t been paid for their contributions.

See? The Internet model which is appearing (and which Chris Anderson argues for) is NOT democratizing at all if the traditional barters of trade (aka MONEY) is not appropriately distributed and has differing equivalence. It is actually……..Communist if the online user bee is expected to build the hive, pollinate it and their reward is only that their content is allowed to exist in the hive — rather than for their content to LIVE, propagate collective sense-making and be nourished by honey (money).

This is why paying users for their content contributions and any special skills they bring to bear on a site should be a consideration that ALL sites which genuinely believe in online democracy need to commit to and implement.

THIS IS WHY MALCOLM GLADWELL WILL PROBABLY PROVE TO BE RIGHT AND CHRIS ANDERSON TO BE WRONG.

Returning specifically to my thoughts on German, what’s the other great reason to be able to speak and read the language apart from improving our technical competence and understanding “Vorsprung durch Technik” (advancement through technology)?

Answer:

* Wittgenstein

* Nietzsche

* Hegel

* Schopenhauer

* Kant

* von Clauswitz

What do these great minds teach us? I think, therefore I am. The World as Will and Idea. The power and utility of logic. We fight wars to win and there is no such concept as moderation in a war (to me, this is a sad but true insight). And, We are Human, All Too Human.

Sprechen Sie Deutsche? Ja, natürlich.

Why do we learn other languages if not to become informed with the wisdoms of and appreciation in as many cultures as possible?

Das ist Die Wahrheit. No, that doesn’t mean “the height of war”. It means………the truth.